The Canadian Investor - Lightspeed, Airbnb, Topicus, Peloton, Air Canada and more earnings!

Episode Date: November 11, 2021

In this release of the Canadian Investor Podcast, we cover the following earnings releases: Etsy The Trade Desk Peloton Constellation Software and Topicus Pinterest Live Nation Lightspeed POS Air Canada Canada Goose AirBnB Tickers of stocks discussed: ETSY, TTD, PTON, CSU.TO, TOI.V, PINS, LYV, LSPD.TO, AC.TO, GOOS.TO, ABNB https://thecanadianinvestorpodcast.com/ Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Stratosphere 🚀 https://www.stratosphereinvesting.com/See omnystudio.com/listener for privacy information.

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

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I'm Brayden Dennis at Brado Capital and joined as always by Simon Belanger at fiat underscore iceberg. On Twitter, you can follow us at CDN underscore investing. On the Twitter machine, Simon, we have a bunch of companies to get to. What is it? 10 different earnings reports to go through. And again, with back-to-back weeks, we have partnered with Quarter, the app that you can download for free.

It is like Spotify for earnings calls. It's a really handy tool. I use it myself. Simon's been using it a bunch. It's really solid. Simon, what is your general feel with earnings season so far? There's one takeaway for me so far, but I'm interested to see what you've been feeling and seeing in your portfolio as well. For me, I mean, it's been for my portfolio, it's been pretty good overall. So I think all the companies I've had, they've been in line with expectations, nothing too crazy going on. But there has been some interesting movement for specifically high growth names.

So we've seen some big, big swings. And we'll talk about a few of those companies, some to the positive side, some to the not so positive, but it kind of goes back to what we've been talking the whole time on this podcast. Growth stocks are great, but when you don't have a perfect earnings release and you're trading at nosebleed valuations, this kind of stuff happens. And it touches on an important thing, which is momentum in public securities is a very, very real thing because there's so many eyeballs on public markets that some of these COVID stocks that got pumped to levels that really, frankly, made no sense last year, now they've had just terrible years this year where

what we're going to talk about on today's earnings review, which is a lot of companies that are bouncing back. They're the opposite side of the spectrum. Companies like Zoom, Moderna, Peloton getting crushed right now. And they all had fantastic years last year. So you have to remember, sometimes momentum is at play and you can't fall into FOMO. Not that any of those companies are particularly bad businesses. It's just sometimes momentum plays such a factor where they went to valuations that just don't really make sense. All right, let's start with the first one here, Simon. What do you got for us first on the slate today? Yeah, so the first one, one of my personal holdings, definitely one of a business that

I think is great and probably everyone should own, but I know not everyone does, Etsy. So Etsy, obviously, it's the craft marketplace that's online for those who are not familiar with them. it's the craft marketplace that's online for those who are not familiar with them q3 revenues up 18 to 532 million that's year over year the increase in revenue was generated by etsy ads gms which is gross merchandise sales volume depop and elo 7 acquisitions they are guiding for $660 million to $690 for Q4. GMS was up 18% to $3.1 billion year over year. That's excluding masks because they want to give a better baseline to people. A lot of the talk when the pandemic started with Etsy was that a lot of their sales were coming from masks. GMS per active buyer was up 20 percent year over year that's always a great indicator for them adjusted ebita was up 33 percent to 174 million

overall marketing spend as a percentage of revenue was actually down to 25 percent and this was the lowest percentage in the past five quarters so it's kind of good to see that they're still growing quite nicely they're not as reliant on the pendant pandemic that maybe a lot of people expected they're seeing some continuous growth with their merchants and the sales they also added during their earnings release that 90% of their US sellers source their materials locally which should minimize the impact of supply chain constraints for them. A note of caution here is that there might have been some pull forward sales in that quarter for people who are buying their Christmas gifts early because of all the supply

chain constraint talk so they did warn that this could be something that happened in the third quarter. Overall like I said very good quarter from Etsy. The stock is not cheap. It still trades around 15 times sales. So if you're interested in this company, make sure that you're well aware of that, that the valuation is still quite high. I like that you pulled out 90% of sellers are sourcing their materials locally. And that should be a good thing for them in this holiday season, right? As you mentioned. And if you're looking for ideas on stuff to buy, Etsy is great for that. I hop on there. I find some awesome ideas and you can buy something from a local Canadian as well

and sort by those kinds of things. So I like how they do the buying experience based on what people are actually conscious about. So that's interesting. The thing that I always track on every Etsy quarter is active buyers and active sellers. It's a platform, right? So you need to keep track of how many people are actually engaging with the platform from a buying perspective on a monthly basis. And then active sellers, if they're going to continue to succeed on the platform, then that's important for the long-term story. Let's look at the trade desk. The trade desk increased revenue 39%, which is great to see as the market was worried about the company's growth. This has been a bit of an up and down one. The stock did trade so expensive so that when you miss a little bit,

yet a little blip in the growth profile, the stock sold off. But rest assured, investor base, the stock is up 30% today. EBITDA margin improved from 36% to 41%. So yes, this is a super fast growing software as a service company, but it's actually profitable. It's been profitable for a long time. So that's nice to see. 40% of revenue came from video advertising. This is the highest ratio that they have seen. And across the internet, we have seen such a migration from all the apps that used to be photo first are now video first. Everything is video first. Video is more engaging and that's where people can actually capture attention in the attention economy. So that was an interesting thing. So let's turn to Jeff Green. He's the founder and CEO. I love founder-led businesses. He's discussing digital advertising landscape as

he sees it right now on the call. I get asked every day about where this market is heading, because the pandemic has changed everything. Because it has massively adjusted the media and tech landscape, it has accelerated the shift to CTV, it forced brand marketers to embrace data, and has driven a higher focus on real-time agility for everyone in our industry. I think this is an important backdrop to why we're doing so well and why our prospects are so bright for the future and why I'm so optimistic about the future of the open internet. Look, the advertising market is $750 billion a year today, And it's expected to surpass $1 trillion in just a few years.

So the Trade Desk is a demand-side platform for digital advertising and demand-side platforms are really smart business ideas. This is the future of advertising for large advertisers. So let me explain how these platforms work in the simplest way I possibly can, think of them as live auctions for digital advertising space on the internet. So say we have a square box on a website and you're reading some blog, there's a spot, a container as they call them for an ad. As the page loads in one 10th of a second, the trade desk has advertisers bid in an open auction, live in real time, based on relevancy and large data to compete for advertising spots live. Now, think of this as an algorithm auction happening every second, everywhere for open ad spots on the internet.

So that's the power of this technology. The benefit of this for large advertisers is say, Simon, I have a billion dollars to spend on ads this year. And I want to advertise on social channels. I want to advertise on websites and blogs and apps and even smart TVs, which is a market they dominate, by the way. You can efficiently deploy your marketing spend all across the internet on these demand side platforms like the trade desk. Love it. The interesting thing here to note is they've partnered with Facebook and Google, but also have big tech players in China, like Tencent, Alibaba, Baidu. This is super interesting because as a digital ads play, the American giants don't

operate in China, really, like Facebook and Google. But the Trade Desk does by working with those giant Chinese tech companies. So the Trade Desk is a play on global digital advertising. The stock is up a whopping 30% today. I own a small sliver of it in my personal portfolio, so I'm feeling pretty good today. It's a really, really cool company, founder-led. There is competition that exists, but just like any really, really great business, there is competition. The good thing about the Trade Desk is they are light years ahead of the competition from my perspective, and they're dominating connected TV like streaming and these are just really early days in the story from my perspective. Yeah, it sounds like they had a great quarter and

clearly the market agreed. I think for them, one of their big headwinds was the whole announcement by Google that they were going to remove certain things, right? The cookies, that's it. But I think they walked that back for a bit, right? They're pushing that back to 2024. So it is still something that they're going to have to continue to navigate. But what investors need to realize is the trade desk isn't just that business anymore, right? The connected TV segment is now huge. Video is making up 40% of the total revenue now and it's the fastest growing. So, if they weren't diversified into these all different channels, I would be very concerned. And that 2024 cookies thing,

I probably wouldn't be an owner of the stock, but the story has changed quite a bit. Well, and it's also good that Google pushed it back because it does give them more time to prepare for that too. That's right. That's right. Well, now we'll switch over to a company that did not have a great earnings release. And I think that's an understatement, Peloton Q1 2022. It was not a good earnings call, pretty much as bad as it gets in my view if you have a listen to the earnings call the shares were down more than 35 percent when it came out on friday and they were down another eight percent today so it's not looking great for peloton but before i give my take on it let's listen to john foley the ceo at the very beginning of the conference call explaining why they had to change their guidance so quickly after announcing their fiscal year 22 guidance in August of this year. Given the unprecedented circumstances presented by the global pandemic, we said last quarter that modeling the exit from COVID and the massive growth we saw in fiscal 2021 would be a challenging task,

and that has certainly proven to be true. With reduced backlogs, our visibility into our future performance has become more limited. From forecasting consumer demand to accurately predicting logistics costs, our teams have never seen a more complex operating environment in which to guide our expected results this year. Well, as you can imagine, it's never good when a CEO starts off the call essentially explaining why they had to change their guidance a few months after they gave it. Before I continue on that, let's look at the actual numbers for them. Total revenue was up 6% to $805 million. The good news is subscription revenue almost doubled to $304 million and they have a 92% retention rate over the past 12 months. They

had a net loss of $360 million versus a net profit of $69 million last year. They burned over $600 million in the quarter in cash versus free cash flow positive last year. So, as we can... Oof. Yeah. Oof. Oh, man. Yeah. A lot of bad news here. Their gross margins took a hit due to weaker demand and cut in prices of $400 for their most popular bikes. They said on the earnings call that it's a sacrifice they are making to ensure that more people get their bikes into their homes and then they get the subscription revenue from them. So basically they're going more and more towards a break even in terms of their bikes to be able to capture that market into their subscription revenue. They were also hurt by supply chain issues,

most specifically due to chip shortages, which is not a surprise. They were hurt by the recall of their treadmills as well, but are getting a lot on that segment. They're really betting a lot on that segment going forward. John, the CEO, spent a good portion of the call explaining that. Another thing that's not been good for Peloton is they saw reduced traffic for their website, which is of course not a great indicator for sales because people who are interested in buying the bike will go to their website. I don't personally own shares of Peloton, but the way I would approach this if I was a shareholder is just basically wait and see. I would not give them a whole lot of leash personally.

I've said this before. We did talk about them in a previous podcast, not in great detail, but my reservation was exactly what's happening here. First of all, how much of their growth was really due to the pandemic. Second, there's a lot of competition in that space. Apple Fitness Plus, Mirror from Lululemon, NordicTrack has been doing advertisement left, right, and center. I feel like I see those ads all the time. Beachbody On Demand, there's YouTubers, there's Instagram. So the most important metric here, in my view, will be the subscription revenue and the churn

rate. The revenue margins for subscription is 69%, which is great, versus 12% for the equipment sales. So we're really seeing them basically giving away the bikes so they can get that subscription revenue in, which was a big change from the past where they actually had decent margins on those bikes, but they just don't have, I guess, the pricing power anymore. It is an interesting branding and marketing problem that they have right now, which is, do you sell the bike at a very premium price to have an exclusive class of people who can afford and use Pelotons? Because there is a... I can't think of a company of people who love the product more than Peloton. This is great to see when the users and owners of Peloton become your marketing people. That is wonderful. And Peloton has achieved that. But if they continue to knock down

the exclusivity of being a Peloton owner by reducing the price, yes, you will probably increase subscriptions, which is a very important part of their business. But they have to remember, people who own a Peloton let you know about they own a Peloton because it is not easy to own a Peloton. Right, Simon? You know what I'm saying, right? Oh, yeah. easy to own a Peloton, right? You know what I'm saying, right? It is a very difficult branding and marketing question that I think that the executives need to think about right now. And look, this is another one of those companies that went to prices that don't make sense. I'm going to go out and say here that I think Peloton is an awesome business. The brand is exceptional. The subscription business

is awesome. But the price that it got to versus the total addressable market of online at-home spin classes, something wasn't adding up and now something's got to give. What's the stock down? Like 63% from the highs today. Oh, that hurts if you're a Peloton owner. But seriously, if you're a Peloton owner, you're probably wanting to own this thing for 10 years, not one year. So keep the long view. I think there's so much negative sentiment on the stock right now, and the price is driving that as well. So it's not a business that's folding immediately. They still have a strong subscriber base, a great brand to the public, and some great margins. So, I'm very mixed on my view here.

Yeah. And I mean, I think that's a great point is just balancing that exclusivity with growth. I think they have a pretty... It won't be easy for them to figure it out because on the one hand, you open it to more people, then yes, potentially you get more growth and revenues out of that but you can also affect the premiumness of the brand like you were saying and one interesting tweet i saw today for someone i follow he was comparing the charts of peloton and planet fitness and it's essentially the opposite it's pretty interesting it's pretty interesting Anyone wanting to do that, just look at both tickers. It's kind of interesting just to show it's almost a story of how the pandemic went. But yeah, I think it's a wait and see for them.

But it was definitely not a great quarter. And the big thing is guidance, right? They almost did a 180 on it in a few months. They had to have known people are not going to be subscribing to this stuff as much as if they're locked down at home. I mean, that's just the nature of it. That being said, moving forward, it's still an interesting product and an interesting business. It did get to prices that didn't make sense. So maybe now people who have a long view on this thing can buy shares. I personally think that an expensive bike with an iPad on it is something

that has very low barriers to entry. But at the same time, if they have this high subscription base, there are network effects that exist because you can compete with your friends. You can actually do classes with your friends. So you do introduce some interesting network effects if they reduce the price of the bike further. We'll see what they do. I don't know what I'd do right now, but good thing I'm not the CEO of Peloton and have to make that decision. 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,

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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. Moving forward, the much requested discussion on Constellation Software and Topicus.com. I'm going to do them together because that makes complete sense. They even do their release of their company reports at the same time. So revenue grew for Constellation. This is ticker CSU on the TSX. Revenue grew 30% with 7% organic growth to $1.3 billion in sales for the quarter. Free cash flow available to shareholders was up 25%.

What else is new? Awesome numbers across the board. Now, this business is an unrelenting mergers and acquisitions machine. They have now deployed more than $1.1 billion in capital at the end of Q3 on a trailing 12-month basis to buy more vertical market software businesses. So when I say vertical market software for the rest of this segment, I'm just going to call it VMS. Vertical market software, VMS. For those who are not familiar with Constellation and my obsession for this Canadian gem, they own hundreds and hundreds of niche vertical software companies, VMS, across the globe. They have doubled their capital deployment from last year. There's an interesting line item here for people who are paying attention on the press release.

Subsequent to September 30th, when the quarter ended, they have already entered agreements to acquire new VMS businesses worth 329 million. Dude, it's November 3rd. They deployed $329 million into small niche software companies in one month. How do they do this? Well, I'll tell you how. There are six different operating groups who have their own CEOs and their own decentralized acquisition teams. So there's six different companies underneath the umbrella of CSU. So they're decentralized into these smaller units to source new acquisitions. Now, I'm getting away from the earnings report here, but I wanted to bring this up, Simon, because as you know, I'm fascinated by incentive structures and CSU may have the most interesting case study in

incentive structures in all of public markets. Once constellation managers have a certain salary threshold, they're required to buy shares on the open public market. required to buy shares on the open public market. What company does that? I don't think another one exists that has this policy. They're not given shares via stock-based compensation. So the share count never gets diluted, which obviously hurts existing shareholders. So there's no stock-based compensation. For a software company, that doesn't exist. That is not common. They have to actually go buy shares and be part owners of the company via the public stock. So everyone wants to deploy tons of capital into good deals because everyone's an owner and they're incentivized to do so. One of those operating groups is Topicus.com,

to do so, one of those operating groups is Topicus.com, which they have a 30% stake in. And now I'll talk about that. Topicus is listed on the TSX Venture under TOI. They had 46% revenue growth to 177 million in euros. It's a European company that poured in euros with 5% being organic. Now Topicus and CSU basically have the same investment thesis with the small addition that Topicus typically has more organic growth, not this quarter, but typically more organic growth, and they can roll up European VMS, which is super hyper fragmented. So given the accelerated capital deployment in CSU, I personally would rather buy Constellation shares than Topicus right now, but I own both. So full disclosure for the podcast, I felt like I should probably do this. Constellation Software makes up 35% of my personal portfolio and Topicus makes up an

additional 9%. I was given a bunch of shares on the split and bought more on the market. So I know a lot of listeners follow this company closely because of how much I talk about it. But I wanted to disclose this for folks who are wondering why I discuss Constellation so much. I have a significant amount of my personal capital in the business and find their story beyond fascinating. And I think that most people should find it fascinating based on some of the stuff I've talked about. So that's just for some disclosure, about 45% of my net worth is tied to...

Age. Well, not net worth, but portfolios tied to these two companies. So I think it's probably time I disclose that. Yeah, just an extra five percent make it a nice round clean 50 yeah we should talk about that at some point because i have some pretty big allocations too i think i have one that's pretty close to that so maybe at some point you have renewable partners and they're like uh yeah i think it's in the 20s in terms 15 20 percent but

yeah in terms of my bitcoin holdings that that's right up there with Constellation. So I kind of view that all in one. I don't differentiate Bitcoin and my stock investment kind of put that all in one. So I'm pretty close to that too. So I can't really talk. Fair enough. Fair enough. Okay.

So I know that's a great breakdown. And I know I definitely go to you whenever it's about consolation or topicus because I know you know that one way better than I do. And you have good reason. I have to. I have to. Yeah. So, now we'll move on to Pinterest. They released their Q3 2021 earnings release. So, the US ARPU, ARPU is average revenue revenue per user i'll be using that quite a bit here was up 44 to 555 the international arpu was up 81 to 38 cents per user clearly they're making most of their money with north american users they say u.s but i've been checked but i'm pretty sure canada is in there as well. Global ARPU, which includes everything, was up 37% to $1.41. Overall revenue was up 43% to $632 million. Net profits of $94

million. Unfortunately, I forgot to put what it was last year. That's my bad. The monthly active user, the metric that analysts and the market tends to focus in on a lot for Pinterest. So the MAU in the US was down 10% to 89 million. MAU for international users was up 4% to 356 million. So overall users were pretty much flat. Some people may be concerned by that because, like I said, the U.S. users are much better monetized than the international users. I'm not too concerned. They did talk about the fact that they're a bit unsure where it's going to go in terms of monthly active user because they did see an impact with the lockdown and then the subsequent reopening, it did affect some of their users. So they're kind of a bit more wait and see to see what will happen. Even with that slowing or diminishing user base in the US, I'm not too concerned. I own shares.

I started a small position. And for me, the biggest thing here is looking at how little they've monetized their platform and there's still a lot of upside and I think people are a bit more to focus on the monthly active user and I have a feeling that as the winter months come around we'll probably see that kind of level out a little bit or even increase when it comes to the U.S. So their guidance for Q4 and full year 2021, they said that they'll have growth of revenue in the high teens year over year. And like I mentioned, they're still unsure of the impacts of reopening and how it will affect their users. This is one where I haven't decided for my own if the monetization of low ARPU is the bull or bear case on the stock.

I can't figure it out. Yeah, it's so under-monetized from an average revenue per user perspective. But does that mean because the platform sucks or because they have a long runway to monetize them? For instance, I'm just looking here. Facebook in 2020 had an average revenue per user of $32. And Pinterest, what for the across the board was $1.41. So that is a significant difference. So is that the bull or bear case? I can't figure it out. You obviously think it's

the bull case. Yeah. Yeah. That's kind of the bet I'm taking. Full disclosure, I don't own 45% of my portfolio in Pinterest. So it's still just a small portion. So, you know, it is a risk. It's something I could be wrong on the thesis here. And, you know, the users just keep going down and they're not able to monetize it and capitalize on their existing base. Like I think I guess it's a wait and see type of deal for a lot of people. But I think for me, it's a good opportunity to start a position because I do think just based on my personal use

and what I've talked to other people, there is a bit of seasonality to when you'll use Pinterest. Fair enough. Yeah, that makes sense. All right, moving on. So there's a bit of a theme happening with Q3, which is reopening. And it's that buzzword, but it's a real thing. No other business to capture that theme than Live Nation, ticker LYV. All business segments had positive operating income for the first time in two years. The company reported $2.6 billion in revenue. Live Nation is the owner of the Live Nation IP, but also Ticketmaster being their bread and butter. Let's jump onto a call from

the conference call here on the strong demand moving forward for live events and concerts in particular that they're seeing, and then discuss this and what the future of this business looks like. The 2021 summer concert season rebounded quickly, with 17 million fans attending our shows in the quarter, as a return to live reflected tremendous pent-up demand. Festivals were a large part of our return to live this summer, with many of our festivals selling out in record time, and overall ticket sales for major festivals was up 10% versus 2019. We had a number of our tours already sell over 500,000 tickets for tours this year, including fellow tours by Harry Styles, Chris Stapleton, and others.

All right, so concerts came roaring back, which is really nice to see, not only just as an investor, but as a human. Ticketmaster had an exceptional quarter. Sports fans back, artists selling out tours immediately, especially for these 2022 global tours. These artists are ready to go back on the road, not only because they miss it, but their wallet misses it as well. This is a really positive quarter for the company. It is wild to see how the market has reacted to this business. I find the stock chart extremely fascinating because it's one we discussed during the pandemic 2020 crash where Ticketmaster and Live Nation, they're incredibly great businesses. They have really attractive competitive advantages,

but the company was affected so much by the lockdowns, whether it was an indoor or outdoor event. How do you get people gathered together? It doesn't seem possible. What a good time to buy shares of this company was during that time, last year, you could have really took advantage of the market's short-sightedness. But to be fair, things looked really rough. They were literally not generating a top line, which is crazy for a business of that size. Europe and the US made up 95% of revenue for the quarter is something I heard on the call. Now, these are the places that seem to be getting back to normal, especially the US. Canada seems to be one of the slowest adopters to that return to normal for whatever reason. I've never really fully understood, but let's

just not go there. There is so much pent up demand. It is wild. They have the best partnerships with artists, the best partnership with sponsors, venues, and teams. It is a tax on live events with Ticketmaster being so dominant. I know some people that have owned this for a long time. And congrats, the stock's pushing all-time highs again. Yeah, Live Nation to me is an interesting case. Like you mentioned, first of all, they've done like their stock has performed quite well since the pandemic, even though they're just kind of restarting now to get back to normal. Personally, I'm a bit bearish on them long term. Short to medium term, I think they'll be fine because of that model they have in place.

But I think they're also ripe for disruption because of that kind of tax that they put on there. And I'm thinking here of decentralized platforms. How they could potentially just come in and disrupt. Where artists are just saying like look we'll book it directly with the venue. We will bypass you and we'll find a way to just sell our tickets and remove that cut. Maybe it won't happen. But I could see them as the middleman being potentially disrupted. I don't think it'll be anytime soon. But as a long-term play, I'd be personally a bit careful here. Yeah, fair enough. It is one of those taxes on the event, which is Ticketmaster. And they do

have this huge market presence. People really hate, including myself, really hate paying the fees. What value add are they actually giving consumers with the fees they charge? But they have such a wide moat currently. You bring up an important point, which is they should be an incumbent ripe for disruption. The network effects and the moat that they have right now will prove to be incredibly difficult. But you're right, it's not a company that people are really excited to be a customer of because it is a tax on their concert or whatever venue they're going. And it feels bad as a consumer when you're a company, when your customers basically hate you. Yeah, and especially when there's incentive from both sides, right? Even the feels bad as a consumer when you're a company when your customers basically hate you yeah and

especially when there's incentive from both sides right even the whether it's the venue or the artist and the consumer to kind of bypass them so that's where i'm coming in from but again i think you know don't quote me on this like two years from now if they're having blowout earnings like obviously i think medium short to medium term for for me, it's more something in the next maybe decade, we might see that. And now another name when we tweeted last week with people just asking our listeners, what company would you like us to talk about during the next earnings release? One of the most popular name was Lightspeed Point of Sale stock or a company that I know a lot of our listeners own. And people, especially after the, what was it? They were down like 30% on the

earnings release. Yeah. Lightspeed POS has been the other kind of POS in the last 30 days. Yeah. Yeah. It's not been great. So before we look at the numbers, I have to say I was a little bit disappointed. Well, I was disappointed with the overall tone of the earnings call. First, I was not a fan of DAX revisiting the whole short report from Spruce Point Capital. So he started the call with that. Lightspeed had already addressed it. I don't understand why he felt the need to address it aside from him really thinking it's affecting the stock price. So that was a bit of a head scratcher for me and not something I'd like to see a CEO do at the right at the beginning of the call.

They had addressed it, like I said, so that should have been enough in my view. Do you have any view on that? A company talking about that? I'm not a fan of that. You have a business to run. Why are you focusing so much on what's happening in public markets with short reports and the Spruce Point thing coming out? You've already addressed it.

You've said your piece. Talk about the business fundamentals. Talk about the results from the quarter. I'm not a fan of that. I haven't listened to the call. I have plans on it. I know you listened to the call, but that makes me feel extremely uncomfortable if I was a shareholder. Yeah. Yeah, exactly. And that's the same thing. I think it's fine that they put out a release, but it should have stayed just there. We're aware of it. It's out. We addressed it. That's it. Having said that, looking at their financial results,

I think it's important to look at both year-over-year growth and sequential growth here. The reason for this is because the year-over-year includes acquisition, but we also have to factor in that a lot of the world was still in the process of reopening last year. But overall, there was a lot more restriction in place compared to this year, last year, right? Total revenues were $133.2 million. That's an increase of 193% year over year. But on a sequential basis, that's an increase of only 15%. Organic growth was 58%. Subscription revenue of $59.4 million. That's an increase of 132%. 4 million that's an increase of 132 percent transaction based revenue of 65 million that's an increase of 320 percent they had a net loss of just shy of 60 million compared to a net loss of just less than 20 million last year what really affected them as well so probably that was part

of the reason so they're seeing slowing organic growth so a lot of their growth now seems to be tied to acquisition i mean organic growth of 58 percent year over year is nothing to sneeze at but when you're trading as highly as light speed when you have a slowdown that kind of growth it's always something that will affect the stock price at least in the short term for the guidance they had cautious guidance going, which will be affected by supply chain constraint. Most of their customers might have some issues with supply chains because getting the goods that they sell, which will affect the gross transaction volume or GTV and revenues for Lightspeed. They also mentioned the seasonality of their business, which can impact their revenues.

They are forecasting for revenues in the 140 to 145 million range for Q3 2022, which is the next quarter. This would be a sequential increase of less than 10% on the high end. So we're seeing here that it's kind of slowing a little bit for Lightspeed. I was interested in

the earnings call as well. I went to the question segment, which may I add, that is a great feature for quarter because you can actually skip right to the question period if you want to. And it's always interesting for me to see what kind of questions are asked by analysts, but the tone and how leadership answers those questions. And my perception from the answers that they gave is they were respectful. They had overall good answers, but it was very defensive. And also there was a lot of excuses why they didn't reach certain things. It wasn't an overall very good call in my opinion. 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. Market agrees with you. I mean, the stock performance after the call was horrendous. I tweeted out that Lightspeed shareholders were millionaires in early retirement in September and on food stamps by November. And that's really the reality of stocks that move sharply up.

Now, I don't want to be too bearish on the stock all of a sudden because the price movement has been so poor. Because the reality of it is two months ago, I was talking about how they have a great product and they have a great founder-led company. They're tacking on an organic growth story that makes a lot of sense. However, we did mention there is a few things that need to be brought up, which is there is a lot of competition in point-of-sale payments. There is tons of competition. We brought up that the acquisition strategy was grow at any cost. And that was a bit concerning. The things that we brought up, not to mention this company is just losing more and more money

every time I look in terms of profitability. We brought up those bearish things and we thought, yeah, the growth is fantastic. It's super expensive and we're worried about competition. the growth is fantastic. It's super expensive and we're worried about competition. And the market realized that really quickly. And it started with the short report pointing out some of these flaws in the investment thesis. That being said, I'm not going to change my sentiment on Lightspeed too much. The reality is I think they have a great product. And the reality is I think that they can continue to gain market share with this omni-channel shopping experience that they have created. I think it's a fantastic product.

So from that perspective, I like Lightspeed. I like the fundamentals of Lightspeed. I don't like how they're spending an ungodly amount on acquisitions that they really can't afford just to show revenue growth on the top line without any sort of vision for what happens after that. That's kept me away from owning it. My God, this has been a disaster for shareholders. Let me see. What is it off the highs? Lightspeed traded for 120. This is the New York Stock Exchange listing. 124 US on the 22nd of September and trades for 72.41 today, which represents a 41.8% drop in the share price. That being said, growth stocks have tons of volatility. If you want to own this thing for five years, don't be keeping score every day. That's what exactly we said. Yeah, exactly. That's what we said. It was valuation and competition here. And I don't think that's changed. I think they have a great product,

but I think these will be things to keep an eye on if you're a shareholder. And it just reinforces to know what you own. It sucks having a big 40% drawdown or whatever it was in one day. But if you have strong conviction in this business and you want to own it for the long term, I mean, it might be an opportunity for you to simply add to your position. I think it just reinforces that. But from my perspective, I'll watch on the sidelines and I hope that DAX won't talk about the short report on the next earnings call and that's just behind it. Yeah. So now... Yeah... If they bring that up again, I'm out. Yeah. Yeah. I mean, well, you're already out.

I'm already out. Well, I'm not getting in. Fair enough. Fair enough. Now, another name that a lot of people asked us when we did that poll or that tweet on Twitter was Air Canada. So, before getting started on their earnings release, I think we have to talk a little bit of news, more specifically that Michael Russo, the CEO has been under pressure for him lacking French speaking skills, for the lack of better words. Even today, Deputy Prime Minister said that the board of directors should add this to Mr. Rusau's key performance goals.

The government- That's hilarious, by the way. Yeah, I know. They measured that KPI. Yeah, yeah, exactly. I mean, I had a chuckle and obviously I'm French, right? So I had a chuckle when I saw that. For me, I mean, if the government wants to get involved, that's fine because they do have a significant warrant in terms of shares. They have 14.5 million shares at an exercise price of $27.26. And that's the result of financing provided in

response to the COVID-19 pandemic. Whether the CEO should speak French or not, in my perspective, as long as they offer bilingual service, whether the CEO speaks French or not, I don't really care. Maybe you have someone, a senior vice president that speaks French and is able to take questions whenever he has a press conference or something like that. But clearly, the federal government wants him to be bilingual. So, we'll see what comes out of that. It shows you how closely tied they are to the feds. I think that this is a very good indicator of that. Yeah.

And if you're an Air Canada shareholder, I know I mentioned the $14.5 million share warrant, but something you'll want to keep an eye on for them, you'll see that the share dilution has been quite significant over the past two, three years. And that's really kind of standard, right? When you're looking to get some more money in, you get financing different ways. And obviously, share dilution was one of them for them. So now back to the result, their operating revenues was $2.10 billion. That's almost three times higher than the same period last year. But like we've mentioned before, this was a clear case of base effects. So if we compare it instead to

2019, that's actually about 40% of what the revenues were in 2019. So there's still a long way from pre-pandemic levels. They had a net loss of $640 million, which is comparable to last year. So that's good. They've also been diluting shares heavily, like I said. On the bright side, they were slightly free cash flow positive for the quarter. So that's definitely a big plus. Overall, management was encouraged by the favorable revenue and traffic trends that they saw in the quarter. I mean, it's not hard to beat compared to what it was a year before. It was clearly better. They've also recalled more than 10,000 employees since the

beginning of the year. So that's great for people that are employed by Air Canada. Things to watch for them if you're a shareholder or looking to start a position in Air Canada would be cost, more specifically fuel costs and wages. It's an interesting case of, I would say, recovery from the pandemic to watch. Yeah. So that's a major theme today, obviously. So whether it's Live Nation, the airlines, whatever, we're seeing nice demand for experiences to no one's surprise. That's to no one's surprise. However, Canada is a very slow adopter with this

stuff. And Air Canada is Canadian airline. I personally think that there are better opportunities in travel and experience elsewhere, whether it's Live Nation, Airbnb, Booking.com, to name just a few. These are platform type businesses that have great margins, much less capital requirements, and generally better businesses from a lot of perspectives. So I'm trying to own the best companies on the planet. And airlines are just brutal. Bad margins, hard logistics, capital intensive. Your customers hate you. Cyclical, seasonal. intensive. Your customers hate you. Cyclical, seasonal. Your costs are dependent on fuel prices. There's tons of competition. Very price sensitive and lack of loyalty, customer base, history of bankruptcies. Shall I go on? These are not fun things as an investor.

That being said, Air Canada stock can still do well. I owned it in 2017 when it was far, far too cheap compared to the growth. It's $17. I sold it at $45. So you can make a decent trade, but trading is not really the game that I'm trying to play here. So that's my opinion on Air Canada, the business. Air Canada, the stock might be an opportunity to make money. But again, that's not the game I'm playing. I'm looking at Air Canada, the business as something to own for a long time. And it's going to be around for a long time. We just talked about their ties with the feds and it's Canada's airline. Is it a fantastic business? No, it's not.

Well put, Brayden. So now we'll move on to another Canadian name, Canada Goose. Great earnings call from Canada Goose and the stock was way up on the day as well. The market agreed with 20% increase. Total revenue excluding PPE from last year grew by 40%. Direct-to-consumer revenue, or DTC, grew by 80% over last year. All-sell revenue was up 25%. Gross margins were 58% compared to 48% last year, which is really amazing coming from mostly direct-to-consumer sales, which are much higher margin. They're about 74% gross margins for those. And that was actually down from 77% gross margin for direct-to-consumer, mostly attributed to the sale of lower margin non-PARCA products. They do not expect any materials shipping headwinds due to global supply chain constraints. They are also launching a footwear lineup,

which they said that consumers have been asking for years. They've been taking their time to do so. And now we'll listen to a clip of Danny Reese, the CEO on the launch of the new footwear lineup. We are entering our strongest selling season with the launch of an exciting, all-scouter new category, footwear. Canada used footwear as one of the most significant milestones in our more than six-decade history.

As we've discussed, we are bringing a completely new perspective to the category, balancing performance and luxury, which is the ultimate expression of our lifestyle brand. And as you can tell from the audio, Danny is clearly very excited by that. They've already had some very positive feedback in terms of some soft launches. And before I finish on Canada Goose, the last reason that they had such a great day when the earnings release came out, they increased their 2022 guidance. Total revenue will now, they're projecting from $1.12 billion to $1.17 billion, up from previous guidance of $1 billion. So that's actually a pretty significant increase from their previous guidance. So if we compare that with Peloton, this is what happens when you increase guidance versus what happens when you decrease guidance.

That's right. The market is looking forward at all times. That's right. The market is looking forward at all times. The benefit to most long-term investors is the market is looking forward on a shorter time horizon than you. For the most part, the market is looking very forward, but only one, two, what do you think is fair? Maybe two years out, Simon. If you expand that time horizon, that's when real opportunities arise. But you're right. The market is forward-looking. And when you increase guidance, they like that. When you decrease guidance, that's obviously not as ideal. And in a reactive market to a rotation out of high-growth companies, those things get accelerated with the momentum going in a less favorable way.

That's my take on that. Yeah, no, well put. And I mean, I don't know about you, but for me, Canada Goose, I was already always a bit lukewarm on them. But the more I look at them, the more time passes by, I feel like they're starting to build a very – well, they already have a very premium brand, but it's sticking. It's sticking. Yeah, I think that's the most important thing here. Like I thought early on, it was just maybe a fad, but now we're really seeing them. Clearly,

it's not. And in my mind, they're almost building something a bit similar to a Lululemon in terms where it's a more premium brand. They have really good margins and it's not a fad. So that's just my take on them, but very impressed. The KPI I'd be watching for this one is Asian sales. That's the one that is very worth paying attention to for Canada Goose. All right. Last on the slate today, it has been a busy episode of earnings calls. There's so many to get to.

We're only getting to the ones that we think are interesting to highlight, but there are so many companies reporting and that's the beauty of earnings season and there's tons of awesome businesses we didn't get to, but we only have a limited amount of time and we hope that there's a lot of value out of this. Last one on the slate is Airbnb, ticker A-B-N-B. Airbnb had their best quarter yet with revenues up 67% year over year to 2.2 billion, which is 36% higher than the third quarter of 2019. That's the comparable I'm interested in. It's 36% higher than 2019. Brian Chesky, the CEO and one of the founders is awesome, first of all.

The founders of Airbnb are all great. They're Y Combinator graduates and Brian Chesky is a legend. He's particularly entertaining. If you're an entrepreneur or entrepreneur in the future, you want to be one, his YouTube videos or interviews of him on YouTube with Brian Chesky, I guarantee they will help you and they're highly entertaining. He's a great storyteller. Now, they pointed out a few things on the press release that I think are very worth mentioning. They said, one, people can now travel anytime, which I think is interesting to discuss. This idea of work and live anywhere, anytime is very freeing and Airbnb is a benefactor of that. Number two, people are willing to go to more exotic, less developed destinations. So they've seen a big drop off, for the better, in concentration in their bookings being in

large city centers. I think the top 10 used to make up 11% and now it's less than 6% of bookings in major city centers. So people are willing to go to more remote and exotic destinations. And that's interesting from Airbnb's perspective because those developed city centers already have so much accommodation infrastructure built out. But these exotic, more off-the-grid destinations, that's Airbnb's bread and butter. It's the cabin in the woods type booking. Those are on Airbnb. Those aren't owned by large corporate infrastructure when it comes

to stays and hotels. Number three, they pointed out that people are living full-time on Airbnb. I actually know countless people in my friend group and my life that are living full-time on Airbnb cheaper than if they were to rent a condo. And you have more flexibility. And it's very cool to see that because think about the total addressable market that this unlocks. It's gigantic. Number four is that hosting your place on Airbnb is easier than ever. Hosts around the world have earned in the quarter $12.8 billion in income, which was up 27% from 2019 pre-pandemic. So people on the platform are generating real incomes from this. More people are

listing their stay. That income that is being generated is up a lot, 27%. So that's great to see. They are truly collating the fragmented by nature market of other people's places, no matter where you live. And that's really cool. This is a company, Simon, I've been wanting to bring up and I finally added to my watch list. And yeah, there's been some nice price movement on it too. But this is one in 10 years where I look back and go, that was so obvious, right? How obvious is Airbnb in the future? I think it's freaking obvious. I mean, the stock trades are like 30 times sales. And I think it's pretty freaking obvious. I mean, the stock trades are like 30 times sales. And I think that's reasonable given the quality, the brand recognition. They don't spend hardly a dime on marketing compared to the other travel and accommodations businesses because of the brand

power. And the first thing you think of when you travel these days is booking an Airbnb. This is one that I feel like I should just buy a piece and do more work on it. Yeah, I've always been interested and I don't know if you know this. I'm putting you on the spot a little bit and if you don't, maybe someone can tweet us and let us know. But what share of the market Airbnb owns versus like a VRBO, right? Which is owned by Expedia. I'd be curious. I know- I saw it today. Oh, you did, huh? Yeah know i saw it today oh you did huh

yeah i saw it yeah i'll pull it up right now but the the market share from like i know it's the majority right no it's it's not no it's not it's not actually i saw that expedia had like 50 of the market okay that's good i know vrbo is quite big in specifically. I know they have a big share of the market there. I thought it was more of a two-player raise, but Airbnb owning the majority, say like 75%, 80%, and then the rest VRBO and the rest probably smaller sites that are fragmented. But I've always been interested because those are clearly the two biggest players in that space. Crap. I can't find it right now.

That's okay. We'll keep it or you can tweet it out on another. Yeah. This is a good call for you to follow us on the Canadian Investor Podcast Twitter. Or if you don't have Twitter, you can look it up. We'll post it. At CDN underscore investing. That is a great way to see what we're keeping up with. We tweet about lots of stuff outside of the podcast to back up what we're talking about, both on our own personal accounts as well. So you can go ahead and do that. Thank you so much for listening on the pod today, guys. We really appreciate your support. If you haven't checked it out already, stratosphereinvesting.com just launched another feature yesterday.

We're going to have watch lists by the end of the month, so it's free to join. That feature is going to be completely free to track your watch list, track the companies you care about, and you can sign up completely for free at stratosphereinvesting.com. We appreciate your support, not only there, but on the podcast. Thank you so much. Take care. 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.