The Canadian Investor - Are Travel Stocks Finally Back? - Earnings Roundup

Episode Date: August 11, 2022

In this release of the Canadian Investor Podcast, we cover the following earnings and news: Air Canada earnings Constellation Software and Topicus earnings Lightspeed earnings Intercontinental Exchange earnings Nutrien earnings MercadoLibre earnings Restaurant Brands International earnings Booking Holdings Canopy Growth earnings Tickers of stock discussed: AC.TO, CSU.TO, TOI.V, LSPD.TO, ICE, NTR.TO, MELI, QSR.TO, BKNG, WEED.TO Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Sign up to Stratosphere for free 🚀 our platform for self-directed stock investing research. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

Welcome back into the show. This is the Canadian Investor Podcast, made possible by our friends and show sponsor, EQ Bank, which helps Canadians make bank with high interest and no fees on everyday banking. We also love their savings and investment products like GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs on a regular basis to set money aside for personal income taxes in April of every year. Their GICs are perfect because the interest rate is guaranteed, and I know I won't be able to touch that money until I need it for tax time. Whether you're looking to set some money aside for a rainy day or a big purchase is

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. This is the Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Brayden Dennis and Simon Belanger. The Canadian Investor Podcast. The date is August 9th, 2022. My name is Brayden Dennis, as always joined by the soon-to-be father, Simon Belanger. You're like a week out, man. How do you feel? You're like, there's got to be some special feeling

you got right now. Yeah, I guess it's a mix of excitement, nervousness, and uncertainty all in one. That's probably the best way to sum it up because it could happen any day, any point in time at this point when you're essentially one week away, less than one week away from your due date. Yeah, no, I was going to give you some words of encouragement or advice, but I have zero to offer to you. But I know that you and your wife are going to do great. So I'm excited for you. Today, we have lots of companies we're talking about. We're doing an earnings roundup, a lot of Canadian co's here, lots of mix of travel, some tech, some good stuff. There there's lots lots on the slate here simone do you want to kick it off with your first one of the day it's a stock that everyone

and their dog wants to know about especially over the past two years yeah so like you said there was a lot of canadian companies reporting which is great when you're called a Canadian investor podcast. So the first one on the list here, everyone knows about it, whether they invest in it or not. Air Canada released their Q2 earnings. Total revenues were up 4x compared to last year for the quarter. Actually, not quite 4x, but pretty close. And that totaled $4 billion. That's still down, though down though 17 from 2019 levels and

i will specify whenever i mention 2019 because it's really important of course travel and air travel was not back to its pre-2019 or pre-pandemic levels last year one line item that was really interesting and was a silver lining for the past year or so was cargo which was down 17% year over year to 300 million so clearly the passenger travel is ticking up whereas cargo is seeing a bit of a slowdown here capacity came in at 73% compared to 2019. Operating expenses came in at $4.2 billion, which is 2% less than 2019, yet their revenues are still down 17% from 2019. So like I said, 2019 is a good comparable. It's really important to stay focused on expenses here because they are quite high. They're almost at the same level as 2019, yet revenues were still much lower. They had a net loss of $386 million, which was much better than the $1.2 billion loss last year. But in 2019, they had an income of $343 million. Now, one of the bright spots is that they produce 440 million worth of free cash flow

versus 1.6 billion of free cash flow negative last year. And when comparing to 2019, it is down 18%, but still pretty solid if you ask me. Now, one of the main focus for Air Canada, it's improving its operation. It's no secret to anyone here that Air Canada operations have not been great to say the least this year. I mean, did you travel with Air Canada when you went to Portugal? No, I traveled with Air Canada when I went out west to Alberta a couple months ago, though. Yeah, how was that? It was fine. It was by far the cheapest option compared to

WestJet. So I took it because I don't care who I fly with. And it was fine. It was a full flight. That's for sure. Yeah. No, I was just curious. But essentially, there's a lot of challenges going on. And Air Canada is mentioning there's resources challenges here affecting various parts of the travel industry. So it's not specific to Air Canada. So we're thinking here, security screenings, US-Canada border custom processing, air traffic control, maintenance provider equipment, aircraft catering, and more. So clearly some of these things Air Canada doesn't have much control over, but they are not doing quite on par with some of its competitors. So I think that's where you have to blame Air Canada a little bit on this.

I don't know what the real story is because every single person who has traveled and checked a bag in the past six months will tell you that it is a complete nightmare. Like anecdotally, so many friends have lost their luggage. It just didn't show up. You know, you put your golf clubs underneath and the oversized baggage, it just doesn't make it. You don't have your golf clubs for three weeks in the middle of summer. Like what a drag. And a lot of times it seems to me that it's been Air Canada's fault. Sometimes it seems like it's the airport's fault. I don't know what the story is. All I know is don't, if you can avoid it, do not check a freaking bag this year. Like I never check a bag. Like I literally do it.

I avoid it at all costs. If I check a bag, it's like I'm throwing my snowboard in the oversized baggage or throw my golf clubs in the oversized. But that is it. One, you save money. Two, you save the time. And three, you avoid whatever nightmare is happening at the airports. Not just in Canada, Europe's like this too. It's all over the board. I don't know what's going on. Yeah. Yeah. And I think there were some mechanical issues with the luggage machines or whatever you want to call them. But Michael Russo, who's the CEO now infamous because he can't speak French. If you remember that there was a big thing happening. I think it was at the beginning of the year where he could barely say a few words in French. I think your French is probably better. Oh, that's tough for Michael. Yeah, that's really bad for Michael. But you mentioned that Air Canada cut its scheduled flights by 15% in July and August to improve operational stability. They are seeing some improvement in their metrics because of those measures. So I know there was a lot of headlines saying that Air Canada was cutting its flights. But at the end of the day, I think that was necessary because if you don't have the resources, whether they're human or whether it's labor or the equipment or whatever it is, I mean, you have to take measures so people just don't get stranded left, right and center.

So hopefully that will keep improving. But there's a lot of work to do here. Just don't get stranded left, right and center. So hopefully that will keep improving. But there's a lot of work to do here. And clearly, if you're a Air Canada shareholder or you're looking to invest in them, do not miss a beat on checking those expenses out because they are quite high. And clearly, they'll have to get a lid on that if they want to remain profitable going forward. These businesses are just historically terribly unprofitable. Now that changed a little bit. I want to say in 2014-ish, all of a sudden, a lot of them started becoming profitable and there was a lot of consolidation. But when an industry has that legacy of profitability performance with that long of a time horizon,

I just think that they're all hard to invest in. Like, I don't see how any of them would make it into one of my portfolios these days. I used to think Air Canada was such a good value stock. I think I've just wisened up to that a little bit. And Buffett learned that the hard way actually two years ago. Yeah, I think for me, the only thing I'll say that'll probably drive it home for a lot of people is it's hard for aircraft carriers or, you know, airlines to be profitable in the best of times. So just imagine when it is not the best of times, clearly they're going to be emerging money.

So that's all I need to know for me from an investment perspective. Fair enough. And also, I am shocked that they're still only at about three quarters of capacity from 2019, given everyone's appetite for getting back out there. 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, 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. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just

going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. All right, let's talk about Canadian headquartered darling, my largest individual stock position, Constellation. And I'm going to tie in Topicus here as well. Topicus was their spinoff earlier, and they are owned by the same management team. They do the

exact same thing. So I always cover them together. So Constellation reported revenue up 30% to $1.6 billion in sales for the quarter. Organic growth was down 2%. But this is not really true because if you actually back out some currency fluctuations, they actually saw plus 3% organic growth. So they're pretty solid. Typically, Constellation has like very small or flat net churn. And that's because they're buying, they're not buying software companies at really high expensive multiples that are growing really fast. They're buying boring niche vertical market software companies that are one, two in their position, serving a very specific niche, serving a very specific geography. So of course you want to see positive organic growth for this business. And you saw a

ton of organic growth in 2021. And so you're seeing that decelerate a little bit to normal rates, but still the fact that that number is above zero means that they are doing well. Expenses creeped up quite aggressively for Constellation, up 36% on that total line item. Staff expenses increased 31% to $209 million for the quarter. They've mentioned retaining talent is tougher, attracting talent, keeping them away from competitors. You know, you got to pay up and you got to pay up for quality people who are ready to do M&A, especially at the level of activity of M&A that Constellation is doing. This is not a job that people just get to hang around and have a relaxing summer. These guys are pushing the pace. I don't know anyone personally who works

there. I just know some guys who work at Topicus actually, who I know from Europe. But my goodness, they are active. They are acquiring a business about every other business day. Overall, margins are slightly down. Capital deployment continues to be record after record quarter. $1.8 billion deployed in the trailing 12 months. So the last four quarters, which is ridiculous. Like almost $2 billion spent on acquisitions of small software companies. Now, they did spend about $800 million on Allscripts. They carved out a business from Allscripts, which is a public company.

Now, on to Topicus. Revenues are up 24%, organic growth was 6%, and those are the two line items that I think are most important to cover for these businesses. Now, I just wanted to pull something from the conference call for Topicus, and this really helps explain the secret sauce of this business, Constellation, and Topicus as well. So this is from the Topicus call here. The secret sauce is effectively that we know how to do business in certain countries. So for instance, Italy, all of Scandinavia, it's just difficult. A Canadian PE company, private equity company, can't just like, this is the quote, I love this conference call quote, they can't just like walk into Germany and start buying German software companies. It just doesn't work like that. Now, this is true, right? You can't just go do M&A in some country. You don't even know the language. You're serving customers that

you don't know the language. You don't know the nature of the business environment there. And so they have this really decentralized octopus arms in all these geographies to be able to actually do business and sort deals that no one else is looking at in their example here of some random Canadian PE firm. Overall, you know, these businesses are acquiring companies at an extremely rapid pace. No signs of slowing, only acceleration. One day, I will convince you that you need to own a piece of the beard, Mark Leonard. So if I were to own a piece of the beard, Mark Leonard. So if I were to own one right now, which one should I choose? CSU or TOI?

TOI. I've never heard that actually. TOI is the- Yeah, sorry. It would be Constellation Software or Topicus. Yeah. I mean, if I had to pick one, it would be the Mothership Constellation just because they own about 33% of Topicus as well. Just like my approach for Brookfield Asset Management is to just own the mothership. They own 60% of BEP, I think like 40 odd percent of BIP. And so that would be my stock answer. Higher upside, maybe Topicus because they have a longer runway and a smaller market cap. But the way that Constellation is acquiring at their rapid pace, it doesn't seem that runway and market cap are inhibitors. This company continues to get it done. That's fair. Now we'll move on to another

software company. This one, I think a lot of our audience knows already. We've talked about it before, Lightspeed Q1 2023 here. They have a weird financial reporting schedule. Revenues were up 50% to $174 million. Subscription revenues up 47% to $74 million, which is usually what they want to see. They're putting more focus on the subscription revenues. The other type of revenue that they have is transaction-based revenues, which were up 62% to $92 million. Organic revenues were up 38%. The average revenue per unit, so that's what they define as ARPU, because we've talked about ARPU before, was up up 39% to $320. Gross margins were down 500 basis point to 44.6%. So this is a pretty bad sign here that obviously expenses outpace revenues. And then if you dig into the financials, you'll see that

yes, expenses were really up. So the direct cost of revenue was up 65% and operating expenses were up 68%. So just comparing to revenues that are up 50% you never want the percentage of your expenses to outpace that and this is what we're seeing right here. Now they had a net loss of 100 million which was more than double that of last year. They lost 36 million on a free cash flow basis which is also more than double that of last year. They lost $36 million on a free cash flow basis, which is also more than double that of last year. And last thing here is that the shares outstanding have increased significantly over the past few years. Obviously, stratosphere.io provides a lot of good tools and I was on it while I was reviewing this for the podcast. Yeah, and I wanted to have a look at the shares because it's so easily accessible there. And in the past few years, it's grown 62%.

Granted, all given that they've made a ton of acquisitions, so obviously that's going to dilute. But 62% is quite a bit. And if you are an owner of Lightspeed or thinking of getting a position into them, that is also something that you'll want to keep an eye on. My goodness, they've diluted 62% in the past two years. The share count's increased by that. Man, like you look at these companies and in 2021 and the back half of 2020, as long as you continued to drive revenue growth like these

kinds of numbers, the market was there for it. The market loved it no matter what. Didn't care if you diluted, didn't care if you bled money. It didn't care if your operating margins and gross margins were deteriorating as long as you drove revenue growth. That has completely flipped on its head. Investors have smartened up a little bit. And you just look at this and you're like, how do I make money here? I actually like the product

too. And I like what they've done. And if they keep growing at this rate, eventually they hit operating leverage. But when? That path doesn't seem clear to me whatsoever. And I think the market, what's Lightspeed's stock here today? I think it's been getting absolutely deleted. Yeah, I don't think they've done well. And I think that's also why Dax moved out of the CEO role. I think they wanted someone that- It's down 77% on a trailing 12 months. Yeah, because Dax, I think, I'll give him the credit is I think he has a really good vision, but I think they moved away from, you know, he's still really involved.

I can't remember his exact role now, but I think he's the chairman. The chairman. I think that's it. He oversees the vision. And now the CEO, I think, is more operational driven. But still, there's a lot of work to be done. And to their defense, at least, they're not the only company seeing expenses go up in the tech space.

So they're not alone here. But that's just an important reminder. Revenue growth is nice. But if your expenses are outpacing it by a lot in terms of increasing, that's a warning sign for me, at least. Let's talk about Intercontinental Exchange, ICE. We haven't talked about this business before on the earnings roundup. I don't think, I don't believe so, unless you can recall a time when we did it.

I don't think so. Usually, we'll talk about TMX. We've mentioned them before, but not in the earnings. I think you're right. Yeah. we've mentioned the LSX, the TSX, which is owned by TMX and NASDAQ and ICE and all the exchanges. But I don't know if we've gone into detail on ICE. Now, we did just release a deep dive into the business of ICE, Intercontinental Exchange, ticker ICE, on stratosphere.io. So you can go ahead and find that. on stratosphere.io. So you can go ahead and find that. But I think I should do a deep dive for it because my analysts and I are intrigued with the business, their data advantage that they've built. These are really good businesses, man. Like, holy smokes, these are really good businesses and extremely durable. So Intercontinental, aka ICE, operates 13 regulated exchanges, including the New York Stock Exchange.

So the NYSE, they do own and operate, and then six clearinghouses around the world. So they have a piece of the pie of a lot of how securities move around this planet. And they touch it in a lot of ways from a data and analytics perspective and from an operation perspective. Exchanges revenue and operating income both increased 20% year over year in the second quarter. Fixed income and data services revenue, operating income increased 12% and 44%. So that data services business is like a high flying growth tech business, really growing fast. Now they saw strength across all of their data and analytics offerings. It's exchanges, it's fixed income, it's data service businesses. They had strong customer

retention, strong pricing power, and lots of new customer additions. There is a huge recurring revenue element to almost every part of their business, not only to continue to stay listed, but also on their data services businesses. There is also a new thing that they spun up over the past couple years called the mortgage technology segment. Now, this actually saw a decline in revenues due to lower mortgage origination volumes. But this has saw a decline in revenues due to lower mortgage origination volumes, but this has been a really nice driver for the business on a three to five year stack. So we'll give them the break here. Again, not a name we've discussed much here on the podcast, but I really like the stock exchanges. I would consider owning this one,

or if not this one, one of the other ones, whether it be ICE, the TMX for the Toronto Stock Exchange, the London Stock Exchange, the NASDAQ, they're incredible. Yeah. There's another one too that is not as well known, but if you want to play more on options and derivatives, there is a CME group. So the Chicago Mercantile Exchange, but they're really on options. So if you're looking to have more exposure to that, that would be the logical play. Yeah. Thanks for adding that. If you look at the returns from ICE and NASDAQ, they have dominated the underlying indices of the stocks traded on their exchanges, which is quite a hilarious thing. It's like the picks and shovels investment play of their financial markets. It's really

boring, but really great. You know, I like playing this side of any business ecosystem, the picks and shovels play, who's the API provider in the back, who's providing the infrastructure. It's these companies. And oddly enough, they continue to massively outperform the underlying indices of the exchanges they operate. Yeah. And they all pay, I'm pretty sure they all pay a dividend too. Yep. They all pay a growing dividend. Yeah. So I know we have, as Canadian, a lot of us have a positive bias towards dividends. So I always like to mention that. Yep. Now, speaking of dividends, Nutrien, nice transition there. Nut nutrient released their q2 2022 earnings it was a really good

quarter obviously prices of fertilizers have gone way up this year so revenues were up 49 percent to 14.5 billion cost of goods sold were up 24 percent gross margins expanded up 1200 basis points to 41 percent which is not surprising when you see the price of a commodity going up that will usually happen. Net income was up 224% to 3.6 billion. Free cash flow was up 142% to 3.4 billion. It was actually up 177% for the first half of 2022 as a whole. Now, they revised their guidance once again for 2022. So they revised it, I think, after their last release in Q1. The revised guidance was slightly downwards compared to the new revised guidance that they had.

But this was primarily due to lower nitrogen pricing and higher natural gas costs overall it was just a slight downgrade in guidance for example they're now expecting earnings per share between 1580 and 1780 a share versus a range of previously 1620 to 1870. So it could still fall within that revised guidance of Q1. And they're also planning to allocate approximately $5 billion to share repurchases in 2022. And so far in 2022, they've repurchased approximately $1.8 billion worth of shares. So, I mean, I know a lot of people own this. So congrats if you've owned this for a year or so because they are doing really well. And honestly, as a more commodity play,

I think this is one of my favorite ones because just the nature of what they sell, people have to eat. And as long as people have to eat, and there's a lot of people on planet Earth, they should do well because there's not a lot of producers like Nutrien. It's the perfect catalyst. It was a supply shock from the situation, the conflict with Russia and Ukraine. There was an inflationary environment, also good for these types of businesses. And demand is continually strong because of what they supply. Like it's pretty resistant to any macro issues at all, like in terms of demand for what they sell. And it's just kind of the perfect storm for this business to do exceptionally well. Yeah, I know exactly. And I mean, there's

still going to be some cyclicality here. You know, obviously there will be, but I think it as a commodity play, I really like it, especially if you're looking to have a dividend and clearly when the price is high, they're not shy of returning capital to shareholder either. Yeah. Like I've never visited a location where they, you know, make potash and stuff like that. But what I do know is that Nutrien is the best in class at what they do. That I do have a lot of confidence in. So it seems like a really well-run biz. 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. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be

a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's Airbnb. your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. Let's switch gears to Mercado Libre, ticker M-E-L-I. This results will be on a neutral basis in terms of Forex because they operate know, they operate with a ton of different currencies in Latin America, whether it be Argentina, Brazil, Colombia, they all have their different currencies and none of them are particularly stable. It's probably the nicest way to say it. So all of these- And they report in USD, right?

That's right. Yeah. So there's a lot of currency fluctuations in the results. So they try to FX it out. Net revenues of 2.6 billion, which was up 56.5% year over year. So the growth on this business continues to impress. 30.2 billion total payment volume, which was up 84%. The TPV total payment volume on Mercado Libre's business is insane. The scale they're reaching and the growth they're reaching is impressive. $8.6 billion in gross merchandise volume, which is up 26.2%. So to give you some context, their two big line items are payment volume and gross merchandise volume. So the payment volume, think of like PayPal's Venmo, right? Like think of it as a PayPal competitor for the Latin American region. And they're serving a very nascent,

developed region. Many people are unbanked. Many people have never seen these kinds of services before. And so they are at the right place at the right time. And then gross merchandise volume, think of them as like an amazon.com marketplace for e-commerce. So PayPal and Amazon for the Latin American and South American region. It's just the right place at the right time, developing the right solutions for a place that really needs this infrastructure. They've been lacking a lot of this infrastructure and MercadoLibre is the giant in this segment. Gross margins were up to almost 50%, which is quite impressive. They did record a net profit of 250 million as well. So it's good to see this business actually produce some profits.

Simone, you can see here I've put in a bunch of their KPIs for the business. Unique active users was up to $84 million from 76. I've touched on gross merchandise volume, payment volume. Total transactions performed was $1.26 billion, up from $730 million. You can see their cap axis have gone down, so more free cash flow. This is the best-in-class business for the region of Latin America and a bet on their continued growth and adoption of digital infrastructure. Yeah, yeah. And if anyone's looking to learn more about their payments business, you can just Google Mercado Pago. Yeah, that. And if anyone's looking to learn more about their payments business, you can just Google Mercado Pago.

Yeah, that's right. Yeah, you'll be able to go on the page. You can translate it now with Google Translate pretty easily and just have a look at what it looks like. Very similar to PayPal, like Braden said. Yeah, exactly. Mercado Pago, just translating to Mercado Pay. Yeah, your Spanish is good. My Spanish is a lot better than my french i'll tell you that for free okay now moving on to another canadian name i think i've all the ones

i'm doing are canadian i'm pretty sure i think you did you run the gambit of just yep yeah yep i mean there was a lot of names i wanted to talk about and they were canadians so it's perfect have you been using the slack channel i sent you where we do all the company roundups for stratosphere it hasn't worked oh no i never got the link but anyways after the podcast we can we'll sort that out we'll take that offline exactly it'll save you a lot of time for the podcast okay sounds good now the next company another well-known name if you don't know the name you'll know some of their brands restaurant brands international ticker qsr.to so their global system-wide sales grew 14 to over 10 billion important to note here this is a primarily franchise model so system-wide sale doesn't mean revenues so their revenues are much lower than that. Comparable sales were up 9% at Tim Hortons, sorry, 14% at Tim Hortons Canada and 18% at Burger King International and 9% as a whole.

Digital sales now represent a third of all sales. So I think that's just when people order in advance with the app. Total revenues for Restaurant Brand International was up 14% to $1.6 billion. Their total store count increased 8.5% to $29,747. They generated $641 million in free cash flow for the first half of 2022, which was slightly down compared to last year. But they also repurchased $165 million worth of shares during Q2 alone. Overall, I think it's pretty encouraging here, especially when it comes to Tim Hortons, because they had seen growths pretty much come to a standstill during the pandemic. So it's nice

to see, especially for those who are shareholders, that that's actually picking back up. People are just on the go again. I think that that was a lot of last traffic, especially in the drive-thrus for Tim Hortons. It's a Tim Biebs. It's got to be the Tim Biebs. You know what? See, Mom, it's the Tim Biebs. I think he has.

Doesn't he have like a drink now with them? Yeah, I've seen this. Okay. So, yes, to answer your question, yes, a there's a tim beebs drink i have not yet had it because i drink black coffee the odd time i will get you know one milk in there if i don't or like you know one milk in my iced coffee or something like that i saw someone get a tim beebs drink okay he's a group of like high schooler girls came in there. They all ordered their Tim Biebs.

It took forever. That's why I was like sitting there trying to get my coffee. And these Tim Biebs ice drinks came out and it just looked like all milk. Like it looked like one big cup of cream. This is disgusting, man. Like give me some coffee. So no, I haven't had had it but that's only because

i do not want to bet you there's tons of sugar in there too oh no no sugar and not dude no of course not if i do not want guttural obesity i will probably avoid getting the cream drink all right booking holdings ticker bKNG, reported their second quarter and revenues were up 99% from this time in the second quarter of last year. So a clean double. We'll round up. We'll give them a clean double on revenues up to $4.3 billion for the quarter. Net income for the second quarter was $857 million. It's a lot of profit. It's a lot of net income compared to last year where they lost $167

million. So that is a big turnaround. Obviously, doubling sales helps quite a bit. Here's a quote from CEO Glenn Fogel. Is that like Fogel, like a super bad Fogel? That's not spelled the same way, is it? No, it's not. It's been way too long since I've seen that movie. How do they spell Fogel McLovin? Oh, it's F-O-G. It's close. He's just missing an L. Glenn Fogel is just missing an L. He could have been McLovin. Here's the quote. We reached another milestone in our company's recovery from the impact of the pandemic, with room nights for the second quarter surpassing 2019 levels for the first time. So that's interesting. Finally passing that for accommodations day. We continue to see

strong accommodation ADR growth, which helped drive a 38% increase in gross bookings or a 48% increase in constant currency basis in the second quarter versus the same quarter in 2019. Again, thank you travel CEO for giving me comps in 2019. I don't care that you quadruple billion percent increased from 2020. You didn't make any money that year. It finishes the quote with you're looking forward. We expect you through revenue to be, uh, we expect record Q3 revenue, my apologies, and are very busy working with our customers and partners to enable an extremely busy summer travel season. I am not surprised. So the agency segment was up huge. The merchant

segment was up huge. The advertising segment was up huge. For context, in 2020, they did $630 million in revenue in the second quarter. The quarter they just did was 4.3 billion. So that is quite the difference, which is now actually past the 2019 level. But you can see how much these businesses all changed in that year of 2020. And I'm surprised they even did $630 million in revenue, to be honest. Yeah. Sorry, I wasn't sure if you were done here. No, no.

Just drop the mic. Simon, what do you think about that? Yeah, no, I think it's encouraging for traveling. It's not a business I would own. We talked about that recently when we did a travel episode. It's just I don't see what, as a consumer, like what makes me come back to them. Because I'm driven by price. I have zero loyalty when it comes to them.

But it's still a good parameter to see what's going on in the travel industry for sure. I totally agree with you. I have one, not pushback, but one thing to say counter to that, but mostly agree. Okay. So their assets are booking.com, Priceline, Agoda, rentalcars.com, Kayak, OpenTable, Rocket Miles, never heard of that, Fair Harbor, rocket miles, fair harbor, hotels combined, cheapflights.com, and mamundo. I've used mamundo before too as well for booking flights. Now, I have pumped kayak's tires multiple times on this show. And I actually just go directly to kayak now. Like I am actually loyal to kayak because I have booked in the past five years, like over 150 flights. I used to travel quite a bit for work. I took about 50 flights when I was traveling and backpacking or traveling around the world. I literally 95% of the time would find the best deal on kayak. And so I guess they've won me from that. But like,

you're right. If there's another site that comes out that gives me a better deal, I'm like, kayak, it's been real, but we're breaking up. Like, I don't care. You were great, but we're done. You know what I mean? So I wholeheartedly agree with what you're saying. Yeah. And especially I think right now, right, we talk about inflation a lot and it's everywhere. But if people are cutting back, but they still want to travel, clearly they're going to go for the best deal wherever it is. Totally agree. Now, the last name on our list. So Canopy Growth reported their Q1 2023 earnings. And I'm just going to say, you know, it's a bad earnings release when the first line in their statement says that their revenues were flat from the previous quarter. Not last year on a sequential basis.

That's the first line. So that's like that tells me that's probably the best thing that came out of their quarter comparing it to Q1. So Q4 2022 with their Q1 2023 so that's what they use and actually i wanted to mention at the same time you can oftentimes pick up things like this when you look at the press release what they're trying to highlight if it's actually like not that great and it's the first line that is usually a sign that it's not going to be a good earnings release. So yeah, they just like pull some like random non gap metric that's just like completely unrelated on the top of the press release. You know, you're going to be in for a bad quarter.

Yeah, exactly. And it's not like, you know, if you're into investing, this is not the standard, like the standard is they'll look at year over year. Yeah. And if they don't, they'll mention usually why and it won't be the first line. So I think that's a pretty good tell right there. Now, looking at their statements, it's pretty much everything is down year over year. You know, I pulled it up. Every single segment. Every single segment. There's a few that are up, but when they're up, it's usually kind of almost a sub-segment that's up.

It's not the actual main segment. The one thing that I was kind of able to spot here that's actually quite good is BioSteel. I didn't realize that they own a majority stake in that. They own BioSteel? Yeah, in 2019. Yeah, I saw that and I had to like google it you mean the drink yeah the drink the sports drink yeah i was surprised too i had the same type of reaction when i did the research i didn't know that so revenues were up for bio still 169 to 18 million

and that was really the outlier here it's funny that their best performing segment is actually not cannabis related. And the other piece of good news is they secured an agreement with Walmart to have their products in 2200 stores in the US. And of course, I'm talking about BioSteel here. Now, coming back to the results as a whole, it was not good. Coming back to the results as a whole, it was not good. Net loss of $2.1 billion, which was in part due primarily to a $1.7 billion write-off. Even if you zero that out, it's still not a good quarter. They still lost $142 million in free cash flow during that quarter, which was $40 million better than last year, but of course still not great. 40 million better than last year but of course still not great i don't want to generalize here but it seems to be pretty consistent here for the past what year or so where it's been

going from bad to worse for cannabis companies and i know they're getting a lot of pressure on pricing because there's very little consumer loyalty and And that's one of the reasons why we keep seeing in those CPI prints in Canada, you know, when they, I talk about alcohol, cannabis, when we break down the segment for CPI prints, well, cannabis in there, and it's always one of the lowest in terms of CPI increases. And I think obviously cannabis has a decent part to play in that, not just alcohol. You have touched on almost every major corridor for Canadian cannabis companies for the past couple years now, Simo, on this podcast. It is the same story every three months for every single company. Oh, it's actually getting worse.

It's getting worse. It's not improving. Yeah. No, it's actually getting worse. It's getting worse. It's not improving. Yeah. No, it's not improving. And it's just like every single time we get these results and it's just like keeps getting worse and worse and worse. And I don't mean to, you know, say we're the best and pat ourselves on the back, but told you so,, there's no customer loyalty in these products whatsoever. That's actually a very common theme across this podcast. So Simon, let's look at all the companies we've talked about, okay? And things we would own versus things we wouldn't own. And I think the results are directly proportional to this as well. Air Canada, no customer loyalty. You and I wouldn't

own it. CSU and Topicus sells niche vertical market software. It's very sticky. Good business. I own lots of it. Lightspeed, quite sticky. Maybe this is the outlier. Intercontinental, extremely sticky. Tons of customer high switching costs. Great business. Nutrien, I mean, it's a commodity, but hey, people need to eat. So good. You can make a case too. It's not like a duopoly, but there's like very few producers in the world. So it's almost a kind of duopoly or I don't know how many companies there are, but I know it's less than five major producers in the world. Right. MercadoLibre, very sticky ecosystem that they're building. I would probably own the stock.

Booking Holdings, not a lot. They're competing on price. Could do well. I think it's actually pretty good business, but that's what you and I would hesitate on. And then here with all the cannabis companies, what's the differentiator? Is there one? i don't think there is the only segment that has performed well in this earnings release is one with a real brand and that's bio steel yeah i mean well qs well yeah for them but yeah restaurant bronze international i guess you can talk about their brand a little bit it's not necessarily one i don't totally yeah but yeah same for yeah i would sleep just fine at night owning qsr i think so too it's not going to be like a huge grower and they will still rely on you know acquisitions most likely they bought what fire subs or firehouse subs not too long

firehouse subs yeah so they'll probably rely on acquisition some organic growth as well but canopy i mean i still remain steadfast that give it enough time there will be one or two companies that will be profitable it won't be super high margins but eventually there's going to be some consolidation in the space and there's going to be some one or two major players and that's it and they're going to own the whole market. I think that's eventually where we'll be at. But is it going to be five years from now, 10 years? I don't know. Will it be until after there is legalization in the US? Very possible. So I think there's a lot of question marks still there. And even those who come out the winners, I think it's hard to say who will come out the winner in this space. Yeah, it's a complete toss-up.

And if legalization south of the border looks anything like legalization did here in Canada. And actually, I have visited Denver, Colorado when they legalized it. And the dispensaries seemed very similar experience to here. And basically no branding, like no visible branding on any of it. And so if you have some bud versus the other bud, and it's packaged in these government containers, who cares about like who was produced by? And maybe I'm just speaking for me and anecdotally, but I know I'm speaking for a lot of people. Now there are, of course, a segment of the market that are going to care about where it was grown. They're going to care about who grew it. They're going to care about all that brand loyalty. But for the most part, our thesis of that not coming

true and differentiating themselves has been true so far. And so I don't know what the catalyst for that to change is. Now, I think for me, the only option is a scale play. That's why I'm saying it's there's going to be one or two major players and they're going to own most of the market because they're going to have razor thin margins. They're still going to be profitable, but because of their scale, it'll make it worthwhile. Yeah. I don't know if this is a silly analogy, but it's another... Actually, no, it's pretty decent. Another analogy here is people were really hyped up about solar panel manufacturing

stocks for a little bit there. Because it's a growing industry, just like cannabis. There are these publicly traded stocks that they're the two, three, four, five players of solar panel manufacturers in the world. They've been complete dogs. They have been terrible, terrible stocks to own because one, hard to differentiate each other. Two, no pricing power. And three, terrible margins. It sounds a lot like cannabis production to me.

I think it's a good comparison. Yeah, it's basically a race to the bottom. That's what it is. Yeah, it's the inverse of pricing power. The market's just racing you to zero. Thanks so much for listening to today's Earnings Roundup. We had lots of Canadian codes for you all to hear today, and we know you guys appreciate that.

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