The Canadian Investor - Should I invest in Lightspeed or Algonquin Power?

Episode Date: July 26, 2021

In this episode of the Canadian Investor Podcast, we reviewed the two stocks that recently won our twitter poll on @cdn_investing. Algonquin Power and Utility and Lightspeed POS. Hope you enjoy our take on those two canadian companies! Tickers of stocks discussed: AQN.TO, LSPD.TO  Getstockmarket.com Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital See omnystudio.com/listener for privacy information.

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A very long awaited episode today. We are going to be talking about two Canadian stocks that are both actually dual listed on the TSX and the New York Stock Exchange. I'm going to talk about Algonquin Power. Simon's going to talk about Lightspeed, but it's going to be an open conversation. We're going to give our ideas, the investment thesis around them, and then we're going to be put on the spot and pick one to hold for the next five, 10 years. So Simon, you are doing Lightspeed. Before we do that, what was your general feel around this company? This is now over 10 billion in market cap and has been one of the more successful tech stories on the TSX as of late. Yeah, my general feel is that really intriguing company,

definitely interesting, very high growth. And if I can sum it up, there's a lot of potential growth ahead, a lot of pulled forward growth with last year and the pandemic. And again, we're looking at some pretty rich valuations. Yeah. I mean, we're talking about 60 plus times sales, right? Yeah. Around there or 50, but definitely around that number.

I have it in my notes. I'll go over that a bit later. So expensive. Okay. Yeah, you know what? This is also a good yin and yang of two different types of companies. They serve very different purposes in an investment portfolio, if you will. One is some high growth, secular trend, technology business.

And another one is a utility that is boring, but pays a nice, fat, juicy dividend that grows it every year and has a really stable cash flow profile over time, which is Algonquin Power. So I'll kick it off with Algonquin. So just to preface this, it is nice to be able to talk about utilities finally. For those who know me well on the podcast, I've been working at a power utility in Ontario for the past four years. Now that I'm full-time with Stratosphere, I can talk about utilities again because it just didn't really feel right to talk about competitors on the podcast while I was doing my day job. But I'm a free man now, so it's nice

to be able to talk about some of these renewable companies. So just with a general feel with Algonquin Power, it's great for dividend investors. I sold it out of my personal account because I have a different portfolio goal than someone else who might hold this. And that's what we have to try to remember as investors is we're not all playing the same game. Like for me, I'm trying to own the best companies I possibly can pay a decent price and hold them for decades. Someone who's looking for income in retirement, you know, is able to buy

something like Algonquin Power to get a 4% dividend yield. And the dividends actually growing in the business is actually growing the top line. Now, that's actually pretty rare to find. And I think that's why people are interested in Algonquin Power. And that's why it's on the show line. Now that's actually pretty rare to find. And I think that's why people are interested in Algonquin Power and that's why it's on the show today. So Algonquin Power has averaged a five-year revenue growth rate of 15.17%. It pays a 4.34% dividend. So again, anything over 4%, you're looking at a juicy dividend yield. They've grown that dividend at 9.29% on the average of five years, which is in line with management's guidance for about 10%. I think what's happened is they're hitting that 10%, but there's some dilution, which I'm going

to talk about. So that's on a dividend per share basis, you're getting that 9.29%. on a dividend per share basis, you're getting that 9.29%. The PE ratio is just under 10 on a trailing earnings, and it has a debt to equity of 1.25. Now, with most companies, anything over one is typically a high debt to equity. For a utility, it's actually quite conservative. So their balance sheet is quite conservative, 1.25. EBITDA margins are great on utilities. They just are. They're doing transmission. All their costs are in the back end on CapEx.

You're going to see that in their free cash flow. They did $1.83 billion last 12 months in revenue. And the stock is $11.6 billion in market cap. It's been a good stock to own. It's up 63% over the last five years. It's been a steady compounder. You've got your nice dividend yield and you've got great yield on cost over time. So those are the basics. And now I'm going to go into the profile of the business. Again, I'm taking this from a long report written on Stratosphere. I'm going to try not to tell you the whole thing because you'll still be here an hour later. So I'm going to try not to do that,

but give you an insight of how the business works, how utilities work, and what are their outlook for the future. So Algonquin owns and operates generation, distribution, and transmission utility assets. Now, you might find Algonquin primarily in dividend portfolios. There is actually a lot of growth opportunities for investors. You've seen that 15% top line revenue growth is pretty impressive for a utility. They're making good acquisitions. They're going into renewables, but I'll get into that. So it's renewable business is seeing lots of secular tailwinds. They've partnered with some companies to try to decarbonize their footprint and the dividend grows at about 10% a year. Okay, so the business is structured into two groups. There is the renewable energy group and the regulated services

group. The regulated services group, or the distribution group, is moving electricity, natural gas, and water through their transmission systems across United States, Canada, Chile, and Bermuda. That is 80% of the business. So think of distribution lines of power, about 80% of the business. The other 20% of the business is generation. So hydroelectric power assets, wind, solar, thermal. And they're really trying to grow this segment over time because the demand for renewable power is strong. So there's two groups, 80-20 revenue split. They do about 88% of their business in the US, 9% in Canada, and 3% internationally. So AQN is primarily a US business, even though they are operated and owned in Ontario. Okay, so let's talk about some

of the competitive advantages that utilities have. I think of utilities as a bunch of mini monopolies. They have these long-term contracts, and the average life of a contract is about 13 years. Now, they have this large footprint, and they recently surpassed 1 million customer connections of their distribution business. The growth on that is actually impressive. It was about 565,000 customer connections in 2016, and then over 1,089,000 in 2020. Now, another competitive advantage is the opposite of the businesses I'm typically looking

for, which is very capital intensive. The competitive advantage of a utility is that they're spending billions in capex. Utilities are trying to spend lots of capex. This is different than traditional businesses. With spending lots of capex, it helps with their regulated rate case when working on how much they should be compensated per megawatt hour with the independent electricity system operators. So utilities will talk about, we are spending X billion in capex as a number that they are really trying to push to investors. Other industries, they're talking about, you know, we're getting our CapEx way down. We have less of CapEx expenditure.

Investors are going to get more free cash flow. So this is different, right? They're different objectives, different goalposts for different industries. Now the renewables business. Algonquin is positioned nicely to benefit from this transition from fossil fuels to renewables. to try to decarbonize their footprint. They've also had deals of a 500 megawatt of clean electricity deal with Chevron. So they're partnering with traditional fossil fuels and they're looking to spend 9.4 billion in CapEx over the next five years on clean renewable energy opportunities, which is about 3,400 megawatts they have in the pipeline. energy opportunities, which is about 3,400 megawatts they have in the pipeline. Now, the dividend. They pay about a 43% dividend payout ratio, and that's been creeping up from 2017. It was under 30. Now, what I'm seeing is that the growth of earnings has slowed down,

but they continue to raise the dividend. So the 43% dividend payout ratio is low. It's low enough for a stable utility, but over time, I mean, you want to see more earnings growth and catch up with how much they're raising it. All right, so I mentioned dilution before. I mentioned dilution before. Between 2015 and 2020, Algonquin has issued $2.2 billion worth of equity. They just closed another $1 billion to front load this 9.4 capital program. So they are diluting shares. There's just no way to put around it. They are diluting shares. I used to work in renewable energy. I don't understand why they're issuing so much equity when they can put out 20-year green bonds to ESG investors at like 2.1%, 2.5% or better.

And at a 1.25 debt to equity, I would be levering up the balance sheet if I was the CFO, I would be levering up the balance sheet if I was the CFO. Like straight up, I would be. So if you're looking for dividend yield, you're going to get a little growth, which is hard to find. You're going to get dividend growth, which is hard to find. But overall, I do like Brookfield Renewable more. It's a pure play renewables power, pure play renewable power business. And as I mentioned many times on this podcast, I just prefer to own Brookfield Asset Management, BAM,

instead of getting into the subsidiaries. But everyone has their preference. Simon likes BEP. Overall, I mean, it's a utility. It's a rock solid utility. It's a good business. I do like other ones more. Yeah. And one of the things you mentioned too, because they're very capital intensive, it also makes it a bit of a barrier to entry just because of the sheer amount of capital required. And obviously the fact that they're so well regulated as well. So it could be a deterrent for random billionaires or other businesses to get in. And what I wanted to ask is those long-term contracts, are they indexed? They are called power purchase agreements, and they will be indexed to certain rate cases. indexed to certain rate cases. So there'll be like a rate case set for a specific utility with the IESO, the independent electricity system operator for five years, roughly is a typical

rate case. So that's what you'll be compensated based on your total cost of generation. And that's the number that they're talking about a lot, which is total cost of generation. And that's the number that they're talking about a lot, which is total cost of generation. And then you'll be paid accordingly for delivering or generating power based on that. So that's why they're trying to spend a lot of CapEx because it's going to grow their distribution and grow their generation profile while also having a rate case to give to the ISO for higher prices. Okay. No, fair enough. So I just wanted to get a sense of that. I mean, the only risk I could potentially see is, you know, what if their costs go way up? Can they go back to the regulatory body and make a case within that five-year period? Do you know?

regulatory body and make a case within that five-year period? Do you know? It's typically locked in. I don't know of any utilities that go in between rate cases. Rate cases in preparation take so long to prepare to the independent board that it would be basically time for the rate case by the time they prepared it anyways. Okay, fair enough. No, I just, you know, just asking a few questions. But for me, those are good questions. Yes, I would think it's a bit like you when it comes to this. I think it's a great play for someone seeking for in like someone looking for income, even if you're not retired. If you want something in your TFSA that gives you a little bit of stability in cash, that could be an option. It may not provide the best returns.

And my last question is, what would be a reasonable expectation in terms of total returns for them per year? Like what, 8% to 10%? Well, that's what you're... So yeah, it's a great question. I don't do discounted cash flows or projected IRRs on certain businesses, but if I'm looking at this with cap appreciation and the dividend, I think you're looking at market-like returns if you include the div and the div growth. Long term, I just think that there's better plays in terms of renewables because this business, let's focus on what it is. It is primarily a distribution play.

It is a utility distributing power. So compare them to like Hydro One in Ontario. Only 20% of Algonquin's power, Algonquin Power's business is power generation. So I do like more pure plate renewable gen. That's why I mentioned Brookfield. Okay. No, perfect. Great breakdown. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service

team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Calling all DIY do-it-yourself investors, Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time.

And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends, and there's other stuff like learning Duolingo style education lessons that are completely free. You can search up Blossom Social in the App Store and join the community today. I'm on there. I encourage you, go on there and follow me. Search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there.

People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, Blossom Social in the App Store and I'll see you there. So now we'll move on to Lightspeed. So Lightspeed POS. So what is POS before we get into Lightspeed itself? So POS means point of sale. So at the point of sale, the merchant calculates the amount owed by the customer,

indicates that amount. They may prepare an invoice for the consumer. And it indicates the option for the consumer to make payment. So at this point which a consumer makes the payment the merchant exchanges the good and the provision of service. So essentially that point of sale it'll include these softwares will include a bunch of different things. It can include the transaction obviously which would usually be printed but also can be sent electronically. It can also include other things just like inventory management, CRM which is customer relationship management, financials or warehousing. So it will

really depend on what kind of POS system that someone or a business has. So it's typically for retail. So just a brief history of Lightspeed. So Lightspeed was founded by Dax De Silva in 2005, who is still the CEO, so the founder CEO. And it's headquartered in Montreal, and it provides POS and e-commerce software to retail businesses. So over the years, they've acquired a lot of smaller POS providers, which has allowed them to grow its reach and customer base on top of their natural organic growth. So now getting to know a bit more what they offered, Lightspeed in terms of products.

So they have complex workflows. They have booking and membership management, discount, pride rules, and gift cards loyalty and subscriptions employee and inventory management floor and table management reporting analytics and dashboards supplier networks products and menu management customer management and accounting They also that's their comprehensive back office suite so they also offer omni channel omni channel for those who are not really sure what it is because i know that term gets thrown around quite a bit so it's just different ways of doing business so

a company would be omni channel if they offer for example you know online services with shipping online services with curbside pickup, in-person retail services. So that would be considered omni-channel. So as part of that, they have in-store cloud POS. They offer mobile solution, marketplaces, platforms, e-commerce, curbside pickup and delivery, just like I mentioned. And then for payments and financing so they have a tailored financial solution so they have light speed payments and light speed capital just a quick note on light speed payments I went to when I bought my mountain bike a couple months ago I

was just kind of talking to the guy and I noticed that they had light speed. So I was kind of curious and it was kind of cool to see that they also, yeah, they support, yeah. And they support cornered the bike market. Have you noticed that? Yeah, I know they even have it in their investor presentation.

I saw, I think specialized amount amongst one of them. And there's a couple of bike brands as well. If I'm maybe giant, I don't want to, I'm just going based on memory but it was just interesting brands and bike shops like yeah yeah exactly they have really cornered that market that's it and it was just interesting to see when you when you know that

a company is publicly listed to see them in action and it was nice because I don't know their system in and out but they did accept Apple Pay which was good because I went back afterwards where I had a problem with my derailleur and I only had Apple Pay with me so I was like I hope you guys take it because that's the only thing I have to pay right now. So in terms of growth so this again is just straight out of their investor presentation. So they want to expand their customer location footprint, build on successes in payments and financial solution, accelerate ARPU expansion by introducing new modules, expand presence. Do you want to talk about what ARPU is?

Yeah, it's the average revenue per unit or user, depending. I think they may use unit in their thing, but regardless, it's the same thing. And then expand the presence within the verticals, like I mentioned, and pursue strategic and value-enhancing M&A. So the CEO and founder does talk about that being one of their strategy. And over the years, you can see that they made a recent acquisition of Vend, which I'll talk a bit later on. So some of the other points of notes, again, I've listened to part of the conference called the most recent one. So the year and finishing in March of 2021. and finishing in March of 2021.

So they focus on small and medium businesses, which in my view is actually kind of a plus because it limits the exposure to one large client. They believe that the need for omni-channel presence will be continued tailwind for them. And on top of that, the CEO did mention, and I do agree with him, that now omnipresent,ichannel present is gone from a nice to have to a must have for a lot of retailers and I again I'll come back to when I was shopping for a bike

but I found it very frustrating when I was looking in February when everything was shut down that you know some either did not have a website or did not have the availability to purchase on their website. In 2021, I found that a bit mind blowing, especially since we had been in a pandemic already for what, close to a year at that point. So one of the things where I rolled my eyes a little bit about the CEO is he did an interview that I watch on on YouTube I think it was with yeah Finance Canada or Bloomberg or BNN one of them and he mentioned that you know they want to become a mega cap company and so I was like okay I mean I appreciate the ambition but you know maybe one step at a time is just the way I saw that well Well, I mean, he's gone to over $10 billion in market cap, so

the guy's the limit. Yeah, no, I mean, kudos to him for that, but I think that's a bit, you know, kind of eye roll a little bit for me. So the shutdown has affected them. They were straightforward about that, but they're confident that they'll continue to see the benefits of economies reopening around the world. And like I said, really the Omnichannel, I think will be a big tailwind for them. So I spoke a little bit about the CEO. Like I mentioned, it's Dagda Silva, CEO and founder. And the ratings are actually very good on Glassdoor. So he has overall ratings of four out of five stars. 77% of people would recommend it to a friend.

95% approve of the CEO. That's quite amazing. And there's 300 plus reviews. So we're talking about a pretty good sample here. So it's not just like five people or close friends with the CEO that are just putting reviews. So you can tell that he's really well liked in the business. He also has skin in the game. So he owns at least 10% of the company because you do get a notification.

They have to say it when someone, an executive, owns such a large portion. However, he's not the largest shareholder, and it does not come to any surprise to me that La Caille is the dépôt de placement du Québec, so the Québec investment arm for the Québec pension plan. They own close to 18%, and that was as of March 31st, 2021. And I will add a little something. When you see Quebec-based companies, you'll see that as being very commonplace. So, like I said, they tend to do a lot of private investments. And they obviously want to help Quebec-based companies. So, don't be surprised if you see an IPO from Quebec that has them as being some significant shareholders.

There have been some amazing French-Canadian entrepreneur stories. I swear they produce the most per capita. And this is just straight anecdotal evidence but it feels to me like there's so many good ones i feel like alain bedard has uh alain bedard like dax da silva the the kush tar guys like it's it's crazy man they have a ability to deploy capital really well. Yeah, yeah. And I mean, obviously, there are some Quebec businesses that haven't done as well. And there's some Bombardier.

Yeah, we won't go there again. And some Canadian-based businesses. But I just wanted to highlight the fact that don't be surprised if you see Cailleza de Porte Plasma as a significant shareholders. For especially businesses that recently IPO'd like Lightspeed did I think two years ago if I remember correctly March 2019. So what do the numbers look like? So like I mentioned the most recent annual report it's for the year ending March of 2021. March of 2021. So the revenues increased 84% year over year to 221 million. Recurring revenue increased 89% year over year to 202 million. They had a net loss of 124 million, 33 billion in gross transaction volume. So that's one of their KPI and I'll touch on that a little later on Right now and these are USD because their numbers are all USD

So I have just figure it was just easier to talk in US dollars So their market cap in US dollars again 11 billion dollars their price to sales ratio Based on those numbers obviously don't start tweeting at me saying like oh, you know They're forward-looking numbers is like 25x sales or whatever I'm just saying what we have on file it's 50 times sales and then their 2020 revenues like I mentioned 221 million not quite sure why I wrote that twice but fault for the notes. The gross margins are 57% for 2020 and 67% for 2019. So that is something to keep an eye. And I just found an excerpt in their annual report. So they saw some pretty significant increases in costs when it came to subscription costs of revenue and transaction based cost of revenue so I

looked at those footnotes I was interested to see why it went up so much and why the the gross margin and those are really where you know it increased over time so that's something just to keep an eye on to see if it was just kind of a short-term thing these you know does increase cost in terms of affecting the gross margin or not. So just something to keep an eye on if you're interested in this one. They lost $95 million in terms of free cash flow. So they are burning quite a bit of cash. As of their annual report, they had $800 million in cash. However, they did close the Venn

acquisition, which costs about $200 million. And the CEO did say that post-acquisition, they had $600 million. They have very little debt, about $30 million in debt. And their share count increased 54% in the past two years. That's not necessarily a red flag. It's pretty common for recent IPOs. So that's something that, you know, they've issued share. They also listed in New York as well. They issued shares to complete

the acquisition in question and some smaller one. So it's not something that's unusual, but something to keep an eye on because like Braden said with Algonquin, the more you issue shares, the more you get diluted. So you have to keep an eye on that. To me, as long as it's reasonable and there's a good and valid reason for it, that's usually what I look for. With Lightspeed, I mean, it makes sense. They came to the public markets to tap them and raise capital versus a well-established utility who can raise debt via green bonds, which I know all about, and I question the strategy over there, but I don't want to digress into EQN again.

Or even remember when we talked about Bombardier, they diluted a lot in their business going downhill, and it's a mature business. So that's also a big red flag there. But for them, nothing to be too concerned about about but still something to keep an eye on and like i mentioned they did the event acquisition vend b-e-n-d recently so it's designed for medium and large retailer more specifically electronics computers fashion homeware and gifts sports and outdoor computers, fashion, homeware, and gifts, sports, and outdoor, and health and beauty. It is a POS system and Vend actually saw Lightspeed as a competitor last year. They mentioned it in one

of their YouTube videos. So it sounds like it's a strategic acquisition. I don't know the POS space well enough to say it's good or bad, but it sounds like it's integrating quite well in the business. They also were talking about a Google partnership that they have. So Google Local Ad Inventory Ads. So reach local customers with local inventory ads directly from the Lightspeed platform. So these ads help nearby shoppers know what you have in stock, driving more visits to your physical shop. They have Google's Smart Shopping campaign.

So today's consumers are shopping across platforms and devices, online and offline seamlessly. With Smart Shopping campaigns, products are eligible to show up across all of Google's properties, and we know there's quite a few of them, and reach users whenever they're searching or consuming content. And the last one with the Google partnership is Google My Business. So Lightspeed customers can get and manage a professional Google My Business listing straight from Lightspeed's commerce platform.

So it keeps customers up to date with your latest information, whether it's store hours or COVID-19 safety protocol, which is that one is actually, if I was a business owner, very cool, very cool to be able to do that all in one place. Like I mentioned before, they have some key performance indicators. So KPIs, specifically if you look at their MDNA, so their management discussion analysis, always a very good thing to look at when you're reviewing a business. So they have four key KPIs. So the positive net dollar retention rate, so it was in excess of 100%.

Monthly ARPU, like we mentioned earlier, of more than $200 per month per location. Customer location, so they had 119K for 2021 versus 76,000 for 2020. And the other metric that they use is gross transaction volume, which going off on memory when i spoke earlier i think was 33 billion gtv so these are some of the kpis you'll want to keep an eye on and braden mentioned that in a previous episode you want to make sure they also keep them they don't kind of change it every year because then what's the point of having a kpi if you can't really measure it compared to previous year also a red flag if you see that happening and some competitors of note so square POS clover POS revel POS Shopify POS toast QuickBooks POS Oracle POS and I know Microsoft also has a suite for that as well so there are some

significant competitors in this space so to wrap wrap up, you know, what I've seen. So, you know, this is not like it was a deep dive, but I did do quite a, definitely three, four hours of research to get all the information, understand the business better. For me, you know, it's growing very quickly. They seem to have a very strong presence in that field. I wasn't able to find exactly what market percentage that they own versus their competitors because usually you need some very expensive reports to be able to get that. But it sounds like a very good product. My two biggest red flags for them is, first of all, competition. They're playing in that field where there's players with significantly deep pockets. And the other flag is the valuation and the fact that they're burning quite a bit of cash right now.

So these three things are probably the biggest red flags, but it's a very promising business. And just going through what I mentioned, there's a lot of stuff to like about this business. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy

all North American ETFs, not just a few select ones, all commission-free, so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. details. That is questtrade.com. Calling all DIY do-it-yourself investors, Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is

a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends, and there's other stuff like learning Duolingo style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you go on there and follow me, search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you

they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, Blossom Social in the app store and I're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the app store and I'll see you there. There are a lot of exciting parts of this business. And you're right, POS or point of sale, not to be confused with piece of S, is very competitive. Like, let's not kid ourselves, Square, Clover, Shopify, these companies want a piece of point of sale. And although it is so competitive,

doing this exercise was useful for me because this was the first time I really looked into the product. So I got some quick hot takes. I'll try not to take too long, but you're right. It's so expensive. It trades at over 60 times sales. It's going to be one of those things where you have to value it over the opportunity. I saw a tweet the other day that said, what are some of the most exciting things coming out of Canada? And I said, maybe Lightspeed, right? It's still small. It is exciting. It has this huge upside, but you are definitely relying on management to execute. Now, Dax De Silva, the founder, is great. He is awesome. He's well-spoken. He's likable. He's a good leader. That 95% approval on Glassdoor says it all. He's grown the business to this double-digit billion-dollar business in 2005. He's a fantastic entrepreneur. So you got to try to bet on these guys that are really doing it. And it's crazy how far the product has come. This is what's made me kind of bullish on it is since the last time I looked at the

stock and I looked at their website when they IPO'd, it is wild how far the product has come even just in the past two years. And you're seeing that with the 67% annual growth rate on the top line revenue. And you think, oh, I might have missed the train. And I say, no, it's only 14 billion in market cap. This market is massive and their product has gotten significantly better. It deserves to have done well as a public company so far. Now, it's not profitable. It has tons of competition. The bear case is so easy to put up, right? But what they're doing well in this strategy has been very clear from the start. It's focus on being the best in certain verticals. And acquisitions really help with this as well.

So I'm glad to see they're doing acquisitions. When they came out, Dax De Silva was like, this platform is for retail and restaurants. And they had these really random niche verticals come out that Lightspeed started to dominate. Like bicycle shops, for instance, like you were talking about that. All over Toronto, all the bike shops use Lightspeed. They cornered that market really well. So whatever they're doing, they have this land grab and then outward approach

to go into other verticals. Now they have this really elegant omni-channel product. now they have this really elegant omni-channel product and after doing more investigation this might be one of the most if not the most compelling product on the market if you are running an omni-channel experience like if i'm running a restaurant or opening a retail store i'd totally be giving lightspeed a try for omni channel. It looks really clean. And it's nice to be able to have both your in-person and online on the same platform versus Shopify being the leader of just online commerce solutions. Now, I can't not talk about the golf business. If you go on Lightspeed's website, there's three categories. There's retail, restaurants, and golf. Now golf is like a perfect way of encapsulating what

Lightspeed does because golf courses need good tech for booking tee times. They need member service as if it's a private club. They have to manage this recurring revenue payments. They manage this point of sale system in their restaurant on the beverage carts and in their pro shop is a retail store. So it's a perfect opportunity for Lightspeed to come in with this technology platform and say, hey, we do it all. So I think that golf kind of encapsulates it. And yes, I'm biased. I love to golf. But it encapsulates such a omni-channel experience of technology and in-person coming together. So I'm a little bit obsessed with this company right now, doing more due diligence and impressed by the founder. So if you own this thing, and if you want to buy some

of this stuff, you got to be able to stomach volatility. I'm looking at a chart here, it swings 20% in a month regularly, very regularly. It's very typical of a mid-cap, high growth business. If you're a small business owner and you use Lightspeed and you have experience with the platform and you want to share it with me and podcast listeners, send me an email, braden at stratosphereinvesting.com or DM me on Twitter at bradocapital. I think it'd be interesting to get some input from people who are using this platform. Yeah, especially if someone has used other platforms before and who can really compare the experience of Lightspeed with a competitor. That would be very interesting. Because just POS on its own is not that sticky but pos and integrated into your fulfillment e-commerce and your entire

platform that's crazy sticky that's incredibly sticky um simon gun to your head you have to own one for the next five years what are you taking taking? Yeah, we texted about that last night. I think I would go with Algonquin mainly because of the steady as she goes kind of growth, the dividend payment, obviously, and the track record. From everything I've obviously talked about and mentioned about Lightspeed, it's not that I don't like the business of Lightspeed. It's more for the main reasons I talked about. First, the competition out there.

You have some major players in that space that maybe may not have the best solution right now, but could quickly develop something as good, if not better. And the valuation combined with the fact that they're burning quite a bit of cash so another risk in that for me is potential future dilution because uh i mean they don't have a lot of debt so i guess that would also be an option as well and debt is so cheap right now but yeah if i had a gun to my head, I would probably pick up Gronkwin for those reasons. Yeah, it's just, I can, yeah, I don't know. It's very close. That's it.

It's very close. Well, they're so different. Yeah, exactly. They're so different. Like if someone asked me the question, I'm saying, I'm saying Lightspeed. But if it's someone asking me, if it's my parents asking me what they should put it in, and they're, you know, just they are in retirement, they're freshly in retirement. I'm telling them they probably want to go with this, this yielder, this dividend yielder, that's actually providing some dividend

growth, which is not common. And those are the kinds of ones I would want to own if I'm a dividend investor. So they serve opposite sides of the spectrum. And that goes down to what game are you playing as an investor? You know, listening to me and Simon talk about how awesome the company is might not be the same game that you're playing if you're just in capital preservation mode or something like that. So make sure you're playing the game that makes sense for you. And if someone's going next to retirement, something as volatile as Lightspeed maybe, even if it's a huge winner, you might see massive drawdowns when you got to withdraw.

So that is not ideal. We got to write it down. July 22nd, come back in a year from now and see what's outperforming. Come back in five years. Yeah, I know. One year is not going to mean anything. Yeah, I mean, I would say just be aware for Lightspeed. It sounds like a great business, but again, I think it's the valuation. Would you be surprised if it had a 50% drop in a year from now? I wouldn't know it and

and it does regularly that's why that's what i that's why i preface this thing is like you know something's valued that high has crazy drawdown so if you want to own it you got to stick through it yeah and i would not be surprised if it was two times higher like for a year from now either that's that's basically what it is like i i don't want to make sense of that in a way so yeah no i mean it was fun doing the research on it i learned quite a bit that i did not know about pos i'll be honest yeah yeah it's it's an interesting business and i think that they're right in the sweet spot of focusing on smbss, which Dax De Silva has been very clear about. They're focusing on small businesses, SMBs, and they're focusing on an omni-channel experience, not pure play

commerce or not pure play POS. And I think that that's an interesting idea. Maybe we can get him to come for an interview. We should. Everyone tweet at Dax De Silva. I don't even know what his Twitter handle is. I'm sure he has Twitter. Yeah. We'll be fair. We'll ask hard questions, but be fair. I think we did a pretty fair analysis of it.

Yeah. Actually, I followed him on Twitter like two days ago when I was doing some work on this thing. Yeah, there he is. Follow him and tweet at him saying he's got to come on the podcast because we've been talking about Lightspeed. Everyone tweet at him saying he's got to come on the podcast because we've been talking about light speed everyone tweet at him um guys thank you so much for listening we put in a lot of effort into this podcast this is 10 pages of notes just for this episode on things that we look

at metrics we're looking at why we do do not like certain companies for our investment portfolio. And a lot of the research comes from, you know, us just looking at it and putting in the work for the podcast. So really appreciate that. All you have to do to recognize that is go give us five stars and leave a review on your podcast platform. I legit cannot explain to you how helpful that is for growing the podcast. It is like one of the most important things to bump it up in the ranking. So if you give it a good review, give it a little nice comment, say what you want to hear on the podcast next on your podcast player. We appreciate that so much. If you have not checked out Stratosphere, that's my business. We talk about businesses like Lightspeed, like Algonquin Power in detail in these primers.

Easy to understand. Get the business. Understand it within 5-10 minutes. Again, that's go to getstockmarket.com. Thanks so much for listening. Peace. The Canadian investor is not to be taken as investment advice braden or simone may own securities mentioned on this podcast

always make sure to do your own research and due diligence before making investment decisions