Earnings seasons is once again ramping up. And one tech stock that is likely in the interest of many investors out there is Lightspeed Commerce (TSX:LSPD). Despite pretty drastic changes, from the return of the founder to a chief executive officer (CEO) role to massive layoffs, the company remains around $18 per share. Yet, with annual earnings around the corner, should investors consider Lightspeed stock once again?

What happened?

First off, let’s look at why Lightspeed stock has dropped and remained down in the last year or so. The Canadian tech stock provides cloud-based commerce platforms for large and enterprise-level businesses. With a focus on retail and restaurants, the company has since expanded its operations to empower companies to compete effectively.

And yet, after a short-seller report stated the the company’s gross merchandise volume (GMV) was all “smoke and mirrors,” stating also that acquisitions weren’t doing as well as hoped, shares dropped. And they haven’t risen back since.

In the last year alone, there have been more concerns that the focus on profitability, which Lightspeed stock has yet to achieve, has reduced their subscription growth. So, what can investors watch for in earnings?

Momentum

During the last few quarters, the company was under the direction of former CEO Jean-Paul Chauvet. So, let’s look at the last three quarters to see what momentum investors will want to see.

During the first quarter of 2023, Lightspeed stock reported revenue of US$209.1 million, with subscription revenue at US$78.7 million. It also reported a net loss of US$48.7 million. By the second quarter, revenue shrunk down to US133.2 million, with subscription revenue down as well to US$59.4 million. The net loss also increased to US$59.1 million.

For the third quarter, the company wanted to improve these areas. And it achieved that! Revenue almost doubled to US$239.7 million, ahead of its outlook. Subscription revenue also climbed to US$80.9 million. The net loss also shrunk back, now at US$40.2 million. The stock achieved positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the first time at US$3.6 million.

More subscriptions needed

While profitability has improved, Lightspeed stock is now under scrutiny for focusing so much on enterprise clients that small and medium businesses are dropping out.

While this happens, it means there has been a drop in subscription increases. The return of CEO Dax DaSilva, the founder of Lightspeed stock, is hoped to refuel the subscription increases once more. In an interview with Motley Fool, the founder said he’s coming back to shepherd Lightspeed stock into a new phase of growth. After a necessary period of focus on profitability.

For now, then, investors should consider looking at whether subscription levels indeed increased during the fourth quarter. Annual reports will be interesting as well to see where the company has shown improvements and is in need of others. But as DaSilva has said, don’t count on any more large mergers and acquisitions. Instead, more operational efficiency, which seemed to happen as the company recently laid off some employees. So, after two positive quarters and more growth needed, hopefully, the next earnings will provide more clarity for the years to come.