The Canadian Investor - Blowout Earnings From Aritzia Despite Tariffs & Brookfield Buys Oaktree

Episode Date: October 16, 2025

In this episode, we cover a busy week of earnings: BlackRock’s big inflows and a push to bring more traditional investments onto the blockchain, Aritzia’s surprisingly strong U.S. growth, and ASML’s steady demand for its chip-making machines despite China limits. Plus, Brookfield buying the rest of Oaktree, Tilray still struggling in a value-driven cannabis market, and Pepsi learning that price hikes can’t beat falling volumes. We wrap with why even “moat” brands need to adapt post-pandemic. Tickers of stocks discussed: BLK, ATZ.TO, ASML, BN, BAM, TLRY, PEP Check out our portfolio by going to Jointci.com Our Website Our New Youtube Channel! Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca 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  Web player - The Canadian Real Estate Investor Beam Radiology - Pain management Asset Allocation ETFs | BMO Global Asset Management Sign up for Fiscal.ai for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

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Investing is simple, but don't confuse that with thinking it's easy. A stock is not just a ticker. At the end of the day, you have to remember that it's a business. Just my reminder to people who own cyclicals, don't be surprised when. there's a cycle. If there's uncertainty in the markets, there's going to be some great opportunities for investors. This has to be one of the biggest quarters I've seen from this company in quite some time. Welcome back to the Canadian investor podcast. I'm Simon Belanger. I'm here with Dan Kent. We are back for another episode of News and Earnings. Now, for those on Join TCI, just a heads up, if my eyes are constantly going down is because

I'm having some foundation work done so we had to I had to move room change room so this is not my normal setup so I'm actually recording my kitchen so doing the best we can despite all of that so there might be slightly less in terms of screen sharing just because I'm just using my laptop screen but the audio should be good I soundproofed a lot of stuff to make sure we don't hear the tractors and all the work that they're doing the screeching sound Yeah, it was a relatively quick adaptation for sure. I thought, yeah, we might not record today, but I'm going to try to handle most of the screen sharing. Hopefully we can, you know, I can succeed there.

I'm sure I will. Yeah, exactly. And one of the reasons why we want to not push it is first we want this, we're recording this on the 15. So we want to have a fresh news and earnings episode tomorrow, but also Dan is on Baby Watch. so we got to record I don't think we can postpone any recordings now if you're available to record we got to do it then make sure that

we have enough episodes in the bank we have about two weeks worth that we recorded early so you have some time to get new to the completely new live that you'll have yeah I'm on any day notice now pretty much so yeah and who knows when my life is going to completely

change but I'm pretty pumped for it yeah no let's get started so we'll start off here so it definitely is starting to pick up for earnings, not a whole lot, but you saw some of the big banks in the U.S. that started reporting. And amongst the big banks, well, it's not a bank, but obviously asset manager BlackRock, so it's always interesting when they report. So revenues were up 25% compared to last year. Net income was down 19% because of acquisition-related expenses on an adjusted basis. However, net income was up 11%. They said that organic

base fees grew 8% over the last 12 months, which is quite impressive when you just think about it that way. They bought back $375 million worth of shares during the quarter. They saw a massive $205 billion in net inflows. Although this, even though it sounds big, it is not a record for Blackrog. However, they had record inflows for their I shares suite of ETFs during the quarter. So that is pretty impressive here. They closed the acquisition of HPS investment partners during the quarter, which will add $118 billion of fee-paying asset under management, and their total assets under management is now at $13.5 trillion. So it is massive. I remember when they reached a $10 trillion mark, just thinking how huge that was, and now $13.5. And obviously, that's kind of a

combination of new inflows, but also assets of all kinds, it seems, just reaching new highs every day. At least that's what it feels like. Yeah, it kind of seems like they peaked in December of 2021 and then obviously we had that big, well, I mean, short, but relatively steep bare market in 2022 and they dipped and we're kind of seeing the same trajectory rising up into you know, 2025. I mean, yeah, the markets are going crazy right now. I think this is the largest retail participation in the markets in history. I think it peaked like it overtook 2021 levels. So yeah, I mean, I shares is doing extremely well.

I mean, they have a dominant stranglehold on their ETFs. Like look at the like the AUM and their in their eye shares went from 2.9 to 5.2 right now. So yeah, I mean, just this is one that I actually cover quite a bit and I actually do own. a chance yet to look into the quarter, but it seemed like it was relatively well received. And yeah, they just, this is one that's going to be not necessarily cyclical to the economy, but to the markets in general. I mean, when the markets are doing well, it's, it's pretty hard for a company like BlackRock to not, not do well.

Yeah, and I think it's, that's a good reminder is, although it's a great business, you have to be careful because if you're heavily weighted inequities and then you have BlackRock, you're definitely they're going to react like they'll go as equities go obviously they have other assets on their management but we've seen in the past and you're sharing here 2022 they saw a pretty sharp drop and obviously a lot of their fees will be percentage based so when you see a sharp drop here in a UM then you do have a resulting less revenue and in and obviously that also results usually in less profit so just something to to keep in mind for people interested in this company. Now, the biggest difference in terms of asset split is that fixed income went from

26 to 24%. Yields are about the same as last year, maybe a bit higher on the longer end of the curve, especially if you start looking at treasury here. But I think that's probably more result of just the AUM increasing for equities. So equity is just reaching all-time highs. And of course, because yields are pretty stable, you're not really seeing that same kind of increase for bonds. So that could be part of it. It was interesting on the call, though. They mentioned seeing opportunities in using tokenization to bridge a gap between kind of traditional assets. So you're thinking here, ETFs, mutual fund bonds and digital assets. So what BlackRock is essentially saying is they see an opportunity to bring traditional investments,

like the ones I just mentioned, to on chains. So that could unlock quite a bit of demand. They think and it's not surprising if you've been listening to larry think and what he's been saying not only on bitcoin but he's been pretty bullish on the blockchain itself ethereum two it kind of aligns with what he's been saying over the last i think year and a half two years i think he made his big big shift if i remember correctly was kind of june or july of 23 is when he came out and said he had studied bitcoin and now was starting to see why people were bullish on it and some of the use cases, and obviously that evolve into also looking at other blockchains like Ethereum.

Yeah, I mean, they, they're kind of expanding more into alternatives, I guess you could say. I mean, in terms of like a wide variety of things, I mean, we look at IBIT, which has just been crazy. I think here to date, it's added around $45 billion in assets under management. So, I mean, this is a company that pretty much has to grow through. acquisition, I guess you could say. And they're, you know, they're acquiring a lot of companies that, you know, don't, they, they kind of like branch off from, you know, your typical, you know, broad base index funds, which are a huge chunk of the business. But they're definitely looking to, to grow in other verticals, which, I mean, it is pretty bullish for the future. Yeah, no exactly. So an interesting quarter, I encourage people interested to listen to the call as well. Now let's move on here, a name that I know you are very bullish on. One night you've had for some time in the fashion space, Eritzia. Pretty impressive quarter, I'll be honest. I was doubtful about Eritzia in the last couple of years, but they're definitely proving me wrong. I was more bullish with Lou Lemon and haven't checked the price of Lou Lemon recently, but I'll just assume it hasn't done all that well. Maybe it's done a bit better, but, That's, I was always thinking of a high emergence, but, uh, you know what, Euritia is delivering

and I think it's reminding me why I should not be investing in the world of fashion. I think it's just, yeah, no, it's like a lot of people, I mean, I guess it's kind of a harsh term, but I kind of, I kind of mentioned, you know, a lot of people were, were dumpster diving in terms of, you know, companies like Lulu Lemon and Nike, which, I mean, it is harsh because like Lulu Lemon and Nike are not necessarily bad companies, but they're just companies that are going through a bit of headwinds right now in terms of just, you know, resonating with the consumer assortment issues like inventory build up, things like that.

Whereas I mean, Eritzia just doesn't seem to be going through any of those issues whatsoever. They topped expectations on both to top and bottom line. But the big thing is they beat earnings expectations by over 50%. I think the markets were, it was a pretty rough day for the markets when Eritzia ended up filing. I think they opened up at like, $90 a share, but ended up selling off.

Like, I think if, if we were on a green day, I think you would have seen Eritzia probably close over 90. And I think, you know, pre-earnings, they were $78, $79 a share. But revenue grew 32% year over year, which is well above internal targets. And U.S. revenue came in just shy of 60% of total revenue. So when I first started covering Eritzia over at stock trades, I think this was back in 2018. I believe the U.S. revenue base was under. 40%. And actually, I'll show, I'll screen share here. I'll show the chart of just how fast the

US segment for Eritzia has grown. I mean, if we look to United States revenue and Canadian revenue, we can see since 2014, we're looking at a 33% compound annual growth rate on U.S. revenue, whereas the Canadian end is only around 12.91. So, and I mean, 13% is not a bad growth rate, but you can just see how dependent this company is. on the US. I mean, back in 2023, it actually overtook Canadian revenue. So you have a pretty large untapped market for this company and they're just taking advantage of it right now. I mean, same store sales were up 22%. So that actually goes back to pandemic level growth and I'll kind of go here to comparable sales. So we've seen a pretty big, actually, let's go quarterly

here, I think be the better measure. But I mean, anyways, the company, yeah, here we go. So the company was growing, you know, there was a few quarters back in the pandemic where it was growing same store sales at like a 30 some percent pace. And then we get into 20, 23. They ran into a bunch of inventory issues. And it ended up kind of flatlining. And now we're kind of returning back to that pandemic level growth. And I mean, this is kind of a prime case where, I mean, in fashion, you just kind of, you don't fight the trend. I mean, it's just crazy the level they're growing at. U.S. revenue, 41% growth. Canadian revenue was 21% growth.

And, I mean, the company's gross margins increased by 360 basis points. And this is actually pretty crazy because tariffs had a 220 basis point impact to margins. So, I mean, we're looking at a near 6% increase in gross margins if we actually didn't have those tariffs. Adjusted EBITA more than doubled year over year and EBITA margins increased by more than 6%. the company is guiding to 22% revenue growth this year and EBITA margins to come in around 15.5 to 16%. And they had mentioned that if tariff impacts didn't exist, EBITA margins would be closer to the 19% range. And this was actually a target that they set to hit at the end of next year. So I mean, if you if you kind of isolate out tariff impacts,

I mean, they would have hit this target a year early. So I mean, obviously you can't completely isolate them out tariffs are an issue but it just kind of goes to show how well the business is doing without you know without things that it really can't do anything about and they do have a lot of flexibility in terms of forward growth because they have around 350 million in cash on the balance sheet and they don't carry any debt and i mean as you had mentioned fashion is is very tricky zero doubt i mean who would have thought erytsia which is kind of like a mid-tier fashion company. I mean, it's a very niche fashion company would be growing same store sales at a 22% pace

while, you know, companies like Nike and Lulu Lemon can't even post like positive comparables. The macro environment is terrible for a lot of these companies, but it just isn't really showing up in the numbers for a company like a Ritz here right now. And I mean, it kind of brings a question, like what happens to this company when the macro environment improves? I mean, we had strong GDP growth in the EU. US, but I'm pretty sure I've read some studies if you take out data centers. I mean, it was effectively flat on a year-over-year basis. Like, I think the consumer there is really

struggling still, but it's just not showing up in, you know, a company's results that, like, they, they sell expensive clothing. I mean, you're talking like, I mean, it's, it's a classic case shape recovery, right? Like, you're seeing people either doing well because they own assets. So, you're seeing a part of the economy doing well and still spending and then you're seeing those who are just struggling to make ends meet and don't have any assets. So I can guarantee you they're not buying Eritzia clothes. So it's probably that upper part of the key. As long as that one stays strong, I guess it should do pretty well again with a caveat that with a fashion play, you never know which way it's going to go. Yeah. Oh yeah, it can turn around, turn around very

quickly. I mean, I guess the final thing I'll say is they do plan, I believe it's 13 new boutiques next year or by the end of the year. I can't remember. I would imagine it's next year just because this company doesn't really add a ton of boutiques year over year, but 12 of those 13 are in the United States. So that should kind of give you an idea of the direction they're planning to go in the future and how well they're doing now. Okay. No, that's a good overview. In this kind of market, I like having some cash on the sidelines. It gives me the flexibility to jump on opportunities when the right stock goes on sale. But just because the cash is waiting, it doesn't mean it shouldn't be working for me.

That's why I use EQ Bank. They offer some of the best interest rate among Canadian banks, so my money's still earning while I wait. You can even get a boosted rate by setting up direct deposit for your payroll and depositing $2,000 or more per month into your EQ bank account. Your cash stays liquid and ready to go when it's time to invest. And if you're not in a rush to access your funds, EQ banks notice savings accounts and GICs are great ways to grow your returns even more. It's a smarter way to park your cash. Visit EQBank.ca to learn more and keep your money earning even while you wait. Want to buy a stock but don't want to shell out hundreds or even thousands for a single share?

With Questrade's new fractional shares, you can invest any dollar amount and build a diversified portfolio instantly. No delays, no trade fees, no excuses. Want to put $10 into a stock trading at $100? No problem. Questrade has you covered. They're the first broker in Canada to offer real-time commission-free trading for U.S. fractional shares in ETFs. It's simple, powerful, and finally available in Canada. Head to quest trade.com to open and fund an account. Use code TCI, and you get $50 to get you started. One of my favorite trips this year was a cottage stay on Airbnb

less than an hour away from Ottawa. Every morning, my daughter would run straight to the lake, sometimes splashing, other times poking at the water with her little pink net, trying to catch frogs. Getting her out for dinner was always a challenge, but after days like that she went down so easily at bedtime. That gave my wife and I the chance to finally unwind in the hot tub and watch a sunset together. Having a cozy place to come back to made the whole trip feel effortless and special. It also got us thinking about our own place.

If someone else's home could be such a perfect fit for us, maybe ours could be for another family too. Hosting our home on Airbnb would let them make their own memories in our beautiful neighborhood while giving us a little extra money to put towards our next trip. And the nice thing is the flexibility hosting provides so we can decide when it makes sense to host our home. Your home might be worth more than you think. Find out how much at Airbnb.ca slash host. Now let's shift over to ASML.

I know a lot of people that listen to podcasts own the company. own it too. I know you do as well. So very interesting one. For those not familiar ASMR, they essentially manufacture these massive machines that are used to create some of the most advanced chips in the world. So the Nvidia chips, for example, AMD, you name it. So they manufacturers the machines. And some of their clients will typically be companies like Taiwan semiconductors, Intel. So these what are called fabs. So they essentially will make the chips. I believe Samsung's also a client of theirs. So they, these fabs will take the designs from companies like Nvidia and AMD and Apple and will make the chips. So some do both like an

Intel, for example, but most of it is either they're a designer like an Nvidia or they do the fabs like, for example, Taiwan Semiconductors. So ASML revenues were $7.5 billion. That was a 2% a decrease compared to last year. There was 66 new lotography systems sold, which was one less than last year. Nine of those were EUV, and the rest were DUV. Now, EUV is the most advanced. DUV is a bit less advanced, but still represents the bulk of the demand in terms of the unit. They also sold six use lithography system, which was three less than last year.

Gross margins drop 200 basis point to 51.6%. Operating margins were just a few basis point higher at 32.8. The install base management cell, which is a key segment for them, which is just basically the maintenance of these machines that are highly sophisticated. And to be clear, the EUV system that we mentioned, so the extreme ultraviolet system, they are the only ones that actually make those in the world. So try finding someone to repair them, aside from ASML, you'll probably have a hard time, right? Yeah, I mean, if you're going to maintenance here, you're probably going to ASML, which, I mean, creates kind of a very sticky and much higher margin, you know, form of income.

Their servicing end is definitely probably the most interesting part of the business, in my opinion. Yeah, yeah, exactly. And net bookings here were $5.4 billion for the quarter. which was 2% lower than last year. Now, bookings are important because obviously these are very complex system. They do take time. Think, for example, like a Boeing or airplanes, for example, they tend to look at bookings as well because they take a long time to do.

So that is a good indication of the demand coming. So relatively flat in terms of booking versus last year, which is good. In terms of guidance, they're executing between, they're expecting, sorry, between $9.2 billion and $9.8 billion. in sales, so let's just say about $9.5 billion if you're using the midpoint of the guidance, and that would be a 3% increase versus last year, and that would be the guidance for

Q4, so the last quarter. On the call, they said that there is positive news around AI and how it's going to benefit their customer base. In terms of customer base, like I said, it's like companies like TSM, Intel, and just the big players in chip making there,

and they believe Chinese demand will be much lower in 2020. than it has been in the last two years. They expect the bulk of that, well, they expect that demand to be the UV, so deep ultraviolet, so the less advanced machine because of export restrictions that were put by, or pressure from the U.S. to put those export restriction towards China. Now, overall, they think that demand will remain pretty strong next year. They expect sales to be at least the same in 2026 than it was 2025.

And I think 2025 they're on pace, and I forgot to write that down. But if I remember correctly, they're on pace to about 15% increase in sales. Yeah, this was kind of a weird way to state like next year's guidance. Like they said, yeah, they expect sales this year to not be below that of last year, which effectively means they're going to grow, but they have no idea how much they're going to grow. Yeah. Yeah. Well, to their defense, we're still a quarter out, right?

until next year. So there's still Q4 that needs to happen. So a lot of stuff can happen in Q4. So they're probably just trying to be cautious. And they said that they will provide more guidance on 2026 when they release their full year result, which is reasonable in my opinion. Yeah. I mean, I am a fan of this company. I believe like if you're looking for kind of the picks and shovels, I guess, of AI plays,

this would kind of be one of them because, you know, you look farther down the line in terms of pieces of software or whatever it may be like computing power. I mean, the profitability of that is is not guaranteed. But when you get, you know, to the bare bone structure of this, I mean, ASML is going to sell these units regardless of how profitable the tech is down the line. So that's kind of why I own this one. And again, I haven't had a chance to look into the quarter, but I probably will after the recording. But it seems like a decent one because, I mean, the one thing I've noticed throughout my time of owning ASML is it usually bombs post earnings, like almost every time, usually see like a double-digit drawdown after earnings happened. So the fact that

it's actually up 3.4% today is a pretty good sign. Yeah, I think there were concerns about the demand dropping from China and how that would impact sales. I don't have the slide deck here, but China still is, I think, at least 35, 40% of their sales went to China. So I think that's why the market was a little bit concerned there. And I think that's probably why they said it'll be at least this year to just ease some of the Chinese demand concerns. Yeah, and I think they're like they're only allowed to sell DUVs to China, isn't it? They're not allowed to sell EUVs at all. Yeah. Yeah. Yeah, I think these are export restriction from the Dutch government because it is a Dutch company, but obviously pressure from the US. Yeah. I feel like if there wasn't

that much pressure from the US, I don't know if these export restriction would be in place, but that's a discussion for another day. So let's go over here. Brookfield, some news there that they're buying the risk of Oak Tree Capital. Yeah, so this started back in 2019, I believe it was, and they acquired a majority stake. I think it was around 60% in Oak Tree. And through some share conversions and reinvestments like over the years, the position I grew to around 74% leading up to the deal earlier this week. So the company will pay $3 billion for the remaining interest in the company and will own 100%. It looks like Brookfield Asset Management is putting up $1.6 billion while Brookfield Corporation will put up the other $1.4. Oak Tree's CIO chief investment officer will

join Brookfield's board and Oak Tree's dual CEOs will become dual CEOs of Brookfield's credit business. So Brookfield originally bought Oak Tree as a bit of a way to diversify its business. So Oak Tree specializes in credit, whether it be private credit, distressed debt. I mean, I think they've been well known to be one of the best companies in regards to distressed debt in the world. And Brookfield kind of felt it needed more of this credit aspect of the business. And I mean, the move is pretty simple from a strategic standpoint. Now Brookfield pretty much collects all the fees related from oak tree instead of having to pay out you know a portion of it to minority partners and i hadn't you know i haven't had a lot of time to look into the deal pricing wise but they did

they did mention it would be accretive so i would imagine it's it's at a relatively good price here and this does now make the united states brookfield's largest market and an interesting element here and this is kind of just something i saw on x i haven't had time to dig into it but apparently this deal was actually exercised by oak tree shareholders not brookfield so brookfield gave them put options, I believe, back in 2019. And they ended up getting exercise because back in 2022, Brookfield had mentioned that they never expected Oak Tree to actually exercise the ability to sell the rest of the company,

but they're doing it now. And I do see a lot of people kind of commenting that the exit might be due to current valuations. It's kind of difficult to say Howard Marks, who was kind of the co-founder of Oak Tree, he's nearing 80 years old. So is this him cashing? out on valuations are just kind of, you know, he's getting up there in age. So, but I think the market reacted pretty positively to the news. So I would imagine they paid a pretty reasonable

price here. And I mean, it just kind of continues to cement Brookfield's dominance over the last while. Yeah. And it's also, it's not like the credit market is without any risks right now. Yeah. So I'm not saying anything about Brookfield specifically towards that, but it's just there's probably some excess to happening in the credit markets, especially when you start thinking about private credit. I can't believe that all that there is a good quality, but Otre has a long history of doing very well in the credit market. So there's, I don't think there's any reason to believe, but yeah, it's just food for thought here. Yeah. Yeah, I mean, you're probably never going to know the true reason they're cashing in, but they are, they're, they're cashing in nonetheless.

No, that's good. So that's a good overview. In this kind of market, I like having some cash on the sidelines. It gives me the flexibility to jump on opportunities when the right stock goes on sale. But just because the cash is waiting, it doesn't mean it shouldn't be working for me. That's why I use EQ Bank. They offer some of the best interest rate among Canadian banks, so my money's still earning while I wait. You can even get a boosted rate by setting up direct deposit for your payroll

and depositing $2,000 or more per month into your EQ bank account. Your cash stays liquid and ready to go when it's time to invest. And if you're not in a rush to access your funds, EQ Bank's notice savings accounts and GICs are great ways to grow your returns even more. It's a smarter way to park your cash. Visit EQBank.ca to learn more and keep your money earning even while you wait. Want to buy a stock but don't want to shell out hundreds or even thousands for a single share? With Questrade's new fractional shares, you can invest any dollar amount and build a diversified

portfolio instantly. No delays, no trade fees, no excuses. Want to put $10 into a stock trading at $100? No problem. Questrade has you covered. They're the first broker in Canada to offer real-time commission-free trading for U.S. fractional shares in ETFs. It's simple, powerful, and finally available in Canada. Head to quest trade.com to open and fund an account. Use code TCI, and you get $50 to get you started. One of my favorite trips this year was a cottage stay on Airbnb less than an hour away from Ottawa.

Every morning, my daughter would run straight to the lake, sometimes splashing, other times poking at the water with her little pink net, trying to catch frogs. Getting her out for dinner was always a challenge, but after days like that she went down so easily at bedtime. That gave my wife and I the chance to finally unwind in the hot tub and watch a sunset together. Having a cozy place to come back to made the whole trip feel effortless and special. It also got us thinking about our own place. If someone else's home could be such a perfect fit for us, maybe ours could be for another family too.

Hosting our home on Airbnb would let them make their own memories in our beautiful neighborhood while giving us a little extra money to put towards our next trip. And the nice thing is the flexibility hosting provides so we can decide when it makes sense to host our home. Your home might be worth more than you think. Find out how much at Airbnb.ca slash host. Now, we'll kind of shift completely here, So we talked a bit about some financial companies with, obviously, Brookfield being not a finance, I guess an asset manager.

You have Black Rock as well. And now I wanted to go back. And once in a while, we look back at these cannabis companies. And every time we look at them, it seems like it never gets better. But it gets worse. Yeah, it gets worse. Exactly. It's like the Bank of Canada's inflation target.

It's like this, you know, it's this unicorn 2%. It's just never, never happens. We'll be doing a segment on that in an upcoming episode. But it's kind of funny every time I look at them. And I decided to look at Tilrey because it's been a while and I was curious. And I know in the past they had kind of reputation of being like one of the better cannabis plays when a lot of them were being hammered hard. Tilry kind of stayed the course not that it means they were profitable or not. But, you know, it's I guess the least dirty shirt out of all the shirts, I would say, was.

probably how a lot of people put it but you know let's have a look see uh see how it looks here so it's actually pretty hard to find a period where they had positive returns if you do one one year three years five years it just doesn't look good i think if you look at the last year it's about around i think flat two percent when i looked at it yesterday but if you look year to date is around 11 percent so year to date if you invested you're around with what the SMP 500 was. So I guess that's good. But if you look back at when the IPO it, I think it's down like 90 plus percent. I think that's the story for all these companies. And obviously, if you bought at the peak, you're probably down around 98, 99 percent. So if you still

hold it and you did that, that sucks. I mean, sometimes you win some, you lose some. But having said that, one of the positive is that revenues were up 5 percent to 210 million. In case you're not familiar with Tillery specifically. They have a few lines of business. Some I wasn't aware of. So cannabis, obviously, that's pretty self-explanatory. Cannabis revenue was 5%. They have beverages, so it produces and markets alcoholic beverages, including crab beer spirits and ready to drink cocktails. So that was down 1%. Their wellness offering, so they're more like ham-based food, CBD products and health supplements. Focus on natural wellness. So that was up three percent and then the distribution part which provides wholesale distribution of pharmaceuticals and

medical products primarily in Europe here so that was up 9 percent the problem here is the profitability so net income was just 1.5 million although that's a big improvement over the 35 million laws they had last year so adjusted net income was 3.9 million versus a net loss of 6.1 million last year. So we'll see, of course, adjustments I always take with a grain of solve, depending on what they are. Free cash flow continues to be an issue. They were 96 million free cash flow negative if we're looking at the past 12 months, including this most recent quarter. And that's probably the biggest red flag year for these companies is at some point you can just burn so much cash before something's got to give. And I looked up some key findings. I was kind of curious,

And this is not specific for them here. It's not specific for Till Ray. But I was just kind of curious. And because Brayden and I think we've talked about that a little bit with you and I as well, the problem I think with cannabis and what we thought would happen is that it just becomes a commodity, right? So a lot of people end gravitating around value. And I thought that was probably what most people did. And most of the studies, that's essentially the same thing.

they said is the vast majority of people when they shop, they want kind of the best value. Sure, they might pay, they might not buy the cheapest cheapest, but they'll really stay in that kind of value zone where they get good bank for their buck. And they won't necessarily pay for craft stuff where you're paying a lot more to get some high quality cannabis. Some people will, but what I'm saying is it's just not great for a company like Tilray because essentially it's a race to the bottom and these are the kind of businesses that end up having to be really big on a massive scales because you're think about grocers for example and I'm not saying it's the same business model but think about grocers is they make yes they make a lot of money but their margins are thin thin thin they make money on volume and I think this is probably what's going to happen I think five 10 years down the line you're probably going to have one or two big players that is is quite profitable because they just make money on volume and you might have some smaller

players. I just focus on the more craft stuff that's more expensive, higher margins, but overall profits are smaller because you just don't have the volume. Yeah, I mean, it's kind of similar to alcohol, I guess I would say. I mean, a $20 case of beer does the exact same thing as a $45 case of beer and the vast majority of people are probably going to look for value in that regard. so it's probably the same with with cannabis. I mean,

till ray has just been pretty much a constant cash burning vehicle, I guess. And they've kind of just milk shareholders dry. I mean, shares outstanding over the last three years have doubled. They went from like 600 million to to 1.1 billion. So I mean, obviously you're going to have to do this when it's not just tillery, though. Yeah. Oh, yeah. It's pretty much all of them.

It's pretty much all of them. It's not isolated to do a single company. But when you can't make any money, I mean, where do you go? You either go to the debt market or you issue equity. And I mean, they've definitely gone both routes, it looks like. But I mean, I just, yeah, I don't know, these companies, they don't, I can't really think of one attractive thing about a lot of these companies. I mean, it's, you know, eventually this was supposed to end, you know, the dilution, the cash burn, but it just hasn't. It's gone on for like, hey, eventually.

It's seven plus years. It's transitory. There you go. Yeah. Just have to define transitory. That's a problem. But I mean, we'll see. We'll try to do them once in a while just to see maybe at some point they'll turn things around.

Who knows? It's just I think we're seeing exactly what we have been talking over the years is just it just becomes a factor of like just a lower price, which is just not good on margins. But speaking of, they had some food and beverage. Or no, just beverages line. Another company that's known for its beverages, Pepsi. So I know you have an update regarding that. Is that a company you own? Can you remind me or?

No, no, no, okay. No. Pepsi is kind of one I like. They don't, they're, like, if you think of Coca-Cola as pretty much a pure beverage company for the most part, I mean, Pepsi's a bit more diversified. They do have a lot of, like, free to lay and stuff like that. So, and that's kind of what has killed, I wouldn't say killed, but why they're, why they're struggling so much. So.

The Frito way, huh? Yeah. Yeah. Yeah. It's funny because for a while, that's why they were doing so well. I know.

Like kind of, well, now that's, that was kind of the core thesis with this company for a very long time. It's just they had a more diverse market. But I mean, the inflationary period kind of hurt them in a big way, but I will go over that.

So it did pop after the recent quarter. But as of right now with Pepsi, you're kind of looking at the quarter. just wasn't as bad as expected, so it tended to do well. So revenue increased by 2.6%, but earnings declined by 11%. And the company reported 2% growth in its beverage segment in North America, but on the food side, volumes just continue to be weaker. And the company has been mentioning it is softer demand for quite some time now.

And I guess I don't disagree with them, but I mean, at some point, you have to counter soft demand with something in order to either boost that demand or just try to generate revenue in another way. And the company did reiterate that that growth moving forward will primarily come from volume increases, but we just haven't really seen any sort of indication of that. And I think the issues that people are starting to realize now is, first off, like, how bad junk foods are for you. And pre-pandemic, they were, they were cheap enough that, you know, maybe some people shrug their shoulders about the health impacts and bought them. but like now they're just not cheap whatsoever.

The company is just continuing to raise prices into declining volumes, which is, you know, there's a, there's a pretty delicate balance here. I'll actually do a screen share here of Pepsi's pricing increases. But it's just like there comes a time where you can only increase prices so much, especially into lower volumes that it's just going to continue to add more pressure. But as you can see here, we have volume growth. and net pricing growth. Let me see here, click this.

Like we're seeing a decline. The orange there would be organic volume and the blue would be pricing. So you're seeing like December 2020, 2022, 2023, you're looking at 14% increases in overall net pricing, which, I mean, this is well above what inflation would have been at that point in time. And you kind of see a direct correlation to when they started jacking prices where volumes declined. And obviously they're down now.

They're only increasing 4%. but obviously we don't have as high of inflation. But I think this is really where the company started to get hit pretty badly. So it looks like they're kind of trying to do a lot of things to make their products more healthy. For example, they're kind of stripping out a lot of artificial flavors and colors from the product. In addition to this, they're kind of trying to cut out numerous underperforming products, kind of like trying to simplify the business. And there was activist investors involved in this company.

So I imagine this has kind of pushed the process along. quite a bit. And I mean, the extensive costs that's going to come along with rolling out these new products that are, you know, healthier for the consumer, you know, it could pay off, but it's also very risky. The health food market is, is hyper competitive. And although Pepsi certainly kind of has the size and scale to pull it off, they could, realistically, they could invest billions of dollars into, say, a multi-year turnaround on this

and a consumer could just not resonate with the new products and it could end up costing them even more. And I mean, at this point in time, the only reason the company's operations have even held up to what they're doing now is because of the cost increases. And I just think they priced a lot of people out of their products. And there has been numerous studies on this. Some of them are kind of conflicting in regards to lower income individuals, kind of consuming more junk food. You'll find some studies that say they do. You'll find some studies that say it's a little misleading.

But I mean, if you think about it, if you're a lower income individual and a bag of chips in 2019 costs three bucks. and it's now seven, you're probably not going to buy them. I don't buy them at all outside of like very specific, like if I'm having people over or something, like I bought same. Yeah, like Thanksgiving, I think I bought three bags of chips in a case of pop and it was over $25. It was just crazy. So turn around.

I use the store brand. Yeah. Well, yeah. And I think that's probably what a lot of people are going to like the no name and things like that. Whereas, you know, Doritos and stuff like that. that are just ridiculous. But I mean,

the turnaround is possible, but I mean, there's a lot of wheels in motion here that ultimately have to work out. It's, you know, it popped a bit, but I think it was kind of a situation

where it was bad, not ugly. And this was like, Pepsi was a blue chip, pretty strong company for, for a very long time. But, you know,

post pandemic, they just haven't been able to adjust. No, no, exactly. And I mean, you know, things change.

And I think that's important is, as strong as sometimes we will make those moats to be some can be eroded right that like even for me I thought blue lemon had a bit of a mode because of how strong its brand was and I think we're starting to see that erode we're starting to see that erode for the reasons for Pepsi you know times change and you have to also be a bit nimble for investors we like to invest for the long term but at the same time if you're going to hold individual companies and not index funds or ETFs the reality is You do have to be more active. You can just blindly hold companies for a very long time.

Very few companies can actually stand a test of time and have a never lasting moat and outperform the market. Yeah. And I had mentioned in the one episode, I don't know if it'll be published yet by the time we do this, probably not. But we go over economic moats. And, you know, for a very long time, Pepsi actually outperform Coca-Cola. And one of the main reasons was it was just a more diverse business model.

I mean, it didn't rely so much on beverages. It had, you know, snack foods, things like that. And it just changed post-pandemic. I mean, I think it was a pricing element, but it's also probably an element that people are starting to realize you probably shouldn't be eating too many chips and drinking too much Pepsi. But yeah, it's, it's, I mean, even now here in Canada, they're starting to put those warning labels on chips and pop about how they're, you know, high in particular fats and stuff like that. I mean, a lot of people are kind of starting to realize how much of a drag these type of products are on your health. Obviously, they'll continue to be consumed. But the shift for Pepsi into, like, healthier products is definitely one they need to do.

But it's definitely not one that is guaranteed to work out either. Okay. No, I think that's a good point to end it. Just a quick note here for those probably most people are aware, I know you are. So I went back to Calgary for a second shot, PRP and PRP. plasma shot in my back. So big shot out to beam radiology who did the intervention there. Really awesome clinic. I would recommend it to everyone. It's not a procedure that's available here back home. Great for pain management. So anyone dealing with chronic pain. I did last year,

saw some big improvement. So I am doing it again for that same kind of improvement. But the first week is quite painful. So I need a break. So we'll call it an episode here. We're done all our earnings and news for those who are interested. You can get more content from us on Joint TCI, including an ad-free feed, the full episodes. This one, of course, may not be as good on my end just because I have a bit of a makeship setup. That's okay. We post our monthly portfolio updates, and I just posted my parents' portfolio just yesterday if you hear this on the day of the release. So thanks again for all the support, whether you're on Joint TCI or not. That doesn't matter. We appreciate it. And again, we'll be back.

next Monday for another episode of the podcast. The Canadian Investor Podcasts should not be construed as investment or financial advice. The host and guest featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with a financial professional before making any financial or investment decisions.