Lightspeed Commerce Inc. (LSPD) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. My name is Dax Dasilva, Founder and Executive Chair of the Board of Directors of Lightspeed. On behalf of management, the Board of Directors and of all of our employees, I would like to welcome you to the annual and special meeting of the shareholders of Lightspeed. The company's meeting is being held virtually this year to reduce the company's environmental footprint. I'll begin by introducing the people with me. We have the pleasure of having with us today, Mr. Jean-Paul Chauvet, our Chief Executive Officer and a member of our Board of Directors; Mr. Patrick Pichette, Lead Independent Director of our Board of Directors and a member of our Audit Committee; Ms. Dale Murray, a member of our Compensation, Nominating and Governance Committee; Ms. Marie-Josee Lamothe, the Chair of our Compensation, Nominating and Governance Committee; Ms. Nathalie Gaveau, a member of our Risk Committee; Mr. Rob Williams, a member of our Audit Committee, our Compensation, Nominating and Governance Committee and our Risk Committee; Ms. Asha Bakshani, our Chief Financial Officer; Mr. Dan Micak, our EVP, General Counsel and Corporate Secretary; and a team from TSX Trust Company, the company's transfer agent and this meeting's scrutineers. Mr. Paul McFeeters and Ms. Merline Saintil of our Board could not be with us today. Before we begin, I would like to say a few words about the proceedings of this meeting. Please note that only registered holders of subordinate voting shares of record as of June 6, 2022, or their duly appointed proxy holders are permitted to participate and vote at this meeting. Following the formal portion of the meeting, time permitting, the members of management here with me today will be available to answer your questions. Although the majority of this meeting will be held in English, please feel free to address the meeting in English or in French. A live translation is also available for the participants of this meeting. [Operator Instructions] For the purposes of the meeting today, voting on all matters will be conducted by a single electronic ballot as requested by certain shareholders of the company in advance in accordance with the company's bylaws and the Canada Business Corporations Act. Registered shareholders and duly appointed proxy holders will be asked to vote on each business item after the presentation of all business items. [Operator Instructions] I would like to point out that the discussion during today's meeting may contain forward-looking information about Lightspeed's outlook, objectives and our strategies to achieve them. These statements are based on assumptions and are subject to important risks and uncertainties. The company's actual results could differ materially from any expectations discussed. A disclaimer regarding forward-looking information is on the current slide and can be found in Lightspeed's public disclosure record available on our website, SEDAR and EDGAR. We will now proceed with our formal portion of today's meeting -- the formal portion of today's meeting. I call to order the annual and special meeting of the shareholders of Lightspeed. In accordance with Lightspeed's bylaws, I will act as Chair of the meeting, and Mr. Micak will act as secretary of the meeting. In addition, I appoint our registrar and transfer agent, TSX Trust Company to act as scrutineers for this meeting. The scrutineers will report on the number of subordinate voting shares represented in person and by proxy at this meeting, tabulate the votes and report the voting results. The matters to be discussed on the agenda of today's meeting are set out in the management information circular dated June 29, 2022. This year, again, the company used the notice-and-access regime enabled by Canadian securities laws to make available its meeting materials and sent a notice with all relevant information in that regard to all shareholders on or about July 5, 2022. As mentioned in such notice, the circular and the notice of meeting are available to shareholders at TSX Trust Company's online platform, on our website and under the company's profile on SEDAR and EDGAR. Accordingly, I will dispense with the reading of the notice of meeting. Our transfer agent, TSX Trust Company, has attested to the proper mailing of the applicable meeting materials. I direct that a copy of all meeting materials be kept by the secretary with the records of the meeting. I received the scrutineers' report on attendance at the meeting. The scrutineer's report indicates that at least 2 persons entitled to vote at the meeting and holding in the aggregate of at least 25% of the shares entitled to be voted at the meeting are attending the meeting themselves or by proxy. Consequently, the quorum requirements in the company's bylaws are met. A copy of the scrutineer's report on attendance will be filed with the records of the meeting. Before we proceed to the passing of resolutions, I would like to briefly comment on the voting procedures. Each shareholder entitled to vote at today's meeting is entitled to one vote per subordinate voting share held by them with respect to all matters to come before the meeting. For the purposes of the meeting today, voting on all matters to be conducted by a single electronic ballot. Registered shareholders and duly appointed proxy holders will be asked to vote on each business item after the presentation of all business items. When you are asked to vote, you will receive a message on the Lumi virtual interface requesting you to register your votes. You only have a certain amount of time to do so. After you have registered your votes for all business items of today's meeting, the transfer agent will compile the votes in respect of each business item. To further expedite the formal part of the meeting, Mr. Jean-Paul Chauvet, as a shareholder of the company, has agreed to move all motions on the formal agenda today in advance. And Mr. Dan Micak, a shareholder of the company, has agreed to second the motions on the formal agenda today in advance. As such, all motions of today's formal agenda have been duly moved and seconded in advance to ensure the efficient conduct of the meeting. I now declare that this meeting was properly called and duly constituted for the transaction of business. The first item of business in the presentation of the company's consolidated financial statements for the fiscal year ended March 31, 2022, as well as the auditor's report thereon. These financial statements and the auditor's report were included in the company's annual report and were made to be able to shareholders under our profiles on SEDAR and EDGAR on May 19, 2022, and on TSX online platform on or about July 5, 2022. I would ask the secretary to include in the minutes of this meeting the consolidated financial statements for the fiscal year ended March 31, 2022, and the auditor's report thereon. Please note that we will entertain any questions with respect to the financial statements in the general question period only. We now move to the next item on today's agenda. The second matter to be acted upon is the election of Lightspeed's directors. The Board of Directors has determined the number of directors to be elected at this meeting shall be 8. The term of office of the directors to be elected at this meeting begins today, and shall continue until the next annual meeting of shareholders or until such time as their successors have been duly elected or appointed. The management information circular contains information on all 8 nominees recommended for election as directors. All of the nominees are currently members of our Board of Directors. Registered shareholders and duly appointed proxy holders may vote for each proposed director nominee individually. Each of the following persons for election has been duly nominated to act as a director of the company until the next annual meeting of shareholders: Patrick Pichette, Dale Murray, Jean-Paul Chauvet, Merline Saintil, Nathalie Gaveau, Paul McFeeters, Rob Williams and myself, Dax Dasilva. The affirmative vote required for electing as directors each of the proposed nominees is a simple majority of the votes cast at the meeting. Each of the persons nominated has confirmed that he or she is prepared to serve as a director if elected by the shareholders, and each of the nominees qualifies under the provisions of the Canada Business Corporations Act and the bylaws of the company to serve as a director. The company has not received notice from any shareholder or other nominations of persons for election as a director of Lightspeed pursuant to the bylaw of the company relating to advanced nominations of directors. Notice of any such nominations was required to be delivered to the company on or before June 25, 2022, being 40 days prior to this meeting. As such, I hereby declare the nominations closed. As mentioned at the beginning of this meeting, voting today will be conducted by a single electronic ballot. We will, therefore, continue with the next item of business, and you will be prompted to vote on the election of each director after all items of business on today's agenda have been presented. The third matter to be acted upon is the appointment of the auditors of the company for the ensuing year and authorizing the directors of the company to fix the remuneration of the auditors. The Audit Committee and the Board of Directors recommend the reappointment of our incumbent auditors, PricewaterhouseCoopers LLP as the auditors of the company for the ensuing year and has been duly moved that PricewaterhouseCoopers LLP be appointed auditors of the company until the next annual meeting of shareholders and that the Board of Directors be authorized to fix their remuneration. As mentioned at the beginning of this meeting, voting today will be conducted by a single electronic ballot. We will, therefore, continue with the next item of business. The fourth matter to be acted upon is the nonbinding advisory resolution on the company's approach to executive compensation. The company is committed to ensuring that the shareholders fully understand the objectives, philosophy and principles that the Board has applied in its approach to executive compensation decisions and to providing shareholders with executive compensation disclosure that is clear and comprehensive. The full text of the resolution to be adopted by the shareholders of the company is set forth on Page 21 of the management information circular. As set owned in the management information circular, in order for the resolution to be passed, they must be approved by at least a majority of the votes cast by the shareholders attending this meeting or represented by proxy. Since this is an advisory note, results will not be binding on the Board or the Compensation, Nominating and Governance Committee. However, the Board and the Compensation, Nominating and Governance Committee will take into account the outcome of the advisory vote when considering the future executive compensation decisions. It has been duly moved at the advisory nonbinding resolution on the company's approach to executive compensation be approved. As mentioned at the beginning of this meeting, voting today will be conducted by a single electronic ballot. We will, therefore, continue with the next item of business. The fifth and last matter to be acted upon is the approval of the adoption of the forum selection bylaw of the company. The full text of the resolution of shareholders and bylaw to be adopted is set forth on Schedule B of the management information circular, and the rationale for such adoption by the Board is set forth on Page 22 of the management information circular. As set out in the management information circular, in order for the resolution to be passed, it must be approved by at least a majority of the votes cast by the shareholders attending this meeting or represented by proxy. If so approved, the forum selection bylaw will continue to be effective from the date of its adoption by the Board. It has been duly moved that the resolution approved -- approving the adoption of the forum selection bylaw be approved. As mentioned, voting today will be conducted by a single electronic ballot. We will now proceed with voting on today's business items being the election of 8 directors to sit on the Board of Directors of the company, the appointment of the auditors of the company, the nonbinding advisory resolution on the company's approach to executive compensation and the approval of the forum selection bylaw of the company. You will now be prompted to register your vote in respect of these decision items. [Operator Instructions] We will wait a few moments for the completion of the electronic ballots and then move on with the remainder of the meeting. We will provide registered shareholders and duly appointed proxy holders approximately 1 minute to complete the electronic ballots. Once voting is completed, I would ask that the scrutineers compile the report regarding the results of voting on all business matters, we will reconvene in a few moments with the scrutineers' report and the voting results. [Voting]

Thank you for waiting. I have received the scrutineers report and confirm the following. Each of the 8 nominees have been elected as directors of the company to serve until the next annual meeting of shareholders or until their successors are elected or appointed. The appointment of PricewaterhouseCoopers LLP as the auditors of the company has been approved, and the Board of Directors has been authorized to fix their remuneration. The nonbinding advisory resolution on the company's approach to executive compensation has been approved. The resolution of shareholders of the company approving the adoption of the forum selection bylaw has been approved. The formal items of business as set out in the notice meeting have now been dealt with. With the consent of the meeting, as there is no further business to come before it, I will hereby declare the formal portion of the meeting to be concluded. At this point, management will give a brief presentation, and then we would be happy to answer any questions registered shareholders or duly appointed proxy holders may have. I will invite the Chief Executive Officer, Jean-Paul Chauvet, to give the presentation.

Thank you, Dax. Good morning, everyone, and thank you for joining us today for our annual shareholder meeting. I am JP Chauvet, Lightspeed's Chief Executive Officer, and I want to take you through a brief presentation that will outline our strategy over the next few years and the progress we made in the last year in executing on that strategy. Before we begin, I wanted to highlight Lightspeed's mission. We are here to help entrepreneurs, creators, chefs and artists build their small but meaningful businesses, businesses that are in the fabric of the communities they serve. We are here to make the complex simple to remove the mundane activities that tax our customers' time and energy to provide financial support where we can and to bring the power of technology once reserved for only very large players to serve the small businesses that are so crucial to the vitality of our cities, towns and neighborhoods. This is the mission that motivates myself and the thousands of employees at Lightspeed to come to work every day and give our best for our customers and shareholders. And it is a mission that I am very proud of. Last year at our AGM, we highlighted where we want to take this organization. Today, Lightspeed is still primarily focused on creating value for our merchant customers. Our software offerings allow them to better manage their inventory, analyze their business, accept payments, form stronger ties with the customers and advance capital to help grow their businesses. But as we advance, we believe our organization can extend its value proposition beyond our merchants to include suppliers and consumers. SMB merchants and their suppliers still live in a largely pre-digital era, where manual workflows are time-consuming, inefficient and, in many cases, ineffective. Merchants do not have visibility into their suppliers' inventory levels, discovering new brands is left at trade shows, and resellers and suppliers have little to no visibility on what is occurring at their customers' locations. All of this leads to too much or too little inventory in retail outlets, consumers that are unhappy with their retail experience, too much discounting in physical retail and missed opportunity to maximize sales and profitability for both the brand and retailer. Lightspeed's aim is to build a network that allows retailers to have much better insights and control over their inventory and ordering capabilities that allow brands to understand what is selling in the retail channel so that you can better supply those channels and to give consumers the products they are looking for when they enter a retail location. This is an ambitious goal, but we believe we have the people, technology and assets necessary to make this goal a reality. Today, I want to discuss 4 pillars of reaching that goal: product, payments, platform and profitability. Firstly, on product. Lightspeed has pursued an ambitious M&A strategy, putting together some of the best companies and people in the industry. I want to remind everyone of our strategy here. It has never been our intention to run multiple platforms and brands. Every acquisition is being integrated into 2 core offerings: Lightspeed Retail and Lightspeed Restaurant. I'm happy to report that much of the work here is done. Last year, Lightspeed launched Lightspeed Restaurant, integrating best-of-breed offerings from Upserve, Kounta, iKentoo and our own offering. Lightspeed Restaurant with very limited exceptions is the only offering we sell in EMEA and will soon be the only product offered globally. Earlier this year, we launched Lightspeed Retail, integrating the best aspects of Vend, Ecwid, ShopKeep and Lightspeed's traditional offering into an industry-leading retail platform. By the end of our fiscal year, we expect to be in market with only 2 core offerings, Lightspeed Retail and Lightspeed Restaurant. I'm very proud of the products we have launched into the markets, and I truly believe that our offerings have never offered more value to our customers. In my opinion, Lightspeed has significantly broadened the gap with our closest competitors. Secondly, payments. We launched Lightspeed Payments in our fiscal 2019 and it has been a huge success. In this quarter, we just reported transaction-based revenues was the majority of our revenue. Payments allows us to drive more gross margin dollar for our customer base, greatly enhancing their lifetime value. As we stand here today, the vast majority of our customer locations, excluding Ecwid, now have access to a Lightspeed Payments offering. A year ago, less than half of our customer base had this access. We have expanded Lightspeed Payments globally, entering markets such as France, the U.K., Germany and Switzerland and by vertical, making it available in retail, hospitality and most recently, golf. We are one of the very few companies that offers a single payment service off-line and online, card-present and nonpresent covering a global footprint. I'm extremely proud of our teams that have brought these capabilities together. Payments allows us to deliver greater value for our customers as an integrated software payments offering allows them to save time and gain far better insight into their business. Going forward, we plan to put as many of our customers on our payments platform as possible, and eventually allow our merchant customers to also pay their suppliers using Lightspeed Payments. Thirdly, platform. A few weeks ago, we announced the initial availability of Lightspeed B2B in 3 key North American verticals: luxury, outdoors and sporting goods. By integrating our industry-leading POS with our new order acquisition, we will provide merchants with a direct digital connection to their suppliers. Our goal is to give retailers unprecedented visibility into their suppliers' inventory levels and to make ordering easier than ever. And for our suppliers, our goal is to provide them with sell-through information from our retailer network. Although we are still early on this journey and there are many more milestones on our product road map, Lightspeed B2B is our initial and very promising first step towards our vision of bringing suppliers, merchants and consumers closer together. Finally, profitability. As a young ambitious company, we have been investing heavily in growing our business, and we have seen those investments bear fruit. But as we mature and scale our business, profitability becomes more and more important for both ourselves and our shareholders. In the end, profitability is what defines a successful business. The initiatives I've just touched on all contribute to our profitability. Consolidating our acquisitions into 2 core offerings, reduces our development and support costs. Expanding payments adoption greatly increases our customers' unit economics and rolling out our supplier network should help improve our ability to win new customers and lower our sales and marketing expenses in the short term and provide new revenue streams in the long term. Profitability is, we believe, insight and we expect to be adjusted EBITDA breakeven or better in our next fiscal year. The last 2 years proved very challenging as a global pandemic threatened the very survival of many of our customers. Now a deteriorating macroeconomic environment is posing new challenges. There will always be challenges, but Lightspeed will thrive to continue to help our customers prosper by enabling them with a technology that makes them more efficient more successful and more satisfied as the owners and operators of SMBs. We believe the world needs SMBs to add color and character to our cities and neighborhoods. And despite the challenges we face, I am confident in our ability to execute and optimistic about the future. And now with that, I'll throw it back to Dax and we'll open up the line for questions.

Thank you, JP. We will now answer any questions registered shareholders or duly appointed proxy holders may have. For each question we answer, we will summarize the question and read out loud the name of the person who asked such question, and if applicable, the entity such person represents. We would like to remind you that questions which were already answered or that are redundant may not be answered. [Operator Instructions] We will now give attendees a brief moment to type in their questions. There being no questions, we are now concluding the question-and-answer portion of this meeting. On behalf of management, our Board of Directors and our employees, I would like to take this opportunity to thank everyone for being here today. I would also like to thank all of our shareholders for their commitment and continued support. We look forward to next year's meeting.