The Canadian Investor - Canadian Companies Finishing 2021 Strong - Earnings Roundup

Episode Date: February 17, 2022

In this release of the Canadian Investor Podcast, we cover the following earnings releases and news: Ukraine-Russia crisis and the impact it’s having on the stock market Constellation software and Topicus earnings Canopy Growth earnings Equitable Group earnings TMX Group earnings Brookfield Asset Management Earnings Indigo earnings Moody’s and S&P Global earnings Canada Goose earnings GFL earnings Tickers of stocks discussed: CSU.TO, TOI.V, WEED.TO, EQB.TO, X.TO, BAM, IDG.TO, MCO, SPGI, GOOS.TO, GFL.TO https://thecanadianinvestorpodcast.com/ Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Stratosphere 🚀 https://www.stratosphereinvesting.com/See omnystudio.com/listener for privacy information.

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

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My name is Brayden Dennis, as always joined by Simon Belanger. It is the morning after the Super Bowl and you and I both came to the exact same conclusion which is every single crypto exchange and do-it-yourself investor exchange had a super bowl ad and simon i was flipping back between the u.s commercials and the canadian commercials and it was the same across the board yeah yeah that's the first impression I got. Like just after a couple commercial breaks, I'm like, holy crap, like it's gonna be what all crypto exchanges, advertising and self directed platforms. I was pretty crazy. And it's amazing that it's also in the US, I was

only watching the Canadian feed on TSN. But yeah, that really stood out to me. But overall, it was a good game. I lost a couple hundred bucks. Aside from that, it was good. Well, you were betting on the Bengals or was it like some party? Oh yeah, Bengals. And I looked at the total points over 48. So I lost.

I was looking good at some point, but then I went downhill in the last quarter. The over 100 was only set at 48 yeah 48 and a half okay yeah i would have smashed the over two i'm not much of a sports better although i love the nfl as all you guys know all right let's get into the investor podcast we have so much news to talk about earning season you know we always a week behind given the schedule. However, we got you covered with tons of Canadian companies today as well. We're talking about Constellation Software. We're talking about Brookfield Asset Management, EQ Bank, Canada Goose, Canopy. We got a lot of Canadian ones on the slate and a couple of American ones as well.

So before we get to that though, markets have been in turmoil a little bit because of this Ukraine-Russia crisis. Do you want to just break that down a little bit and potential impacts on the market? Yeah, yeah. Before I get started, I'm not an expert in this conflict and what's going on. So this is just a high level overview. But yeah, the reality is that it's definitely important to keep an eye on it because Europe imports large quantities of gas and oil from Russia. Some figures I've seen is that it's around a third of Europe's oil and gas imports that come from Russia. So whatever you think about oil and gas, that's beside the point the reality is our economies are still extremely reliant on it for the foreseeable future and europe is no different here and the market is

definitely nervous about what's going on and you know as well as i do braden the market hates uncertainty and this is exactly what we're seeing obviously you add that with the inflation figures coming up, and it's really making the market extremely volatile. And volatility is just the name of the game when you invest. We've talked about that before. But I think it's just good understanding what might be causing the volatility right now. And those are two of the things that are definitely having a big impact. But keep in mind, stay focused for the long term. And this volatility and the situation between Russia and Ukraine may actually create some really good investment opportunities in the long term. I mean, you can still find something

that is very attractive long term that you'll see some short and medium term pain. But as long as you're focused in the long term and you do your own due diligence and you're smart about it, I think you'll be able to do quite well and take advantage of that. I want to tie this back to what we saw with the Super Bowl ads, which is a huge inflow of new investors, new investors opening up a brokerage account, potentially dabbling in some crypto. We saw lots of those ads as well. But if you are new to managing a portfolio, every big, uncertain, global type fear that you'll see in the markets, and I'm not saying this isn't scary, like it is. But if you look historically, the stock market has gone through every type of imaginable type of uncertainty. And now add pandemic to the mix as well. I mean, we're

still seeing the impacts, right? So it might seem like a doomsday all the time because guess what? News outlets are incentivized to display the news in that format. So just remember, this is a long-term game. You're investing for a long period of time. That's where you make really good gains in the stock market is by holding and the waiting, not in the trading. So yeah, thanks for that little overview. But again, I'm seeing lots of good opportunities in the market, man, especially on top of the drawdowns we've seen over the last three months. I think there's some great quality companies. We'll talk about them on this episode. Yeah, yeah, I agree with that. Definitely. I've seen a few things that I'm finding very attractive, or at least reasonable companies ours. Yeah. Well, yeah, exactly.

Attractive compared to where they were that's probably a better place but no i totally agree with you and we'll we'll be talking about a few of them at the end that's right okay so it wouldn't be the canadian investor podcast earnings results after constellation and topicus released their earnings without me going through it so i just want to start with these results are fuzzy and confusing given the spinoff of Topicus. The comps year over year are very difficult to understand, especially with free cashflow. And it's important because now moving forward, Topicus is going to be its own entity and the comps will be a lot more clear. So we're going to get some more clarity on the coming quarters, especially on that free cashflow available to shareholders number

given for the sake of this podcast. And I'm going to cover them every quarter in the future. So I'm going to talk about the really important line items right now. So first of all, there's no better management team. Like straight up, Mark Leonard is a legend, one of the most prolific capital allocators in the world at this point. Everyone is starting to know his name. management team. Like straight up, Mark Leonard is a legend, one of the most prolific capital allocators in the world at this point. Everyone is starting to know his name. And when they say they're going to ramp up M&A, when they say they're going to start doing larger deals, when they say they're going to learn from the operating groups, learn how to extract organic growth, they go out and they do it. This is the one of the most important things is that when

management says they're going to do something, they actually follow through and consistently and reliably do it. These are the people you want to partner with as allocators of your hard-earned capital. So constellations, total annualized returns. This will blow your mind, Simon. Since 2006, This will blow your mind, Simone. Since 2006, the compound annual growth rate on the stock price since IPO is 37.4%. It's better than Netflix. It's better than Amazon, better than Apple, Nvidia, Salesforce, Microsoft, and Google during that timeframe. During that timeframe, the TSX did 7.1%. All right, now onto the results. The full year revenue for Constellation Software was 5.1 billion, an increase of 29%. 7% organic growth. This is a game changer for this company. This is way better than usual. Constellation deployed half a billion in Q4, which is

ridiculous because they're buying small companies. And then now one month into 2022, they've already mentioned that they've deployed 150 million so far this year, 2022. So they deployed a total whopping 1.4 billion in capital on acquisitions in 2021. This is more than double their previous record. And it's 150% increase from last year. RBC estimates that they've rolled up only 3% of their target companies. They own hundreds at the moment and could feasibly own thousands of vertical market software companies. For example, they bought, this is a $40 billion market cap company. They made an acquisition for a company for 400 grand, $400,000. That is a tiny,

tiny company to be buying. And the company, that one they bought is going to do half a million in revenue on high margin recurring revenue software. Like this is incredible, right? Why would they sell? Yeah, I don't understand. Man, so many. Oh, yes, that was a good deal. And I'm just calling that one out as like definitely ridiculous EBITDA multiple they paid, like doesn't even make any sense.

However, a lot of tech founders who make these small niche, very niche mission critical software companies that are specifically for one type of customer, they bootstrap them, they get a huge payout, you know, it could be life changing money for them, and they're ready to build another company. I see it a lot, especially like since I have my own startup now, I see it a lot with other startup founders. It's like, you know, they have like ADD. They want to, you know, what's the next idea? You know, they want to have like 10 different companies in their career, not just one. Serial entrepreneurs. Exactly. And it's a specific type of person, right? So let's go on to Topicus now. I'll do both of them here. Increase in revenue of 50%. Not bad. 8% organic growth. And so when they said they're going to extract the learnings of organic growth from Topicus and deploy it at Constellation, what did they do? They did it. It's incredible how quickly they're able to do things that they say they're going to do. 10% organic growth year over year, both Constellation

and Topicus, you see that declining organic growth on the hardware business, but nice growth on the professional services. And the most important line item, which is maintenance and other recurring revenue. This is the line item for that recurring sticky software revenue, the bread and butter of the hundreds of businesses they own. 33% growth of free cashflow. And again, more clarity on those line items over the next coming quarters. I think there's going to be better comps now that the spinoff is complete and we'll have a year comp of when they're separate companies. It'll be a little bit easier to compare apples to apples. Yeah, no, a good breakdown. Now we'll move on to a

completely different space, Canopy Growth, Q3 2022. So before I get started here, it's been quite the fall from grace for this stock over the past five years. I mean, the stock is essentially flat. Obviously, it looks like a roller coaster ride if you look at the charts, because it went way, way high at the height of the weed mania. And when it legalized and then has been on a downward trend. Pretty much ever since. So revenues for them were down 9% over a year to $155 million.

Gross margins were down to 6.5% compared to 14% last year. So that's not good. It's trending down as well. They had a net loss of $108 million versus a net loss of $904 million last year. So that is an improvement. However, a lot of their loss last year was because of asset impairment, which included some restructuring costs. There was also some this year, but to a much lesser extent. In terms of cash flow, it still does not look great here.

So for the first nine months of fiscal year 2022, they were free cash flow negative to the tune of $455 million. That's compared to a bit more than $500 million last year. So that's negative, obviously. Their share count increased 5% for the year, which I think is actually a good thing here. One of the silver linings, because a lot of their competitors have been heavily diluting shares.

So that's something I recommend to everyone who wants to potentially start a position in this space. Keep an eye on share dilution, because it's very important. The last thing I wanted to mention about the cannabis space is XO actually received a warning from NASDAQ for non-compliance. So they had a warning because I mentioned, we talked about this before, their share price is not high enough to stay on the NASDAQ. So they have to comply,

I believe off of memory, I didn't take it as a note, but they have to comply within 30 days of receiving that notice. We'll see if it happens, but if it doesn't, they're risking of getting delisted from the NASDAQ. Incoming reverse split. Well, they already did, right? Incoming another reverse split. Yeah, I know. So it's not looking great.

I mean, I'm not saying that there's not any good plays in the industries. There probably are some, but definitely, I think for me, at the very least, it's still a wait and see. I'm not interested at all in this space. Picks and shovels plays, which I don't know what they are, I think might be interesting looking ahead on the growth of cannabis as a whole. But each grower and each brand is just so hard. but each grower and each brand is just so hard. They're so difficult, and they have been difficult, and we've continued to say how difficult they are,

and they just get even more. Having an investable idea just continues to get harder and harder from my perspective, and thank God we've been hesitant to own any of them because do you remember in 2018, not so long ago, you were an idiot if you didn't own Canopy Growth Corp. If you didn't own that stock, you were an idiot. And I was like, I don't know, man, the valuation makes literally zero sense. And I was right. But in the short term, I looked like an idiot. Because if you didn't own weed, Canopy Growth Corp, ticker weed,

then you were just missing out on doubling your money every couple of weeks, right? Yeah. Yeah. I mean, and I think that's where I was like you. I never had any of the marijuana or cannabis companies in terms of my holdings just because for the same reason, the economics of it didn't make much sense. And there was also a lot of not knowing what the market was going to be. I think there was a lot of unknowns. And these companies were making projections without knowing what the actual market would be, was a big red flag for me. And that's been one of their big mistakes. There's been a slew of them. And I'll just say before we move on to our next name that I've had people, you know, reply to me on Twitter and saying we only look at the dumpster fires for cannabis companies,

and they'll suggest certain companies and I have a look and, you know, it's less bad. Like I probably I have a different definition of what a great company is compared to them. But I've looked at some of the names that people have pinged me to just say, you know, oh, have a look at this one. It's way better. And oftentimes it is better, but it's not that great either. So just some food for thought there. And it has to be, you know, still a better idea than some of the highest quality companies that I'm looking at in the world, right? Like the hurdle rate for public equities needs to be high. If it's not, then you're investing in shitcos.

That's my opinion. Yeah. You know, keep your standards high for high quality businesses. There's no reason to stoop your quality level, especially when a lot of them are trading at reasonable prices. And if one of them ends up emerging like an awesome company, I'd rather be a bit too late to the game than having suffered these losses. trading at reasonable prices. And if one of them ends up emerging like an awesome company, I'd rather be a bit too late to the game than having suffered these losses.

Exactly. How many decades did it take Warren Buffett to buy Apple stock? And it's one of his greatest trades of all time now. He was quote unquote late to the game and the market cap is like quadrupled since then. He's done all right. He's done all right. He's done all right. He's done all right. He's done all right. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission-free, so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real

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these amazing ETF products. Please check out the link in the description of today's episode for full disclaimers and more information. Now EQB approved a 51% increase in the quarterly dividend. 51% hike on the div. You love to see it. Full revenue was up 15%. Earnings per share was up 29%. The EQ bank, that digital bank that we talk about on this podcast, they have more than 250,000 customers on it, which is up 44%. They did enter an agreement to buy Concentra Bank. They have 11.3 billion in assets, and that should close November 30th, 2021. The transaction has been approved by the boards of EQ Bank, Concentra, and the Credit Union Central of Saskatchewan. Deposits grew to 7 billion, an increase of 53%.

Total customers across EQ Bank and Equitable as a whole are north of 325,000, which grew 42%. They do have an exciting product roadmap ahead. Just looking at their roadmap that they put out there, they have a lot of easy growth levers to pull, I think, which is amazing, even just expanding coverage of their products, but also geography. And so I think that that's an exciting thing ahead for them. A record quarter and them sponsoring this podcast. Do you see it coincidence? I mean, I think not. I see that as the best ROI on their marketing dollars and look at the quarter they're having. So thank you very much, EQ Bank. Yeah. Yeah. Well put. Now, I don't think I have much more to add about EQ Bank, you said it all.

So now we'll move on. There's all you need to know. We'll move on to another company that's in the financial space, a bit different here. So TMX Group, obviously they own the Toronto Stock Exchange. They released their full year 2021 results. Not bad for a company that I consider quite mature myself. Do you consider them more of a mature company? Yeah, they're the exchange, of course. Yeah.

Yeah. And so their revenues were up 13% year over year. Net income was up 21% year over year. Net income was up 21% year over year. They had free cash flow of $390 million for the year, which was up 13%. They also repurchased $84 million worth of shares for the year. And they are increasing their quarterly dividend by 8% to $0.83 per share, which now yields 2.5% for those interested in dividends. And I know we have a lot of listeners that love getting paid from their stocks. So, you know, that might be one that you want to look at. But a very good quarter for, like I said, what I think is a pretty mature business. They've been a wrong for a long time. It's been an up and down year for TMX, but over the long term, they've been in line with their returns with the S&P 500 very, very close over the last five years. Which is better than the TSX itself.

Yeah, definitely. Which is kind of ironic when you think about it a little bit. Yeah, exactly. But no, overall, a very good year by TMX. Now, the exchanges are incredible businesses. And, you know, TMX runs the Tron Stock Exchange. You got ICE that runs the NYSE. And you got NASDAQ. All three of them are publicly traded companies.

And they've all been ridiculously good compounders. Their moats are like seemingly impenetrable. The margins are good. They have lots of recurring revenue and they have accelerated trading volumes, right? So what's not to like about owning the exchanges these days? I mean, I think they're incredible businesses. Yeah. One that you forgot was CME, the Chicago Mercantile Exchange. So they do a lot of their revenues based on derivatives and options trading. But that's another one.

Same kind of thing. I think they've done that very well over the long term as well. Yeah. Another great compounder, right? It's like these are, it's the picks and shovels of the investment business, right? And so I love owning the kind of backbone infrastructure. It's never as sexy as some of those front-facing things. But if you look at the financials and you look at the quality of the company and how moaty they are, I mean, what's not to like? Speaking of a company you and I like

incredibly, we love perhaps Brookfield Asset Management reported full year revenue of 75 billion, an increase of 21%. They have now 688 billion of assets under management, an increase of 14%. I am waiting for the day we go ding, ding, ding, a trillion assets under management. Absolutely conceivable. The growth rate they're on, the tailwinds of the types of money that they're managing. Oh man, we can see that very clearly. Fee bearing capital, 364 billion. This is my favorite metric to track. This is an increase of 17%. So this is capital that is currently collecting fees. This is the capital they're managing on behalf of other people and collecting fees on it. $364 billion of it. They had $7.6 billion

in funds from operations. This thing's churning cash. The board declared an 8% hike on the dividend. So more of the same, they kind of hit that mark regularly. They are raising a huge $15 billion global transition fund to decarbonize. Now, they are the perfect company to do this. And they're the perfect company to take advantage of the ESG and environmental fund flows. But here's the thing. They're able to actually make a difference environmentally and not just like virtue signal this ESG crap, because there is a lot of ESG crap. I will be dead honest about it.

I've been very vocal about it. It may be cool and merit, but a lot of it is just very surface level. However, Brookfield actually has expertise in building and operating renewable energy at large scale and allocating the capital to building those projects. Early partners in the fund already are Amazon and Bridge and Scotiabank. Now onto a big line item, which is my man, Bruce Flatt, is floating the idea of doing a spinoff of the asset management business. And so then you'd be able to own that as a separate entity as well. They would be kind of complete all of them. You can own all of them individually. They're always looking to unlock value in the asset management business is absolutely electric.

It's recurring revenue, growing fast, high margin. They have extreme competitive advantage at investing their money at scale in real assets, which is their bread and butter. This asset management business is at a $7.8 billion annual run rate on revenue. Anytime you hear run rate on revenue, it's probably a good business model. They think they can get a re-rate on the asset management business. That's the point of the spinoff. This unlocks value for shareholders and why not? Bruce Flatt is the guy you want working in your corner for these kinds of reasons. He said, quote, we're heading down a path and we're quite serious about it or else we wouldn't have put it out in

the letter that the way we did. The spinoff could come in the quarters slash years ahead or not happen at all, end quote. Now, I think that this is exciting because the multiples they're seeing on asset management business is higher than the one being applied to the asset management business inside of Brookfield. And so that's why they did all the other spinoffs. And that's probably why they'll end up doing this. I would say I have actually complete confidence that this will happen within the next year. Yeah, yeah, I would not be surprised either. I mean, actually, I would agree with you that it's probably going to happen if they see value to be unlocked somewhere, they pounce on it. So that's always been Brookfield. That's what they do. Always go back to the Terraform power acquisition from BEP. They essentially bought Terraform as it was trying to avoid bankruptcy. So it was essentially on the cheap. Renewables were not as well seen back then as they are today. They bought it extremely cheap and then they thought that they could still extract even more value of it.

So they bought the remaining shares of Terraform Power and just incorporated into BEP. So to me, that's just what Brookfield does, right? And something like that, a spinoff, if they can extract value, they'll do it because it makes sense for shareholders. Yeah. Anytime I hear annual run rates, you're like, okay, this is typically a good business. Can I give a primer on what run rate is? Because I feel like we talked about it. Sure. Go for it. So let me use the Amazon Web Services example. Amazon or Web Services is a cloud provider. And since their revenue is recurring in nature, what they'll do is they'll say what the run rate is.

So for instance, if I did $25 billion in sales per quarter, But then all of a sudden in the fourth quarter, we doubled our revenue and accelerated it to $50 billion. Now, since all of that revenue is recurring, your actual run rate is 50 times four, because that's what we can expect the business's actual run rate, if it doesn't grow at all will be for the next year because that 25 billion that it did in previous quarters is old news now you have a new recurring base of this accelerated growth and so i don't know if that explains it well but basically yeah it's just way better yeah i think it's a good example. I think you have to be careful for those not used to this term. You can't project anything because some businesses may be more cyclical. And what Brayden really explained is when those revenues

are reoccurring and they're happening every quarter consistently and you know that your new base has a high likelihood of being your future and going forward. So that's why you can use a yearly runway, like you just said. So you kind of expand it over a 12-month period, and that's the numbers that you get. But you have to make sure that is recurring revenues because if not, you can really shoot yourself in the foot in your analysis. Yeah, and they're able to use that number because that fee-bearing capital is as sexy as software, in my opinion.

And that's why I've been so bullish on it because it's not known out in the market as the sexiest software. But if you look at the fundamentals and the nature of the business, oh man, it's an incredible place to be. Yeah. Now moving on to our next name, another Canadian name, Indigo. They had their earnings for Q3 2022 so the period ended January 1st 2022 I would like to mention that because it does incorporate the holiday season so this is an interesting one I had talked about this one as a reopening play I think it was was it last year 2020 I do not remember you did. I remember it very clearly, actually. Yeah. So and I talked about it because from my point of view, it's really an experience. When I go to chapters,

I actually enjoy it. I'll go through the books and I'll grab a Starbucks and I will be talking about Starbucks a little bit. So that's why I think they can really benefit from the economy reopening. So for them, revenue increased 17.8% to $430 million. Earnings increased 47% to $45 million. This is all year over year. What's interesting is the online sales were down 2.8% to $122 million. So if the online sales were slightly down, it means that most of this increase actually came from their in-person purchases, which is very interesting because we were that period was kind of when Omicron was starting. So I guess they may have had good traffic before the lockdowns and the shutdowns really all started. But the market really loved this quarter because the stock was actually up 25% on the news. And their quarterly report, they actually commented on something very interesting. They received $17 million from Starbucks Coffee Canada after

renegotiating their partnership from the company. They were providing a year to date update, if you like. The payment was actually not included in q3 it was included in q2 so the prior quarter but i thought it was interesting because that partnership with starbucks i personally think it's mutually beneficial because i don't think any of them really has the upper end i think you could make a case Indigo could go with another chain and probably get as good as result or very similar. But Starbucks still has the brand name and vice versa, right? People go to Indigo and every time I go, I end up getting a Starbucks coffee. I don't know about you, but it's almost like I go get the coffee and then I browse around and go check out books.

So I think it's a really good partnership for both businesses and just definitely happy to see that it's going to continue. I don't know for how long this agreement was. They didn't mention it in the section I was checking, but still very interesting. And I think they'll continue benefiting from economies reopening. I totally agree with what you've said here. And I found it really interesting that their online sales were down.

I know, sure, maybe some of it's coming back, but I am surprised to see that figure and still had a pretty good jump on the top line. That is very impressive. And you're right. It's an experience, right? And Indigo needs it to be an experience or else they'd be in a tough situation. And the partnership with Starbucks is smart, right? It's a relaxing place. If you like coffee and you like books, those two go hand in hand. And this might be close competitor to best smelling retail location compared to my love

for Home Depot, my Home Depot, but coffee and fresh books. I mean, come on, that's a good call. No, definitely. And I mean, you know, the one thing to say, though, it's not going to become a multi-billion dollar market cap business. Obviously, their market is Canada, and there's probably still going to be some growth forward. So just keep that in mind

if it's a play that you're a company that you're keeping an eye on. We're not talking here by a company that will expand in China. It's not going to happen, right? Right. Yeah. So manage expectations with a good old Indigo. Exactly. Yeah. But overall, it was a good quarter. Got to hand it to them. This next section, I'm coupling two businesses together because I own them equal weight. Now, this is a prime example of what we just talked about earlier, which is there are some phenomenal businesses out there that are trading at attractive, or in this case, at least more reasonable valuations. Because these are two of the best companies on the planet, some of the most high quality consensus, high quality

companies on the planet. And they're trading at more reasonable valuations. And those companies are Moody's and S&P Global, credit rating agencies. Moody's reported full year revenue of 6.2 billion, an increase of 16%. Earnings per share increased 25%. S&P Global had 8.3 billion in revs, an increase of 11%. Earnings per share up 29%. So it's the same old story for these companies, which are double digit, like not going to, you know, shake the world. I'm not going to set the world on fire with revenue growth, but consistent top line, double digit revenue growth, but with a ton of operating leverage.

And that's why you see EPS and free cashflow typically grow even faster than the top line. Now, both companies have nearly impenetrable moats, and I'm serious. I truly mean that. They are the toll booths on the global bond markets and also have these attractive recurring revenue software as a service platforms for investors. And S&P Global has that really nice index business as well. Like the S&P Global, Global has that really nice index business as well. Like the S&P Global, I don't see them changing. I mean, S&P 500, I don't see anyone coming out to change the name of that anytime soon. Absolutely phenomenal businesses on rare 20% drawdowns. Like these companies hardly ever face drawdowns and trade for attractive prices. On a 10-year compound annual growth rate,

they challenge the success of the FANG names in terms of total return. So they're definitely worth a look. I think today is a reasonable price to pay for two of the highest quality companies that you can find. Yeah, yeah, that's a good breakdown. You know them better than I do. But yeah, that's pretty rare. They go down 20%. My only thing with them is I still think their business model could be disrupted in the next decade with all the new technologies just, you know, happening, whether you're thinking about the blockchain, cryptocurrencies, potential new global settlement layers. I think they could potentially be disrupted. Maybe not. That's the biggest risk that I see personally for those two. We could do a whole podcast about why I don't think that's really possible,

but let's save it for another time. Sounds good. Maybe we can do a segment and I'll say why it's possible. I love it. I'm down for that. Okay. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team

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Moving on to Canada goose earnings. Yes, another Canadian play. So these numbers are in Canadian dollar. I always mention it, whether it's USD or Canadian, because when you have these dual listed names, for the most part, they actually post in USD. So I was surprised it was Canadian. It was not a good week for Canada Goose. Its stock was down more than 25% since the earnings released last week. So you might be wondering what happened. Well, revenue increased 24% year over year to $586 million. That might sound good, but there was an additional week in the quarter versus last year. So that week provided $41 million in revenue. So if we strip that out,

the increase is actually 15% year over year, which is pretty good. And I'll mention why the stock was down. Direct-to-consumer revenue increased 49% to $445 million. So the vast majority is actually now coming from direct-to-consumer. That represents 76% of sales. 76%? Yeah, yeah. Which I'm not surprised on because you see a lot of their branded stores. Yes, you can find their codes at like a Nordstrom, for example, which would not fall within that. But their website is actually quite well done, I have to tell them.

And I think they've really been pushing in the past two, three years towards that direct-to-consumer model. And they've been succeeding. You really can't put it any other way. 76%. I mean, I think that's better than Lululemon, to be honest. Oh, I think so for sure. Yeah. Yeah, by quite a lot.

I think it was Lululemon in the 30s. I think it's higher. Which is great. I think it's higher than that, but I can't remember off the top of my head. But anyways, all that to say it was impressive. That is probably the reason why their overall gross margin improved from 66% to 70% year over year. Net income also increased 42% to $152 million. They have generated $158 million worth of free cash flow for the first three quarters of fiscal 2022,

which is down 31% from last year during this same period. I mean, I would still take that with a grain of salt. I think it's just something to keep an eye on because it's only three quarters as well. So the big reason here why the stock was down is because they revised our guidance. So guidance, I mean, how many times do we talk about a stock having a haircut and it's all about the guidance? So this was not any different. So the company had raised its revenue expectation in November between 1.12 billion to 1.17 billion for the fiscal year 2022 now it expects revenue to be within 1 billion and 1.1 billion so basically the high end of that range now is the lowest end of the range that was previously stated, actually below that a little bit.

So one of the main drivers was the slower than expected sales in China and a stall in luxury tourism. They haven't seen major impacts from supply chain disruptions and don't believe the overall inflation that we're seeing right now will have an impact on its business because they say they have pricing power. that we're seeing right now will have an impact on its business because they say they have pricing power. And also the reasoning is that people who have enough money to buy $1,000 plus coats from them, you know, an increase in 10% will probably not dissuade any of those potential client to not buy it. If anything, I think the fact that they cost so much is the allure of the brand. I don't own Canada Goose myself, any of their coats, because I think personally they're overpriced for what you get. But I don't think you can argue that people who want to own it are really, they love the brand and they're ready to pay quite a high price to have that brand. And they've been around for a long time now. So I

don't think it's a fad anymore. So I actually like this quite a bit going forward, especially now that the valuation has come down and they're trading around like three, four times sales right now. So I don't have the profitability metrics. I didn't have them offhand, but that's actually quite reasonable given that they're still looking at growing. Given the margin profile too, right? Yeah, and they're still growing. They have a lot of growing to do in China, which has a big luxury good market. So I think this is definitely an interesting play.

Yeah, I tend to agree. It's one that I looked at a lot during the IPO and kind of just forgot about, I'm not going to lie. And that revenue, I mean, that top line guidance, it's not a big difference, right? Like it's a fraction compared to what they were guiding before. Now, I am curious. So when they did that much for the Q3, is that just because that had the holiday season?

Yeah, ending January 2nd, 2022. So there's the holiday season plus that extra week that this year's q3 had so that's why i mentioned that because you have to factor that in but it still looks really good like i think people are a bit more short-term focus and i think you know management raised the guidance right before omicron came out like i think personally you give them a little bit of a pass because you can't really like i mean you they don't have a crystal ball either so i think you get a bit more of a pass here i think that's it's different from paypal right with the whole ebay thing where they could have managed that better this is really i think

just unfortunate yeah right and it's not like it's like oh by the way we're cutting our rev guidance in half like it's this is very small difference yeah i know i back i back it i do think it's interesting given that margin profile and i had no idea 76 of sales was direct consumer 70 gms is really nice to see. Never underestimate people's willingness to spend exuberant amounts of money on impressing people they don't know. And so that is the investment thesis on Canada Goose, right? That patch is worth a whole lot. dude like never underestimate people who cannot afford to buy these coats continuing to buy the coats i mean i was browsing on their website when i was doing the earnings just to have a look at the pricing and you cannot get a parka under a thousand dollars it's minimum like twelve

thirteen hundred dollars and it goes over two grand for some of their codes yeah yeah and well they want to they want to capture that like extreme high luxury market as well so they probably have stuff even more than that like you probably probably spend thousands and thousands of dollars i'll stick with my north face personally yeah there you go i i got the eddie bauer that's good too that's kind of the same price range right yeah yeah yeah it's a couple hundred bucks but it's warm it's just as what maybe i don't know i've never had a goose so i'm not going to comment all right gfl green for life environmental had revenue of five and a half billion dollars an increase of 31.7%. Free cash flow was 500. This is full

year numbers, by the way. Free cash flow is 540 million, an increase of 50% compared to last year. They deployed 2.6 billion in acquisitions, which was a slowdown from 2021, or sorry, from 2020, which was a slowdown from 2021, or sorry, from 2020, which they had a record deployment in cash for acquisitions, but still 2.6 billion deployed in acquisitions is no small chunk of change. They have improved their balance sheet and they continue to reduce their cost of debt, which is nice to see because that was the bear case, right? It's like this thing's levered to the nines. So their cost of capital has gone from 6.4% to 4.2% on their debt in 2021. Those numbers are from 2019 to 2021. Now the solid waste business had 10% organic growth, which is unreal. Like that number is really impressive to me and over 35.6% revenue growth for the entire solid waste

business. The liquid waste business grew revenue at 45.6%, really solid. So death, taxes, and garbage, what they do well is really crushing it. And I think trade's that extremely attractive multiple. I own shares currently and I want more. Now the third segment, it was infrastructure. And it has had tons of delays and revs were completely flat and hasn't performed that great. They said that the infrastructure division is just so different than waste management operations. And they're going to divest the business and double down on waste management. They're going to turn this infrastructure division plus an acquisition of another company into a new entity called Green Infrastructure Partners. Patrick DeVigie, the founder and CEO, thinks this is a good play.

He's going to sit on the board of the infrastructure partners business. And he wants them to run separately and autonomously and thinks that there's such a big opportunity in waste. He even said on the call, he's like, I'm not going anywhere until I see the stock like $100 or something ridiculous like that. It's still so fragmented across North America, which is to their benefit. And so they can continue to roll up garbage. They do it well. They integrate it well. What's not to like for boring business like garbage? I think it's a really solid opportunity given how fragmented it still is. With all these consolidators out there, there's still a huge opportunity ahead of it. and gfl is my favorite way to play it yeah yeah i mean i i kind of go with you on that one you know it better than i do

i think when we first talked about it i know trash baby i think the the one thing that was concerning i think when they first listed was the amount of debt but you said they're deleveraging a bit right they're deleveraging but like that's why a lot of people like GFL is they like the levered nature of the business. I mean, the cash flows are so stable, so lever that balance sheet up. And so I've kind of come around to the idea that it's not such a bad thing being that their leverage ratio being well north of four. I don't see that as a huge problem for them. They're continuing to deleverage over time, which I think is probably smart. But yeah, I don't see it as the risk I did once see it.

Yeah, I think it's for those kind of businesses, right? It goes with utilities too. It's not unusual to see these type of companies being quite levered. I think you have to create a good balance, especially with waste management, not the company, but just waste management in general. You're oftentimes reliant to contracts with municipalities, right? And these come, they get tendered once in a while. I know they're typically fairly long-term contracts, I think five years around there, maybe a bit longer.

But that's always a bit of a risk, right? You can rely on them, but you have to make sure you don't lose them either. That's right. Sometimes good companies are wrapped in a bad balance sheet. And look at utilities. American Tower is like 8x debt to equity. Still a great business. Balance sheets. Balance sheets is scary, but they can do that, right?

It's not like some highly cyclical thing. It's fairly common too with real REITs in general. Yeah. Yeah. All right. Let's play a little game of what's on your watch list sponsored by Equitable Group, the owners of EQ Bank. EQ Bank, we love them. We like working with them. And look at those numbers they're posting.

Look at the numbers. I have two here that I want to mention. One is Thermo Fisher, ticker TMO. And two is Adyen, ticker Adyen. So I'll go really quick. But Thermo Fisher is a bit of a picks and shovels play on life sciences and biosciences. Super high moat, bit of an acquisition machine as well. Wonderfully run company.

One of the most high quality companies in that space. And Adyen is payments. It's like a Stripe competitor, and they also have some point of sale. Now, the reason that I have been dismissive of Adyen is because I live in a bubble where I think Stripe is going to be the only player here. And the reality is, is that's just not true. And Adyen has been a wonderfully run company. I've listened to the call recently, their entire investor presentation that they put out and just showing their growth, showing their levers. It's almost like they really care. I'm interested in Adyen for sure. Now it doesn't trade in North America, so it is a euro listing so that is another thing

to think about but adyen is a really really cool company and if stripe is not going to go public i might have to look at adyen yeah you've mentioned them before i think right it's not the first time yeah a couple times maybe yeah you like your you like your payment companies so i like payments infrastructure companies yeah i do so me, it's actually, I thought it was good to just use a name we talked about in this earnings release. So for me, it's Canada Goose. So people might have been listening to me and kind of not be surprised that I'm mentioning this name, but it's pretty simple. It's trading at a bit less than four times sales uh during their with their current run rate for this year they are trading at around 20 times free cash flow on a full year basis as well

so he has the price to earnings it was a bit higher but still i mean it's uh really really interesting to see right now how well they're doing and personally definitely something I'm keeping an eye on because I know we talked about Motes recently and I know brand power is not something that can stay forever but they have enough of a track record in my opinion that they do have that brand power and that pricing power associated with that and I think they still have quite a bit of runway in certain country and I won't mention China but yes China so I think they still have quite a bit of runway in certain country. And I won't mention China, but yes, China. So I think for those reasons, it's definitely an attractive play for me, especially given the big haircut that they had in the market being focused by really what seems to be more short term. And let's not forget, too, there are coming out with

new products as well. Remember Remember in the last earnings release, I talked about their shoes that they'll be coming out with kind of their footwear. So it'll be interesting to keep an eye on if there's a good uptake as well. But I still think there's some growth here. And just the brand is powerful. The brand sure is powerful. And I think investors have gotten kind of like sick of the story, right? Like IPO in March of 2017, it went on a fantastic run up until the fall of 2018 stock was up over 300%, you know, always good. And then from that point, it's down 60%. It's been this just really unsexy stock to own if you look at IPO to now. Now, you've made money if you bought shares on the IPO to now, but you've underperformed the market.

And if you held shares through the crash of March, you lost money net. And so I think that it's just become kind of like an unsexy story on Bay Street. And the reality is that the numbers are pretty good and the margins are crazy, as we would expect. But I didn't look at your notes ahead of time, and I am impressed with how much of it is. Yeah, the direct to consumer to three quarters. That's really impressive. Hopefully they can keep it up, but if they do, they'll probably be able to keep those margins fairly high because they can always

increase the prices. I think they have good pricing power built in their brand. Yeah, that's pricing power, right? If you're charging over $1,000 for a coat, sometimes $2,000 for a coat, I think we can check you have pricing power. We can check that box off. You got it. Yeah. All right. Thanks so much for listening. Listeners of the Canadian Investor Podcast, we appreciate you very much. Thanks for tuning in. And if you're new here, we have episodes on Monday and Thursday mornings. We got your commute covered. We got your workday covered. We got your business news covered.

And yeah, we really appreciate you very much. Check out stratosphereinvesting.com. By the way, check that out. It is the best platform for self-directed investors. I spend all of my waking hours on it. And so I'd appreciate you check that out. That is stratosphereinvesting.com. For self-directed investors, I spend all of my waking hours on it. And so I'd appreciate you check that out. That is stratosphereinvesting.com.

And if you can't remember that or spell that, that's fine. I understand. Go to getstockmarket.com. It's going to redirect you right to where you need to be. Thanks so much for listening. Take care. Bye-bye. The Canadian Investor Podcast should not be taken as investment or financial advice.

Brayden and Simone may own securities or assets mentioned on this podcast. Always make sure to do your own research and due diligence before making investment or financial decisions.