Lightspeed Commerce Inc.
Condensed Interim Consolidated Financial Statements
(Unaudited)
For the three and six months ended September 30, 2023
(expressed in thousands of US dollars)
Lightspeed Commerce Inc. Condensed Interim Consolidated Balance Sheets (Unaudited) | |||||||||||
As at September 30 and March 31, 2023 | |||||||||||
(expressed in thousands of US dollars) | |||||||||||
Notes | September 30, 2023 | March 31, 2023 | |||||||||
Assets | $ | $ | |||||||||
Current assets | |||||||||||
Cash and cash equivalents | 761,491 | 800,154 | |||||||||
Trade and other receivables | 9 | 100,478 | 84,334 | ||||||||
Inventories | 18,059 | 12,839 | |||||||||
Other current assets | 10 | 38,537 | 37,005 | ||||||||
Total current assets | 918,565 | 934,332 | |||||||||
Lease right-of-use assets, net | 18,785 | 20,973 | |||||||||
Property and equipment, net | 18,516 | 19,491 | |||||||||
Intangible assets, net | 267,865 | 311,450 | |||||||||
Goodwill | 11 | 1,347,385 | 1,350,645 | ||||||||
Other long-term assets | 12 | 39,562 | 31,540 | ||||||||
Deferred tax assets | 179 | 301 | |||||||||
Total assets | 2,610,857 | 2,668,732 | |||||||||
Liabilities and Shareholders’ Equity | |||||||||||
Current liabilities | |||||||||||
Accounts payable and accrued liabilities | 13 | 71,052 | 68,827 | ||||||||
Lease liabilities | 6,701 | 6,617 | |||||||||
Income taxes payable | 2,459 | 6,919 | |||||||||
Deferred revenue | 63,029 | 68,094 | |||||||||
Total current liabilities | 143,241 | 150,457 | |||||||||
Deferred revenue | 1,291 | 1,226 | |||||||||
Lease liabilities | 16,952 | 18,574 | |||||||||
Other long-term liabilities | 1,123 | 1,026 | |||||||||
Total liabilities | 162,607 | 171,283 | |||||||||
Shareholders’ equity | |||||||||||
Share capital | 15 | 4,336,578 | 4,298,683 | ||||||||
Additional paid-in capital | 205,679 | 198,022 | |||||||||
Accumulated other comprehensive loss | 16 | (6,613) | (3,057) | ||||||||
Accumulated deficit | (2,087,394) | (1,996,199) | |||||||||
Total shareholders’ equity | 2,448,250 | 2,497,449 | |||||||||
Total liabilities and shareholders’ equity | 2,610,857 | 2,668,732 | |||||||||
Commitments and contingencies | 14 |
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
2
Lightspeed Commerce Inc. Condensed Interim Consolidated Statements of Loss and Comprehensive Loss (Unaudited) | ||||||||||||||||||||
For the three and six months ended September 30, 2023 and 2022 | ||||||||||||||||||||
(expressed in thousands of US dollars, except per share amounts) | ||||||||||||||||||||
Three months ended September 30, | Six months ended September 30, | |||||||||||||||||||
Notes | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||
$ | $ | $ | $ | |||||||||||||||||
Revenues | 4 | 230,273 | 183,699 | 439,359 | 357,581 | |||||||||||||||
Direct cost of revenues | 5, 6 | 134,105 | 102,230 | 255,286 | 198,587 | |||||||||||||||
Gross profit | 96,168 | 81,469 | 184,073 | 158,994 | ||||||||||||||||
Operating expenses | ||||||||||||||||||||
General and administrative | 6 | 26,324 | 25,132 | 51,268 | 55,371 | |||||||||||||||
Research and development | 6 | 33,081 | 36,596 | 67,116 | 72,232 | |||||||||||||||
Sales and marketing | 6 | 60,290 | 64,337 | 115,578 | 132,982 | |||||||||||||||
Depreciation of property and equipment | 1,493 | 1,188 | 2,950 | 2,409 | ||||||||||||||||
Depreciation of right-of-use assets | 1,647 | 2,063 | 3,877 | 4,110 | ||||||||||||||||
Foreign exchange loss | 689 | 29 | 1,360 | 472 | ||||||||||||||||
Acquisition-related compensation | 560 | 12,653 | 3,105 | 29,756 | ||||||||||||||||
Amortization of intangible assets | 23,990 | 25,684 | 48,495 | 51,560 | ||||||||||||||||
Restructuring | 80 | 603 | 552 | 1,810 | ||||||||||||||||
Total operating expenses | 148,154 | 168,285 | 294,301 | 350,702 | ||||||||||||||||
Operating loss | (51,986) | (86,816) | (110,228) | (191,708) | ||||||||||||||||
Net interest income | 7 | 10,746 | 4,851 | 21,108 | 6,858 | |||||||||||||||
Loss before income taxes | (41,240) | (81,965) | (89,120) | (184,850) | ||||||||||||||||
Income tax expense (recovery) | ||||||||||||||||||||
Current | 755 | 516 | 1,970 | 780 | ||||||||||||||||
Deferred | 497 | (2,538) | 105 | (4,891) | ||||||||||||||||
Total income tax expense (recovery) | 1,252 | (2,022) | 2,075 | (4,111) | ||||||||||||||||
Net loss | (42,492) | (79,943) | (91,195) | (180,739) | ||||||||||||||||
Other comprehensive loss | ||||||||||||||||||||
Items that may be reclassified to net loss | ||||||||||||||||||||
Foreign currency differences on translation of foreign operations | (2,917) | (6,689) | (3,517) | (15,522) | ||||||||||||||||
Change in net unrealized gain (loss) on cash flow hedging instruments, net of tax | (1,017) | (2,059) | (39) | (2,778) | ||||||||||||||||
Total other comprehensive loss | 16 | (3,934) | (8,748) | (3,556) | (18,300) | |||||||||||||||
Total comprehensive loss | (46,426) | (88,691) | (94,751) | (199,039) | ||||||||||||||||
Net loss per share – basic and diluted | 8 | (0.28) | (0.53) | (0.60) | (1.21) |
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
3
Lightspeed Commerce Inc. Condensed Interim Consolidated Statement of Cash Flows (Unaudited) | ||||||||
For the six months ended September 30, 2023 and 2022 | ||||||||
(expressed in thousands of US dollars) | ||||||||
Six months ended September 30, | ||||||||
2023 | 2022 | |||||||
Cash flows from (used in) operating activities | $ | $ | ||||||
Net loss | (91,195) | (180,739) | ||||||
Items not affecting cash and cash equivalents | ||||||||
Share-based acquisition-related compensation | 2,953 | 26,740 | ||||||
Amortization of intangible assets | 48,495 | 51,560 | ||||||
Depreciation of property and equipment and lease right-of-use assets | 6,827 | 6,519 | ||||||
Deferred income taxes | 105 | (4,891) | ||||||
Share-based compensation expense | 41,104 | 73,589 | ||||||
Unrealized foreign exchange loss | 84 | 290 | ||||||
(Increase)/decrease in operating assets and increase/(decrease) in operating liabilities | ||||||||
Trade and other receivables | (16,292) | (10,434) | ||||||
Inventories | (5,220) | (2,473) | ||||||
Other assets | (9,283) | 368 | ||||||
Accounts payable and accrued liabilities | 1,866 | (8,029) | ||||||
Income taxes payable | (4,460) | (46) | ||||||
Deferred revenue | (5,000) | (2,786) | ||||||
Other long-term liabilities | 188 | (83) | ||||||
Net interest income | (21,108) | (6,858) | ||||||
Total operating activities | (50,936) | (57,273) | ||||||
Cash flows from (used in) investing activities | ||||||||
Additions to property and equipment | (1,909) | (5,206) | ||||||
Additions to intangible assets | (5,141) | (1,498) | ||||||
Purchase of investments | — | (820) | ||||||
Interest income | 22,046 | 7,185 | ||||||
Total investing activities | 14,996 | (339) | ||||||
Cash flows from (used in) financing activities | ||||||||
Proceeds from exercise of stock options | 1,601 | 4,033 | ||||||
Share issuance costs | (106) | (193) | ||||||
Repayment of long-term debt | — | (30,000) | ||||||
Payment of lease liabilities net of incentives and movement in restricted lease deposits | (3,905) | (4,106) | ||||||
Financing costs | — | (373) | ||||||
Total financing activities | (2,410) | (30,639) | ||||||
Effect of foreign exchange rate changes on cash and cash equivalents | (313) | (2,827) | ||||||
Net decrease in cash and cash equivalents during the period | (38,663) | (91,078) | ||||||
Cash and cash equivalents – Beginning of period | 800,154 | 953,654 | ||||||
Cash and cash equivalents – End of period | 761,491 | 862,576 | ||||||
Interest paid to financial institutions | — | 373 | ||||||
Income taxes paid | 6,432 | 768 |
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
4
Lightspeed Commerce Inc. Condensed Interim Consolidated Statements of Changes in Shareholders' Equity (Unaudited) | |||||||||||||||||||||||
For the six months ended September 30, 2023 and 2022 | |||||||||||||||||||||||
(expressed in thousands of US dollars, except number of shares) | Issued and Outstanding Shares | ||||||||||||||||||||||
Notes | Number of shares | Amount | Additional paid-in capital | Accumulated other comprehensive income (loss) | Accumulated deficit | Total | |||||||||||||||||
$ | $ | $ | $ | $ | |||||||||||||||||||
Balance as at March 31, 2023 | 151,170,305 | 4,298,683 | 198,022 | (3,057) | (1,996,199) | 2,497,449 | |||||||||||||||||
Net loss | — | — | — | — | (91,195) | (91,195) | |||||||||||||||||
Share issuance costs | — | (106) | — | — | — | (106) | |||||||||||||||||
Exercise of stock options and settlement of share awards | 1,200,943 | 35,048 | (33,447) | — | — | 1,601 | |||||||||||||||||
Share-based compensation | — | — | 41,104 | — | — | 41,104 | |||||||||||||||||
Share-based acquisition-related compensation | 182,357 | 2,953 | — | — | — | 2,953 | |||||||||||||||||
Other comprehensive loss | 16 | — | — | — | (3,556) | — | (3,556) | ||||||||||||||||
Balance as at September 30, 2023 | 152,553,605 | 4,336,578 | 205,679 | (6,613) | (2,087,394) | 2,448,250 | |||||||||||||||||
Balance as at March 31, 2022 | 148,661,312 | 4,199,025 | 123,777 | 2,677 | (926,190) | 3,399,289 | |||||||||||||||||
Net loss | — | — | — | — | (180,739) | (180,739) | |||||||||||||||||
Share issuance costs | — | (193) | — | — | — | (193) | |||||||||||||||||
Exercise of stock options and settlement of share awards | 1,431,737 | 29,961 | (25,928) | — | — | 4,033 | |||||||||||||||||
Share-based compensation | — | — | 73,589 | — | — | 73,589 | |||||||||||||||||
Share-based acquisition-related compensation | 222,715 | 26,740 | — | — | — | 26,740 | |||||||||||||||||
Other comprehensive loss | 16 | — | — | — | (18,300) | — | (18,300) | ||||||||||||||||
Balance as at September 30, 2022 | 150,315,764 | 4,255,533 | 171,438 | (15,623) | (1,106,929) | 3,304,419 |
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
5
Lightspeed Commerce Inc. Notes to Condensed Interim Consolidated Financial Statements (Unaudited) | ||
September 30, 2023 and 2022 | ||
(expressed in thousands of US dollars, except number of shares and per share amounts) |
1. Organization and nature of operations
Lightspeed Commerce Inc. ("Lightspeed" or the "Company") was incorporated on March 21, 2005 under the Canada Business Corporations Act. Its head office is located at Gare Viger, 700 Saint-Antoine St. East, Suite 300, Montréal, Quebec, Canada. Lightspeed’s one-stop commerce platform provides its customers with the critical functionalities they need to engage with consumers, manage their operations, accept payments, and grow their business. Lightspeed has customers globally in over 100 countries, empowering single- and multi-location small and medium-sized businesses to compete in an omni-channel market environment by engaging with consumers across online, mobile, social, and physical channels.
The Company’s shares are listed on both the Toronto Stock Exchange ("TSX") and the New York Stock Exchange ("NYSE") under the stock symbol "LSPD".
2. Basis of presentation and consolidation
These unaudited condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") applicable to the preparation of interim financial statements, including International Accounting Standard ("IAS") 34, Interim Financial Reporting, as issued by the International Accounting Standards Board ("IASB"). Certain information and disclosures have been omitted or condensed. These unaudited condensed interim consolidated financial statements should be read together with the Company’s audited annual consolidated financial statements and notes thereto for the fiscal year ended March 31, 2023.
These unaudited condensed interim consolidated financial statements were approved for issue by the Board of Directors of the Company on November 1, 2023.
Seasonality of interim operations
The operations of the Company are seasonal, and the results of operations for any interim period are not necessarily indicative of operations for the full fiscal year or any future period.
Estimates, judgments and assumptions
The preparation of the unaudited condensed interim consolidated financial statements in accordance with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenues and expenses during the period. These estimates and assumptions are based on historical experience, expectations of the future, and other relevant factors and are reviewed regularly. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future period affected. Actual results may differ from these estimates.
In preparing these unaudited condensed interim consolidated financial statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of uncertainty are the same as those applied and described in the Company’s audited annual consolidated financial statements for the fiscal year ended March 31, 2023.
3. Significant accounting policies
The same accounting policies and methods of computation were followed in the preparation of these unaudited condensed interim consolidated financial statements as were followed in the preparation of the most recent audited annual consolidated financial statements.
6
Lightspeed Commerce Inc. Notes to Condensed Interim Consolidated Financial Statements (Unaudited) | ||
September 30, 2023 and 2022 | ||
(expressed in thousands of US dollars, except number of shares and per share amounts) |
New and amended standards effective within the three and six months ended September 30, 2023
In May 2023, the IASB issued International Tax Reform—Pillar Two Model Rules, which amended IAS 12, Income Taxes, to introduce a temporary exception to the requirements to recognize and disclose information about deferred tax assets and liabilities related to Pillar Two income taxes, and targeted disclosure requirements for affected entities. The relief is effective immediately upon issuance of the amendments and should be applied retrospectively in accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, while the targeted disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2023, but not for any interim periods ending on or before December 31, 2023. The Company is currently assessing the impact of these amendments on the consolidated financial statements.
4. Revenues
Three months ended September 30, | Six months ended September 30, | ||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||
$ | $ | $ | $ | ||||||||||||||
Subscription revenue | 81,043 | 74,494 | 159,770 | 148,054 | |||||||||||||
Transaction-based revenue | 137,672 | 101,304 | 258,642 | 192,828 | |||||||||||||
Hardware and other revenue | 11,558 | 7,901 | 20,947 | 16,699 | |||||||||||||
Total revenues | 230,273 | 183,699 | 439,359 | 357,581 |
Transaction-based revenue includes $4,188 and $5,781 of revenue from merchant cash advances for the three and six months ended September 30, 2023, respectively (September 30, 2022 – $1,903 and $3,181).
5. Direct cost of revenues
Three months ended September 30, | Six months ended September 30, | ||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||
$ | $ | $ | $ | ||||||||||||||
Subscription cost of revenue | 19,963 | 20,657 | 39,303 | 41,080 | |||||||||||||
Transaction-based cost of revenue | 99,425 | 70,011 | 188,444 | 132,912 | |||||||||||||
Hardware and other cost of revenue | 14,717 | 11,562 | 27,539 | 24,595 | |||||||||||||
Total direct cost of revenues | 134,105 | 102,230 | 255,286 | 198,587 |
6. Employee compensation
The total employee compensation comprising salaries and benefits, including share-based compensation and related costs, excluding government assistance and acquisition-related compensation, for the three and six months ended September 30, 2023, was $90,567 and $173,279 (September 30, 2022 – $96,912 and $199,123, respectively).
7
Lightspeed Commerce Inc. Notes to Condensed Interim Consolidated Financial Statements (Unaudited) | ||
September 30, 2023 and 2022 | ||
(expressed in thousands of US dollars, except number of shares and per share amounts) |
The following table outlines share-based compensation and related costs included in the following expenses:
Three months ended September 30, | Six months ended September 30, | ||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||
$ | $ | $ | $ | ||||||||||||||
Direct cost of revenues | 1,587 | 2,212 | 3,440 | 4,458 | |||||||||||||
General and administrative | 6,463 | 8,626 | 12,644 | 18,711 | |||||||||||||
Research and development | 6,963 | 9,984 | 15,339 | 20,869 | |||||||||||||
Sales and marketing | 8,291 | 14,106 | 10,614 | 29,192 | |||||||||||||
Total share-based compensation and related costs | 23,304 | 34,928 | 42,037 | 73,230 |
As at September 30, 2023, the Company had 11,717,285 options, 6,767,005 restricted share units, 85,456 deferred share units, and nil performance share units which include non-market performance conditions outstanding (September 30, 2022 - 11,277,494 options, 4,638,239 restricted share units, 47,980 deferred share units and 619,640 performance share units which include non-market performance conditions outstanding).
7. Finance income and costs
Three months ended September 30, | Six months ended September 30, | ||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||
$ | $ | $ | $ | ||||||||||||||
Interest income | 11,143 | 5,388 | 21,898 | 8,104 | |||||||||||||
Interest expense | (397) | (537) | (790) | (1,246) | |||||||||||||
Net interest income | 10,746 | 4,851 | 21,108 | 6,858 | |||||||||||||
8. Loss per share
The Company has stock options and share awards as potentially dilutive shares. Diluted net loss per share excludes all potentially-dilutive shares if their effect is anti-dilutive. As a result of net losses incurred, all potentially-dilutive shares have been excluded from the calculation of diluted net loss per share because including them would be anti-dilutive; therefore, basic and diluted number of shares is the same for the three and six months ended September 30, 2023 and 2022. All outstanding potentially dilutive shares could potentially dilute loss per share in the future.
Three months ended September 30, | Six months ended September 30, | ||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||
Issued Common Shares | 152,553,605 | 150,315,764 | 152,553,605 | 150,315,764 | |||||||||||||
Weighted average number of Common Shares (basic and diluted) | 153,478,935 | 149,688,692 | 153,003,277 | 149,332,947 | |||||||||||||
Net loss per share – basic and diluted | ($0.28) | ($0.53) | ($0.60) | ($1.21) |
The weighted average number of potentially dilutive shares that are not included in the diluted per share calculations because they would be anti-dilutive was 17,519,996 and 17,321,764 stock options and share awards for the three and six
8
Lightspeed Commerce Inc. Notes to Condensed Interim Consolidated Financial Statements (Unaudited) | ||
September 30, 2023 and 2022 | ||
(expressed in thousands of US dollars, except number of shares and per share amounts) |
months ended September 30, 2023 (September 30, 2022 - 17,300,048 and 17,349,949). This weighted average number includes all of the Company's issued and outstanding potentially dilutive shares notwithstanding exercise prices, as applicable.
9. Trade and other receivables
September 30, 2023 | March 31, 2023 | |||||||
$ | $ | |||||||
Trade receivables | 37,236 | 37,167 | ||||||
Allowance for expected credit losses | (4,603) | (4,131) | ||||||
Trade receivables, net | 32,633 | 33,036 | ||||||
Research and development tax credits receivable | 6,568 | 8,424 | ||||||
Sales tax receivable | 5,211 | 4,862 | ||||||
Merchant cash advances measured at fair value | 50,618 | 29,492 | ||||||
Indemnification receivables | 708 | 4,042 | ||||||
Accrued interest and other | 4,740 | 4,478 | ||||||
Total trade and other receivables | 100,478 | 84,334 |
The indemnification receivables are for indemnities on certain liabilities assumed through our acquisitions.
10. Other current assets
September 30, 2023 | March 31, 2023 | |||||||
$ | $ | |||||||
Restricted cash and restricted deposits | 1,153 | 1,366 | ||||||
Prepaid expenses and deposits | 12,432 | 14,149 | ||||||
Commission asset | 13,357 | 12,160 | ||||||
Contract asset and other | 11,595 | 9,330 | ||||||
Total other current assets | 38,537 | 37,005 |
11. Goodwill
The carrying amount of the Company's net assets exceeded the Company's market capitalization as at September 30, 2023, which triggered an impairment test to be performed for the Company's operating segment which is the level at which management monitors goodwill. The Company completed an impairment test of goodwill as at September 30, 2023 using a fair value less costs of disposal model which demonstrated no impairment of goodwill. The Company reassessed as at September 30, 2023 the key assumptions used in the December 31, 2022 test and found no reduction in the terminal value multiple, no increase in the discount rate and no decrease in the revenue growth rate.
9
Lightspeed Commerce Inc. Notes to Condensed Interim Consolidated Financial Statements (Unaudited) | ||
September 30, 2023 and 2022 | ||
(expressed in thousands of US dollars, except number of shares and per share amounts) |
12. Other long-term assets
September 30, 2023 | March 31, 2023 | |||||||
$ | $ | |||||||
Restricted cash | 324 | 408 | ||||||
Prepaid expenses and deposits | 3,762 | 3,775 | ||||||
Commission asset | 17,043 | 15,147 | ||||||
Contract asset | 16,960 | 10,691 | ||||||
Investments | 1,473 | 1,519 | ||||||
Total other long-term assets | 39,562 | 31,540 |
13. Accounts payable and accrued liabilities
September 30, 2023 | March 31, 2023 | |||||||
$ | $ | |||||||
Trade payables | 42,421 | 36,958 | ||||||
Accrued compensation and benefits | 19,604 | 22,543 | ||||||
Accrued payroll taxes on share-based compensation | 3,307 | 3,030 | ||||||
Acquisition-related payables | 662 | 331 | ||||||
Sales tax payable | 4,115 | 3,556 | ||||||
Other | 943 | 2,409 | ||||||
Total accounts payable and accrued liabilities | 71,052 | 68,827 |
14. Contingencies, Provisions and Commitments
Contingencies
Beginning in October 2021, the Company and certain of the Company's officers and directors were named as defendants to an application for authorization to bring a securities class action filed before the Superior Court of Quebec, and the Company and certain of the Company's officers and directors were named as defendants in a securities class action brought in U.S. district court for the Eastern District of New York (a separate action brought in the Southern District of New York was voluntarily dismissed after a lead plaintiff was appointed in the Eastern District of New York action). The application and action are sought on behalf of purchasers of the Company's Common Shares, and are based upon allegations that the defendants made false and/or misleading statements to the public and seek unspecified damages. On June 27, 2022, the Company filed a motion to dismiss the securities class action brought in the U.S. district court for the Eastern District of New York. Plaintiffs to the securities class action brought in the U.S. district court for the Eastern District of New York filed an opposition to the Company's motion to dismiss, and the Company filed a reply. The Company and management intend to vigorously defend against each of these proceedings.
The Company is presently engaged in a dispute with one of its residual payments partners that has resulted in that partner purporting to terminate two agreements it has with the Company and ceasing to pay the Company amounts owed pursuant to those agreements, approximately $6,500 in the six months ended September 30, 2023, beginning in April 2023. Although the Company is not yet aware of a formal claim having been filed by the partner, the partner alleges that the
10
Lightspeed Commerce Inc. Notes to Condensed Interim Consolidated Financial Statements (Unaudited) | ||
September 30, 2023 and 2022 | ||
(expressed in thousands of US dollars, except number of shares and per share amounts) |
Company has breached certain covenants in each of the two agreements and has made a demand for damages under each agreement. The Company intends to vigorously defend against any claims resulting from the dispute.
On September 3, 2023, Tyro Payments Limited commenced proceedings in the Supreme Court of New South Wales against a subsidiary of the Company, alleging breach of certain contractual obligations and seeking orders, among other things, for damages and restraining the subsidiary from engaging in certain conduct. A hearing on the matter is scheduled for early November. The Company and management intend to vigorously defend against these proceedings.
On October 22, 2021, CloudofChange, LLC, a non-practising entity, filed a patent infringement lawsuit against the Company in the Western District of Texas. The patents at issue in the suit include U.S. Patents Nos. 9,400,640, 10,083,012 and 11,226,793. These patents generally relate to web-based point of sale builder systems. The matter had been scheduled for trial in September 2023, but was postponed and is now expected to proceed to trial in early calendar 2024. The Company has separately, applied for, and had instituted its applications for, inter partes review of all three patents by the U.S. Patent Trial and Appeal Board (the "PTAB"). In mid-October 2023, the PTAB issued final written decisions on Patent Nos 9,400,640 and 10,083,012 finding all of their claims unpatentable. A final written decision in respect of the remaining patent is expected by mid-November 2023. The Company and management intend to vigorously defend against the action.
The Company has not provisioned for the above-referenced matters.
Provisions
The Company is involved in other litigation and claims in the normal course of business. Management is of the opinion that any resulting provisions and ultimate settlements would not materially affect the financial position and operating results of the Company.
Commitments
During the six months ended September 30, 2023, the Company increased its commitments from those disclosed in its audited annual consolidated financial statements for the fiscal year ended March 31, 2023. The Company renegotiated certain contracts with payments processors which include additional commitments of $12,435 over the next five fiscal years.
15. Share capital
The Company’s authorized share capital consists of (i) an unlimited number of Subordinate Voting Shares and (ii) an unlimited number of preferred shares, issuable in series. All references to Common Shares refer to Subordinate Voting Shares in the Capital of Lightspeed.
11
Lightspeed Commerce Inc. Notes to Condensed Interim Consolidated Financial Statements (Unaudited) | ||
September 30, 2023 and 2022 | ||
(expressed in thousands of US dollars, except number of shares and per share amounts) |
16. Accumulated other comprehensive income (loss)
Foreign currency differences on translation of foreign operations | Hedging reserve | Total accumulated other comprehensive income (loss) | ||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||||||||||
Balance as at March 31, | (2,932) | 2,654 | (125) | 23 | (3,057) | 2,677 | ||||||||||||||||||||
Foreign currency differences on translation of foreign operations | (3,517) | (15,522) | — | — | (3,517) | (15,522) | ||||||||||||||||||||
Change in net unrealized gain (loss) on cash flow hedging instruments | — | — | (39) | (2,778) | (39) | (2,778) | ||||||||||||||||||||
Balance as at September 30, | (6,449) | (12,868) | (164) | (2,755) | (6,613) | (15,623) |
Foreign exchange forward contracts
The Company designates certain foreign exchange forward contracts as cash flow hedges when all the requirements in IFRS 9, Financial Instruments are met. The Company's currency pair used for cash flow hedges is US dollar / Canadian dollar. The notional principal of the foreign exchange contracts was $54,600 CAD as at September 30, 2023 (March 31, 2023 - $109,200 CAD).
17. Related party transactions
Key management personnel includes executive officers. Other related parties include close family members of the key management personnel and entities controlled by the key management personnel.
The executive compensation expense to the top five key management personnel is as follows:
Three months ended September 30, | Six months ended September 30, | ||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||
$ | $ | $ | $ | ||||||||||||||
Short-term employee benefits and termination benefits | 784 | 685 | 1,598 | 1,414 | |||||||||||||
Share-based payments | 4,163 | 6,314 | 7,527 | 13,325 | |||||||||||||
Total compensation paid to key management personnel | 4,947 | 6,999 | 9,125 | 14,739 |
18. Financial instruments
Fair value
The Company measures the fair value of its financial assets and financial liabilities using a fair value hierarchy. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value. The different levels of the fair value hierarchy are defined as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;
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Lightspeed Commerce Inc. Notes to Condensed Interim Consolidated Financial Statements (Unaudited) | ||
September 30, 2023 and 2022 | ||
(expressed in thousands of US dollars, except number of shares and per share amounts) |
Level 2: Other techniques for which inputs are based on quoted prices for identical or similar instruments in markets that are not active, quoted prices for similar instruments in active markets, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the asset or liability;
Level 3: Techniques which use inputs that have a significant effect on the recognized fair value that require the Company to use its own assumptions about market participant assumptions.
The Company estimated the fair value of its financial instruments as described below.
The fair value of cash and cash equivalents, restricted cash and restricted deposits, trade receivables and trade accounts payable and accrued liabilities is considered to be equal to their respective carrying values due to their short-term maturities.
The fair value of accrued payroll taxes on share-based compensation approximates its carrying value as at September 30 and March 31, 2023.
Recurring fair value measurements
The fair value of foreign exchange forward contracts was determined based on Level 2 inputs, which included period-end mid-market quotations for each underlying contract as calculated by the financial institution with which the Company has transacted. The quotations represent the discounted future settlement amounts based on current market rates.
The fair value of merchant cash advances was determined based on Level 3 inputs by calculating the present value of the future estimated cash flows based on the terms of the agreements. The fair value of investments was determined based on Level 3 inputs using the prices for financial instruments stemming from private investments that the Company participated in.
As at September 30 and March 31, 2023, financial instruments measured at fair value in the unaudited condensed interim consolidated balance sheets were as follows:
September 30, 2023 | March 31, 2023 | ||||||||||||||||||||||
Fair value hierarchy | Carrying amount | Fair value | Fair value hierarchy | Carrying amount | Fair value | ||||||||||||||||||
$ | $ | $ | $ | ||||||||||||||||||||
Assets: | |||||||||||||||||||||||
Cash and cash equivalents | Level 1 | 761,491 | 761,491 | Level 1 | 800,154 | 800,154 | |||||||||||||||||
Restricted cash and restricted deposits | Level 1 | 1,477 | 1,477 | Level 1 | 1,774 | 1,774 | |||||||||||||||||
Merchant cash advances | Level 3 | 50,618 | 50,618 | Level 3 | 29,492 | 29,492 | |||||||||||||||||
Investments | Level 3 | 1,473 | 1,473 | Level 3 | 1,519 | 1,519 | |||||||||||||||||
Liabilities: | |||||||||||||||||||||||
Foreign exchange forward contracts | Level 2 | 164 | 164 | Level 2 | 125 | 125 |
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