Lightspeed is ‘spending a fortune on hiring’ as tech sector cuts thousands

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The world’s biggest digital technology companies are in the midst of laying off tens of thousands of people, but Montreal’s Lightspeed Commerce Inc., one of Canada’s leading tech companies, doesn’t plan to join the bloodletting.

Instead, chief executive Jean Paul Chauvet said he’ll pick up the talented employees that companies such as Inc., Meta Platforms Inc., Shopify Inc. and Twitter Inc. have left behind.

“We have 350 open positions, and if we could hire them today, we would hire them today,” Chauvet said during a roundtable with journalists this week at the company’s headquarters in Montreal. “It’s the number one priority right now, in operations.”

It’s been a rough year for big tech. Many of those digitally oriented companies experienced an e-commerce bump from the pandemic, but it fizzled once in-person retail opened up., a layoff tracker, reports that 122,000 employees across 800 tech companies have been let go this year as companies try to figure out how to be profitable again. Shopify laid off 1,000 employees in July. Twitter let go 3,700. Inc. and Meta plan to lay off 10,000 and 11,000 respectively.

Not Lightspeed, which provides point-of-sale and e-commerce software to hotels and retailers. The company isn’t feeling the strain as acutely as “pure digital” players such as Meta, said Chauvet, because Lightspeed serves brick-and-mortar companies.

“We’re spending a fortune on hiring,” said Chauvet. “Our recruiters spend their time saying: ‘Yeah! Facebook just downsized!’ … Let’s go and try and recruit the best people there.”

Unappreciated stock

Pouring money into hiring may seem a counterintuitive choice for Lightspeed, whose share price is down about 60 per cent this year.

But Chauvet said his company is being unfairly punished by an indiscriminate move away from tech stocks, as they look like riskier bets amid higher interest rates and worries about a recession. Meta and Shopify are both down about 70 per cent from January, and the tech-heavy Nasdaq composite index is down 30 per cent on the year.

Lightspeed’s share price is “a short-term reflection of a market where interest rates are through the roof and yields are very far from what they were,” said Chauvet, and “is no way a reflection of our performance.”

Thanos Moschopoulos, an analyst at BMO Capital Markets who follows Lightspeed, said Chauvet might have a point.

“I’d say there is a disconnect in the performance of the business and the stock,” said Moschopoulos, adding that he expects Lightspeed’s stock to outperform the market over the next year. “They’re in a competitive space. But I think the market isn’t fully appreciating the strength of their competitive position.”

Chauvet, who replaced Lightspeed founder Dax Dasilva as CEO in February, and president Jean-David Saint-Martin said they believe that if they stick to their three-part plan — consolidating their acquisitions under one cohesive brand, implementing their payments business and narrowing their focus to established small- and medium-sized businesses — profitability will naturally follow.

“Certainly I agree with that,” said Moschopoulos. “I think their path to profitability is very credible,” he added, highlighting the company’s plan to prioritize its most profitable customers. At the roundtable, Chauvet said Lightspeed will devote most of its resources to larger, more established retailers, which account for the vast majority of the US$80 billion in transactions the company’s clients process annually.

“Companies out there are taking different routes to (reach profitability), like, you know, laying off cohorts of employees,” said St-Martin. “We can get to our path to profitability and beyond by just continuing to execute on our plan.”

Good time to be a ‘Lightspeeder’

Technology companies such as Meta are choosing to prepare for a recession by conducting mass layoffs, and expressing regret for overreacting to pandemic-era signals as they do so.

“I view layoffs as a last resort,” Meta CEO Mark Zuckerberg wrote in a message to employees. “At the start of COVID, the world rapidly moved online and the surge of e-commerce led to outsized revenue growth. Many people predicted this would be a permanent acceleration that would continue even after the pandemic ended.”

Zuckerberg added, “I did too, so I made the decision to significantly increase our investments. Unfortunately, this did not play out the way I expected.” He added that decreased ad revenue and the impending recession have resulted in lower revenues.

Meta wasn’t the only company to misjudge the shift to e-commerce. Shopify, one of Lightspeed’s main competitors, made the same ill-fated gamble. “We bet that the channel mix — the share of dollars that travel through e-commerce rather than physical retail — would permanently leap ahead by five or even 10 years,” Shopify chief executive Tobi Lütke wrote in a message to staff. “Ultimately, placing this bet was my call to make and I got this wrong.”

As a result, the industry has lost much of its swagger. Gone are the days where tech staff “thought they could find jobs everywhere, anywhere,” said Chauvet. Now, they’re asking themselves, “Do I have job security? Am I with an employer that’s going to keep me? And I think it’s reassuring for Lightspeeders to see that we are doing so well in a market that’s having difficulties,” he said.

The company posted a $79.9-million loss last quarter, but Chauvet said Lightspeed is “extremely well capitalized,” with $860 million left in the bank. “We burned, in cash, last quarter, $40 million. We could go on at this rate for many, many years before we are in trouble.”

Lightspeed expects a spike in retail revenue around Christmas, but leaders aren’t getting their hopes up too high. “This market is going to be struggling, especially for tech. The cost of money is going to go up, investment rounds are going to be much tougher,” said Chauvet.

Chauvet added that the complexity of the operating environment actually bodes well for Lightspeed, because its products reduce complexity, and will be increasingly in demand as the market becomes more complicated. Retailers are battling inflation, staff shortages and a possible recession, he said, and “these factors are really favorable to Lightspeed.”

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