Lightspeed POS Is Dining on Its Rivals

Churchill once said, “Don’t let a crisis go to waste.” It’s a phrase that’s been dusted off in 2020. And the Canadian POS player Lightspeed has taken it to heart, in particular when applied to the battered restaurant space.

With its stock price high, and assets relatively cheap, Lightspeed has made two acquisitions designed to upgrade its technology and expand its POS footprint. This week (a busy one for acquisitions and funding announcements), Lightspeed announced it will acquire restaurant-management solution Upserve in a $430 million cash and stock deal.  This deal comes hot on the heels of Lightspeed’s acquisition of rival POS ShopKeep for $440 million. The latter deal closed on November 25.

Lightspeed, founded in 2005, is focused on three major verticals — golf, restaurants, and retail. It’s done well through the pandemic by focusing on offering tools that help clients adapt to the new normal. For example, helping restaurants adapt with order ahead technology or retailers with eCommerce.

A Good Time to Buy

It’s notable that both the ShopKeep and Upserve deal were cash and stock deals, with both being much heavier on stock than cash. The pandemic has been good to Lightspeed’s share price. The stock fell 10.6% through January and February. Then, boom, shares are up 134% since February 28. The Upserve deal involved $123 million in net cash, with the remaining $307 million in stock. ShopKeep got a similar deal, earning $145.2 million in cash and $295 million in stock.

The rationale for the ShopKeep acquisition was pretty straightforward. It eliminates a rival and adds 20,000 locations, bringing Lightspeed’s total locations served to 100,000 worldwide.

And as noted, it’s a good time to scoop up rivals if you can. Lightspeed’s President & Corporate Director Jean-Paul Chauvet Lightspeed POS Inc. said as much on an investor call discussing the company’s recent acquisitions.

“Obviously, it’s been a bit choppy for restaurants…the GTV of Upserve has been a bit choppy,” he said. “But that is to our advantage, and that’s why we’ve managed to make these transactions at a good value. And we all know that it’s going to come back to normal after the pandemic, and that’s where we’re hoping that we’re going to see an accelerator.”

So Why Upserve?

Upserve, founded in 2009 as Swipely, is more than just a POS. It’s an all-in-one restaurant management system that helps restaurants manage staff and handle marketing, bookings, and other tasks. This deal adds another 7,000 locations to Lightspeed’s roster.

Upserve generated $40 million in the 12 months ending September 30. And $8 billion in gross transaction value (GTV) passed through its platform over the sale time span. So the deal amounts to 10X last 12 months’ revenue.

Lightspeed’s leadership team says Upserve brings more than new locations into the fold. The companies’ leaders tout their complementary technologies, with the goal of creating a platform that will power restaurants as they are likely to be configured in a post-pandemic world. Lightspeed seems particularly keen on acquiring Upserve’s analytics capabilities.

“I think what’s very exciting to us is, actually, there’s a lot of complementarity between what we’re offering and what they are,” Chauvet said. “The good news here is, this is not Jupiter and Mars. We’re on the same planet…what’s very exciting about this is when you combine our Lightspeed K Series with their analytics engine and their modules, you really have probably the best platform out there.”

In the deal announcement, Upserve’s CEO said the following.  “Through its analytics-based POS and restaurant management solutions, Upserve has been delivering actionable insights to restaurateurs for over a decade. Lightspeed is quickly emerging as a world-leading commerce platform for SMBs and partnering with them to deliver data-based insights through a single digital hub was a natural choice.”

Poised for a Rebound

As Chauvet noted, Lightspeed appears to be positioning itself to clean up once the pandemic is in the rearview mirror. And the company, which operates in 100 countries, has gained confidence in this from experiences in other markets.

“For us, really, what’s essential at this stage is we got to get prepared for after COVID where we’ve seen from our Australian businesses that once COVID leaves, there’s a huge adoption of systems like ours,” Chauvet noted. “So for us, it’s just consolidation to have an even stronger workforce, stronger sales force, and a stronger product at the end of the day.”

Despite the pandemic, or perhaps because of it, investors are making bets on who will emerge victorious in the restaurant tech space once the crowds return. As a case in point, we reported last week that Lightspeed rival Toast has raised another $40 million and has seen its valuation surge this year.

Toast Rising Against Pandemic Headwinds

Will Lightspeed stop here or will it lean in and make more deals? We imagine it will look around for other opportunities to use its stock as currency and further cull the herd in advance of a restaurant recovery that, while inevitable, remains uncertain. When will the tables be fully booked again? And when they are, how will the dining experience have changed permanently? The restaurant tech firm that gets the latter questions right, in particular, and has the toolset to support it, will be in good stead.

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