The Canadian Investor - Earnings roundup - Canadian Banks, Facedrive, Peloton, Best Buy, Autodesk and CloudMD

Episode Date: September 2, 2021

In this second episode of the week, we’re doing an earnings roundup and news because it’s earnings season!  We’re talking about recent earnings of Canadian Banks, Peloton, Best Buy, Autodesk and CloudMD. We also discuss the recent news that Facedrive’s CEO and CFO will be leaving the company. Tickers of stocks discussed: BBY, PTON, FD.V, ADSK, DOC.V, BNS.TO, RY.TO, BMO.TO, TD.TO, CM.TO, NA.TO   https://thecanadianinvestorpodcast.com/ Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital 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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on the charts, according to Apple Podcasts and Chartable. So thank you guys so much for listening. And I sent you that screenshot today that showed we're at the top of the charts. How did that make you feel, man? At first, I was confused that we were first. I didn't expect it. But once it's sunk in, same as you, I just confused that we were first. I didn't expect it. But once it's sunk in, same as you, I just wanted to thank our listeners. I know people are really engaged. We really love

it. We tried to get back to you as much as we can. And yeah, we really appreciate all our listeners and the fact that you guys enjoy the podcast and all the feedback we've got. Yes, sir. And you know what? There have been a few times during the history of this podcast, we've made some bold predictions, we've made some bold calls, and we have been very vocal about specifically the TSX venture being home to some total junk and honestly, pump and dump, just things we have no time for and warn investors, especially new Canadian investors that this stuff is out there. This stuff exists. And the regulators seem to be blindfolded to it. So we point out some of that stuff.

And there is some news with our favorite junk company, Phase Drive, to point out here. And Simon pointed something out. There was some news coming out of the executive team. So do you just want to highlight that? Yeah, I'll give a brief highlight what's going on with Phase Drive. So Phase Drive announced last week that its CEO, Sayan Navaratnaman, and CFO, Ferry Lee, were stepping down effective September 1st, 2021 and September 24th,

respectively. The announcement is on the verge of their company releasing their Q2 earnings because the deadline, I believe, is tomorrow, so August 31st. If Q1 is any indication, this will really be disastrous. And as a reminder, this is a company that posted a 4.255 million in revenue for Q1 and expenses just shy of 11 million. So let that sink in. 4 million in revenue, 11 million in loss. Yeah. And it's not surprising, right? We've called out how this is just selling a story. And now the classic pump and dump executives pump super low float on the share count and then get out. So let's roll a clip of us dunking on FaceDrive way back when earlier in this podcast,

several, several months ago. Let's roll that clip and then have some discussion. Suman, I texted you about that FaceDrive company. Did you look into it? I mean, I looked a little bit into it. It's just based on the financial. It's quite something. I've never, I mean, it's just a lot of keywords and kind of reminds me of well-held technology, but even worse, to be honest. Oh, way worse. But I'll let you elaborate on that. Yeah. I mean, well is good at selling some telehealth play when the revenue mix is not

really from telehealth. That's one thing. That's a legitimate business though. They operate a fairly legitimate business. FaceDrive, ticker FD on the Toronto Venture Exchange, just hit $5 billion in market cap. This company does $700,000 in sales. $700,000 in sales is not a lot for any company. It's like a thriving small business, the $700,000 in revenue a year. This thing is worth $5 billion in market cap, is a stock promotion on steroids. The management team, I looked into their past, all have a bit of a sketchy past. They're very smart about how they do this. By the way, we can get in lots of trouble for calling things the F word and it ends with odd. I'm talking about fraud. You can get lots of trouble. This is not investing advice, of course.

Do your own due diligence. This company, in my mind, is a zero. A legitimate zero. Hindenburg Research, the short seller, came out with a report in July of the summer of last year talking about how it's probably a zero. They have a super low float, meaning that the stock's really illiquid and they just pump it. The insiders pump it. It's gone to outrageous valuations. What the business does is they claim they are an environmentally friendly ride-sharing program, like only have electric vehicles. They have two active drivers in the city of Toronto, which is their target market. Two drivers. So if I'm going to take this ride-sharing program,

there's like two of them. They're across the city. Like, no. How So if I'm going to take this ride sharing program and there's like two of them, they're across the city, like no. How on earth are they going to compete with Uber and Lyft? Yeah. I mean, it might work in Ottawa, but Toronto, you need more than two drivers, right? More than two drivers. Anyways, so the main three like verticals I was looking at in Hindenburg research report is electric vehicle ride sharing, which is a business that just really doesn't exist. Food delivery that have 17 active restaurants on the app. 17. Dude, that's like one block. That ain't enough. And they sell their own merch. What a joke, man. This company's a zero. It's worth 5 billion in market cap. Be careful out there. Don't try to chase gains on this thing. Oh my God. I hate that short sellers on this who are

trying to call out something that's not worth what it is. And they're getting their faces ripped off because it just keeps going higher and higher. So be careful out there with that one that's uh calling it now february 6 2021 face drive ticker fd on the venture exchange is a zero okay so yeah that's a great clip to hear i know braden was the first one to point out to me but i've probably been the one who's been checking it on it a bit of more often since. Yeah, that's just an indicator. All the signs were there. And that actually, when we released that, it was when their stock was close to an all-time high. It was north of $5 billion in market cap on the TSX venture. Yeah, exactly. And on top of what I mentioned earlier about the executives departing the

company, Imran Khan, which is about the executives departing the company, Imran Khan, which is another co-founder of the company, issued a notice in late July that he would be selling up to 500,000 shares within a 30-day period. All indications show that he's been selling those shares. I couldn't find exactly where I read this, but it also appears that they're closely watched by the Ontario Securities Commission which makes a lot of sense if you just look at their news and releases and their PR statements which by the way they paid for a lot of those. If you compare them to right now in the past few months to early in 2021 or 2020 they're very few and far between and for additional context in the last six months which is not even

when it reached its peak of $60 a share the stock is down 90% and it's just been going down by 5 to 10% every day it seems there's been short reports on this company and there's also been some scathing Globe and Mail articles I think I'll probably add one to the show notes that was recently posted. It's really a company that used a lot of buzzwords. They had all these different kind of businesses that really did not make a whole lot of sense together. They had an electric vehicle leasing business on top of their ride sharing or in food delivery service. I'm not quite sure why people would lease vehicles from them versus the actual automaker, but that's another discussion.

They had these COVID-19 bracelet that vibrate if you get too close to someone on our work site where they don't allow cell phones. That was called TraceScan. TraceScan should have been called TraceScam because those bracelets were available for Alibaba and then bought in bulk, shipped here, and then FaceDrive managed to sell these bracelets in a big contract to the government of Ontario. in a big contract to the government of Ontario. So, I mean, good for them for fooling our government on that because this is just a complete joke.

I mean, TraceScan may as well be called TraceScam. And it's pretty sad that our government bought a big order of those. Yeah, and it just shows that even if the government buys something or if they're backed by a certain institutional investor, it doesn't mean that it's a good company. They can make mistakes as much as anyone else. And the last thing I would say as an example, they bought this company called EcoCRED, apparently a sustainability platform that offers cyan-backed carbon offset to empower communities, businesses, and individuals for a carbon neutral lifestyle.

It has zero revenue. It was in a press release a few months ago. I'm not sure why they bought that, but I guess it was some good PR, so it was worth the price of admission for them. Yeah, and you know what? This is not us bringing it up so we can say, hey, look, we've been dunking on this company and it's falling apart. It's down over 95%. It's for us to point out that in this environment,

there's a lot of new investors. And people who listen to this podcast, we have experienced investors, some are in the middle, and new investors. And new investors can be tricked into the allure of some of these companies that use these buzzwords and demand huge valuations on the public markets before they're even a legitimate business from my mind. So just out of curiosity, I went to FaceDrive's Twitter and this is their bio. And I hadn't been on this before. And I kid you not, Simon, I was in tears laughing. FaceDrive is a multifaceted, people and planet first, tech ecosystem, offering socially responsible services to local communities. Hashtag ESG, hashtag tech, hashtag innovation.

The hashtags kill me at the end because hashtag ESG. So people who don't know ESG is it's environmental social governance. And it is the term that investors give credit to companies that have good environmental and social governance around their company. So like renewable power companies are ESG friendly because they're good for the environment. FaceDrive is literally trying to just be so cringe with these buzzwords. Hashtag ESG, hashtag tech, hashtag innovation. You can't make this stuff up. It's perfect. It's hilarious. And so the reason for this whole segment that we just wanted to point out is these things happen. And in public markets, you can't assume just because they may

have an order and just because they're on a publicly listed exchange, that it's a half decent business. You have to look at their financial statements. If you looked at their financial statements and you saw that a five and a half billion in market cap company was doing $400,000 in revenue, or maybe I think just $700,000 in revenue, that's not a lot. That is half the price of an average home in Toronto. That is not a lot of revenue for a company demanding that valuation. So the message here is be careful, do your due diligence, and don't react spontaneously to buying securities, especially something that is not proven like this. If you did some due diligence like I did, I downloaded their app to see if I could take one of their ride sharing

programs. There were no drivers in Toronto, which they said is the market that they served. Not a single driver would pick me up and they're competing against Uber, Lyft, taxis. Just no chance this works out, right? So I think we beat this one to death now, Simon. Yeah. Yeah. And the last thing I wanted to just add here is, look, if you happen to invest in a company like that, that you find out at some point that it's not what you thought or you did not do enough due diligence. And look, just make sure you learn from that. I think that's the most important thing.

I've said it before. I've made some mistakes early on and I've not repeated those mistakes. I've learned from them. So if that's the case with you, just, you know, take it on the chin, learn from it. That's the most important thing that you don't repeat the same mistake. 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. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in

South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. That is Airbnb.ca forward slash host.

Well said. Let's switch gears to Canadian banking. Yes, the big Canadian banks out with their earnings. I'll go into detail for a few of them, and then Brayden will give a quicker overview for the rest of them. It's very similar tendencies or story that you'll see from all the banks. So the first one I looked into was BMO. They had their third quarter. It's all their third quarter, I believe, as well. So they're releasing their third quarters. And this is comparing to third quarter of last year. Revenue increased 24% to $7.5 billion. Net income of $2.275 billion, an increase of 85%. Earnings per share $3.41, that's an increase of 89%. Recovery of credit losses, that was $70 million compared with

provisions for credit losses over a billion dollars. And that's actually one of the biggest impacts for all the banks here and their profits is they had put some money aside for bad loans. They reported net efficiency ratio of 56% compared to 57.4%. And return on equity, which is a very important metric specifically for banks of 17.5%, an increase of 9.4% compared to last year. So overall, obviously very good results across the board for BMO. Like I mentioned, one of the biggest things was those provisions for credit losses. Anything on that, Brayden? No, I don't think there's much more to add. As we rifle through these banks, it's really just important to recognize the base effects of last year,

like you have mentioned before. And we've talked about so much on these earnings episodes, which is the environment was quite different back then. But overall, I mean, and I'll talk about this more later, but overall, I mean, earnings and profitability and the amount of cash that the banks are sitting on right now is at a scale that we've just never seen before in a recessionary, in air quotes, environment is quite strange. I'm not going to lie. Yeah, no, exactly. And without going into the whole macro stuff, obviously, there's some different reason with the amount of stimulus and so on that I think even the banks did not predict because obviously they would not have put that much aside as reserves for credit losses. But now we'll move on to BNS, so Bank of Nova Scotia. Again, Q3 this year versus Q3 of last year. Revenues were flat for them compared to last

year. They said that this was mainly due to higher non-interest income but offset by lower net interest income which is not surprising because of lower interest rates. It means that they will tend to have a lower spread between the money that they essentially lend out so the interest that they lent out and the interest that they pay out on deposits. The net income was $2.54 billion, up 95% compared to last year. Earnings per share $1.99, that's diluted, which is almost a double versus last year. And again, a big increase on the return of equity, 15% compared to 8.3% last year. There are wealth management segment and global banking had a strong quarter. As a reminder, for those not aware, Bank of Nova Scotia has a very strong present in both

Latin and Central America. I think we've mentioned that before. You see their banks all over the place. I know I remember pre-COVID seeing their banks when I went to Jamaica, if I remember correctly. Yeah. I had the most success withdrawing funds from Scotiabank when I was in South America. I saw their banks a lot, primarily in Peru. It's the classic, like you're on vacation and your car doesn't work or something, like those travel stories. And I hit like five different local banks and I couldn't get any success. And then I hit a Scotiabank. I was like, I didn't even know they were there. And you walk in there and you're like, well, I'm in a Scotiabank. This is strange. And I got my cash out. So thank you, Scotiabank in South America. Yeah. And the last thing for them, same thing as BMO. So a big part of their profit

increases was because they had lower provision for credit losses. So that's definitely a reoccurring theme that we saw with the big banks. Last one here that I'll go through and then Braden will give us some quick notes on the other banks. So Royal Bank, again, Q3 versus Q3 of last year, revenue was pretty much flat. Year over year, slightly down. Net income was $4.296 billion. That's up 34%. Diluted earnings per share of $2.97, up 35%. Return on equity, 19.6%.

That's up 390 basis point from last year, 3.9% higher than last year. Without repeating the same thing over and over, it was very similar. Again, they had much lower provision for credit losses once more. Yeah, well put. And there's a common theme here we're seeing, right? Earnings per share is way up and revenues are flat. And the reason for that is like we mentioned is those loan loss provisions, they throw them back in. They're like, oh, we kind of overestimated our needs for these loan losses, throw them back in and then they come out as profits on their income statement. When you are looking at the income statement of big banks, there is lots of adjustments that need to be made if you're doing comparables like loan losses. That's why banks are underratedly very confusing.

A lot of new investors, they come out and they want to own the big banks because they're told that they are the blue chips of Canada. I actually do agree with that sentiment. They are as blue chip as it comes. They're rock solid. They grow over time. They compound earnings. They grow the dividend. They buy back stock. That's great stuff, but their financials are very confusing. So just something to consider. TD reported net income up 58%. CIBC reported net income up 48%. And National Bank increased by 39%. National Bank also made an acquisition of Finks or Flinks, whatever that business is called. And they have also done their brokerage, which is zero commissions. I can't help but notice that National Bank

is pushing the pace a little bit here. They've always been the smallest of the big banks. And lately, they've been one of the best performers because they are pushing the envelope a little bit. And I got to give them credit here. National Bank does deserve a look because whatever they're doing, they're looking at their competition across the rest of the banks and thinking, we have to be the opposite of lethargic. We have to move quickly. We have to think like a fast moving agile business. And they've been vocal about it and they're executing on it. So I give a round of applause to National Bank as of recently, especially. Simon, have you noticed they're coming out with, they're just pushing the envelope a little bit. I mean, I don't pay as much attention to the banks, I'll be honest, but definitely the announcement for the removal of commission, that was a big announcement.

And look, it may give them a leg up if their competitors don't follow suit soon enough. They may get people that will simply switch over to them and that could bring them more business in other sectors of their business. So I think there's a lot of probably calculated risk on them on their part. So, yes, they'll receive less income on those fees, but they may get more income for other products that they offer just because someone individual switches to their online broker. Yeah, exactly. And national banks, as I was mentioning that acquisition, they paid $103 million for a majority stake in Flinks, a Montreal-based data aggregation startup. That is very broad. So I'm not going to go too into detail,

but you can look, that means literally nothing, but you can look into that. The company they acquired is called Flinks. All right. And back on the conversation of big banks. So you'll see on their press releases, some banks talk about it more than others, but a very important metric for big banks is called CET tier one ratio or CET one. It compares a bank's capital against its risk weighted assets to determine its ability to withstand financial distress. So what does that mean? The higher the number is, the more conservative their book is. So more safe their book is from a ratio of risk-weighted assets to their capital. Okay. So all the banks have historically high CET1 ratios right now because they've been told

by the feds to be extra conservative. And this is due, the reason this is so high, you're seeing all this cash on their balance sheet, the CET1 ratio is way in excess of what they need to keep it at from a regulatory perspective, is they are still not being able to buy back stock and hike the dividend. So you're seeing historically low dividend payout ratios because the profits are on fire for these businesses, but they can't increase distributions or buyback stock. So I have been, Simon, quite vocal on this podcast that I'm bullish for banks if you're a dividend growth or dividend income investor in the short term, because I expected

over this last week for them to deliver huge dividend hikes. I'm not talking about like 5%, 10% here. I'm talking 25%, 30% hikes. And they could do that financially quite easily. They just have to wait a little longer for the feds to let them do it. So I did believe they would be able to do this by now, but it's a reminder that it's impossible to predict what regulators will do in the future. As for looking at the facts financially, the banks are ready to reward shareholders, in my opinion. Yeah, the only thing I'll add to that for people just trying to wrap their head around

what the CET1 ratio is, basically, it's a ratio making that if there's something significant that happens in the economy, the banks are able to sustain it and not go under. And it's really important when you have large banks or systemically important banks, because if one of them were to fail, it could drag down all of the Canadian economy and even in some banks, part of the worldwide economy. So that's why those ratios are in place. Yeah, and it's good that they're in place. I mean, look at the 2008 financial crisis. The US banks were structured much differently than ours.

And I mean, we don't have to say that old story, but our banks were good. The US, you can't say the same, a couple of major ones went under. So it's good that we're conservative. I feel like that is very a Canadian thing in general to be conservative and extra cautious. 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. Here on the show, we talk about companies with strong two-sided networks make for the best products.

I'm gonna spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host.

All right, let's move on out of banking. A company that I thought would be interesting to pull out because it is such a air quotes COVID stock. But I got to tell you, I'm impressed with this business. Peloton. Now Peloton is the stationary bike company. You order this expensive bike, it comes to your house and then you subscribe to their workout, their spin classes. I like spin classes myself. I have not stepped on a Peloton. I'm too big of a peasant to own a Peloton, but that's okay. Peloton shares are down 10% since releasing their report, but their fitness subscriptions grew 114%. Revenue is up 54% to just under 1 billion in revenue for the quarter now their gross margins in total were 27.1 percent you might be thinking well that doesn't seem very good but the margins on the actual product is only 11 percent which is way lower

than i was expecting for how expensive these bikes are, got to give it to them. They're putting a lot of money into each unit. If their gross margin is only 11%, they're building a high quality product. But here's what's interesting is the subscription margins are close to 70%. And so that makes sense. That's the bread and butter of this business and how it's actually going to cash flow is get the Peloton in their home and then get the users paying for a subscription for the workout classes. This is the future. This is the model that's been laid out now from these e-commerce businesses and Peloton should be able to capture that well. One thing I did want to point out was that since the Q1 of last year, so over two years ago, because they actually

reported Q4, this is the first quarter they had a decrease in workouts done on their platform. And now you might be thinking, that's not great. The first time they actually have a decrease in workouts. But this is the summer months with an indoor cycling product. My hot take is that this is exceptional because it is way, way, it is more than double this time last year. So even in the summer months, they're seeing such strong growth. I got to give it to them, to be honest. Yeah. So there's a couple of things I wanted to add that I think the reason behind that pullback, the first one, I think investors as a whole didn't love the fact that they're reducing the price of their least expensive bikes by 20%. I think it's

probably recognizing that there's some competition out there. I've seen ads of competitors that have similar looking bikes that look really good. And personally, I wouldn't see much of the difference. So that's probably a part that went down. The other part, obviously, like you said, we'll see in terms of the pandemics, the effects, but there's also more competition on connected fitness, but also workouts online. Apple Fitness Plus is one I can think of. Beachbody has a platform online as well. They recently went public with a SPAC. There is definitely some competition out there, so that's probably part of it.

And my quick take is I'll be interested in seeing what happens during the fall and winter. That's really, really be interesting to see those workout numbers because that shows how engaged people are and if people are not engaged enough they may eventually cancel their subscription right it's true it's a very important metric to track is how engaged are users because it is a subscription business so it's not just oh we got the bike in their house. It's great. The lifetime value that they build into cost of acquiring customers and the growth long term does rely on that consistent growth of subscriptions and keeping the churn low. Autodesk, ticker ADSK, did report earnings. Revenue is up 16% and now 98% of revenue is recurring.

Speaking of recurring revenue, there is still very strong growth coming out of that AEC customer segment. That is architecture, engineering, and construction. This is a very important market for them and we're still seeing strong growth out of it, 21% year-over-year growth on the top line of the business. Now, the stock is down about 8%, close to 10% from guidance because they had soft-ish guidance on free cashflow numbers. So I look at this and I think Autodesk investors should be licking their chops for an entry point. I think these are the opportunities that you pounce on, that you wait for. It's not like this stock is cheap, but this is an attractive entry point from my perspective. This is a high

quality, high growth business with a wide moat. So companies like Autodesk don't trade cheaply very often. This is a business I expect to grow the top line at high teens, low twenties for a long time to come. Now you're not going to see it smash 50% growth rates all of a sudden, but it will do, I think, double digits for a long time in my perspective. That is due to its foothold in the market right now. For those who are not familiar with Autodesk, they are the software company behind computer-aided design products like AutoCAD, Revit, and more that engineers and architects are very familiar with. I own this stock. The margins are exceptional. The quality of the business is exceptional. They are doing some acquisitions. You can see long-term growth from this type of company.

And if you are familiar with the AEC, that is architecture, engineering, construction, or even their new segments in manufacturing, they are getting such a strong foothold in this. I really like their strategy of making sure that when you do engineering school, you learn Autodesk products. It can take decades to master something like AutoCAD, and that makes it extremely sticky for professionals that use this service. Yeah, nothing to add on that one. So I'll move on to CloudMD. Q2 results are out compared to Q2 of 2020. As a refresher, CloudMD offers telemedicine, medical clinics, rehab clinics, pharmacies, and digital services focused on electronic medical records, EMR. The company continued making acquisition, which is a clear strategy for them

and will continue according to their leadership going forward. They closed acquisition during Q2 of Asperia, RxI Pharmacy, Vision Pros, and Oncidium, amongst other names. They had revenues increase 461% to $15.66 million, which is pretty crazy. But again, you have the base effects, but also the acquisition effects here because they do a lot every quarter. Net loss of $5.99 million, so all close to $6 million versus a net loss of $2.77 million last year. And they were still free cash flow negative, close to $6 million versus a net loss of $2.77 million last year. And they were still free cash flow negative, close to $3 million. They have a decent amount of cash on the balance sheet, though, for the size of this business. They didn't provide any specific guidance that I could see in their MD&A. I am not surprised given the uncertainty and the pull forward growth they've had due to COVID-19.

in the uncertainty and the pull forward growth they've had to do to COVID-19. So that's just a quick overview of CloudMD because I know we've had a lot of questions on this stock before. Yeah, we have had a lot of questions on this one. It is a roll-up strategy and they're making acquisitions. They're doing what they're setting out to do. The business is exploding in terms of the top line. It is still so small. So from a multiple perspective, you are paying up quite a bit for the sales numbers and it doesn't actually generate free cashflow yet. I have been quite vocal on this. When it comes to roll-ups in Canada, in the medical space, medical services, whether it's software or in-person medical services, it's very difficult to scale outside of these borders. And that is a concern for me. When we're talking about roll-ups of businesses that are in the technology space, the upside built into their valuation

multiples is scale. And when you can't really scale effectively outside of the country that you're building in, this is a huge problem. And the reason why it's so hard to scale in medical is because every country's medical policies, how they treat medical in general, varies so much. I mean, look at Canada and the US and how medical is covered. It's completely different between the two nations. So I do think that that's a lot of friction for these technology businesses to scale outside of Canada and just something to be considering when you are paying such a high multiple for these types of businesses. Lastly, let's talk about Best Buy. A good old brick and mortar business, they reported some great results. Sales were 11.8 billion, which was up 20%. Earnings per share increased 76%.

So with Q2 sales so strong, I do expect an absolutely monster rest of the year for this company because Q4, if you look at their statements and you go on stratosphereinvesting.com, you go on Best Buy, ticker BBY on the company search, and you type in their income statement, you go quarterly, you see that there are huge spikes in Q4 because it is holiday season. People are buying electronics and a lot of them during holiday season, and they're reporting some Q2 numbers right now that are really solid. So I'm expecting a big year for them. really solid. So I'm expecting a big year for them. Now, an interesting tailwind to discuss is that they're winning a lot of work from home office equipment that they wouldn't ever normally get when people are working in the office. So typically a business would get an enterprise

purchase for office electronics or from like a distributor that works business to business. But now there's this decentralized process happening. They're making employees get their own stuff either on their own dime or with an employee allowance to purchase new equipment, new monitors, new laptops on the company's dime. But this is a decentralized purchasing from big box retailers like Best Buy. And when it comes to brick and mortar retailers, big box retailers, throughout all of this, the ones that were in a good position that had an omni-channel experience, the ones that

were well-capitalized, the big just got bigger. well capitalized. The big just got bigger. Best Buy is a classic example of that. The Walmarts and the Costco as well, prime examples of this. Best Buy is a really good operator. I'm quite intrigued on the business right now. The brand is strong and there's a lot of positive developments happening for them with this decentralized purchasing. positive developments happening for them with this decentralized purchasing? Yeah, the one thing that will be interesting in following is they did mention that they did not see much disruption on the chip front. So the computer chip front, for example, or chips and everything, basically. And some of them are competitors.

I've seen that. So it'll be interesting if that affects the results going forward this year and early next year. It's been good on that front for Best Buy so far, but I wouldn't necessarily bet on that being the case with what we've seen across the board. So that's probably the one thing I'd keep an eye on if I'd be interested or if I own Best Buy shares. Yeah, good to point out because the chip shortage is well known at this point. It's affecting pretty much every supply chain and a company that sells electronics. They're prime for disruption in terms of the supply chain. All right, guys, thank you so much for listening.

We really could not have gotten to the top of the charts without you guys. Appreciate you guys so much. As I mentioned before, we do have a new website, which is linked in the show notes. You can find all the information about the podcast. I've mentioned, I really like the search function in the top right. It is excellent to find different topics that we've discussed because at this point, we've discussed a lot of topics on this podcast for Canadian investors. This is really just the beginning. Simon and I are picking it up, doing the two episodes, trying to provide as much content for you guys as you can. So share it with a friend, check out the website. We appreciate you.

Thank you so much. Peace. The Canadian investor is not to be taken as investment advice. Braden or Simone may own securities mentioned on this podcast. Always make sure to do your own research and due diligence before making investment decisions.