Lightspeed Commerce beat expectations with its first-quarter earnings Thursday, and the company expects its new unified payments offering to put it on track to be profitable in fiscal 2024. 

Thursday’s earnings were the first since the Montreal-based fintech launched its unified payments product at the end of March. It combines the point-of-sale hardware and software for merchants like restaurants, on which the company originally built its business, with its payments service, an embedded payment processor that lets merchants accept various payments directly within their point-of-sale systems. Merchants that continue to use another payment service, rather than Lightspeed’s consolidated offering, will have to pay a third-party processing fee.

“This year is a year of profitability for Lightspeed, and … the success of unified payments will get us there without any layoffs or without doing anything unnatural for the business,” JP Chauvet told The Logic in an interview.

Here’s what you need to know:

By the numbers: Lightspeed exceeded its total revenue outlook of US$195 million to US$200 million, growing 20 per cent year over year to reach US$209.01 million in its first quarter, which ended June 30. 

The company expects revenue to further increase in its second quarter, landing between US$210 million to US$215 million. 

For fiscal 2024, Lightspeed’s plans to break even or better, expecting total revenue of roughly US$875 million to US$900 million. 

Some other key numbers from Thursday’s earnings:

• The company’s quarterly net loss narrowed to US$48.7 million, compared with a net loss of US$100.8 million a year ago. 
• Transaction-based revenue—Lightspeed’s cut from transactions between its merchants and their customers—climbed 32 per cent to US$121 million.
• Subscription revenue—the fees it earns from customers paying to use its software—increased seven per cent to US$78.7 million.

Lightspeed’s shares on the Toronto Stock Exchange climbed five per cent after the morning’s earnings call. 

Time will tell: “Everybody wins” when it comes to unified payments, Chauvet told The Logic. Merchants using Lightspeed’s platform get money from their customers’ transactions deposited faster, and can access consolidated reports from point-of-sale and payments systems, while servers in restaurants can be more productive by using Lightspeed’s payments software on their mobile devices to settle their customers’ bills, rather than relying on shared payments terminals—something legacy payment companies typically don’t offer.

For Lightspeed, revenue per user doubles when they get software users to also buy into Payments, he added.

One key concern for the executive team, however, is the timing of the unified payments rollout, since not all of Lightspeed’s merchants have opted to abandon their existing payments platforms—the likes of Moneris, First Data or Worldpay—for Lightspeed’s payments software.

Martin Toner, who covers Lightspeed as a sell-side analyst and is a managing director at ATB Capital Markets, told The Logic that customers representing 20 per cent of the company’s gross transaction value use payments. 

“There’s still a large number of customers that have not taken any action,” chief financial officer Asha Bakshani said on Thursday’s earnings call. In the coming months, those merchants will start seeing new transaction costs on their monthly statements, which Lightspeed hopes will act as a “catalyst for action.” 

Larger customers, which represent the bulk of Lightspeed’s gross transaction value, may take longer than two to three months to switch payment systems, Chauvet added in the call. Lightspeed is prepared to wait. On the company’s February earnings call, Chauvet told analysts that Lightspeed is “hyper-focused” on creating value for customers with over $500,000 in annual gross transaction volume.

While the company has so far only rolled out unified payments in North America, Chauvet told The Logic, after this summer it will launch the offering in Europe, Australia and New Zealand. 

On Thursday’s earnings call, Chauvet said that while the company had been concerned unified payments would increase its churn rate—the rate at which it loses customers—it has so far remained as expected.

Toner said he believes the company’s unified payments offering has a strong value proposition for its merchants, and that they will choose Lightspeed’s software and payments over the alternatives.

“Although the signs are promising, it is still too early to determine the full impact of our unified payments efforts on our fiscal year,” Bakshani said. 

Divided attention: Under normal circumstances, Lightspeed would be pushing even harder on Lightspeed Capital, the growing merchant cash-advance service on which the company is also betting. On Thursday, Bakshani said the team is being “conservative on the ramp” because of the current macroeconomic environment. 

While Lightspeed has dedicated a new team of 10 to 15 people to push the capital offering, Bakshani said; the company’s sales teams had been distracted from promoting Lightspeed Capital this quarter as their full attention was on unified payments.

“We definitely should see that pick back up in the back half of the year when unified payments is behind us,” Bakshani said.