The Canadian Investor - Buffett’s Farewell, Constellation’s Pullback, and GoEasy Sells Off

Episode Date: November 13, 2025

Dan is back as we break down a busy week in Canadian markets. We look at Constellation Software's latest quarter and if the drawdown is a buying opportunity. Shopify delivers another strong quarter but the stock dips anyway. WSP Global’s record backlog signals sustained infrastructure strength, and we revisit GoEasy’s first results since the short report to assess the real risks behind its “secured” loans. Plus, a quick reflection on Warren Buffett’s farewell letter and Greg Abel’s transition at Berkshire Hathaway. Tickers of stocks discussed: CSU, TOI, SHOP, LSPD, WSP, BRK.B, AAPL, V, MA, GSY.TO 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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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. My name is Simon Belanger and Dan is back for this recording. Dan, who just became a dad, had two boy twins.

So Dan, congratulations. Had a lot of congratulations as well from Joint TCI subscribers, just letting you know that, yeah, they're pretty excited, pretty happy for you. Yeah, thanks, everybody. It's been pretty fun. I mean, I definitely have a new definition for Tired. I think there's tired before you have kids and there's tired after you have kids. probably, I'm sure parents who are listening will understand, but yeah, I'll probably

never complain about being tired again. But yeah, it's been pretty good. They've been pretty calm relative to a lot of stories I've heard, so very fortunate. I imagine it'll get worse, but we'll see. Yeah, all babies are different. That's what I kept hearing. It does get better for sure. I remember a couple weeks in just thinking, oh my God, I'll never sleep again. So you should be able to get some sleep, but that's the biggest difference, right? When they're newborns is you're tired and you can't really catch up on the sleep, so that's always a biggest challenge. Yeah, definitely. I mean, you're up four or five times a night, and you can't not be up four or five times

a night, so you kind of got to find opportunities to sleep during the day, and I haven't really had a lot of those, but I'm sure I will in the future. No, exactly. Well, let's get started then. I'll let you start with earnings from Constellation Software, Constellation Software, which is seeing some pretty big drawdowns right now, something very very very. rare. We've talked about them in the past, but these kind of drawdowns are very rare for consolation. But obviously, there's been some big news. There's more uncertainty ahead. So I'll

let you go over what happened in the latest quarter here. Yeah, I would argue it's probably the biggest news on the Canadian market, at least, is Constellation. I mean, this is a company that really typically does not generate much news at all. But I think, you know, the fears in regards to AI disrupting a lot of software companies plus, you know, Mark Leonard stepping down, even though he's still going to be on the board. He is stepping down. And I also think it's not exclusive to Constellation. Like there's a lot of just straight up software companies that are getting smashed right now because of those AI fears. I mean, Adobe would be another one I would think of. But the interesting thing here is like nothing really has changed operationally for

Constellation. It was a pretty good quarter. Revenue increased 16% and free cash by 46%. This was the largest quarter of the company's history in terms of free cash flow generation. If we look to the first nine months of the year, revenue grew around the same, but free cash flow increased around 27%. 46% is not a typical growth rate in terms of free cash flow for the company. Organic growth came in around 5% and when you adjust for currency fluctuations, 3%. The most important area of the business, which is maintenance and recurring revenue, still had organic growth of around 6%. And this segment of the business is the most important just because it's, you know,

the largest revenue generated for the company. It makes up over 75% of total revenue and it's also the highest margin segment. So you'll typically see when you look at kind of an organic growth chart that Constellation provides. They have, you know, like hardware, professional services, things like that for different segments. Like a lot of them are all over the map. Sometimes you'll see negative growth on all of them. sometimes they'll see like huge 20% plus growth in one particular area but the the maintenance is

kind of where you want to see the steady increases and the one thing I guess acquisition activity has slowed down over the last couple of years which is probably what's causing a bit of a concern as well cash is kind of building up acquisitions are coming in slower and I mean obviously this is a company that needs those acquisitions to succeed I mean if you the easiest way to look at this is it had 16% revenue growth and you know only 5% of that was organic. So two thirds of the business plus is growing via acquisition. And I think the slower deployment plus maybe Leonard stepping down is kind of another driving factor that's sending the stock down. I mean, in terms of the quarter, it wasn't really bad at all. But I really don't

think like in terms of the kind of sentiment towards this one, like it's going to take much more than a single quarter. It might take much more than like four or five solid quarters before people kind of get rid of the narrative or get rid of the idea that, you know, AI is going to disrupt the software industry as much as it is. Yeah, they've never, just speaking of the cash, they've never had that much cash on the balance sheet. So now they're at $2.8 billion. And typically it's been building up in the last few years,

but I guess around $500 million was a bit more typical, give or take a few hundred millions for them in the past decade. So it is noteworthy that has increased. all that much and it probably shows that there's not that many attractive deals for them right now out there. Yeah. And in terms of that, actually, that works quite nicely into what I was going to go into is I think AI, you know, it could potentially provide some leverage for consolation to get cheaper deals because, I mean, if you believe the idea that AI is going to disrupt a lot of these software companies, there's probably a lot of people who might look for exits, you know,

and it might drive valuations down as well. It could provide more opportunity. Because a lot of people talk about how Constellation is going to, like, run out of acquisition targets. I really don't think they are. Like, they have mentioned that they have like tens of thousands of potential companies still in the pipeline. So it's more like price wise right now. And I mean, you could get a lot of owners of VMS companies that are a bit spooked, maybe, potentially and willing to sell for maybe a cheaper multiple or even if the multiple doesn't change because Constellation has even said they don't, they haven't seen valuations

change because of AI, but it could, you know, more people could sell because of this definitely. And I think one of the added difficulties here is there's no conference calls from Constellation. So like normally you would have some of these software companies like Adobe report. And then, you know, they discuss the situation and what they think moving forward in terms of AI. But you just don't get that with Constellation, which makes it very difficult for people who maybe don't fully trust the company, I guess you would say. But thus far, I mean, there's really nothing to indicate that AI is disrupting the business. However, I mean, you're, you're pretty early in this regard. And any sort of any shred of doubt that it is,

like, you know, they're, you know, the slower acquisition activity, things like that, kind of the slower-ish organic growth. I mean, it's probably going to spook people. But, um, there was a ton of insider buys on the recent dip. I think there's, there was quite a few. And I mean, there's only one reason. Insiders buy a stock. Plenty of reasons for them to sell, but really only one reason to buy. So yeah. Yeah, exactly. Doesn't mean they're always right.

But I added just one share just a few days ago on the recent downswing. I know you've been adding consolation, but also Topicus, right? Yeah. And to your portfolio recently. So I think, I mean, that's how we see it. So just wanted to make sure we're being fully transparent here. Yeah. I still think there's the probabilities is there will be a good company going forward.

and the depressed valuation, I think, is actually pretty good because it does make potential returns better. And I think sometimes people forget that, is if you bought it higher, I mean, your returns at that point will likely be much lower because the valuations were so high. I know sometimes it's counterintuitive. We have emotions playing against us. When the stock is around all-time highs, usually there's a lot of optimism around it. And when it drops, what, 25, 30 percent to what, to what, it is now from the peak? It's a bit harder to pull the trigger. There's more uncertainty, but I think it's definitely a good opportunity.

So that's why I added one share there. Yeah. Well, I mean, it's difficult. Like they don't have, I actually end up buying. I often buy Constellation in my wife's TFSA because well, it's with Well Simple and you can buy fractionals, whereas Questrate, you can still only buy whole shares right now. Yeah. Like I imagine they're going to get fractionals pretty quickly.

But yeah. You made a good point when we were chatting, though. that it may be a good idea for them to do a stock split just because for anyone buying Constellation that has enough money to buy a share, you'll notice that oftentimes the spread are quite large. Oh, yeah, they were huge. Yeah, exactly, because you're essentially removing a whole chunk of the market because not all brokers have fractional Canadian shares. I think a big chunk of them actually don't.

So I think it would probably benefit them to have to a stock split for that reason. you brought it up so I'll give you credit for that but anything else you wanted to have before we move on here no I was just like I was just going to say like yeah when it was drawing down like there was some points where the the spread like the the bid and ask like what someone is willing to pay and what someone is willing to sell at it was like 300 plus I think at some point which is that's huge that's like that's a 10% difference yeah it's huge so yeah I think it would be beneficial it would kind of open them up quite a bit to to more investors that's it exactly Want to buy a stock, but don't want to shell out hundreds or even thousands for a single share?

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PTF. 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. So before we move on to other companies, I don't know, did you read the letter that Buffett published basically announced in this very well? Yeah, he's stepping back.

Yeah, he's not going to write the report, the annual letters anymore. Yeah, exactly. So I just wanted to make a quick non to that. We hadn't added to the notes, but I read the letter. So essentially Buffett announced that he was. was stepping back from Berkshire officially, although he had already said that back in the, at the shareholders' annual meeting back in May, I believe, was the time. Yeah.

And that he's really handing over the reins of Greg Abel, who's a Canadian, by the way, as CEO of Berkshire Hathaway. He's going to be donating a lot of his shares to charities that are run by his children. But he made it very clear that he's not losing confidence in Berkshire. He really believes in Greg Abels. And I think to me, that's something I've been saying. I do own Berkshire Hathaway is that if you trust Buffett, you'll trust that he selected the right person to take over.

And I think sometimes people forget that. They just look at Buffett and how much they trust him. But if you really trust him, why wouldn't you trust that he selected the right person? And he reminded Cheralders that Berkshire will always focus on resilient, that 50% drawdowns will happen, but he still believes in America, that America will come back. And so Berkshire shares. He definitely finished with some humility and humor like he usually does. So I just wanted to do a quick mention. I encourage people that are fan of Buffett to read the letter. There's a lot of reflecting. There's some, I would say, just nuggets of wisdom,

not necessarily a whole lot about, you know, investing necessarily. There's a lot of things of reflecting back on his life, the people he knew. It talks about. Charlie Munger and some other people that really influenced his life. So just wanted to do a nod because obviously he's arguably the best, the greatest investor of all time. Yeah, I think he'd be up there, if not the best. I mean, I haven't had time to dig into the letter. I am going to read it, but I mean, obviously right now, I haven't had a lot of time. But yeah, it's, I think the succession has been in the works for quite some time. I mean, they've had numerous people. I mean, you do have to remember he didn't even want to buy Apple.

It was his advisors who kind of, you know, guided him towards buying Apple. I mean, he hasn't really, there's been a lot of people behind the scenes, you know, kind of making the core decisions at Berkshire. So to like kind of get the idea that he's kind of still at the helm. And once he leaves, everything's going to not necessarily fall apart, but lag, I think is a bit overblown. I think that's the exact same thing with, with Mark Leonard as well, especially considering he's still staying on the board.

I think people tend to overreact. Yeah. Yeah. So I mean, I don't think you're going to see much interruption on either side of the company. But yeah, best investor of all time, I would say. Yeah, exactly. And they're still sitting on a mountain of cash. It's going to be interested. So Greg is going to have a lot of ammunition and hopefully be able to rely on Buffett as a sounding board. I know he's up there in age. I think he's 95 now. But hopefully able to rely on him as a sounding board for years to come. I'll switch things up here. Not exactly in the order we had it then, but I'll move to Shopify earnings. Just because I'll finish with GoEasy, they released and we've been pretty, I know, well, we've been both pretty critical. I think I've been very critical of them in the last couple quarters. So I'll leave that till the end because it'll be a little longer segment and a bit more nitty, gritty in terms of looking at what they said, analyzing that actually like counter fact checking what they're saying versus. the reality of their financial statement, which I've noticed a lot of people don't really do that

own the stock online. So I'll keep that for the end. So Shopify earnings revenues were up 32% to 2.8 billion. So it is, it was a good quarter honestly from Shopify. Even despite these numbers that you'll see and here is the stock has been down the low since they release. So maybe it's It's just a sign that things were getting pretty price in terms of valuation. GMV, which is gross merchandise volume, was up 32% to 92 billion. GMV is simply the amount of merchandise that is actually transacting from Shopify, so they'll have a smaller take rate out of that. So GMV is a common term, for example, that you'll hear with Visa and MasterCard.

So it's not necessarily, it won't equal to revenue. They'll have a small slice of that. merchant solutions revenue was up 38%. And think of it as a tool, the tools that merchants need to run their business like shop pay and point of sell hardware. So these, when you go into a shop and the point of sell is basically that machine, that software, right, they're using.

The more there is volume here, the more Shopify rakes in. And subscription revenue was up 15%. And that's essentially what merchants pay to access the platform. There's different levels of subscriptions available for Shopify here. So it is, again, the numbers, the growth is really impressive there for Shopify. And for a joint TCI subscriber, I'm just showing here the gross merchandise volume, which is essentially just a straight line into the right. And Shopify payments penetration was up 65, actually was 65% of GMV.

Shop pay GMV was $29 billion, which is an increase of 67% year over year. International GMV, another great spot or bright spot for them was of 41%. Business-to-business GMV was up 98%. Operating margins were up 160 basis point year over year. But really more importantly with the margins is that it's steadily increasing over, it's been steadily increasing over several years now, and free cash flow margins have now been steadily increasing as well over the last few years and hits 17% in the quarter.

quarter. So really impressive by Shopify. I can't really add too much here. I'll talk about what they said on the call and what's really being the driver, but any comments before I keep going down? No, I mean, the one thing you do want to see with a company like Shopify is you have that gross merchandise volume and then you have the, I mean, I guess it would be gross transaction volume where like Shopify is actually processing the payments and stuff like that. That's going to be the more profitable area. And I know it is, I don't know the exact numbers, know it's becoming a much larger percentage of gross merchandise volume. Actually, you have it there, Shopify payments, yeah, 65%.

So yeah, I think even like five, yeah, five, some five, six years ago, like this was, I think it was like under 40%. I might be wrong on that, but like the larger that number, the betters. It just means like Shopify is kind of, you know, raking in those, those processing fees, which is ultimately more profitable. Yeah, exactly. And if you're looking here for joint TSI, subscribe. verse, you'll see the gross payment volume.

Again, it's not the penetration specifically. Obviously, penetration's a percentage of GMV, but just goes to show that that volume has just been going up so that the shop pay that some people might be signed up with, that would be part of it. Yeah. Yeah, and you can just see it, if you kind of chart that against their GMV, you can see it's becoming a larger and larger chunk, which is a good sign. Yeah, there you go.

So. Yeah, you can just see it becoming. larger and larger. It is sticky. I'll give that to them. Yeah. So they make it very easy, which can be dangerous if you're trying to cut back on spending. I'll be honest. But, you know, it is pretty easy for that. And it does make you wonder, a company like Lightspeed, right? Like, how can they compete with a company like Shopify when they offer so many other solution? And they're essentially like encroaching on more and more on the point of sale system. Yeah. Well, and I mean, that's coming from like Lightspeed at a pretty good.

quarter. They went up like 20, 25%, but obviously they're down. But long term. Yeah, I don't know how how you can compete. And I mean, even like you have to think like light speed kind of went public and said, hey, we want to sell the company and they still didn't get anybody to buy it. And this was probably one of the main reasons is the competition is just crazy. No, exactly. And on the call, they said AI is really becoming a central differentiator for them. Tools like sidekick are being widely adopted, helping merchants operate more efficiently, and Shopify is integrating with Chad GPT and Microsoft co-pilot to drive conversational commerce. They're also working on integrating with other conversational AI. They mentioned explicitly on the call perplexity. They have,

they also, there has been some major brand joining type of brands. Like you always, I don't know about you, but I always thought Shopify a bit more like, you know, I want to start knitting some shirts. Small business, yeah. Yeah, small business, exactly. I'm going to open a Shopify shop, but you're talking about major brands, and that was the previous quarter as well. There were some other ones, but they mentioned specifically Estee Lauder, Mattel, Fanduol that are joining the platform.

So these are not small company. International growth is accelerating, like I mentioned, especially in Europe, supported by localized payments, financing, and point of sales rollout. The platform continues to take share from legacy enterprise system, due to speed flexibility and lower total cost of ownership. International and offline retail may remain major growth runways, and they also really emphasize on the call that they are growing,

but increasingly profitable while they are growing, which is not always the case for Shopify, and in the current environment and some type of companies that we're seeing right now, there's some companies that, yeah, it's worth seeing. Sure, they're growing the top line, but they're losing a whole lot of money. And it's kind of nice to see Shopify being profitable at the same time. For the outlook, they expect Q4 revenue to be in the mid to high 20s year over year.

So very impressive. And free cash flow margins should be slightly above Q3. So that, again, very encouraging for Shopify. Yeah. And again, it sold off. I think it was like 10%. But it has run up 100% since Liberation Day. So, I mean, obviously, it's, it's doing great.

I mean, it's, you could call it, I would say, the best publicly traded company in Canadian history. It's, it has to be pretty close. Now, it's still very expensive, to be clear. Oh, yeah. And over 100 price earnings and free cash. So obviously that this, maybe the sell-off was warranted. Maybe there was just people were expecting perfection and maybe there was slightly, you know, slightly below that. But it's very impressive from Shopify.

So we'll move on here. WSP Global I think it's a song that's pretty popular from some of our listeners here so they report it as well Yep so they reported pretty good quarter It's been going through a bit of a drawdown over the last month

It's kind of difficult to imagine why I mean it did go on a pretty decent run Over the last year so I mean Maybe a bit of consolidation Yeah and for those not familiar WSP Global is a global engineering firm So if you're not familiar with the business Yeah so they're kind of a

A play on on infrastructure for the most part. I mean, things like that, especially because they have, they're pretty much 50-50, I believe, in public and private mix. So a lot of different avenues for growth there as well. And they are, yeah, effectively global. So their adjusted EBITA hit a record 700 million. That is up 20% year over year. And their EBITA margins also hit 20.2%, which is the highest in their history. The backlog is at 16.4 billion. So that's up double digits. And it represents about 11 months worth of revenue. I mean, we're getting closer and closer to full year worth of revenue on the backlog, which is definitely a good sign. And organically, the company is growing revenue in the

mid single digits, but it's also starting to see a lot of its acquisition activity payoff. So the company bought Power Engineers, I think it was about a year ago, probably last, it was either last November or last October. And it's already contributing to revenue mid-teen's growth and helping boost margins and the company's newest acquisition, Ricardo, which is a UK engineering firm, will start contributing to results next quarter. And the company's leverage ratio, which would be its debt to adjusted EBTA, I would imagine, is only 1.4x, which is very low. You factor this in plus record free cash flows and it's kind of hard to imagine the company just doesn't continue to make more acquisitions moving forward. They are known to make a lot of deals.

And they kind of, I mean, they're one of the better engineering firms in the country in terms of, you know, margin profile and just overall growth. They've had a very, you know, strong last five, ten years. And Canada remains the best performing segment of the business. So organic growth was 6% and margins are 27.8%. So this is kind of the bread and butter of the company in terms of profitability and just overall growth. their backlog grew at a 15% pace. They kind of continue to win a lot of new projects at a pretty quick pace. And again, its margin profile is probably among the best of all engineering firms here.

America, 6.6% organic growth with 22.3% margins. Europe was 6.4% with 15% margin. So it's definitely on the lower end margins, margin wise in Europe. And Asia Pacific is the one that kind of continues to struggle, but is still, you You know, it's a relatively small portion of the business, so it doesn't have a material impact, but organic growth was down 3.9%. Its margin profile in that area is 23%. So it's one of the better margins. So if it does end up improving, it should have pretty good impact on results. But their 2025 guidance, it was raised very minimal, kind of negligible amount, really, and they just tighten the bottom end of the guidance up. Their tone on 2026, pretty optimistic. Backlog should continue to grow. Roe project win race should improve and if the macro environment improves, they, they kind of mentioned that it should amplify this further. I mean, we all seen the budget.

We all seen how much spending is going to be ramped up here. Yeah. Yeah. Yeah, it's something I did, uh, some ideas for the budget. So that is one I did not mention that as you were talking, I'm like, oh, this, this could be a good play on, uh, infrastructure investments. And on that episode, I did solo. One of the biggest points I did is, doesn't really matter if it's liberals or

conservative, they're probably going to be spending as much on infrastructure and mining and natural resources probably a bit differently, but I don't see that kind of premise really changing whoever takes power. Yeah, I don't think so. I think regardless of the government and power, it's going to be like huge boost to infrastructure spending. And that's kind of why I own WSP Global and another one I own is Toramont, which is kind of equipment supplier.

Like, I own those two companies kind of based on this idea, and they've done very well over the last couple of years, and I can't see any sort of slowdown. Yeah, W.S. Actually, is in a little drawdown, I don't notice. It's down about 12% or so, and the valuations are actually not too bad. No. So it's still in the high 30s, price to earnings, and low, high teens for price to free cash flow. but again, it's not, it's kind of reasonable for WSP historically, so it could be,

it could be an interesting play there. Yeah, and it is a company that tends to, like it's done very well over the last while. I mean, you're talking almost 800% I think from 2015, but it is known to when it, when it corrects, it corrects quite a bit. I mean, you're looking, there's been a few times since even 2019 where it's corrected 25% or more. So it's a large cap stock here in Canada, but it's not like, it's not a low, volatility stock whatsoever. It tends to swing quite a bit. Yeah. So anyway, so that one I will have on

my radar. I do have, I do like those infrastructure plays. And another one was Canva in the US. I haven't looked at Canva recently. Just because it, yeah, just see a quanta. Sorry, not Canva. I was going to say Canva is like a. Yeah. Yeah, the yeah, the graphics design, quanta services. Oh, yeah. the other one. That one has just been on a tear. That one, the valuation just, yeah, I don't know. Yeah, it just keeps going up. That's a very good AI type infrastructure play for sure.

Yeah, I should have bought it when I talked to it on the podcast. I think it's up to almost 100% since, but that's beside the point. 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 and 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. Do you keep hearing about these all-on-one ETFs lately? Well, I have some exciting news. BMO ETFs just cut the fees on their flagship all-in-one ETFs to 0.15%, making them one of the lowest cost options in Canada. That's right, more value, same smart diversification, all in a single, ETF. Whether you're just starting out or simplifying your portfolio, BMO all in one, ETFs make it easy to invest with confidence. Just ZED it and forget it. Considering

ETFs like ZEQT, BMO's all equity ETF, or ZGRO, BMO's growth ETF. 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.

let's move on here to go easy and feel free to chime in because you know my opinion on this company so this was go easy go easy's first earnings report since the short report came out in late september the report accused go easy of various things we talked about it on the podcast some of it that was verifiable some of it not the big theme was that they were accusing go easy of not properly reporting the liquidacies and they had earnings quality issues. That means that earnings were not as good as OE GoEasy was saying. It doesn't mean they're doing fraud. They could still be playing within the rules.

But there is a difference between earnings and income statement earnings, which it's not necessarily the same as cash coming in. And actually in a lot of cases, it's very different. That's why we actually like looking at free cash oil for a lot of businesses. I don't think GoEasy, you could really look at that. Before that, let's look at high levels, the high level number released by the management team for the earnings release here. So loan origination was strong. They grew by $336 million.

I know there's some Go Easy Bowls out there, and that's a number that they constantly quote. So they'll lay, oh, see, like they're still growing loans. And I think one of the other things don't mention is that, oh, they decline. 90% of the people applying for loans saying that they're being disciplined, which I mean, the people applying for loans would go easy to begin with. They don't have very good credit. And it's usually kind of a last ditch effort to get financing. So the fact that you're declining 90% of them, I don't find that overly reassuring. But I mean, that's just me. What about you then? Do you find that reassuring? No, I mean, not really. I mean, the one thing I

guess you're seeing the highest credit ratings in their history, like the highest overall credit ratings from all their borrowers in history. But I would say that's more of an indication of how bad the environment is in Canada in terms of cost of living. And I mean, look at the loan book for this company. Like it's it, it clearly deteriorates like in 2022, 2023. Or I guess I don't want to say deteriorates, but goes up like significantly. And I think it's just like more people and more like high quality borrowers having to tap in to the subprime market, which a lot of people would think, well, they're higher quality borrowers, but I think just the overall environment of Canada and like how, you know, inflation costs of living here,

those high quality borrowers are just struggling financially. So that's kind of why they're going to go easy in the first place. Because as you mentioned, like this is a, this is a last resort lender. You only go here when you have to because they charge you absurd. amounts of money. Yeah, that's it. And you're seeing here personal loans starting at 29-99%, home equity loans starting from 9.99% and auto loans starting at, let's just say, 12%, 11.99. Let's keep these numbers in mind just because there's going to bring a little bit of context here. But again, if you're paying that much for home equity loans or auto loans, you're probably not getting approved by, you know, by better lenders or lenders that would offer you.

more favorable term. So let's keep that in mind. Well, just think of, if you think about it, if you're going to go easy to get a personal loan at 30%, that probably means you can't get a credit card because those are only 20%. 25%. Like, why wouldn't you tap into that side of the market, right? So yeah. Yeah, exactly. So one of the things that was verifiable from the short report was the growing interest receivable versus interest income. And as a subcrime lender, just to explain it here, they make most of their revenue from interest income. They also have fees, but let's just say interest income is the primary source of revenue.

And interest receivable simply means that it's been booked as income or as revenue, but the cash has not yet been received from the borer, or the lendy, I guess the person borrowing the funds. Now, this is going to happen for some prime lenders. It's completely normal. I mean, the reason they are subprime lenders is because the borrers, they lend. to are much riskier than normal. So you're going to see that because oftentimes what will happen is those interest receivables will accrue and they will eventually write off those loans or portion of them

because people are simply not able to pay them. And that's why they charge much higher interest rates. So what I just showed here, riskier loans mean that you need to charge a higher interest rate on your loan because you'll inevitably write off a higher percentage. That's a business model. Pretty simple to understand. No issues with that. That's what a subprime lender is. So you would expect them to have more interest receivable than a traditional lender just based on that. Well, the issue is that interest receivable as a percentage of interest income has just ballooned

over the last few years. So going back to Q3 of each year of 2021, because they just released Q3. So I just wanted to show how it grew. And I'll also provide Q2 of 2025. Here's what the numbers look like. That percentage was 15% in 2021. Lower is better because you want to be collecting as much as the loan as cash as possible, not accruing it on your balance sheet because if you accrue it means people are not paying you. 22, 17%. Again, kind of reasonable. That's fine.

2023, 19%. Creeping up, but it's still all right. 2024, 33%. So we see a big jump there. Q2 of 2025. So last quarter, not this one. 42% and Q3 of 2025, 43%. So you're seeing that massive jump and that's really the core of the issue here.

And that's why there's reason to believe management is just not being fully transparent on the quality of its loan book. I think that's, I mean, to me, that's almost a guarantee, like not a guarantee, but that's highly, highly probable. Now, they did increase their loan loss provisions during the quarter versus Q2 and said it was due to weak macroeconomic conditions. and I was really interested in hearing what they had to say on the call because let's not forget, this is the company that held a sell-side analyst private call only on the day of the short report, the day it got release, and they were essentially using the cell-side analysts who are typically very bullish on companies that they cover. They would have to see outright fraud to be not bullish.

That's how, like, it has to be almost inevitable for them to like, start being bearish on a company or on a stock they cover because they want to keep those relationship. There's career risk involved. So I think management just decided, you know what, we'll let the sell side analyst do our bidding for us. After listening to the conference call, I don't know if you listen to Dan, but it's clear to me that they were using the sell side analyst to reassure the market and dismiss a short report because they did not provide anything reassuring. Yeah, I usually do a YouTube video on Go Easy's earnings almost every quarter. I haven't had a chance to do it yet. So I would usually have looked into the quarter and looked into the call,

but I haven't. Yeah. You're forgiven. Yeah. Yeah. With new twins. But assuming, I'm assuming they were thinking it would look better coming from analysts than them directly. But look, they definitely heard from shareholders because they on the call, they made a point to address the interest receivable issue. But the explanation was really, was really more concerning. So if you're attentive to detail and one actual numbers, they gave you nothing, nothing at all. So first, they said it's, they just essentially reset the, what they told the analysts. And why do I know that? Why do we know that? Because the analysts were essentially out. I remember a Globe and Mel article, basically were a national bank analyst, I think. National was. National. Yeah. Basically

just like regurgitating what management had told him. It's exactly what they said again on the calls. So First, they said, it's because their loan portfolio is growing in terms of total loans. So that percentage of interest receivable versus total loans is still very manageable. Actually, I remember looking at that, remember when we did the previous quarter, and it was still ticking up, not as severely, but it was still ticking up. But it does not explain that the increase in interest receivable as a percentage of interest income doesn't explain why they're booking more. revenue from this interest income than they're actually collecting and that's, you know, they're, well, they're booking, yeah, more and more, well, they're booking less and less in terms of actual cash that they're collecting.

So it's stuff, they're putting it on the income statement, but they're not receiving the cash and that's getting worse and worse. And the portfolio is what generates that interest income. So the bigger it is, the more interest income you'll have, right? and what would be reasonable to expect would be for the interest receivable to grow, but that the percentage versus the interest income would stay relatively stable, right? Like, that's what would be reasonable. The second reason they gave was, and this one, I know you know my opinion on it already,

is it's fine because we're just issuing more secured loans in the form of auto loans and home equity loans. So if people remember, like just before we started this segment, I talked about Go Easy and those home equity loans that are starting at 9.9% and you're also seeing the auto loan starting at 12%. Starting at. So there are some higher rates than that. So this is not, this is not good. This shows that, um, well, first of all, the borrower, quality is not good and the first thing is to me that's they're saying this as it's like with this special unicorn that makes things better i mean cars are rapidly depreciating asset you you have to factor that the fact that now they take 180 days past due to declare the loan delinquents so it

stays longer on the books then the time it would cost to take it to repo repo the car so reposses the car and then sell it to auction so that cost money and when you're selling at auction you're actually not getting the most you can get when people also know that you're going to take back the car they probably don't take the best kind of care with the car either they might not be doing all the maintenance the oil change stuff like that that they need to do so i asked chat gpt just to get a rough idea because i'm not an expert here and the figures they gave me is that subprime ledders likely recoup between 20 and 45 percent of the remaining loan balance when they repossess a car in a very good market for

reselling cars 35 to 55 percent so let's say to be optimistic the recouping 40 45 percent of the loan value back so the loan the remaining loan value you have to keep that in mind so that means that they are riding off at least 50 55 60 percent of the loan when it goes bad And the second issue here, it's home equity loan. And people may say, okay, well, home equity, that's not risky. Well, it's actually probably worse. People may be surprised by that. That's because they, if it's a home equity loan, what will typically happen for

subprime lenders, it will be the second loan on the property. So meaning that if there is a power of sale or foreclosure, they would come in after the primary mortgage lender, likely a big bank. And then they would come in after all. so municipal taxes. Municipal taxes, if they're overdue, they'll come first and then the mortgage and then would come in a go-easy. So they would be third in line.

And another issue is that a lot of those loans are in Ontario. And unless you've been living under a rock, Ontario real estate is not doing all that well either. So now you get into an even worse situation where you're probably, they're probably selling, you know, these homes are selling for even less than in terms of the equity that was provided. and their third in line in that situation. And I did ask Chad GPT again. And I actually compared it with another LLM just to see if it would give me a same similar response.

And Chad GPT said they'll likely get back on average about 0 to 60% of the remaining low balance. Zero to 60 is kind of the range that they gave because usually they're going to be a high combined loan to value. And combined loan to value just means the mortgage on the property that's already the existing and whatever loan home equity loan that go easy is actually providing. So that is going to be pretty high. And obviously when you start getting into a market downturn and they reference data from the states and during the great financial crisis, you get these kind of subprime lenders even worse position to try and recoup some money on those loans.

So it's not like these are all that great. Sure, it's better than a personal loan where you won't recoup really anything if it goes bad. But to say that, you know, it's fine because of that. That's really concerning. And they cave two more reasons that are not reassuring at all. They just actually would worry me even more. The third reason they cave is because their interest receivable is growing because of the increase use of borer assistant program to support customer and loan repayments.

And you were familiar, I think, with that, with the previous tenant of yours. But the fact that they're more of them using this assistance program, like, how is this a good thing? It's not. I don't understand. Yeah, it's not a good thing. And the last reason they notice was that they're focusing more on collecting small cash payments while instead of waiving it and also waiving less interest. So it balloons their interest receivable, but they're collecting less cash. So that's the second reason.

But that also means that if they're focusing more on that, they're spending more resources to collecting cash. And it actually tells me that they're seeing more stress in their loan book if they're trying to collect more and more cash and putting more efforts, which costs them, that's if you're putting more effort, that's higher cost for you. So it will impact the business at some point as well. So all these reasons, I mean, is really concerning.

And one of the things they could have done is provided some actual recovery numbers for fixed assets or secured assets. So auto and home equity loans, like kind of a range that they get or an average that they recover. That would probably have helped at least appease investors. I'm thinking it's probably really bad. And that's why they did not provide those numbers. My base case for them is the next two, three quarters, you're going to see their actual earnings get, worse and worse because now they're going to have to start booking more and more write-offs and putting more more money aside for bad loans.

And that's the problem with earnings quality is they've booked those earnings really early. And now there's a good chance that this will come back and buy them in the rear end because they booked those earnings early but those loans are actually not collecting cash on them. And now that's going, it's going to happen soon. or later, I mean, that's my view because you're seeing all the signs here. Yeah, I mean, we're, we're already seeing earnings declined by 5%. Yeah, I think a couple of quarters straight of earnings declines.

And that's with all these people in, and borrower assistance. I mean, like, you'd never see like a major bank get away with something like this, like kind of kicking the can down the road for 180 days. Like, they're heavily, heavily regulated. They're like, they're just not allowed to do this. Obviously, these subprime lender. are, you know, a little less regulation. That's exactly why, like, back during COVID when the government told the banks that they

couldn't raise their dividends, Go Easy was free to do this because it's not really regulated like those major banks are. But, yeah, I mean, secured loan against an automobile is, especially like you see on the website there, they do like 84-month term, 12% interest, 84-month term. Like, that's a secured loan, but that is like, it's, I don't. a wet paper bag of a secured loan, I guess you could say. Like, it's not going to hold. That vehicle is probably not even worse as much, even especially like three, four years

into it. It's probably worth less to be honest than the loan when you factor in because I, I suspect they also finance the fees as well. So the fees associated with a car purchase on that loan. That would be what I suspect. So my suspicion would be that if they offer a 15K loan for the car, they assess the value of the car with all the extra fees and stuff like they might well the car might be actually worth 13k or whatever it is like they may all already be a bit underwater for that loan just hoping that the

bore makes the payments and uh you know they don't have any issues with that loan but it just it's just very interesting because they really use that as secured loans and it just kinds to show you that sell side analysts are not critical at all either that or they're not very smart one or the other So I really don't know. So I think they're probably driven. Maybe there's a little bit of both, but they're probably driven again by career. Oh, yeah. Well, we did that.

There was big career. We did that one episode on it, like how bad that industry is for bias. And because there's a lot of money at stake. So they're generally, yeah, they're generally bullish. And I, yeah. Yeah, because I remember reading those Globe and Mel articles where they came out and it was like, now seeing what they're saying on the call, it was like an absolute joke. Like, I'm like, how can you be an analyst and actually believe that?

Like, either you're not good at that job at all, or you are just concerned about your future career and not creating any animosity between you and the company you cover. Yeah, it's kind of like it's, it's pretty much go easy, just kind of wanted softball questions. So they, they held a call of people who would give them softball questions. But yeah, the secured loans against automobiles is crazy to me. I mean, they're, they're just, these banks are not in the business of reclaiming and selling automobiles. Like, it's not a good, there's a reason why. Even the home equity loans, I mean, I think those are might be even riskier right now, just because.

Well, depends on the market. Use car market. Yeah, exactly. Like, at least a use car market, you can make a case that a lot of people will buy use cars just because new cars are so expensive. So there might be a decent market for them going, you know, know for in the next one to three years where that's the housing market again if it really keeps going down and then you've based your original loan on a higher home value yeah it's not great then i mean look again i'm not an expert maybe someone listening knows this stuff better

than i and but when you combine all of that and the fact that management like only held the sell side analyst call like do you really if you're looking to buy this business or you own this business. Do you really think management cares about its shareholder all that much? Like, I don't. That's my view. Yeah. And again, I'm not saying that they're doing fraud or anything like that. I, from what I can see, they're playing by the rules, but they're really stretching them. Yeah. But that's, yeah. I mean, they're not doing. They're not doing anything they're not allowed to do, I guess. Again, they're not as regulated as, you know, the big banks. On the heat lock front, I mean, I know they can like freeze your heat lock or reduce the amount.

If your, like, equity shrinks, they can kind of like force your rebate. Yeah, I don't know if they're specifically HELOC. Yeah. So I don't know if they're all lines of credit. So I just wanted to specify. It could just be a loan that's provided based on the home equity that you have. Oh, okay. Yeah, yeah.

That makes sense. I mean, again, on the automobile front, there's a reason why pretty much every big bank, maybe TD still does it, but they've all exited the auto lending market because it's just not, it's not a good business. No, exactly. So anything else, Dan, or I think we'll call it an episode, your first episode back. I feel like you probably use all the energy you had today for that, aside from the diaper changing and feeding that you'll probably help out with later in the... Oh, yeah, I'm going up right after the conclusion of this episode, yeah. Okay, so you want to keep it going a bit, huh?

Yeah. Well, welcome back then. Again, congratulations. I'm really happy for you. It's really great. Again, it's the last. lack of sleep will get better and then when it gets good you're going to get some regression again so just get ready for that and it's just phases but for those who um are not aware we do have a patreon page where we post our monthly updates for our portfolio we post the full videos as well of our recording so we pose that there i also have the mid-month update for my parents retirement portfolio and we also offer the podcast ad free that you can add to whatever player whether it's Apple, Spotify, or any other players. So for those interested, it's $15 a month.

If not, we appreciate all the support as well. We get here, all the love. We really appreciate that. I've been posting more content on YouTube. So if you're looking to see us, it's kind of the shorter five to 10 minutes videos. I'm getting better and better with the video editing. We now have high definition as well. So have a look.

I think I'm getting, you'll see these videos improve. Just it's a steep learning curve. But I feel like once you start learning it, it gets easier and easier. So it's just taking the time to do it. Yeah, I mean, if you go back and look at our YouTube videos from like 2019, they are absolutely awful. So yeah, it takes some time. But I mean, they're looking better. Yeah, well, I appreciate it.

Thanks everyone for listening. And we will be back for another episode on Monday. The Canadian Investor Podcast should not be construed as investment or financial advice. The host and guests featured may own securities or assets discontes. on this podcast. Always do your own due diligence or consult with a financial professional before making any financial or investment decisions.