The Canadian Investor - Canadian Inflation Heats Up and Google Makes a $32B Deal

Episode Date: March 20, 2025

In this episode of the Canadian Investor Podcast, we talk about Canada’s February CPI print that came in much hotter than expected at 2.6% year over year. We also discuss the Bank of Canada’s latest rate cut and how rising inflation will likely make their next interest rate decision even more difficult. We also dive into Google’s massive $32B acquisition of Wiz, the fastest-growing software company in history, and whether the deal will pass regulatory hurdles. Plus, we analyze earnings from Adobe, Vail Resorts, and Bird Construction, including why Adobe's AI investments aren’t exciting investors and whether Bird's recent stock dip presents an opportunity. Tickets of stocks/ETFs discussed: GOOG, ADBE, MTN, BDT Check out our portfolio by going to Jointci.com Our Website 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 Finchat.io 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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This is the Canadian investor where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Brayden Dennis and Simon Bélanger. Welcome back to the Canadian Investor Podcast. I'm back here with Dan Kent. We are doing the news and earnings like we usually do on Thursdays.

A bit slower on the earnings front, but a little bit of macro stuff happening between the Bank of Canada announcement. And this morning, fresh off the press we got the CPI the Canadian CPI for February so at least that will give us a bit to talk about and then next week I know there's a bit more earnings that will be coming up this week that we'll be able to talk about Yeah, there's a few companies that are Recording kind of off of the regular routine.

I think there's Couchard. Yeah, I think Couchard and I think Dollarama is soon too if I remember correctly. Yeah, they'll be, I would imagine, equitable as well. I think they report kind of off the, you know, off the major big six. Yeah, they're a sponsor and they gives us context. Yeah. Yeah. They're a sponsor and they give us content. That's good. Double whammy right there.

Yeah. But yeah, we'll get started because there's some, definitely some interesting data that happened here. So the CPI numbers came out this morning and it was not good. I think it's fair to say that it was just not a good print. It came in higher than expected at 2.6%. Markets were expecting from what I could see 2.1%, 2.2% for February, and the month over

month increase was massive at 1.1%. Of course, the end of the tax holiday, the GSDHSD tax holiday on certain items played a big part in this, but that ended February 15th. So it's not even a full month of that tax holiday. So it's a half month effect. And of course the market would have incorporated that into their expectations. So the fact that it was way higher than what the market was predicting. Not great if we're looking here for the Joint TCI viewers.

So you'll see the 2.6, 1.1 year over year, you had food items that were up pretty decently, 1.9% month over month and 1.3% year over year. So the year over year is much smaller because a lot of these items were of course impacted by the GST HST tax holiday not all of them gas prices also Contributed to the increase but the rate was slower than at the same time last year because of base effect lower crude prices

specifically were mentioned here and One of the increases that was related to gas was because of higher refining costs. Gas prices were still higher year-over-year but not as much as they were last year. Energy as a whole was up 0.5% month over month and 3% year-over-year. Services I think is playing a pretty big part into this higher than expected inflation print. So that's one I've been keeping a close eye on. It had gone down to I think 2.8% in January. Year over year, so it was showing signs of actually going down. But the fact that it's gone back up to 3.6% year over year and

1.2% if you're looking at month over month and I don't recall any services really impacted by the GST and HST. Correct me if I'm wrong. So this one is definitely a bit on the, you know, keep an eye on because it is one that's a pretty big jump. Yeah, I mean, I don't think anything was excluded in that regard. The one interesting thing I'm kind of looking at now is just the elimination of the carbon tax, because I think they said it's going to be, what did they say, 17 cents a liter or something might be removed from gas?

I'm not sure. I heard it was going to be a pretty decent amount for sure. Yeah, I think so. I don't think that'll be instant more gradual, I guess. But there's a lot of like offsetting things right now and a lot of a lot of things going on. I mean, when you look at food prices, like what are the tariffs going to do to food prices moving forward? It's and then again, you have the removal of that GST holiday, which is impacting it. I would imagine the prints over the next while they're going to be probably all over the map,

but this one, like if I were to have bet, I would have expected it to come in lower than expected rather than higher. But this, cause like I had mentioned to you, like I couldn't really find what was driving this so much higher because like food went up again, but really not like overly concerning. It's still well below the below the target shelter is pretty much what it's always been for the most part But yeah, it was pretty interesting to see it come in this high which yeah Yeah, exactly and what's starting to what will probably start alarming the Bank of Canada? Yeah, and I'm sure they were not thrilled with this print and we'll be talking about the rate announcement, but clearly inflation is something they're keeping a close eye on

and they're really trying to thread the needle between cutting and stimulating the economy because there's a slowdown versus, making sure inflation doesn't pick back up because of tariffs and obviously counter tariffs, which are affecting the goods that we're importing to Canada. And you mentioned food clearly. of tariffs and obviously counter tariffs, which are affecting the goods that were importing to Canada and you mentioned food clearly.

And when you start looking at the core CPI metrics from the Bank of Canada, they were all higher. So you're looking here, the CPI common went from 2.2 to 2.5, CPI median. The common again, I always find it a bit confusing, but still the CPI medium and trend, they both went up from 2.7 to 2.9 and we're starting to see a month, like a couple of month trend here that the core inflation is going up. I think it's probably a bit too early to say it's a trend, maybe if one or two more prints and it'll give us a better idea, But the CPI median, this one,

it just takes the middle price increase in all the basket of goods and it gives you what that increase was. And then the CPI trim, it removes the most volatile components on each side, whether it's volatile on the way down or on the way up. So these one typically will be at least the CPI trim will remove a lot of the food and energy because that's more volatile and it's still increasing. So despite some of the lower prices we're seeing or potential for lower prices because of what you mentioned with the carbon tax there's still some figures that show that it's not going in the right direction right now and it will be very interesting when the Bank of Canada does its next meeting what they're going to say whether

they continue cutting pause i think is probably the two things they would look at i don't think they would start increasing hiking without some more data showing that inflation is taking hold but i think it's definitely throwing a wrench because they were expecting headline inflation to be 2.5 for March. I don't recall them saying anything for February during their meeting so we'll see but if we're seeing 2.6 in February it's not looking great for March. Yeah I mean if you look to the numbers here on the chart like there's three straight months of month over month bumps on pretty much everything except the median, like it went flat for one month.

And I mean, this won't have any tariff impacts in it yet. Very limited if so, right? You may have some businesses that were changing their behaviors a little bit that may have started looking for alternative suppliers outside of Canada potentially. So there may be some early impacts, but you're right. Like the major impacts are probably not going to be felt

until the next print, the March print and the April print. Yeah, so optimally, to weather that a bit, you want it to be low, you know trending upwards and relatively high exactly I mean, I don't I wouldn't want to be the Bank of Canada right now I mean this is gonna be probably pretty tough to navigate Mm-hmm. No exactly and I'll go over what they said and people will understand what we're talking a bit more about now And then they have an interesting table. They always do that, kind of the biggest pressures on CPI. So you're looking here for January and February

and a lot of important items really increased in inflation rate. Some were outright deflationary back in January are actually, yeah, deflationary, but now it's more of a increase in inflation so you're looking you know food shelters about stable is actually a bit down. Household operation furnishing equipment that's up. Clothing and footwear that's up. Transportation is slightly down. Healthcare and personal care that's slightly

up. Recreation education and reading that's almost doubled and then booze is booze tobacco products and cannabis is again a decent amount as well. So you're seeing some upwards pressure there. We'll have to see again I don't want to panic people or anything like that I think it's also one print but we're starting to see especially with the core print that things may be inflation may be a bit stickier than a lot of people thought. Yeah, and pretty much when you look at the chart, like everything that was deflationary was pretty much because of the GST, the tax break, effectively the tax holiday. I mean, it's not really all that surprising to see it

return but I mean a lot of the things that a lot of people are affected by most when you look to like food and shelter still relatively under control which is a good sign but it's definitely not trending in the right direction yeah and that's the issue when you impose like tariffs but in the case of Canada counter tariffs The counter tariffs end up impacting your own population because then you're increasing, you're taxing the goods that are coming in on those counter tariffs. So I think it's just important to remember because there's a lot of misinformation out there, starting with the orange man himself saying that it's not paid by the US consumer. I mean, maybe it's not explicitly paid by them.

By the end of the day, the company's important, this stuff will pay that tariff. And a lot of the time, a good portion of it will be passed on to the consumer. So I think it's just important to remember. Whether it's a ski trip to Whistler, a business trip or a summer getaway in Western Canada, one thing's for sure.

When I travel, I want to stay somewhere that feels like home. That's why I always book Airbnbs. And while I'm away, my place could be earning me some extra income as an Airbnb too. It just sits empty while I'm away, so why not put it to work? I've also thought about hiring a co-host from Airbnb's new co-hosting network. If hosting sounds overwhelming, a co-host from Airbnb's new co-hosting network. If hosting sounds overwhelming, a co-host makes it easy. A local vetted co-host can manage everything for you from creating your listing, handling reservations and even welcoming guests.

Turn your home into a way to earn extra income while you're away and it's empty. Find a co-host at airbnb.ca forward slash host. As do it yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free, so that you can choose the ETFs that you want.

And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly

what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. 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 tools. So go ahead, blossom social in the App Store and I'll see you there. Of course, the Bank of Canada did cut rates. So congratulations if you have a variable rate mortgage, you're probably going to be looking at a lower rate already or soon. So they cut the overnight rate by 25 basis point to 2.75%. Several factors went into that decision Headline inflation has been at or around 2% target even if course CPI remains higher due to sticky shelter inflation, of course That was before this print came out So I'm sure they would revised the statement a bit slightly even though, you know, it's just been a week They also stated that the headline CPI came in higher than expected in January

So that's something they were keeping an eye on The overarching theme was that despite some concerns about inflation the uncertainty relating to tariffs is holding back business and consumer spending Which is why they decided to cut by 25 basis point But you'll see as I keep going here You'll see some conflicting statement from the Bank of Canada, which is fine, just because there is so many competing factors. So the economic slowdown is putting downward pressure

on inflation while tariffs and counter tariffs, of course, like I just mentioned, will put upwards pressure on inflation. Tiff was pretty direct when he got asked a question about the tariffs, whether there would be a one-time impact on price levels or a longer-term inflationary impact. And I think this also, his answer really shows how difficult it will be for consumer and businesses to navigate this because in short, he said they just don't know.

The scenarios are changing every day because of the US trade policy constantly shifting. He said it in a way to not piss off obviously the US administration. And you could tell that there was a bit of frustration here with the US administration and of course Donald Trump, but they never mentioned his name outright and they were definitely trying to be politically correct here and not create any more animosity between the two countries. He also mentioned that higher costs are a real possibility going forward and I guess we're seeing this with this most recent print.

He mentioned specifically a lower Canadian dollar which will make things more expensive to import Counter tariffs which are raising the cost of good coming in from the US and of course, I just talked about that I think that's important to say and reinforce Response from Canadian businesses which will likely look for new suppliers to avoid tariffs Which could also increase costs and potential supply chain disruption as a result of tariffs and counter tariffs. I think this last one was a really good point because I think this one is one that's really under discussed.

The potential supply chain issues that could be caused by all this like tariffs, unknown or counter tariffs, reciprocal tariffs that the US are also saying that will be coming in April against other countries as well. So there's just a lot of uncertainty and the Bank of Canada doesn't know. I don't know. You don't know. I don't care which macroeconomist you listen to, you watch, you read. A lot of them will know, will say that it's not going to be good and

I think most people will agree for that but to what extent, it's really hard to know. So I think it's important just to remember that, just to be aware of it and especially if you're investing, just to have some awareness of this environment, especially if you have cyclical businesses because they will be impacted by this more than other type of businesses. Yeah, I mean, there's nothing really more to say than I don't know. Because like you said, the policy, it changes like sometimes multiple times in a single day, like you just never really know. And like we there hasn't necessarily been an environment like this in a very long time. I mean, this is pretty much the most aggressive, you know, tariff response by the United States since like pre World War II, I think. I

know he implemented tariffs in his first term, but they were nothing like this. And I mean, he's getting really, really aggressive. And it's just like, who knows if it's going to work out. But the one thing that's guaranteed is there's going to be, there's definitely going to be economic difficulty. I think that's, that's pretty much a no brainer. It's just like, how long does it persist? I think is the question. Yeah, exactly. And we were having an interesting discussion on Twitter with someone that was bullish on

go easy, which is a subprime lender. And my main argument was like, like, look, this is not really the time to be investing in subprime lenders. And we've talked about this time and time again, where it may look cheap because you're looking at past earnings and the company may look attractive, but you're entering a phase of the cycle where unfortunately, if the economy takes a turn for the worse, a lot of these subprime loans will just start being underwater. People will not be able to make those payments

because you don't make payments typically because you lose your job. If you have a loss of income, and let's be real, there's gonna be loss of income. Maybe the government will come in with stimulus and enhance EI benefits to make sure it softens the blow for people, but again, EI benefits typically will not give you your full salary either, so it's still a loss of income that's possible.

So that's just an example of a type of business that would be really difficult right now to, in my view, just invest in because there's just so much uncertainty and they are very dependent on the economy and as well as they may try to prepare conservatively, put money aside for bad loans. I mean, the more you put aside, the more it starts impacting your earnings too. So you have to keep that in mind as well. Maybe you release some down the line because it's not as bad, but I think in mind as well. Maybe you release some down the line because it's not as bad, but I think it's important to remember that some of these businesses, cyclical businesses that are dependent on the economy, let's forget about tariffs, just depending on the economy, will probably have a hard time in the next few years.

Yeah, I had mentioned like for quite a while on the podcast, like Go Easy is typically a company that does well when the economy is bad or weak, but not weak enough that it starts to hit unemployment, GDP starts to slow down. And they had Propel, which is another alternative lender here in Canada, but primarily operates in the US. They pretty much came right out and said, like word for word, their Goldilocks scenario is a weaker economy, but not one that's so weak that defaults are rising. I mean, they're writing off more loans, unemployment gets worse.

And I mean, alternative lenders aren't the only companies. I mean, this would hit major Canadian banks as well. And we were talking about that report that S&P Global came out. I've made a YouTube video on it. I mean, even they had mentioned that, you know, it's not going to hit those big banks as bad first off because they're mostly prime lenders and they also have much more diverse loan portfolios. But I mean, it can hit the banks

as well. I mean, they're very economically sensitive. And I think at, you know, at this point in time, I think it's really important to know what you own because... Yeah, and very dependent on the Canadian economy. Exactly. Yeah. Very dependent. And I mean, like I said, we haven't had a situation like this in a very long time. I mean, there's probably nobody...

There's very few people who are investing today that would know what something like this is like. I would argue that nobody has. I mean, these tariffs, like I said, he puts them in his first term, but it was nowhere near the chaos that's going on right now. The closest thing I can think of, and it was obviously a different situation,

but it would probably be the GFC, the Great Financial Crisis, in terms of uncertainty, different kind of uncertainty, but still in terms of uncertainty and prolonged bear market, I think it probably would be the closest one. But with the amount of debt governments now have, they do have less flexibility than they did back then. Even if you start looking at it as a percentage of GDP, it's still higher than it was back

then. So that's probably the one you'd have to look back. But again, tariffs are a bit of a different beast too. Yeah, definitely. Okay. So now we'll move on enough with the macro. So some news came out this morning. Google pushing to acquire the company whiz.

So do you want to go over that? Yeah. So this is Google's largest acquisition in its history. Obviously if it goes through, there's still, you know, a lot of questions as to whether or not it'll go through. But they're paying $32 billion for pretty much a cloud security startup. Like, Wiz only started in 2020, I believe. There, it's just been crazy how much they've grown. And although this acquisition is definitely like, the acquisition is fresh news. I mean, attempts had been made prior back in 2024. They tried to purchase whiz, but whiz shut the deal down for a few reasons.

The first time I am pretty sure it was just because of the Biden administration. They were pretty adamant on tight trust. Yeah. Yeah. Making it very difficult for big tech companies to acquire competitors. I mean, like Biden straight up said, rather than competing for customers, they're simply consuming their competitors. So I think they were a lot more stringent in that regard. So Wiz didn't really like this element, the antitrust element.

So I would actually imagine the deal probably has resurfaced partly because the Trump administration is now in power. That's just pure speculation by me. But I, like, I guess we're going to see his viewpoints on it in that regard. But in addition to this, as I, as I mentioned before, the offer is much bigger. So back in 2024, uh, Alphabet was only offering 23 billion. So. I mean, good on whiz for holding out, I guess.

I mean, you're talking 23 and there yeah 23 billion to 32 and I can't even remember when the deal was I think it was like midway through 2024 So you're talking like not even a year. It's yeah, it's pretty crazy and The other reason the deal was rejected back in 2024 was the fact that was kind of wanted to They wanted to get to 1 billion in ARR, annual recurring revenue, and kind of seek out an IPO. They wanted to go public instead. But I just think, it just seems like Alphabet just came in with a price that they just can't shut down. And again, when you think about it, Wizz was founded what, five years later? Yeah, five years

later and they're being sold for 32 billion. Plus keep in mind too like the IPO market, I think there is a lot of question Mark with the state of the markets right now. I think so. There's going to be a lot of appetite for new IPOs as we're seeing major indices like the S&P 500 being like in correction territory right now. Maybe, but that's debatable, right? I think that that is probably the other thing they had in mind is there's always a risk that the IPO, if they did it, would not be as good or well received as they would have hoped. Yeah, like if you think about it, this is like 2020 or 2021. They're probably going

public because the IPO, it was crazy back then. But I mean, I think that did help them in a way too, because they did raise a bunch of money during that time. And I mean, when you look at it, there's probably a lot of synergies here. Google can pretty much integrate WIS into their cloud platform, along with pretty much serving the platform across all major cloud providers like Amazon Web Services, things like that. They said they're not going to isolate it just to, you know, Alphabet's platform. They're going to still offer it.

And you know, like if the deal goes through, it's probably going to be a big advantage for Google because more companies will look to Google cloud for, you know, advanced security, things like that, which apparently is a bit of an issue right now. So that they're trying to eliminate it in this regard. And I mean, just on Wiz, I mean, there are the fastest growing software company in history. So it took them just 18 months to hit 100 million in ARR. They more than tripled that by the end of 2022 to sit at 350 million. And by August 2024, it had surpassed 500 million.

So in 2025, they expect to exceed a billion. So they are, from what I read this morning, the quickest company to 500 million in annual recurring revenue in history. So this is definitely not a slouch of a company. I mean, I like, I am not an expert on the, on the cloud security area. I really have, you know, no idea overall, like on the surface, it looks like this deal is crazy expensive. So I mean, if they hit 1 billion in ARR by the end of 2025, I mean, that's 32 times that price today,

but the market really isn't reacting that badly in terms, in terms of, you know, Google's price. So they must like it. I mean, it's down 3%, but the NASDAQ is down 2%. There's many big tech that are actually down more than Alphabet right now, so the market's actually not reacting all that poorly to it at all. So I'll have to look into it a bit more. I mean, I guess the real question now

is does the deal even go through? Because I'm pretty sure when this was made last year, there was a really good chance that this deal would be blocked. And I don't know what's gonna happen now. I would think they must have talked to Trump officials. You would think. Yeah, officials in the administration,

just to get a sense of their receptiveness. And G.D. Vance used to be a venture capitalist too, right? So I think he probably has some pull in there and he's probably favorable for this kind of acquisition because it's, let's be honest, like for seed investors, venture capital, this is an exit strategy. That's part of being acquired by Big Tech. Yeah. So he probably has a lot of lobbying happening for these type of purchases to happen. So I don't know, I'm just speculating, but I would think before you make this kind of

offer, I'm sure you have a few contacts if you're a Google within the US administration, just to see whether that's something they'd be open to approving. Yeah, I mean, it just kind of shows you the sheer size of Big Tech too. Like they can scoop this up 32 billion. This would probably be a top 15, top 20 size company in Canada. Thirty two billion dollars and Google's just kind of scooping them up. I mean, it's Big Tech is they're huge. I can see the justification on this.

I mean, they have enough cash flow to just buy up these companies again. Like Biden had mentioned, I mean, they have enough cash flow to just buy up these companies again. Yeah, I was gonna say, yeah. Like Biden had mentioned, I mean, they can't, like, rather than competing, they just consume because they generate so much money. I mean, they can sit there and pay 32 times, you know, expected recurring revenue for this company and probably integrate it and actually, you know, make money from it. So's just it's it's definitely interesting. I mean they have right now just cash on the balance sheet obviously I'm not factoring in the the debt so it's probably net cash is definitely lower than that but let's forget about the debt

for a second they have 96 billion in cash. Yeah like it's so crazy. Just a third of that yeah can just buy it out right for 32 billion. A company growing at, you know, like a hundred percent pace annually. Like, I mean, it's going to be interesting to see if it goes through. That's the thing. Yeah.

Whether it's a ski trip to Whistler, a business trip or a summer getaway in Western Canada, one thing's for sure. When I travel, I want to stay somewhere that feels like home. That's why I always book Airbnbs, and while I'm away, my place could be earning me some extra income as an Airbnb too. It just sits empty while I'm away, so why not put it to work? I've also thought about hiring a co-host from Airbnb's new co-hosting network.

If hosting sounds overwhelming, a co-host makes it easy. A local, vetted co-host can manage everything for you from creating your listing, handling reservations, and even welcoming guests. Turn your home into a way to earn extra income while you're away and it's empty. Find a co-host at airbnb.ca forward slash host. 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 RSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself I've been impressed with Quest Trades customer service. Whenever I call or email every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. 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. Now let's move on to another tech company, big one that reported and didn't have a chance to look at it, so I'll be listening to see if the results were good or not. I think it was Lukewarm at best. Yeah, it was kind of so-so. They've had a lot of so-so over the last while, and that's Adobe. So on a headline basis, they topped estimates.

And what is interesting here is the company has actually beat expectations on top and bottom lines for 8 plus quarters. But since the start of 2024, the stock's down 33% and is trailing the S&P 500 by over 50%. Revenue, $5.7 billion was a quarterly record. Earnings per share, $4.14, grew 11% year over year. The company's digital experience subscription revenue came in at 1.3 billion.

That's up 12% year over year. So this portion of the business is primarily directed towards increasing customer experiences for business. I mean, we can think AB testing, analytics platforms, digital shopping, things like that. Their overall digital media annual recurring revenue came in at 17.6 billion up just shy of 13%. So digital media would be the things like Photoshop,

Premiere Pro, Adobe, probably what most consumers are, you know, used to thinking of Adobe as. They bought back 7 million shares on the quarter. So at today's prices, that would be around $2.8 billion, or nearly a third of its trailing 12 month cash flows. So clearly, the company believes its shares are cheap. Their main AI platform is Adobe Sensei, I believe. And by the looks of it,

it looks like they're dumping a bunch of time, effort and money into attempting to kind of separate themselves from the pack in terms of AI based tools. So they ended the quarter with around 125 million in annual recurring revenue on these platforms and add-ons. And it does expect to double this by the end of the year. And I don't really follow Adobe all that much, but I mean, the main thing I take away from all of this,

all of this is that they're putting in some pretty large Capex into AI initiatives and aren't necessarily seeing the results the market wants. I mean, that $125 million in ARR is kind of a drop in the bucket in terms of the company's total annual recurring revenue. And I mean, even if they manage to double it by year end, it's still kind of a drop in the bucket. And the other thing I was kind of thinking of it, you know, at this level is just competition. Again, I don't follow Adobe's AI products all that much, but it just seems like a lot of them, like it's functionality inside Premiere Pro, generative image

makers are just easily replicated by, you know, even like smaller competition. I mean, like I was looking at some of it, you can, you know, when you're editing videos, you can eliminate stuff you can like, it kind of like creates AI situations for you, like videos and stuff like that. Like I, I just don't really see how, you know, competition in the space wouldn't be rampant and kind of easily replicated in this area. I'm not necessarily in the trenches in terms of, you know, digital media space. All I really do is use Premiere Pro to make our YouTube videos. I didn't even know Adobe had anything to offer AI wise in Premiere Pro.

But to me, it just kind of seems like even a startup or established company could come in along and replicate what Adobe has done with its AI tools. Like not necessarily easier, but not really all that difficult either. And I believe the other thing that's causing some difficulties is from the looks of it, the company is looking to move a bit slower with a freemium type system with its AI platforms. It did this with Adobe PDF with great success.

So this is kind of an attempt to eventually move more users through the funnel, get them to convert to paying members over the long term You know effectively you get More users now on a freemium platform in effect to get more of them to convert to paid rather than you know Slap a paywall up right away This looks to be frustrating investors who want results right now and I think in a way, you know I think that's more the overall market environment and the fact that AI, you know over the last few years has been growth growth growth Like now, you know what? I mean, they're all growing crazy amount

Whereas this is probably looks to be more a long-term approach, but it's kind of the nature of the markets I mean the margins are nice company generates a ton of free cash flow But the growth does seem to be slowing quite a bit here and it's really struggled over the last while Yeah, I was showing earlier that the drawdown and it's pretty significant over the last year it's down like 30% plus so I mean a lot of tech stocks are down quite a bit over the last year so it's not surprising but this will be one fascinating one to to watch as AI gets better as there's more and more competition in the space. Because Adobe was the name, like was the name for photo video editing for years. I think a lot of professional grew up on the platform. I know there's some other

alternatives that have come up over the last five years but as there's new alternatives will be interesting whether they can keep that market share or not. Yeah, I mean, for me, like the only reason I still use Premier Pro is just because I know how to use it. I'm sure there's other platforms that are probably easier, but I just like, I don't have,

I just haven't spent the time to try and learn it, but in terms of generative tools and stuff like that, like those are all over the place. And I mean, you can, you can get those anywhere. And I, I'm not, like I said, I don't follow Adobe all that much. So if you own Adobe, like I don't follow them that much, but just my initial glance at it seems like a lot of their stuff can be pretty easily replicated. I don't know what kind of advantage they have in this regard.

I mean, maybe they're that much higher quality than, than other companies, but I just don't know what kind of advantage they have in this regard. I mean, maybe they're that much higher quality than other companies, but I just don't know. Yeah, so if you're a professional in this space, especially video, image, editing, all that stuff, graphic designer, let us know whether you're seeing a shift or Adobe is still number one here or if you think it's still the most widely used, but you think there could be some changes coming down the line. It's always interesting to hear people that are in the industry to see if it's being used a lot, versus people like us who do use some of their products, but we might not, you know,

we're not graphic designers by trade. I don't think anyone would pay me to design graphics for them. Yeah, like I use Premiere Pro at the absolute most basic functionality. Yeah, me too. Yeah, like I use Premiere Pro at the absolute most basic functionality. Yeah, me too. Yeah, it's... But now that I'm leaving my job, I'm definitely looking at trying some other tools as well

that have AI capabilities. I know there are some out there just to make essentially the business more efficient. Yeah. I mean, that is something it might be a little bit of a learning curve, but hey, if you can improve efficiency over time, definitely worth it. Now we'll completely shift gears here. A company that is always interesting for me to look at.

So, Vale Resorts, ticker MTN, they're listed in the US. If you're probably familiar with them, Vale Resorts primarily owns listed in the US. If you're probably familiar with them, Aveil Resorts primarily owns properties in the US, but it also has a property in Canada, some properties in Europe and Australia. Now this is a tourism play of course on experiences. They had a big boom of course because of the pandemic especially because for example skiing was one of the things that people could do. Now revenue was up 5% to 1.1 billion for the quarter. Lift revenue was up 6.9%. Ski school revenue was up 5%. Dining up 11% at their properties. Ski rental was slightly down and hotel and condo revenues were down across the board

Revenues per available room was also down to point nine five percent So that was interesting that part where hotel and condo revenues was down Operating expenses were only up four percent. So clearly with the revenues being up five percent It's looking good from that standpoint net income was up 12% to 258 million. Of note they mentioned they had a strike at their Park City which resulted in a bad consumer experience and resulted in higher costs as they decide to provide credits to those guests. The reasoning is that they want to make sure the guests come back. So it was logical to provide them some credits because they of course did not get the right

experience or was long lineups and they wanted to make sure. I think that's a good move. It's a short term hit but long term it's definitely a good move on their part to do that. And if you're a guest there, obviously you'll be interested in coming back, especially if you have a credit knowing that a strike is probably just a one-off thing. And they restated their guidance. However, when asked about the softening consumer demand due to the economic uncertainty, they said that it was too hard for them currently to know what the impact would be for the business. But clearly they left the door

open to potentially revising that guidance, but they said right now they're sticking by it. But I wouldn't be surprised personally. This is another kind of business that will definitely be impacted if the economy turns over. The US economy, it's hard to say whether it will be entering in a recession the next year or so. I've seen a lot of economists raising the probabilities of a recession. The US, I think JP Morgan has it now at close to 40% that the US will go into recession before the end of the year. And from what I've seen, it's been raised between 20 and 40%. I think the highest I've seen was 50% in terms of recession odds. But you're seeing raises across the board, which shows that there are increased risk

of a recession in big part because of the policies that are being put forward by Trump, all the cutting that's being done in the US federal government for federal employees. These are people that spend money into the economy. So at some point it will have an impact, especially if I'm not sure how it's structured, but I'm assuming they're giving them severance for a certain amount of months, depending on how long they've been there. So it may be an impact that will be felt a bit more towards the end of the year, but something to keep an eye on, especially as you have companies that are more focused on the economy, like

we were saying earlier with GoEasy, but there's a lot of them that are very dependent on the economy that are not staples that definitely need a better economy so that people go and spend those extra dollars that they have that extra discretionary spend. Yeah. I mean, I think in regard for this, I don't know this company too well, but they look to just be like pretty much a ski resort type company. Yeah, it's a resort. Yeah. Like I would imagine you're going to see, you can see rentals are down.

So I mean, probably like if you get into an environment, you know, tighter economy, I don't believe that people who do ski will not ski anymore. I mean, it kind of seems like an activity that they'll still probably do. But I mean, maybe you don't bring in new people, you know, when people are pinching pennies, maybe they're not gonna try it for the first time.

Whereas before they probably would. And I mean, the hotel and condo revenues, you could make complete sense that, you know, even the people who do ski, maybe they're gonna pinch a few bucks and Instead of renting out, you know a condo they drive home instead, you know, I mean that's yeah or they go less often Right. Yeah, or they may not commit to full a season pass which tends to be more advantageous

Early on allows you to go a lot but say if you're not, you know It's still probably more expensive than just going a couple of times. Like I don't know exactly the deals that you get. I used to ski back in the day. I know if you went, usually it was like, you know, if you went more than 10 days, definitely it was more advantageous to get a season ski pass, especially if you got it early in the summer. I think they give you deals the earlier you buy it because it gives them stable cash flows

and more guaranteed money coming in. So it'll be interesting. It's one I'll definitely try to do a bit more towards the end of the year, just to see how they've trended and whether they adjusted that guidance or not. Yeah, yeah, this is, it's definitely an expensive sport. Like it's not, I know skiing is- It's not cheap. Yeah, it is not cheap. So I mean, it's definitely an expensive sport. Like it's not, I know skiing is-

It's not cheap. Yeah, it is not cheap. So I mean, it's definitely gonna be one that's impacted no doubt. Do we wanna go over Boyd or sorry, Bird? I guess we have time to do it. Yeah, if you do it quickly, we have about five minutes. Yeah, so-

It's not a company that I know well, so go for it. Not one that I know all that well either. I mean, it's one we've never talked about on the podcast, but they're pretty much a small cap construction play here in Canada. And it's gone on quite a tear over the last couple of years, which is kind of what caught my eye. It had gone up like 150 some percent until,

it had a pretty big drawdown in share price over the last three, four months. So the company missed analysts expectations on both the top and bottom line, but it was by pretty much negligible amounts. However, I do think that valuations got pretty rich and back in October, the company had kind of did its investor day.

And I think that kind of, you know, the forward guidance wasn't really all that good. So it's fallen, I think 35, 40% since. It's had pretty big dips, but I mean, on paper, the results look fantastic. I mean, you're looking at revenue up 18% year over year, earnings grew by 49%, operating cash flows are up by 32%. And when we compare 2024 to 2023,

these numbers are even higher. Since 2022, the company is, it has a, I I mean we're only talking about two and a half years But I mean they have a 50% compound annual growth rate on free cash flow And the one thing that was interesting to me as well is unlike a lot of construction companies their balance sheet is very solid So the company only has debt of around 150 million on free cash flow generation of around 80 million has debt of around 150 million on free cash flow generation of around 80 million. Interest coverage ratios are 11.5x and its leverage ratio, which would just be its net debt to its EBITDA, it actually came in at only 0.5x. It's a very solid leverage ratio. I mean, when we look at just right off the top of my head, when we look to a company like BCE, they're leveraged like 3x.

So their debt makes up over three times their EBITDA. And the company's backlog has grown from 2.6 billion in 2022 to 3.7 billion today. So that's a 42% bump. And in terms of pending backlog, it has around another 3 billion in projects. And at this point in time, I think it mentioned about 1.5 billion of those will be moved into the

confirmed backlog numbers but I believe they're waiting most of the growth is gonna come in the second half of the year. And just overall I'm actually kind of surprised by the drawdown I mean I knew the company was expensive when it was in you know the low 30% range but I didn't expect it to head down you know to $20 almost so quickly. I mean, I guess just some of the missed earnings expectations, lower guidance. And I do think they're having a bit of issues in terms of project delays just due to the current economy.

And it seems like an interesting option I'm definitely going to be doing some digging on. I mean, construction companies are pretty tough to get a handle on. They're very cyclical. During drawdowns, they tend to have a lot of issues in terms of delayed projects. I know Acon, which is another construction company, got into a bit of cost overruns with TC Energy, things like that, that actually hit the stock price hard.

So these companies are crazy volatile. Cost runs, legal issues, things like that. But Bird seems to be a company that's doing a lot of things right at this point in time. Yeah, no, it looks Looks like an interesting play of relatively small cap around 1.2 billion market cap here, too So one to keep an eye on if you're looking for an construction play. That's for sure it's one I'm not against investing in construction, but you're I'm like you it can be a bit difficult to to invest in these companies and it's usually a company where

Or a sector where it's hard to invest really long term and just be like, oh, this is a great business I'm gonna hold it for like 15 years It's almost a kind of business again like a bit like a go easy, right? That you have to kind of pick a right moment, not right moment, not pin the bottom or anything, but you look when the company is looking very attractive and then when things get a bit frothy, you usually get out without necessarily pinpointing

the bottom or the top, but that's typically while you'll wanna do for cyclical industries. Yeah, I mean you kind of got to buy the dips and sell the highs really because their things tend to be, you know, very rocky. A bit lumpy. Yeah. But they're definitely doing well now. Mm-hmm.

No, they're doing good. So I think that is it for the episode today. Anything else you wanted to add? Nope. That's it. You're good? Okay. Well, thanks everyone for listening. If you haven't had a chance, give us a review on Apple Podcasts or Spotify.

It does help people find us. And you can follow me at Fiat underscore Iceberg on the Twitter machine or X as it's now called. And then at StockTrades underscore CA. Yep. And yeah, thanks a lot for listening. We really appreciate the feedback, all the comments. The good, the bad, the ugly, the constructive. We really appreciate the feedback and people listening. We wouldn't be able to do it without you. We'll see you next week. The Canadian Investor podcast should not be construed as investment or financial advice.

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