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  "documentTitle": "Lightspeed Commerce, Inc. (LSPD)",
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  "authorName": "Spruce Point Capital Management",
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  "presentationDate": "2021-09-29 00:00:00",
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  "notes": "The slide uses a vertical arrow structure to categorize evidence into pre-IPO inflation and post-IPO deterioration.",
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      "kind": "callout",
      "text": "Evidence of Slowing (And Declining) Organic Growth And Business Deterioration Through IPO",
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      "text": "Evidence Shows Lightspeed Massively Inflated Its Business Pre-IPO",
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      "text": "We see 60%-80% downside risk to ($22.50 - $45.00 per share)",
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      "text": "After its IPO, LSPD laid out its organic growth plan and listed “attracting new merchants” as its first objective in its year end conference call. On the following call it reported 2,000 net new merchants on its system. Thereafter, LSPD stopped disclosing net new merchant adds and it began a string of acquisitions. Hardware margins have recently turned negative and deferred revenue quality has deteriorated. Hardware sales, formerly a profit center, is now a cost center as competition gives it away for free. LSPD used to get upfront payments from customers for long-term contracts and reported long-term deferred revenue. Now, it charges monthly payments and long-term deferred revenue is declining. A former employee told us definitively LSPD’s ARPU has been declining, but management claims it is growing. LSPD initially told investors that operating cash flow was the best way to measure its growth. However, it quickly suspended its cash flow guidance and didn’t promptly call out the change to investors. LSPD’s income statement disclosures make it difficult to determine organic growth. However, balance sheet allocation from recent acquisitions gives us some insights: In Q3 2021, LSPD shifted towards larger acquisitions: ShopKeep ($545m), Upserve ($412m), and Vend ($372m). By backing out each acquisition’s contributions to deferred revenue and receivables, we find evidence of double digit organic decline. This contrasts with LSPD’s claims of 42% organic software and payments revenue growth in its core business",
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      "text": "We find irrefutable evidence that LSPD overstated its customer count by 85%, while GTV, a measure of payment volume through its platform was overstated by at least 10%. Using the Wayback Machine to scrape customer and GTV counts suggests that LSPD’s business was already stalling pre-IPO. LSPD has shifted its discussion from customers to locations: GTV overstatement identified as early as 2014 and revisions were made pre-IPO, reducing it by ~$1.5 billion. A former employee told us to be careful of GTV as a metric, and that it is “smoke and mirrors”. Customer overstatement from 50k to 27k verified by two methods, using GTV per customer and ARPU per customer. At its IPO, LSPD’s prospectus promoted a Total Addressable Market (TAM) of $113bn to grow to $542bn: Yet, after $2.5bn spent on acquisitions since its IPO, its recent prospectus showed a current TAM of just $16 billion (85% less). A compensation clawback policy was formally adopted at IPO for material misstatement of financials",
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      "text": "share price: 60%-80%",
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      "text": "After conducting a forensic financial and accounting review, Spruce Point believes shares of Lightspeed Commerce Inc. (TSX/NYSE: LSPD), a cash degenerative North American roll-up of point-of-sale commerce solutions, has covered up massive inflation of its Total Addressable Market (TAM), customer counts, and Gross Transaction Volume (GTV). In addition, Spruce Point believes LSPD is covering up increasing competitive pressures and double digit organic declines in its business with a flurry of acquisitions. Given numerous changes to the definition of its Average Revenue Per User (ARPU), its resilience to revenue loss and improvement in DSOs during peak COVID-19 while its restaurant and retail clients were pressured, and subtle accounting changes, we question LSPD’s revenue quality. Initially it guided investors to its cash from operations (CFO) as the best way to measure its performance, and then quietly suspended guidance. Based on employee interviews, we believe its ARPU has actually been declining, not all acquisitions have been successful, and it appears LSPD is gaming its goodwill testing to avoid impairment. LSPD baits investors with its payments solution, but we believe it has not been transparent about competitive pressures and material margin decline. Now a $17 billion company, we believe LSPD is crowding into Shopify’s space, and will be forced to compete head-to-head with it, and new entrants such as Amazon. We believe LSPD will lose the battle and its astronomical 23x 2022E sales multiple will contract. We see 60%-80% downside risk to ($22.50 - $45.00 per share)",
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      "text": "Spruce Point Estimates 60% - 80% Downside Risk To Lightspeed Commerce Inc (LSPD) Share Price",
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