The Canadian Investor - Braden’s Back for Episode 500! Finchat Rebrand & Stocks On Our Radar

Episode Date: July 3, 2025

For our 500th episode, Braden is back on the mic as we reflect on the last 5+ years of doing the podcast. We kick things off with the story behind the rebrand from FinChat to Fiscal.ai, why the name change was necessary, and what’s coming next as the platform evolves. Then, we each bring a company that’s firmly on our radar. One is riding a wave of long-term infrastructure spending, while the other quietly powers a huge portion of the internet.  Tickers of stocks discussed: PWR, NET Get your TSX Meetup tickets here! Get your Calgary Meetup Tickets here! 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 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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that it's a business. Just my reminder to people who own safe Google's, 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. quite some time.

Welcome back to the Canadian Investor Podcast. We have a special episode here today. We have a familiar voice. Brayden Den is the one and only. Welcome back to the podcast. Like we had mentioned, you would make some appearance every now and then, so welcome back home, I guess. Yeah.

Well, our goal is to do a quarterly kind of mastermind and make it fun. Talk about individual stocks, stocks that we're looking at, that we were thinking of buying, things that we might have bought. And dude, it is episode 500. Yeah. We didn't plan me coming on for episode 500,

but I am damn glad we did because that is, that is no small feat man that's pretty awesome. Yeah and we did not can Dan Cant either just to make things clear. He had a last-minute thing that came up and obviously we already announced that I already announced that he was becoming a father so he had a baby related thing to go to so totally understandable we didn't want to get him in trouble with his beautiful wife, so we're just doing it old school, you and I.

Just like the good old days. And it's episode 500. That's pretty amazing. On a quarterly basis moving forward, we'll have the three amigos on here. We'll each probably bring a stock idea to the table, maybe one topic each to the table and go from there. So I'm not going anywhere. Just, just, just have one knows.

And dude, it's been nice to also listen to the pod because I've been listening to you guys and I've been enjoying it. I've really been enjoying it because I could never listen to the podcast before. You know, listening to your own podcast is pretty cringe and it's just really hard to hear your own voice. So now I'm listening to the podcast. I feel like I'm an actual fan now and it's been great. Yeah.

The only time I listened to it a bit was in the beginning, just to make sure like everything came out correct with the podcast players, right? Like you're just a bit paranoid, but yeah, I'm like you. I don't really listen to it. Did I tell you about when I picked up Ashley on our first real date? We had hung out a couple of times, but on my fiance and I's first real date, I told you about the story about how the podcast

was on in my car, right? No, I don't think you have. Okay, this is pretty good. So, this is so embarrassing. So I, like I said, can't listen to the pod. It's just cringe. I can't stand hearing my voice. There was an issue. I think it was Airbnb or one of our EQ Bank messages going, by the way, can't hear any of the ads. They're not firing. And so I was like, okay, let me check. I'll throw it on and see if I can listen to that.

So I'm trying to find all the ad breaks. I'm like, oh, there is something wrong with our software. Let's fix it. But when you start up my car, it automatically plays whatever was most recently playing. So first date, we kind of don't even really know. We've hung out a handful of times up in my cottage with some mutual friends, but this is our first real date.

I fire up the car, she gets in, I pick her up, and you just hear me talking about stocks. It's the first thing that happens when the car turns on. And I'm like, I promise I don't listen to my own podcast. I promise. This is not as cringe as you think. And it's so funny cuz I had probably not listened to it since the early days but needed to to check if the EQ bank ads were working and

Yeah, that was our first date. So there you go. There you go We must she must have liked it cuz I you guys are fiance's now So the rest of the date was good enough, just barely, I think, after setting myself up for failure. But no, you and I are both going to have a stock to bring to the table today. But I also thought maybe it'd be good to give people an update on our rebrand in Series A. Yeah, go for it.

I mean, I've been pretty much in the loop because I invested early. In FinChat or fiscal.ai obviously. You'll be talking about the rebranding. So I'm in the loop but I know a lot of people are interested. I know a lot of our listeners use fiscal.ai. It's an amazing product and saves you a lot of time if you're interested in doing research. Yeah, so you know online we've basically just been writing as fiscal.ai brackets formerly FinChat. And it is not lost on me that we have changed the name

twice now, because at first it was stratosphere, investing.com, that was a terrible domain name. Yeah, too long. Yeah, too long. Too long. And then even just the word, I thought the name was good, but I thought it was easy to spell. A lot of people really had a lot of tough time

putting it into the browser. Anyway, so it's a bit of a long name. Wanted something a little catchier. We launched the AI chat tool as a new domain name called FinChat, merged Stratosphere into that. And that's the reason that we originally changed that name is because FinChat was actually spun up as a new product.

It wasn't a name change. And then we merged the tooling from Stratosphere into it. So that's how that happened. Now we knew that we needed to change the name from FinChat for three main reasons. One, it's so much more useful than just a chat GPT for finance. It's a full-fledged terminal.

And most of the usage in our analytics is actually off the chat platform and in that traditional data aggregation. So that's one. People were a little bit confused that they're like surprised that there was more than just an AI chat window. We had issues with the banks,

especially the Canadian banks. Everything chat was just blocked for security reasons. They didn't want people putting in customer sensitive information, for example. So anything chat was just blocked. And we'd get a message back as they're trying to buy the product like eight months later, like, okay, we finally got the firewall removed.

I'm like, oh my God, I forgot we even knew each other. I knew two out of the three reasons. I wasn't aware of that one. Yeah. Yeah. And then the third one's just some IP garbage that we don't need to discuss. But so we knew we needed a new name and I was trying to find a new name for probably two months, honestly. And I just couldn't stop thinking about it, couldn't stop thinking about it. We tried everything.

We were, you know, at one point we really liked the word hummingbird, like, oh, it makes you work fast. Hummingbirds are cool. That's great. Turns out there's another FinTech with that exact same name out of Toronto with really nice branding. I was like, hey, no hummingbird. I was listening to the Costco earnings call.

I said, oh, welcome to the fiscal Q1 Costco, financial results and prepared remarks, whatever. They kind of go through their stuff. Fiscal, interesting. I go fire up a couple of companies and they all start the earnings call with that kind of prepared remarks. Welcome to the fiscal Q3, fiscal Q2, whatever.

Here's our fiscal Q bajillion results. And I was looking around the platform and I was like, this is actually one of the most common English words in our entire platform. And I've never even really thought about this word. Cause I always think of fiscal as like government policy. Yeah, that's where it comes to bring it. I remember when you reached, like we were texting

and you're like, oh, here are the names we're kind of looking at. I think that was what, early this winter, early in the year around there. That's right. And I remember thinking like, I don't know, like the first time I heard it, but you showed me all the other names.

I'm like, actually, I think this is the worst. But I think that it's not that- Best of the worst. Yeah, it's not that I didn't like it. It's more that the meaning for me was, yeah, like it was like, yeah, fiscal kind of government. I guess business too, but that's a kind of ring it had to me.

Once we realized the dot com wasn't being used, none of them were being used, the dot AI was available, we just thought like finance plus AI is more generically what we're going for. And, you know, a five letter English word that represents finance plus a dot AI domain name. Perfect. Like it was just kind of. Isn't it six letters? Fis...

We're definitely keeping this on the audio. Oh, 100%. Keep that. Six letters. You're telling me I have to... I did a presentation about the name change and I called it a five-letter word. Oops. Because you're talking and I'm like, it has a document open with her notes.

I'm like counting. I'm like no no that's six right? F I S Yeah, no six. Hey still six. Yeah short English words. You can't use it in wordle. So just so people know. Oh, yeah. Yeah, you couldn't get it in wordle But yeah, so that's the that's the new name. So what's next? With this we announced our ten million dollar USD But yeah, so that's the new name. So what's next? With this, we announced our $10 million USD Series A financing, which is pretty awesome.

We've now raised 13 million USDs in the bank and just growing, just trying to grow the team as much as we can and serve everyday investors as well as enterprise as well with our new enterprise offering that's launching and bringing the data that we have to APIs to go serve all the fintechs, the brokerages, the platforms you and I know, the banks,

you know, our peers, these kinds of things. So bringing all that offering into a B2B platform as well too. So that's the vision, man. It's obviously an important time for us right now. And I'm very excited. One last question. I'm sure people are wondering when are you going to go IPO?

Not for a little bit, huh? Yeah. You know what? Once you're on this venture track, I think that's actually kind of a good segue into just like why the IPO market has just been so underwhelming. Like why is Databricks not public yet? Why is Stripe not public yet? And it's like, OK, I get to operate as a private company with these late stage private backers that are willing to do $50 billion financing rounds,

the open AI type $40 billion series, whatever letter. And so- And you don't have to deal with all the extra stuff you have to do as a public company. Like I know we like to invest in public company, but the reality is there's a lot more scrutiny that comes with being a public company, disclosures, all these things, all that sucks for work,

governance, regulations. Yeah, exactly. So it's not a nothing burger. No, it's not. And look, I mean, there are a lot of pros to being public as well too. I think that it's just, it has provided another option that before 20 years ago,

the concept of those companies that I just mentioned, not being the SpaceX's of the world, not going public yet, wasn't even a concept. I don't think that that late stage venture ecosystem was built. So that's really what's happened. You get these financing rounds that are huge.

You go series A, we just did A. So you typically do like pre-seed angel maybe and then like a seed round, which is kind of like kicking off the company, going commercial, products in market. And then an A round is basically like, you typically have a few million dollars of revenue at that point You're gonna raise somewhere between five and ten million dollars and try to go big and then like the kind of the BC

Once you're in kind of see and after you're talking about pretty large businesses like significant Private companies at that point, but I have no issue with going public one day I've thought about that. Do I want, would I want to be a public company CEO? And I don't know. I'm not sure. I think it would have to make sense, right?

Like I think at the end of the day, like I'm just thinking about some recent IPOs and then it's just been all over the place. Like if you think about like Circle, that went public, like they've, I mean, it's been phenomenal. Like the stock is up, I don't know how many fold, but then you see other IPOs, it's been very much hit or miss.

And if you're going to IPO, obviously you want it to make sense and you want to tap the markets when, you know, it makes sense as a company to do so, not when there's not really an appetite for that. And I'll leave it at this. I was investor before CEO. So I run the company very shareholder friendly,

like very thinking about shareholders, honestly. I think that's a good way to run a company, especially if you're gonna take other people's money and they're gonna invest in you. I wanna run this company for maybe the next 10 years. But if I was to go public in five years, for instance, I would never go public as the company's CEO if I didn't have commitment to my shareholders, that I'm probably going to be the founding CEO of the company for another 20 years. To me, that would be the commitment of like,

hey, you're backing a founding CEO running a public company for hopefully a few decades, not revolving door of new CEOs in three, four years. So I think it would be more so like my commitment to the shareholders. No, that's good to hear. That's a good point. I mean, we'll see what the future has in store, right?

But very exciting, congratulations. I'm a happy early shareholder in fiscal.ai and I'm sure I'll slip up a few times, they'll call it FinChat from time to time, but I think I've been doing a decent job. You're okay, I'm doing it. I think I'm 50-50. And I'm the one that renamed it. Want to buy a stock but don't want to shell out hundreds or even thousands for a single

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shares in ETFs. It's simple, powerful, and finally available in Canada. Head to questrade.com to open and fund an account. Use code TCI and you get $50 to get you started. Summer always gets extra busy. Weekends at the lake, trips out to Canada's East Coast, vacations with the family, chasing a bit of sunshine somewhere new.

Every time I'm away, and probably you as well, your place just sits at home empty. And since I'm already staying at a great Airbnb, why not have my own place generating a little income on the side while I'm gone? I've always thought it's a great idea, but it made me nervous to think about the work required. It's easier now with Airbnb's cohost network.

I can find a local trusted cohost to handle all of it. Guest check-ins, support, even cleaning, no stress, no extra work. If your place is often empty in the summer, maybe it's time to let it make some income for you. Find a cohost at airbnb.ca forward slash host. Calling all DIY do-it-yourself investors, Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians

plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked.

And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends, and there's other stuff like learning, Duolingo-style education lessons that are completely free. You can search up Blossom Social in the App Store and join the community today. I'm on there, I encourage you go on there and follow me,

search me up, some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the app store and I'll see you there. Okay, so do we wanna get started?

I guess I can go with that. Maybe some stocks a little bit on our radar, I think would be the best way to put it at this point. The segment you did, right? Yeah, I wanna hear about the one that you have here. This is pretty cool. Yeah, so stocks on a radar presented by EQ Bank, our great sponsor, obviously.

They've been with us for a long time. We both bank with them. I think they're a fantastic online bank. I don't know what I would do without EQ Bank, to be honest, in terms of having my banking. It's just, I would not go back to any of the large banks. Did you see Andrew Moore passed away? Yeah, I saw that. Yeah, that's really too bad. I was reading up on that and it seemed like pretty sudden too, right? Over the weekend from what I saw. It seems like it. Yeah. So for context, the CEO of EQB, Andrew Moore, president and CEO,

passed away at age 65 just this past weekend. So amazing what he accomplished and gone too soon. So rest in peace and to the employees and his family and friends, we're thinking of you guys. Yeah, it might be, and maybe on the, cause I remember when I saw the news, they said they had already been working on succession planning as well,

given he's into his 60s. And maybe just a quick note on that, if we're thinking about on the investing side, not specific to EQ Bank, but just companies in general, when you have CEOs that are a bit older, late 60s, even their 70s, I think it's something really interesting to check if the company actually says that they have a succession plan in place. Because obviously as you get older, the risk of passing away actually increase and maybe we've been so used to seeing Warren Buffett being at the helm of Berkshire into his 90s and Charlie Munger that sometimes we forget about it. But I think that's something that investors should definitely keep an eye on to make sure

that especially companies that have CEOs that are pretty important, maybe like even I would say key persons in the business, that to keep like, keep an eye out. Constellation. Exactly. Just keep an eye out to see if they have like an actual succession plan in place. Cause I think that can be very valuable, especially when you have a super important CEO, not just someone that was there for five years

and you know, they just kind of roll over CEOs on a five year period. There are companies like that, but really someone that has been there for a long time and a big reason that the business is doing that well. Absolutely. Well, rest in peace, Andrew Moore, FinTech and Canadian finance tech pioneer.

Yeah, yeah, definitely. So yeah, our condolences to all his family and friends. Now we'll go on to the actual companies here. So the market cap of this company called Quanta Services, take your PWR, it's 55 billion, so it's a pretty large company, it is listed in the US. I can't, like I just came across it, I think I actually was reading some articles

and I came across the name just a few weeks ago and then yesterday when we were talking about what we talk about, I thought about this one, I had just read quickly on it, so I started digging a bit more, and it's really a company that provides engineering and construction services that can be really broken down in three big buckets.

You have electric power infrastructure services, so installation, upgrade, maintenance, and repair of electric power transmission and distribution infrastructure. Oil and gas infrastructure services, so pipeline, industrial facility construction, maintenance and upgrade services, and communication infrastructure services. So the installation and maintenance of fiber optic and wireless communications

network. So right there, I don't know about you, Braden, but that sounds like a lot of stuff that we'll need in the next 10 to 15 years. This is a slam dunk stock that I heard about for the first time four minutes ago from you. The backlog is, I mean, I don't wanna, you know. No, that's okay. Steal your thunder here, but the backlog is 35 billion. Am I seeing that correctly?

Yeah, you are correct. Oh my God. Oh yeah, I mean, I started digging into it and all the numbers were something else here. Like you're talking about the backlog, here it is. It's literally jumped in the span of five years it's more than doubled. Wow.

Yeah, and you're looking at revenues that are looking really good too. Like the total revenues have just been, like, I mean, obviously when your backlog is that big and increases, clearly your revenues will be increasing, too Doesn't take a math genius to to know that so revenues have been increasing at a really good clip So revenues have actually grown at a pace of 20% over the last three years and a rate of 15% Over the last five years they went from having like said, a backlog of 15 in 2020 to 35 in 2025.

And what's more impressive is they increased their 2025 revenue guidance and profit guidance in their latest quarter. So when they released Q1, when a lot of companies are actually suspending guidance because of all the uncertainty with tariffs and the macro and everything with the economy They actually increased their revenue and profit guys for the for the full year

Like just one quarter after they had issued it free castle has increased seven times since 2021 and free castle per share went from a dollar thirty five to over nine dollars during that same time period they for dividend lovers, this is probably not the stock for you. They do pay a dividend, but it is tiny. So if you're really, your sole focus is to have a dividend yield. I mean, it will not move the needle. I mean, it's currently yielding 0.1%.

So it's not much, but- They're increasing it by 4 cents every year, it looks like though. Yeah, so they're increasing at a good pace, but again, I think to me, the dividend is not really that important, but if your rule is to have a dividend, there is a dividend. So that's the good news here. And the good news is, like you said, they do increase it and their payout ratio is very low. It's in the 20s right now, the low 20s.

They have some debt on the balance sheet but seem very manageable from what I could tell. At a pretty quick glance, their interest coverage when compared to EBITDA is over 10 times, so there's really no issues there. Their operating margins typically range between 4.5% and 5.5%, so that's pretty good for a company in that kind of area. Their return on invested capital is not the highest at 6.8%, but again, if you're compared to like a WSP that does have some overlaps here, they're at 7%. So clearly, I think again,

you have to think about these kind of metrics more in terms of the business lines and sector because clearly they're not going to have the same return on invested capital as a meta for example or kind of these may take place it's not going to be the same. They have made some acquisition over the last few years which is why their share count has gone up a bit despite buying back some shares. The biggest drawback here is really the valuation. I mean if you're looking at a trailing 12-month valuation we can look at ford whichever but either way it's not the cheapest. So trailing is 60p, ford when you look at the

estimate it's about 35 and if you're looking at a price of free cash flow you're looking at a trailing of 38 and forward of 33. So not the cheapest but again if you think I'm going to use WSP a little bit and knowing that they're not exactly the same companies, totally granted here that's fair, but it just shows that yes there's definitely a premium right now for this business and it's trading pretty high in terms of even its historical norm. So I think that's the only thing that would make me a bit skittish about starting a position right now is really on evaluation basis. And the other reason would be that I do need to do a bit more digging on the business.

I just put a couple hours in so there's more digging required for sure. Is it all services? My from what I understood and I could be wrong, it seems like it's in part services but also managing some of the projects. That's my understanding. I again I could be wrong so it seems like it's a bit of a hybrid but it sounds like they outsource a lot of the actual kind of project management part to contractors. That's my impression again, I could be wrong but that's my impression of it. Yeah, it's trading like its valuation, its expansion on the multiple has just increased, increased, increased, increased. And the business has gotten better, but the multiple has expanded steadily post 2020.

Oh yeah. All the way basically from trading at what was like a utility multiple of like 12 times EBIT to 42 on operating like enterprise value to EBIT. So you've seen really heavy expansion, but you look at the backlog and the demand forward for their kind of services as North America needs

to basically level up the entire grid for this next era of computing. And it makes sense. Like the multiple expansion makes sense. The question is, is it too much? I wonder. Yeah, exactly. That's a good point. I mean, the bull case is very easy to make.

I mean, the secular trend, when you think you just said about AI, the electrical grid, it needs to be expanded. I mean, I was reading an article just like Ottawa of all places. They're basically saying now like Ottawa needs to expand its electrical grid. So you can just imagine other areas in North America that are way more that are growing the data center and AI infrastructure a lot more what it'll need. I mean, the energy infrastructure as well, right? Like people don't realize, but there's been a lot of under investment in the oil and gas sector since 2014. Since we saw the big

crash in the oil price back in 2014, there's just not have been enough incentive for businesses to invest in infrastructure. There's also been obviously with the different governments in North America a lot of reluctance, denial for regulatory approval and so on for environmental reason and other reasons of course. So there's just not been there's been under investment. So at some point this will catch up because the reality is with the amount even if you forget AI and you think about everything else we will need more energy like we will need a lot more energy in all its forms and

we just cannot have in all its forms and we just cannot have, we cannot sustain the amount of energy we will be consuming just with one type of energy. We'll need a whole lot of different forms of energy to sustain that long term and oil and gas will be one of those and there's also you know the communication infrastructure. I don't think the internet and fiber is going anywhere anytime soon. So it's just the three areas are just, it's hard to not be bullish on it. Yeah, and I like these types of companies,

the same way I like WSP a lot more than owning a utility. Yeah, versus owning a utility is one, it's a lot more capital light. The margins can be significantly better. And you can just grow faster than having to actually outlay one facility at a time. You can be the service play for everyone that's doing that outlay across the entire country.

Yeah. There's a little bit more competition for sure to win those bids, but they're doing something right. Yeah, and you're also looking, I don't have the link here, but I did a recent episode with Dan and some estimates on the spending that will happen both on the public and private sector in the next, until 2040, from now to 2040.

I mean, you're're talking I think around 90 trillion dollars in terms of estimate. Of course their estimates they may not be realized but the reality is whether there's a good or bad economy it's likely gonna be some massive investments because if there's a bad economy why wouldn't government want to stimulate the economy and if there's a good economy then likely the private sector will be investing a whole lot in this infrastructure. So to me, it's very hard to not be bullish,

at least on that whole sector. Yeah, there's a lot of replacement cycle in the utilities, especially electric utilities in particular. Cool, man. Sometimes I feel like such a goof. I feel like I know every large, medium, 50 billion plus publicly traded company, especially in the US,

and then I see something like this come across my plate, 55 billion market cap, and never really heard of it. Hey, I never heard of it until a couple weeks ago, so there you go. You're not alone. 55,000 employees. Yeah, it's not a It's not a small business and it's funny. I guess it's just not a very sexy name. That's why people don't really talk about it

Yeah, engineering services. It's it's like the acquisition that WSP had of power engineers. Yeah It's engineering firm that services the electricity grid. Yeah. Yeah, exactly It's engineering firm that services the electricity grid. Yeah, exactly. No, it's- Same thing. But it's not sexy, right? They probably both bid on that acquisition, honestly. Yeah.

I wouldn't be surprised. But it's not as sexy as the newest AI play that you're trying to make, right? Like it's not, I guess that's why there's just not as much fanfare, whether it's for WSP or this company. 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 US fractional shares in ETFs. It's simple, powerful, and finally available in Canada. Head to questrade.com to open and fund an account. Use code TCI and you get $50 to get you started. Summer always gets extra busy.

Weekends at the lake, trips out to Canada's east coast, vacations with the family, chasing a bit of sunshine somewhere new. Every time I'm away, and probably you as well, your place just sits at home empty. And since I'm already staying at a great Airbnb, why not have my own place generating a little income on the side while I'm gone? I've always thought it's a great idea but it made me nervous to think about the work required. It's easier now with Airbnb's co-host network.

I can find a local trusted co-host to handle all of it. Guest check-ins, support, even cleaning, no stress, no extra work. If your place is often empty in the summer, maybe it's time to let it make some income for you. Find a co-host at airbnb.ca forward slash host. for you. Find a co-host at airbnb.ca forward slash host. Calling all DIY do it yourself investors, Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing.

This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends, and there's other stuff

like learning, Duolingo-style education lessons that are completely free. You can search up Blossom Social in the App Store and join the community today. I'm on there, I encourage you go on there and follow me, search me up, some of the YouTubers and influencers and podcasters that you might know,

I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the app store and I'll see you there. Okay. Should we do mine? Yeah, let's go for it. Okay.

Today I'm going to be talking about a company called CloudFlare, ticker NET. So N-E-T. CloudFlare is a absolute beast, but very expensive stock. So I'm gonna go a little bit into what they do in simple terms, the scale today, some of the growth KPIs, and then lastly talk about the valuation. So the reason I wanna discuss Cloudflare a bit today is a bit of a forcing function.

I'm not doing the pod so much anymore. And there's some companies that I just really wish I understood better. So I'm like, okay, I'm gonna, you know, cross two to-dos here with the podcast and learn a little bit more about Cloudflare. And my company, like we use it a lot. We're using their products a lot.

And so I'll try to litter in how we use it to make it a little bit more tangible. I'm no by no means in the technical weeds like my CTO or software engineers would be, for example, but that's okay. We can focus on the high level and the financials and cloud flares and investment specifically. So Cloud Flare is a web infrastructure company. They're most well known for their content delivery network. So it's called the CDN. And there are several publicly traded CDNs. They're really focused on cybersecurity on the edge.

And the simplified version of what they do is they help websites operate fast and keep them safe. That's like the TLDR. It makes websites faster and keeps them secure. By helping companies load pages faster for users, stay online and have better uptime, remain secure from bots and hackers, it can be extremely valuable to these companies that terminally run their business online, whether it's software, e-commerce, everyone's using it. And to give you an idea of scale, more than one quarter of all websites in

the world use CloudFlare. I didn't know that. 10% of global internet traffic runs through Cloudflare's edge computing. I mean I've seen the brand because sometimes the website don't work and you see the Cloudflare stuff pop up. Yeah that's basically making sure you're a real person. Oh that's right. Like when you when you see those you know how you can do like CAPTCHA. Oh man I hate those. I feel like I'm sometimes I get it once and sometimes I'll like have 10 times in a row. I'm like, I'm doing exactly what you're telling me and it's not working. Exactly.

And users hate CAPTCHA. And what would happen, you know, what's the value of a customer who hates CAPTCHA and they're about to check out, buy something for $500 on your website and a CAPTCHA comes up to make sure you're not a bot and you don't complete it or can't complete it and you just lost the sale, right? Like CloudFlare is doing that in the background for them.

Sometimes it takes two, three seconds for it to work but that's a significantly better option than CAPTCHA for example. So that's an example of one of their products keeping websites secure and fast. So one quarter of all websites are using Cloudflare and they only have 250,000 paying customers. They have a lot of people getting a lot of usage

on Cloudflare and not paying. It is, they are playing the longest game. Like it's run by the founder CEO today. And this guy is incredibly patient because I believe this business is incredibly under monetized. Like extremely under monetized. Which sounds crazy right? Because the 65 billion dollar company today they have 4,000 employees they're doing 1.7 billion in revenue today but Matthew Prince the founding CEO still has significant skin in the game

and he owns 8% of it, which is nice to see. So I'll talk a little about what they actually do and how to make it really simple because they have a lot of products that serve developers to make your website fast and secure. Those are the North Stars. They have a lot of products that serve that. The content delivery network,

like how it can make this really simple is so let's say you are, you're my customer in Germany, okay? You live in Berlin, you subscribe to fiscal.ai, but my database sits in California, for example, in the cloud. To best deliver right on the edge that data to you so it's served up quickly. And we're data companies, we're fetching so much data. We'll actually use Cloudflare's nodes that are more distributed than the Cloud's hyperscalers are, cache it in all those servers around the world so that if you're in Germany,

it's gonna spin it up to you faster than if I had to go fetch from a California-based data center and serve it up to you. Does that make sense? That's kind of the way to think about edge computing. And so it can be pretty much instant delivery if it's cached in those servers. So a lot of products like detecting stopping bots

for signing, say I'm a ticketing website. I don't want scalpers coming in and buying 400 tickets for the Taylor Swift concert. So how can we detect it? Detect it's a real user, an actual real IP that's signing in. It's not some bot farm. And for example, us, we had a DDoS type attack where we had, I mean, it didn't hurt us,

but we had like 20,000 fake accounts sign up. And like, we couldn't send customers any emails for a day because we had basically hit Google's authentication limits. So that attack, you know, whatever, it doesn't hurt our business. It's just 20,000 emails that go into a server. But it stopped us from being able to serve customers for like 24 hours until we got it sorted out with Google's authentication system. Cause they basically say, hey, you guys are not stopping the bots,

you're cut off, right? So we'll go to something like CloudFlare, insert that turnstile and it fixes the problem. It's like, they have a lot of products where you're like, I need an Advil right now, here it is, quickly developers can get it going in no time. So does that kind of help demystify the business a little bit?

Yeah, no, I think that makes a whole lot of sense, yeah. It helps websites operate fast and secure. So I'm really particularly bullish on their platform called Cloudflare Workers, which is basically like think of a little a bunch of AI bot little workers that are running in the servers and they run your cloud your code all over the world and closer to people than like just one place in some North American data center.

And the CloudFlare Workers is again, so, so valuable. And I hope Matthew Prince or the salespeople aren't listening to this. Like we don't pay them like hardly anything. We get so much value and we're not really paying. And so this is what I'm particularly bullish on and probably why the stock's so expensive. Like they're doing less than 2 billion revenue

is trading at 65 billion market cap. That's a huge multiple. Yeah, yeah, clearly the market is seeing something that potential for unlocking at some point in the future. That's right. So as you have up on there on the screen for the listeners on jointtci.com, 250,000 paying customers now,

which over the last 10 years is up, seven times growing at around nearly 30% a year. I would love to know how many active developers they have on the platform. They don't disclose that they just have paying customers as 250,000 businesses. I wouldn't be surprised if there's like 10 times that, that are not paying at all,

just based on how much traffic. So what's the advantage of paying versus not paying? If you're hitting certain scale limits. Okay. Like if you're, it's basically the business model is like, unless you're huge, I don't care. Keep using this. We hope you get huge one day

and start being like six figure customers with us. Okay. That's basically the business model. It's a very freemium product led growth market motion. So the revenue is still growing at like 27% a year over the last couple of years. The gross margins are nearly 80%. They've never generated drop of gap profit. That's one of the bearish cases on the business.

They've never generated any actual gap profit operating, not even gap operating income. Have they generated a single positive year of- Who needs gap, right? Just suggested. Yeah, who needs gap? Just adjust the crap out of it. But that's pretty bad, honestly.

It's pretty rough. So I'm gonna break this down to a few points. It brings me back to 2021. Exactly. This stock went gangbusters in 2021 and then fell from grace. So here's the good and the bad. The good is they have this nice product led growth motion

selling to developers and a lot of upside and monetizing these customers over time and growing them into enterprise customers. Their focus on cybersecurity is a major plus because cyber is one of the largest growth vectors of the last 10 years and probably of the next 10 years in terms of critical infrastructure that everyone needs. Three, I don't know how to put this other two into words other than they build really freaking good product.

Like you can tell they care. You can tell that it feels founder led and it is. They build, like they really care. They build really good product. Probably hella under monetized. So they have around 3,500 customers paying over 100K a year. I wouldn't be surprised if that ballooned

to like 10,000 in the next few years. And it wouldn't be surprising at all. Are there alternatives to Cloudflare? Like any competition or like you said, CAPTCHA for an example, but any like companies that would be doing it the right way like Cloudflare? There are, there is competition in the content delivery network.

I think their biggest competitor would be a company called Fastly. Okay, yeah, I've heard of them. So content delivery network, again, it's like delivering the content closer to the customer more efficiently, faster. So that's like a big part of their business. So they do have some competitors there,

and they definitely have some competitors in some of the cybersecurity stuff. The way that they pair them together, I would say is quite unique. Where they're light years ahead in both a bull and bear case, is they are light years ahead of edge computing against the hyper scalers,

like AWS, Google Cloud and Azure. Right now in that edge computing, they have more nodes to deliver the content right at the edge for customers. That's a bull case. The bear case is that gap will erode over time. Yeah, I was gonna say, if there's companies that can throw money at stuff,

those are the companies. They're going directly up against AWS when it comes to AWS, just like, you're going to be a customer of both AWS and Cloudflare. But you might not need Cloudflare if AWS has better edge computing and content delivery. Yeah, that makes sense. Yeah, yeah, that's good. And just the sheer amount that they've invested in AI, right, The IPERScalers and people if they want to remember, just look up how much money Zuckerberg has been giving to some of the top AI people in the industry recently. I know it's made headlines. Just look it up. You'll see that they're not

shy at throwing money on what they think will bring a lot of value to the business. It's Toronto Tech Week this week and I went to dinner at a Michelin star with AWS on AWS's dime. They're doing okay. They're doing all right. They have some money. So yeah, it's not the best type of person to compete with. Excellent growth, very sticky.

They're gonna grow for years to come. They're monetizing customers better. They're finally having kind of like building out a direct sales team, which I think is kind of overdone. Too late, but it is what it is. And 110% dollar based net retention, so existing customers will continue to expand. That's the bull case.

The bear case is that growth is gonna persist, but it won't be the 50% year over year. Those are the, those 2018, 2019, 2020, 50% a year, steadily for like five to 10 years, those days are over, but they can still grow really nicely. Bear cases, the share count takes up about 3% per year. And most importantly, I'm bearing the lead here, we gotta talk valuation. It trades at a trailing nearly 40 times sales.

40 times sales, not profit. They don't make that sales. If you're looking forward, it's only 30. If you're looking forward, they trade only 30. If you're looking forward, they traded 29.5 times enterprise market sales. So, you're telling me there's a chance. Makes my engineering firm look pretty cheap. Yeah, no kidding.

Apparently I just said something that set off Siri. I don't know what that was, but. Oh man, I hate that. Is it the AI version? Yeah. The listeners of the podcast might have just got Siri get educated on Cloudflare. After my analysis today, the stock will continue to sit on my watch list. What is going on, Siri? Hold on. I got to turn it off.

I mean, it's happened to me before where I have Apple devices too, where I'll say Siri on my watch list. What is going on, Siri? Hold on. I got to turn it off. It's happened to me before where I have Apple devices too where I'll say something and just Siri just randomly pops up. I have no idea. I'm trying to figure out what I said to make it pop up. So Apple executives, if you're listening to this, fix Siri. Oh, they're listening. Is enterprise value to sales? Is that setting her off? Bottom line, so the stock will continue to be on my watch list. As a customer, not as an investor.

I should have bought that. It's this and CrowdStrike are the two expensive SaaS companies that I feel like in that ugly post-2021 growth tech sell-off, they're probably really, really good targets. This thing went from 110 bucks to 40 bucks. And it's one of those companies that you kinda have to sit and wait while it goes up. It's a really hard one to have on your watch list. Because if good times

are rolling, this thing just keeps going. It's got a lot of momentum. And you have to be a little bit disciplined. You can't own all of them. You got to be selective. You know, my my investing style is own fantastic companies that can grow for a really long time, and not pay what I believe is egregious pricing. 40 times sales is really hard to justify no matter what the company does. And so you can't own them all.

I'm really impressed with the business and the products. They're executing extremely well. I like the founding team still very much so involved. I would be a buyer in like the forward teens multiples, which is the stock cut in half from here. And that might never happen. And that's just, just, just okay. And when it maybe when it does happen, it's too slow growth at that point, which is a risk in itself. So I can't justify paying the risk price.

What about just doing a starter position? I don't do that. No, I know you don't. I figure maybe you changed a little bit. I mean, there's a case to be mine. I made some time, right? If you really love a business, but you're really having a hard time with evaluation,

you just do a starter position with the intent of adding more once the valuation gets more attractive. Like I think there's, the positive of doing that is you really stay on top of the business, you're really interested in it, gives you that incentive. But again, the other side of the coin is that it's not big enough to make you care all that much. And you're still paying a very high valuation.

The problem with really expensively traded companies in a starter position mentality is what's the catalyst to all of a sudden start owning more of it? If it's a massive sell-off, then that's the thing you've been waiting for with the company on your watch list. And if that doesn't happen, then it's just meaningless to own such a tiny position.

It's not that I really despise starter positions. A lot of people like doing them. I personally don't use them, but it doesn't mean that they're not important. I do think that they're pretty destructive with this type of investment though. Cause if the catalyst to own it to become a real position is like happening, then I'll jump on it then.

That's the way I think about it. But this is the important part of having a watch list system. Like go on fiscal.io and go for free and build out your watch list names. It's super helpful to have that list. Yeah, because if you don't, I mean, you just forget about names, right?

Like it's a name that you're like, oh, I'll keep an eye on it. And then you just forget. And sometimes I've done that before where there's names I was interested in four years ago. And then I kind of just forgot. And sometimes I've done that before where there's names I was interested in four years ago and then I kind of just forgot. And now I look back at them, I'm like, oh man, should have started a position

when we did stocks aren't on watch lists. Yeah, like as you were talking on Qantas services, the glitches ticker power at the button, there's a button at the top, it says save dashboard and I selected watch list. So your pick's now there, right? Like I'm going to be looking at this company because it's on that list.

I think if I don't do that, I'll just completely forget about it. Yeah, no, exactly. Well, Brayden, I think we'll call it an episode here. I know you have to run pretty much in the next minute or so. So it was great rekindling, going back to our roots, having you and I just doing an episode. You will be back, like you said, every quarter,

and maybe even a bit more often, maybe some guest appearances if something big happens and you have to scratch that hitch. But congrats again on the new financing round. And it was great to see you, and I'll be seeing you in person in the next few weeks as well. So excited for that. Yeah, that's right.

I'll see you twice if memory serves me correctly here in July. But dude, no, love you pal. Episode 500, amazing. What a run and the show goes on with you and Dan so I'm happy to be less involved but now a fan as well too. So it's been fun to follow along. Thanks for having me again man. Okay thanks for coming on.

The Canadian Investor podcast should not be construed as investment or financial advice. The hosts and guests 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.