The Canadian Investor - Is Disney the New King of Streaming? - Earnings Roundup

Episode Date: August 18, 2022

Has Disney become the king of the streaming wars?  Yes and no.  There is more to the story and we discuss why. In addition, we break down the latest down news and various earnings reports. Tickers of stocks discussed: BAM-A.TO, DIS, NVEI.TO, EQB.TO, HUT.TO, CGX.TO, TTD In today’s release, we cover the following news and earnings: Elon Musk sells more Tesla Shares US July Inflation numbers Disney earnings Nuvei earnings EQ Bank earnings Hut 8 earnings The Trade Desk Earnings Cineplex earnings Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital 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  Sign up to Stratosphere for free 🚀 our platform for self-directed stock investing research. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.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

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. 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. The Canadian Investor Podcast. Today is August 15th, 2022. My name is Brayden Dennis. As always, joined by the legendary Simon Bélanger. Simon, at any moment, you may have to sprint off this call yeah yeah and and you know that full

well I know that yeah it's definitely a risk so we're uh recording this one a bit earlier than we usually do just uh have some extra episodes ready to go but this one will be up to date it'll be current stuff so you guys will you know we're not talking about things that happened four weeks ago no it is all current stuff. But at any moment, Simone's getting the call off to the hospital with his wife. Today, we are talking about the US CPI number. Also, I don't know if you saw this, the Bank of Canada did a long Twitter thread today. Oh, I didn't see that.

About explaining inflation. Oh, shoot. I should have sent it to you. I can send you the link here when you're talking, but it't see that. About explaining inflation. Oh, shoot. I should have said that to you. I can send you the link here when you're talking, but it was quite funny. I, of course, trolled them and wrote, which in turn wrote this. But yeah, then we're going to talk about Brookfield, Disney, Canadian earnings. You got Cineplex on the end here too? Yeah, I thought it'd be a good one.

I don't think we've talked about Cineplex in a while. Yeah, I thought it'd be a good one we've talked about cineplex in a while i thought it'd be a good one to look at especially it's one of the names that was the most affected by lockdowns so just see how they're doing yeah spoiler alert they're doing better than last year but you'll have to wait and listen to the end to see how they're doing compared to 2019 oh goodness me okay all right kick it off here with CPI for us. Yeah. So the US released its CPI figures for July last week. So it was 8.5% year over year. And of course, if there's some new listeners, CPI is just an official government metric called the Consumer Price Index that measures inflation. Now, if you think that's still high that's because it is the market though loved

it and it's been mostly up i think pretty much every single day since then since they released it the market was really expecting higher cpi than the one that was released well first of course it was lower than the 9.1 experience in j. So there are some good news in this number. It was flat on the sequential basis. So meaning month over month compared to the previous increase in June. That's compared to a 1.3% increase from May to June. So it's kind of nice to see it flat on a month to month basis. nice to see it flat on a month-to-month basis and although gas was up 44% year-over-year it was actually down 7.7% on a sequential basis so we're really seeing some good news when especially it

comes on the sequential basis here and the market is seeing this as a potential sign that inflation may have peaked in the U.S. Now there's a lot of other things the price of some commodities are also going down aside from oil here I think personally it's a little bit too early to celebrate let's see you know let's give it probably till the end of the year to celebrate whether we've reached peaked inflation or not because there's a couple of components definitely some red flags still on the release food was up 10.9 percent and 1.1 percent on a sequential basis so still very high and again this is a necessity so it does affect everyone the second one here shelter which was up 5.7 percent it might sound reasonable but cpi captures what households are paying right now

for shelter. So because of the tight housing and rental markets, there is a strong case to be made here that this metric will increase in the upcoming months, especially when you have renters, rents are coming due, landlords are taking advantage of that to increase the rent. And in the U.S., depending on the state, there's not the same type of high limitations that we have in most provinces in Canada. So like I said, I think there's definitely some good, but I think it's also very early to celebrate that inflation is coming down. We just need to see what happens in the next few months. But of course, I think it's just a reinforcement that markets will be affected a lot in the short term by this kind of macro stuff. But long term, it shouldn't matter too much. So I think it's really important to remember that and not get to one way or another positive or pessimistic,

depending on just one month of figures. It's so funny. It's like, oh, it's really high, but it's lower than last month, right? The market's just looking for one positive news thing on this topic. And so I'm pretty sure the market had a huge huge day when this came out i forget what it was like every everything was as soon as the release came out you can see it's funny because oftentimes the fed will release the new interest rates or you have these measures and especially i think the fed interest rates usually happens around two and you can see a clear demarcation when the news comes out.

Yeah, yeah. Oh, that's too good. All right, let's move on to some earnings. Canadian Darling Brookfield Asset Management reported their second quarter. And it was a good one, especially for the asset management side of the business. And it was a good one, especially for the asset management side of the business. Record inflows sitting on $111 billion in cash, which is the largest cash pile they've ever ended a quarter with. They did generate $1.4 billion in funds from operations, but that was actually down about $200 million from this time last year. Now, here's a quote from the CFO. We remain on track to complete the distribution to shareholders and listing of a 25% interest

in our asset management business by year end. So they've hinted at this and they now have confirmed, year end. So they've hinted at this and they now have confirmed, yes, this is happening full steam ahead, right? Like there's no reason for us not to do this and we're going to be pursuing this. Fee bearing capital was up to 392 billion, which contributed a 21% increase in fee-related earnings. So getting close to about $400 billion in capital that they manage for their investors that they collect fees on. So fee-bearing capital just means money that they're collecting and expense ratio on year after year. And it's a high margin recurring revenue. I always say that the fee bearing capital is like closer to SaaS than it is like another type of business, right? Because it has all those really great characteristics. I have a good acronym. So ASS, asset as a service. I think we're onto something there. And you know what? When you find a good acronym, you got to run with it. So our next business vet, oh God, here we go. But yes, I like that.

Asset management as a service. They closed the acquisition of American National for 5.1 billion. They closed the acquisition of American National for $5.1 billion. That's the insurance company, right? I think over the past 12 to 18 months, they've really spun, like they've had more focus on insurance as a business. They're the Brookfield Reinsurance Partners thing. $750 million in asset under management is today's number on the bottom of their statements. Their fleet of assets are highly cash generative, inflation resistant, and they have inflation linked like price ladders linked in them. So all is well for Flattened Team on that front. Now, in the short term, the most exciting line item here is the asset management spinoff. It's the the SPF spinoff. And we're getting so many questions on like what I've been getting lots

of questions in my in my DMs and stuff like, what are you going to do with the shares? Because, you know, I'm going to get the spinoff shares. And I haven't decided quite yet, but as you know, I prefer to own the mothership and then just get exposure to everything else. But you know how much I love the asset management business. So part of me wants to own pure play of that, but it's only 25%. So the mothership will still own 75% of the asset management business. So first feeling I get is selling it and move and reinvesting that money back into Brookfield, the corporation, because I believe, I haven't heard, listened to the call, but I believe the plan is to rename the mothership as Brookfield Corp and have the asset management business be Brookfield Asset Management.

And so, you know, it's recording this on a Monday of a beautiful summer weekend in Northern Ontario. So I haven't listened to the call yet, but I believe that I will hold the corporation, which holds controlling interest in all the different names. I'm still benefiting from that one-time spinoff value accretion that they're going to have from spinning off the asset management business, because it's going to give investors some look through, better look through on what that business is actually generating, which should unlock value. And as well, the pure play asset managers that are publicly listed are trading at higher multiples. So that'll also unlock some value there. So that's basically why they're doing it. Anytime they see an opportunity to

one time or long term unlock value for shareholders, they don't hesitate whatsoever. Yeah, it's a good question. I haven't really thought about it. I mean, I like the way you're thinking, but I personally may end up selling my BAM shares, the corp shares to buy just the asset management, just because I own so much of BIP and BEP. And that would give me the three exposures I like the most. I'm not a big fan of their property business that they rolled up. So that's kind of the one part where I'm like, meh, I'm not too sure about. I'm sure they usually do smart moves and it may be worthwhile in the long run. But that's kind of the first way I'm potentially leaning is just owning the three that I really like because there are other parts

of the business as well, right? In Brookfield Asset Management or the C-Corp, if they do end up changing their name. Right. Yes. No, I agree with you. I think that the infrastructure partners, the real estate business and the asset manager is definitely the jewel of the business. But that already makes up so much of the market cap that I'm like, whatever, right? It's one of those fundamental questions like, do you want to own the 10 companies in this ETF or own the ETF? That's right. It's a very similar type of thing. Honestly, I don't think whichever approach you take here, you can really go wrong. I agree. 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 questtrade.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.

Now, moving on for some of our favorite news item, Elon Musk is back. A celebrity. Yeah, exactly. Elon is back in the news. And the reason why he was back in the news was because he sold 7.92 million shares of Tesla last week for proceeds of around $7 billion. Just a bit shy than that. About $6.97 billion approximately. Of course he did $6.9 billion in proceeds. I rounded up a little bit.

What a greasy alien he is. And it was sold between August 5th and 9th. Now Musk had previously said that he had no further plans to sell tesla stock after he sold 8.4 billion worth in april well surprise surprise elon saying one thing then changing his mind afterwards is nothing new we've seen this script play out before and elon said that he sold the shares more because of the ongoing legal battle for the purchase of Twitter he was selling in case he's forced to buy Twitter and some equity partners in the purchase don't come through he doesn't want to have to do that as an emergency sale of the stock now personally

I find that a bit funny because in terms of explanation, because wouldn't there have been some risk of an equity partner not coming through even before the legal battle? I find that a bit eyebrow raising. I'll just say that as the reason why he sold some more. I mean, it might be the reason, but why wouldn't you have planned for that even before the legal battle is my question and i'm pretty sure i saw him reply to another thing that was like are you buying tesla stock and he's like yes like he's like a net seller and he's just like yes like to this random tweet that someone added him like he's like yes i am like you know like it's just there's just no accountability for this guy at this point i'm surprised that he would even have why would you have notifications on if you're him

or he just goes through the tweets and just sees one random yeah yeah yeah he just gets bored and that's what he does oh boy of course it was 6.9 billion. He probably tried to do it at 4.20 PM. And they're like, sir, the market is going to be closed for 20 minutes at that point. He's like, oh, shoot. Like, that's probably what happened. All right, let's talk about Disney. I wanted to highlight Disney because I just watched a fascinating look at Walt Disney's life last week.

You know, I do random, you know, just nerd stuff, right? Let's listen to this audio book on Walt Disney. And from the early days to like the success in animation, to the ambition, to nerdy quiet guy becomes massive entrepreneur, and then to the ambition and imagine to build Disney World, which was like everyone in his life told him he was an absolute maniac for pursuing that. His risk-taking was always like he was always working on distractions. He'd build this elaborate train thing in this warehouse just because he had a real passion for trains. You'd think like, oh, what a waste of money. What a waste of the founder and CEO's time. That ended up becoming

the first version of Disney World. All these random distractions he turned into important business ventures. And it got me thinking, reading, obviously this being timely because I was just listening to this thing, and then reading their earnings report today for the podcast, because I was like, oh, I'll cover Disney. And it made me think of the Disney Plus thing. And I don't give Disney enough credit. Not only I think that maybe I will in the future, just given like hearing the story of Walt Disney and how he has like spun up all these new businesses inside of the Disney Corporation, I haven't given them enough credit for their ability to spin up new ideas. And my goodness, is Disney Plus a million times further

than I would have expected at this time. Never in a zillion years would I have would have guessed that achieve the scale and ramp up to where they are today as quickly as they did. When you look at revenue and operating income, revenue is up 21% year over year. Operating income was up 50%. They added almost 15 million subs to Disney+, bringing it to 221 million subs, which actually surpassed Netflix. This is very shocking to me. If you think about that, just really? How? It's very close. Netflix has 220.67 million subscribers. Disney Plus has 221. It is a rounding error between these two companies in terms of total subscribers. So call it a dead even tie for subscribers. But given to where Disney has spun this up,

like seemingly overnight, it is quite impressive. On that same note for Disney+, keep in mind, while as impressive as it is, I don't want to take away from that, but the average subscriber only pays $4.35 USD per month, and Netflix is $11.96. Disney Plus discloses its average revenue per sub in each region. It's actually close to around $6.25 in Canada and the US. But globally, it's $4.35. And globally for Netflix, they are generating almost triple per average subscriber in revenue. So it's not equal. It's not apples to apples. They're not the same.

But that's not to take away from what Disney Plus has spun up here. Looking more at the results here on the segments, the media and entertainment distribution business had 11% increase on revenues. And then the parks experiences and products, this has been the one that really suffered, of course, during the lockdowns and pandemic and stuff being closed. And so that is up 70%. And so that's kind of fairly in line with what we've seen from every other company reporting their second quarter for travel and leisure vacations and in-person stuff. We've seen like a flat double across the board and 70% for Disney

Parks was to be expected. So it's nice to see that business come alive again too. Yeah, I would suspect that Parks is probably like three quarters, 80% of what it was pre-pandemic. That's what I've been kind of noticing. It's not quite back for most things. It's around that 75, 80%, but it looks awesome when you just look compare it to last year because things were still quite depressed for the disney plus i mean the one thing disney it was part of their strategy to price it fairly low so they would get those subscribers so i anticipate and i think they may have announced already some U.S. increases for their subscriptions. I anticipate that's coming.

And, you know, they're doing something right. And honestly, it's not overall surprising. I think the pace at which they achieve it is very surprising. But when you factor in the pandemic, it makes a bit more sense. And look, Disney has the intellectual property. That's what it is, is right a lot of things that we've seen on netflix and netflix has really struggled with that with some really popular shows like a friends for example that was available on netflix then it's no longer there

because the content owner decided to pull it and put it on their own platform and you'll see a lot less of that with disney because they own the content yeah i wanted to add something here because based on what you're saying now things are back at like 80 ish i got an anonymous message from a well it's not anonymous but i'm going to keep him anonymous, from a pilot of Air Canada. I'm not going to share this with his identity here on the show. He gave us this little info, and he said, the reason AC is still basically operating at 80% is not a demand issue. you. It's the fact that there are three major flights of Shanghai, Beijing, and Hong Kong running over three times a day on a wide body aircraft is just not happening. And so that is a huge amount of volume that Air Canada used to serve in China. It's nice to have some of that

info, right? Because it's not something you're going to see on the surface it's something you got to actually know about the business and so that was a thank you for sharing that guy but uh you know that that makes a lot of sense to me yeah i've taken the flight from hong kong straight to toronto no stop i've taken that flight before and no stop stop didn't stop in vancouver nope straight they had back about 10 years ago, a bit more than that when I came back from Taiwan. So I flew from Taiwan to Hong Kong and then Hong Kong straight to Toronto. And lucky for me, there was, we were on the window side. So the three seats was me and the lady and someone didn't show up for their seats. So we basically used a two edged seat and then had the middle for extra leg room. So that's pretty good. Nice. I did that flight from Hong Kong to Toronto, but we stopped in Vancouver. And then it was like one of those things where it's like Hong Kong Airlines did the leg to Vancouver and then WestJet did the next leg. We show up on that flight and somehow my cheap ass is not paying for first class flights. And all of a sudden, we're just placed one, one and one, two on the ticket. I'm like,

what? How do we have these seats? We sit down, it's like absolute royalty. Here you go. And I'm like, we did not pay for this like it's got that's probably like a four thousand dollar upgrade oh yeah those tickets like those business class tickets or first class when you go overseas they are not overseas it was incredible but i don't know how we lucked out on that so fun story from hong kong to toronto, now we'll move on to another Canadian company here. So the dual listed Noive reported its Q2 2022 earnings last week. And after they reported the stock was really down, I can't remember the exact percentage, but I think it must have been around like 15-20% last week. The total volume for payments increased 38% to $30 billion. Revenues increased 19% to $211 million.

Gross margins were up 150 basis point to 83%. However, when you go down the line there and you start looking at the cost of revenue, which includes obviously their selling general and administrative administrative expenses those were up 52 percent net income for the period was down 10 to 35 million free cash flow was up 11 for the first six months of the year versus last year i had a look and they had some good information in their release they mentioned that they were negatively impacted by the strong US dollar during the quarter because they report mostly in USD. Again, something we'll be hearing a lot and we've been hearing a lot from companies that report in US but get substantial amounts of their revenues

from other currencies. The US dollar has been strong compared to other currencies and we're seeing that quite a bit. I think Melly mentioned that when we talked last week about them. Now they also revised their outlook for the rest of the year downwards due to those currency fluctuations. But also lower volume in digital assets and cryptocurrencies. They revised their revenue guidance 13% lower than their previous ones at the beginning of the year. I used the mid-range here of both guidances to calculate it, so it's still a bracket. But just to give you an idea, it was not great.

And I know some of our listeners own this stock, so if you're wondering why it was down on the earnings release, I would say this would be the main reason. The other reason is probably that their expenses really increase year over year, especially those SG&A expenses. 52% on SG&A with volume up 38%. So many of these fast-growing, I'm going to call them startups because they're like, you know, billion dollar public companies, but it is fascinating to see them handle this kind of like increased expense line item, revenue slowing down a bit on the growth, still growing, like still growing quite fast. But in what world you're going the wrong way, right? Like you're like the path to profitability is like, okay, like keep up this operating leverage. Yeah. Like this is great. At some point you reach operating leverage

and we have seen it just continue to diverge in terms of profitability, like expenses just keep creeping up faster than revenues growing. And it's like, what's got to give, man? Like it still seems like there's so much of this. And then you're like, ah, the share count. There it is. Found it. Got it. Like there it is. It's the share count. Yeah, no, exactly. I mean, the share count, something to really keep an eye on, especially for those fast growing companies. And it's something I'll touch as well on one of the other earnings coming up after the next one that you'll talk about here, EQ Bank.

EQ Bank reported, you know, the stock was down like 6% on this news. And then I watched, I looked at it, it was like, oh, just because it was slightly lower than some expectations. But the actual report I thought was pretty great. And if you are a dividend growth investor, oh my God, the growth on the dividend is absurd. They grew at 7% quarter over quarter, which they continue to do. They're doing the quarter over quarter hikes. This represents a 68% growth in the dividend from just last year, which is bonkers. They were guiding for, we're committed to 25% dividend growth year over year for the next five years, I think what they announced.

And then right after that announcement, banks weren't allowed to hike dividends. How long did that last? A year and a half basically? Maybe longer? No, I think it was probably a year, year and a half. I don't think it was. Yeah, I think it started maybe right around March, April and probably around like end of spring of last year if I remember correctly. I don't think it was. Yeah, I think it started maybe right around March, April and probably around like end of spring of last year, if I remember correctly. I feel like it was after Q2. I think it was a little longer. Yeah, anyways, it doesn't matter. So they're catching up. This is a long roundabout way of saying like they're catching up on that div growth. Adjusted net interest income was up 18%. They added 58,000 customers year over year. Bank deposits at EQ Bank was up 16%. So that EQ Bank deposits, the number that I think

is really important for a variety of reasons, obviously. Yeah, there's equitable group, and then there's equitable bank, and there's all this other segments to it. But EQ Banks, like they're really like kind of the moonshot and driving so much of the growth at this company lately. And duh, they're sponsors of the show. So, I mean, Simone, like that's got to account for like an absurd amount of growth if you think about it. Like if you just think about our reach, right? Like, wow. They almost have 46 billion in assets under management. Revenues on the top line only grew about 3.4%. So nothing super shocking, nothing amazing there, but record profitability, 15.6% adjusted return on equity, which is really good for this bank. 15.6% ROEs is wonderful. I mentioned the dividend growth.

Dude, their IR page, you look at the quarterly results for a company, it's like a bunch of bullet points and you're like, yes, give me the goods. Yes, yes, okay, yep, I need this number. EQ Bank has like 400 bullet points, like legit, like 100 bullet points, like legit, like 100 bullet points of just every single from the like CET1 ratio, ROE, like non-adjusted ROE, like it is so many numbers. IR at EGU Bank,

simplify this for me, man. Like I can't look at 450 numbers. It's ridiculous, especially because banks are confusing enough already. Yeah, JP Morgan is always a bit like that too. They have like these tables with all these different ratios kind of lined up in the earnings release. Like you just said, banks can get pretty complex. I always find it a bit mind-numbing to Rindo's to say the least. Yeah, yeah. It's like this is the most boring earnings release of all time. No, but EQ Bank, I mean, it's EQB, Equitable Groups, the actual company. It's very impressive story out of Canada here. Yeah. Some exciting product stuff coming too.

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. Now moving on to the next name on the list, another Canadian listed. I believe this one is dual listed if I remember correctly. So, Ut8 Mining Corporation. Don't be fooled by the name for those who are not familiar. It's not a traditional mining company. It is a Bitcoin mining company.

Now, revenues increased 31% to $44 million. The company mined 946 Bitcoin during the quarter, an increase of 71%. The increase was primarily due to an increase in hash rate, also known for those not familiar with the term as computing power, to solve these problems that are very intensive. Those came from new mining rigs that they received during the quarter. The cost of revenue exceeded their revenues, which is not surprising since the price of Bitcoin last year was much higher than this year's during the same reporting period. They had a net loss of $88 million, which was 20 times greater than last year. They were free cash flow negative to the tune of $7 million which was 280 percent more than last year now this is more a result of having more computing power than anything else because they have higher expenses

that's because of ad hate strategy they will always be free cash flow negative even if the price of bitcoin shoots way up that's because their expenses are in dollars and they keep Bitcoin on their balance sheet and sell very few of them. So don't be surprised if you see that. If you wanted a deeper dive, you can go back to one of our episodes last October. October and November, I think we released it

where I go into the business and a bit more how it works. So those of you interested, you can go back to that episode. Now, for that reason, you should always look at their assets when evaluating their financial results. For most companies, I think when there's earnings release, I think you're probably like that too, Braden. You know, I'll be familiar with their assets already. So I'll usually just have a quick look at it just to make sure nothing like crazy has changed.

Their balance sheet is their income statement. Pretty much. Yeah, that's a great way. Like kind of. It should be one of the first things you looked at. So obviously assets, it wasn't great for the quarter here. Cash was down 57% to 60 million compared to last year. 57% to $60 million compared to last year. And the value of their digital assets on their balance sheet, mostly Bitcoin, of course, was down 42% to $188 million. Now, the good news is the company

has all its Bitcoin in custody and none of them in outstanding lending agreement like we've seen some companies go bankrupt or be in real difficulty in the past couple months. Now a couple things I wanted to touch on quickly. First if you're a shareholder you're most likely going to get some dilution coming in the upcoming quarters. That's because if you're thinking about the cash I just mentioned down 57 percent. So they will need to get some cash one way or another. And in the past, their strategy has been to issue shares because they've been very reluctant to sell Bitcoin. Not sure what they will do this time around because their share price is much, much lower. So it would dilute quite a bit more. But clearly not a great quarter here.

But if you own Hut8 or are interested in investing in them, you have to be aware that this company will go as far as the price of Bitcoin will go. I'm trying to like while you're saying this, it's not a name like I follow particularly well. But whenever you talk about it, my mind's always like racing about the unit economics and like how they fund it. And it's like, it's kind of fascinating. And like an accounting way, it's kind of fascinating, right? like it's kind of fascinating and like an accounting way it's kind of fascinating right and part of me is like because of hash rates they mine 71 percent more bitcoin this quarter than they did the previous quarter and those hash rates will go up with the price going down they act inversely proportional right because of the unit economics of mining Bitcoin? Not necessarily. So I actually, I,

my predisposition was thinking the same way as you. I actually looked at the mining difficulty and it's actually been steadily going up. Oh, it has. Yeah, it has. So last year we saw a big drop because China, the move away from China, that was one of the big reasons. It doesn't go in firstly proportional to the price like that's what i would have thought in theory i guess but the reason is the computers are getting better and better and i think it's just over time the technology just kind of keeps up with it i would assume that's the reason why yeah okay well scratch the thought i was i had the same idea i actually had to look at it because i had the same reasoning. I'm like,

oh, for sure. They actually saw- Because 71 is a lot, right? That's a big jump. But it was basically they had deliveries of new machines, a lot of them. That's why. And they were more efficient. Yeah. Okay. So yes, I'm looking at this and I'm going, well, they should be quite resilient to the price because they don't sell it. It's not a big deal until you realize that it just moves the price of the actual stock moves with the price of Bitcoin. And that is how they fund the business. The price of the stock really, really matters because it is how they actually

finance the business through dilution. If the stock is trading way lower and they need to raise the same amount of money, you do the math, you have severe dilution as you mentioned. It's like a bit of a catch-22 there on the economics of how they actually finance this thing. Yeah, exactly. Anyone interested, listen to their earnings call. Their CEO, So, it's like a bit of a catch-22 there on the economics of how they actually finance this thing. Yeah, exactly. And anyone interested, listen to their earnings call. Their CEO, she's very impressive. She knows what she's doing.

So, very worthwhile listening to. Jamie Leverton, right? Yeah, that's right. Yeah. Okay, cool. All right. Let's talk about the trade desk. Speaking of fascinating CEOs, Jeff Green is a freaking wizard. The founder of the business, you know, I love founder-led public companies and the trade desk is an option

there. Okay. So in software, so we're talking about the trade desk, ticker TTD. So in software, you have this thing called the rule of 40. Okay. It's basically you want your revenue growth plus EBITDA margin to be above 40 or at least close. Right. And so a perfect example, like let's do an example here. Okay. 22% revenue growth. I have some cool company. I achieved 22% revenue growth and 24% EBITDA margins. I would have a rule of 40 of 46. So 46 is good. This passes the rule of 40 test. Now, the trade desk is a unique animal. You have a fast growing technology business that has been run profitably since 2013. It's been profitable its entire time as a public company and has always generated free cashflow. Revenue for the trade desk

in this recent quarter grew at 35% with a 37% EBITDA margin, which is quite fantastic profitability. This gives you 72. Okay.. That is a bit of an outlier. You don't usually have that level of growth and that level of profitability. It's just not that common, really. It's really not. This company has been profitable since 2013, which I said. Now, this is a small position for me. It's one of my smallest positions I own of any individual securities. But it became a little bit larger last week when the stock jumped 36% in one day when these results came out. Customer attention, again, exceeded 95%.

Jeff Green is an absolute wizard. Highly recommend just listening to him. He even does like YouTube videos. They have this cool explainer series on YouTube, explain in human terms or something, which is basically explaining the complex technology of their ad business and explaining it to me like I'm a five-year-old. And it's great if you're not used to understanding like how the auction works for like live bidding for ad space on the internet. And I mean, who really is familiar with that stuff? So thank you for making those videos, Jeff. They are building a unique competitive advantage in connected TV.

This has been a gigantic growth channel for them. Here's a quote from Jeff. First, there is a secular tailwind that continues to propel us forward, and that's the worldwide shift to advertising-fueled connected television. I don't know that we've ever experienced a secular tailwind like this before. Connected TV is moving faster and evolving faster than anyone predicted, and if we continue to execute, I believe we will benefit as much as any company in the world from this tailwind. So, I mean, look at how much connected TV has evolved in the past five years.

Look how much it evolved during the pandemic. And now look how it's evolving with these streaming platforms pivoting to a ad-supported model as well. I watched just in preparation for this, I didn't expect to stumble upon it, but I saw a video in an interview with Jeff Green, and this video was done in 2020. And he said, I know that there are like subscriber supported video TV content out there today, like the Netflix's of the world. He goes, historically, television has been 95% or more supported by ads. The whole business model is a media advertising business.

You're watching the NFL game and then all of a sudden there's six commercials roll through. He said, I predict that it will be more than 95% moving forward, even despite these services. You look, what's happening now, they're all moving ad supported and i just like seeing those little tidbits of like okay this guy knows what he's talking about and he's so confident to say that like i don't believe what they're doing is sustainable i mean he was right pretty much right like he's right i think he's a bit ambitious for the 95 because if i had to pick for a lot of the services i have like i'll as long as it's reasonable, I'll pay up for no ads. That's just the way I'm in. And I think you're going to get those too.

But I think there's a lot of people, especially, we talk about CPI at the beginning, costs are rising. If you can keep your subscription and reduce the cost by half, say, why not do it if you're looking to save money like if you're willing to go take a little pee break while they're doing the ads might as well yeah yeah i hear what you're saying i mean you're in a higher snack bracket than you know the global population for sure look at youtube right like how many people just put up with the ads versus paying yeah for youtube premium you just you just soak the ads versus paying? I say that and I put up for the ads with YouTube. Yeah, for YouTube premium, you just soak the ads.

Like you don't pay the 10 bucks or whatever it is. You know where I'm coming from? Like there's levels to this stuff. Yeah. We'll see what happens. It's still TBD, but obviously a great quarter for the company. Smashed expectations and the market seemed to like it as well. Yeah, that's definitely another,

like the other advertisement play that I'd be the most interested on. And after having sold Pinterest, I find that Trade Desk and Google are really both in really good position. And it's funny because the ad space, the social media ad space, however you want to call it, right, the internet ad space, space, however you want to call it, right? The internet ad space. It's been very kind of all over the place in terms of results. We've seen some good, some bad, and some really ugly results. So it's interesting to see that Google and the Trade Desk, I think they're the two that really stick out as on the good side. Very high quality, for sure. Now, moving on to the last name here, we referenced it at the

beginning here, Cineplex. So I wanted to do this because it is a Canadian company and it's one of the most affected, I think, in terms of publicly listed businesses, the ones that were affected by the pandemic and various lockdowns and restrictions. Now I'll reference both year-over-year revenues and 2019 revenues since I think it's the better indicator in a lot of cases and it's too bad but clearly they did not reference the 2019 revenues in their earnings release so I had to go and look at the financial statements and actually compare them and do the calculations myself. Now revenues... We appreciate that because if you just look at their press release, it is not useful. Yeah, it looks great.

It's not useful. Yeah, it looks great. So, revenues increased 439% to $350 million year over year. Again, you may look at this and say, wow, if you're coming out of a coma- Whoa, 440 percent wow holy you're coming out of like uh you know a year and a half coma you're probably or you have no idea that pandemic happened you're this this is really good numbers right there but then you look at 2019 and that number is still 20 down now the theater attendance I wasn't able to find the

figures for 2019 but I think this one's a good indicator so people are returning to the movies it was nine times higher than it was year-over-year. They made 1 million in net income compared to a loss of 103 million last year. For comparison net income was 25 million in 2019 so they're still behind that. Their expenses as a percentage of their total revenues are still much higher. They generated free cash flow of $20 million for the first six months versus free cash flow negative of $32 million last year for the same period. Now, compared to 2019, free cash flow is still down 65% to those numbers. free cash flow is still down 65% to those numbers. Now this one feels really similar in a lot of ways to Air Canada like we discussed last week. Numbers are impressive when looking at year over year but it's still about three quarters 80% of what they were in 2019 in terms of sales. That's why I

mentioned it on Disney because it seems to be the trend here. They are trending in the right direction, but clearly they need to get a hold of expenses, which are extremely high. Not a company I would own personally, but I find really interesting these type of companies, even like just for case studies to see how quickly they'll recover from the pandemic. And maybe it's going to take them a few years to get back at those levels because, you know, I know you are, I know I am, like, I'm very comfortable going in public with other people, I don't have any issue. It took me a little bit of time after the restrictions started to come down. But now I'm all good. But, you know, we've said it before, not everyone has the same comfort level. I've been to a couple of movies since they reopened in the

since the beginning of this year it was great to be there in person where i'm actually watching something and not distracted by my phone so it was yeah and obviously the the popcorn was awesome too just load up the butter do you just dump the whole well the whole brick of butter and just throw it on there we did so the first time we went the masks were still required so we're talking to the girl and i didn't hear because i could it was pretty loud i couldn't like tell what she said and she asked their lips it's like exactly so she asked if we wanted layered butter i didn't hear her but my wife heard her and she's like oh yeah that was too much that was too much for the oh the layered dude yeah give me that for like a dollar extra i think and so they like put half

they butter it but then they put another half and they butter it again. It was too much, man. It's just too much for me. And the stuff at the bottom is like soaked. It's like soggy with butter. And I love it. Soggy throughout. Yeah, exactly. I finished the whole thing before the previews end anyways. So for the most part, I think people are fully comfortable with it. I just, at this point, if it's at, what did you say?

Revenue's 20% down. Okay. 80% of the revs from 2019. Okay. How much of that? I predict most of it. This is just me. I'm not in the movie business, but I predict most of it is an actual shift away, a secular shift away from people going to the movies as much. This was already an ongoing trend. I think, what if we normalize here? I think that that's totally in the realm of outcome, maybe 85% of what it was before. I wouldn't be shocked. In fact, I would think that that maybe is where it normalizes. And people who love the movies are going to keep going to the movies. But people who like, you know, it was a every once in a while thing, maybe they just don't go anymore at all.

Maybe they just watch at home. I think that we normalize somewhere below 19 is what I predict. we normalize somewhere below 19 is what I predict. Yeah. I mean, it could very well be. And their actual revenues are probably more like 75% if we use constant dollar basis. Because let's be honest, I don't remember what the prices were in 2019, but I'm going to go on a limb and say they're slightly higher right now. True.

Yeah. Think about the flex pricing power as well. Have you done the VIP thing, by the way? Yeah we've done it it's pretty fun yeah you can get like beer or yeah whatever a drink and it's pretty and it's more it's more comfortable too the seats are better at least the one near us for me i i look at that and i'm like if i'm gonna go to the movies i will spend double. It's already like not cheap to buy a ticket if it's like 3D or whatever. Just give me double so I can sit in that comfy ass chair and drink some beers. I'm all in on that. Like I love that.

Yeah, you get a little buzz going, enjoy the movie. Oh yeah. Especially if it's a comedy, man. Like it's going to be even better. So I'm all in on that. And I don't, again, I'm assuming average ticket prices have exploded for them on a skew basis because of that. Because of that, like what they're offering to people who want to make it a more fancy date night. Yeah. Yeah.

Just an experience, right? Yeah. Yeah. And if they really want to lean into that, I think that that's smart because we've seen, even if there is a tougher macro environment, people are still really, really leaning into experiences. I don't see that big shift changing anytime soon. Like I think that that's here to stay for a little while, like experiences over stuff, especially with young people. Oh yeah. Especially with young people. Oh, yeah. Especially with young people. They're inspired by that stuff.

Yeah, just maybe not every earnings season we'll do them, but maybe once every two quarters or something, just have a look how it's trending. It's going to be an interesting just case study to have a look at. Speaking of the movies, do people still bid up AMC? Is that still like some meme stock here the stocks up like 73 since july oh my god this thing peaked at 60 usd in june of 2021 it is a third of that today yeah that's what happened chase meme stocks. Yeah. If you want to gamble on meme stocks, you may get lucky or you might lose your shirt.

Yeah. The stock market casino is alive and well year over year. And so that was definitely one people were using. Thank you so much for listening to the episode. Simon, I'm just glad we made it through to the end. I thought you were going to be like, dude, I'm having a baby. My wife's having a baby.

We're going right now. We're off to the... We've done were gonna be like dude i'm having a baby my life's having a baby we're going right now we're off to the we've done the prenatal class so there's usually it's not a switch like that so there's usually build up so i think we'd have probably a couple hours at the very least because they won't take you right away you have to be at a certain stage until you actually you go into the hospital yeah but could you imagine um sorry honey i am recording a podcast like i don't know if you know we're a big deal that wouldn't happen so if you have something to wish for us is that we're lucky and there are some available private rooms that would be the one thing because i don't know if everyone saw the friends episode with like

rachel when she gives birth and there's like five different women that come in, one of them, including his ex Janice or I know. Yeah, yeah, yeah, yeah. I know the one you're talking about. Yeah, it's so awkward. The ex comes in. Oh boy. Thanks so much for listening to the Canadian Investor Podcast. If you are a real estate investor or you're looking to get into real estate, have you checked out the Canadian Real

Estate Investor? That is another podcast we've tucked in under our network of the Canadian Investor Podcast goodness. So get that in your listening queue. If you're into real estate, they just did an episode on like a 25 point checklist to do before you like buy a property, like 25 things to look at when you're investing in real estate. And hello, like that is perfect for me. Like, that's just like exactly what I need to hear. So it's been great to hear, hear some of that stuff because it's something I don't like. I'm not qualified to run the Canadian Real Estate Investor Podcast. Oh no, me neither.

But those guys are. And so that's why you should tune in as the Canadian Real Estate Investor. They'll probably do a dive too. I didn't have a chance to look at them today because they just came out, but the Canadian Real Estate Association numbers, I believe the most recent one just got released and they go over those a bit like we do the earnings release on a regular basis. So they dig into them. So they'll do a much better job than I could, even though they told me I actually did a pretty good job when we went over them in the past, they will go into those. So if you're looking to know where it's at right now, just give them a listen. Probably in the next episode, they'll go over that next episode or two.

Just give them a listen. Probably in the next episode, they'll go over that. Next episode or two. It is a beautiful thing. If you haven't checked out stratosphere.io, go check it out. We got a nice looking new can of paint on the webpage too. She's trying to optimize it. You go on and you're like, who's this for? And we want to convince you within the first six seconds that it's for you.

Because if you're an investor in individual securities, you got to know the business and you got to know the financials and we break it down for you on a historical basis. That is stratosphere.io. Go ahead and check that out. It's free to use it. Take care, guys. See you in a few days. 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.