The Canadian Investor - Nvidia’s Market Cap hits 2T and the Start of Canadian Bank Earnings

Episode Date: February 29, 2024

Join Dan and Simon for the weekly news and earnings episode. In this episode, Simon and Dan start by talking about Nvidia’s blowout quarter and what the future might hold for Nvidia, AI and the semiconductor space. They then discuss the earnings of Lightspeed Commerce and Teladoc, two pandemic darlings that have seen their share price crater since 2021. The episode concludes with Simon and Dan discussing Loblaw’s earnings and the start of Canadian Bank earnings. Tickers of stocks discussed: NVDA, BMO.TO, BNS.TO, L.TO, TDOC, LSPD.TO Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Sign up for Finchat.io for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

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 Braden Dennis and Simon Belanger. Welcome back to the Canadian Investor Podcast. We're back for a earnings and use episode. I'm here with Dan Kent, as I'm sure everyone is familiar with at this point. Before we get started, Dan, you know, how's it going? And have you been having fun reviewing the Canadian banks

this morning? Because I know you woke up early to do that, right? Yeah, definitely did. Talk about it a bit in a bit here, but it's been going all right. I was about to make my weekly contributions to my portfolio and my dishwasher crapped the bed a month after the warranty ran out. So I kind of held that off because it's probably going to be a a 1200 bill to replace that so yeah i conveniently it failed like i moved in january 12th and it failed yesterday so like 13 months you'll have to become a you know the dishwasher yourself. So. Yeah, exactly. For a bit here. Yeah. No, I don't think I've ever asked you that. So do you cook or is it your spouse that cooks? Like I do most of the cooking. Okay. I'd like that too. I probably do 90%.

Yeah. A lot of, a lot of couples are surprised. I'm like, well, I mean, there's some simple stuff, but you can also just follow a recipe, right? It's not rocket science. That's why when HelloFresh or GoodFood come out with the 60% off the first box or whatever, I love that. Throw it in the fridge and whip it out. Hey, there you go. Well, I guess enough of our food and cooking habits. We'll get started here.

And obviously, is there any other way to start, Dan, There you go. Well, I guess enough of our food and cooking habits. We'll get started here. And obviously, is there any other way to start, Dan, than just that little company called NVIDIA that reported last week? The stock that probably saved the market because it wasn't looking good up until the earnings. No, exactly. And it does feel like that, right? I was kind of joking to Braden. I was texting him and I'm like, I can tell if Nvidia is up or down because the market will be up or down. That's pretty much how things are going right now. Well, what did they, after they reported, I think the NASDAQ closed like 3% up or? Yeah.

I think it was something like that. Whereas if it didn't report earnings, it probably would have closed 3% down. I would imagine so because it was looking that way yeah and i mean i think we can all agree and people will listen and i'm sure at this point you've seen a lot of takes on the quarter from in nvidia so you know personally i think obviously it was a blowout quarter i think you can't really say otherwise as an investment i think this is where it gets a little more difficult for Nvidia because I think there's a lot of risks going forward. And you hear a lot of bulls on TV about Nvidia, and they tend to only focus on, you know, the good and extrapolating

what's happening into the future. And I'm sure it will continue to happen to some extent in the next year or two. But beyond that, I think just hearing people saying like, I can see NVIDIA continuing doing that for like four, five, six, seven years. I think they're ignoring a lot of risks involved with that business. Yeah, it seems crazy to think that it can grow this fast for this long. But I also, I compared it probably a week ago to Google just in terms of cash flow generation and how like Google's generating like four times the amount of cash flow and how NVIDIA would have to grow it at a lot of free cash flow relative to what it has done previously. So, I mean, maybe it can keep it up, but over the course of the long term, it seems hard to imagine, but who knows? Yeah, exactly. I think it all depends where the business goes, the competition, I mean, the growth rate, the valuation, right? There's a lot of things involved.

There's no doubt it's a great business, but at the same time, will it be a great investment? I think that's where the debate lies in. But having said that, let's talk about the results here. So revenues increased 265% year over year for Q4, which is pretty wild. But even the increase from Q3 to Q4 was 22%. And for a lot of businesses, I don't know about you, but for a lot of businesses, just having that kind of year-over-year growth of 22% is pretty impressive. Obviously, on a sequential basis, it's even more so.

Yeah, 22% quarter over quarter, especially when they're, what, a $2 trillion company? It's pretty crazy. Yeah, and really leading that is the data center revenues. They were by far the biggest contributor here by a mile, I would say. So revenues were up 409% for data center revenues year over year and 27% from Q3.

Data center revenue is now 83% of NVIDIA's revenue. So it's really massive, obviously driven by AI here. And gross margins went up from 63% to 76% year over year. And the increased 200 basis point from Q3 alone. Earnings per share was up 765% year over year and 33% for Q3. So get used to these numbers. over a year and 33% for Q3. So get used to these numbers. That's kind of how their quarter went. They're just these really large numbers, which are definitely hard to wrap your head around sometimes. I don't know about you, but just reading that, it's just like, it's mind blowing. Well, yeah, you look back to, I was mostly, their data revenue or their data centers is what is just unbelievable. Like in 20, January,

2017, this is from the FinChat, like KPIs, 830 million in data center revenue. And now it's 30, almost $33 billion. Like that is just, it's crazy.

Yeah. It's completely insane. And I posted on Twitter, if people want to, you know, follow me, it's at Fiat underscore Iceberg. And I posted a chart that I'm showing right now to join TCI members. Essentially, it just goes and shows it's on a quarterly basis. And you just see the data center revenue just massively increasing. I mean, since the quarter that ended in January of 2020, data center growth has compounded at an annual, compounded at a rate of 108%, which is pretty crazy. Yeah, like you would think this would have to plateau at some point, because I mean, this is probably all like a lot of preemptive purchases maybe by big tech and all that kind

of stuff. You wouldn't think't think i mean it can't really grow at this pace for a long time but who knows how long it'll keep up for i mean especially with so many new ai platforms rolling out recently yeah and i think that's the debate right is how long can nvidia grow this and that that's definitely a big debate going on and just finishing over the numbers here free cash flow was up 57% compared to last year. Obviously, looking at the full year basis, they bought back $3.5 billion worth of shares during the quarter, more than offset the $1 billion in stock-based compensation.

Whether that's the best use of capital here, I guess, is debatable. I mean, it probably looks good just based on the pop that the stock got when they released earnings. But the big debate, I think, is around how long can this continue. And I was watching an interview on BNN Bloomberg with a senior portfolio manager, and he was arguing that the AI market would grow at 40% annually over the next five years, and that NVIDIA will keep exceeding expectation during this period of time. The argument being that NVIDIA will be one of the biggest beneficiaries from that. And what was interesting when the host asked him about concentration risk, because

and the host cited that one customer represents 20% of their revenue. It's actually 19%, one customer represents 20% of their revenue. It's actually 19%, but because I was reading their annual report in the risk section, they don't say who their customers are, but concentration risk of customer is one of the risks, and they do state that there's one customer that represent 19%.

I think you can fairly, people can guess who the customers are. I think you can probably say that obviously, there's a Microsoft and there's going to be Google, there's going to be Amazon, like all the big cloud providers are purchasing this equipment right now. But at the same time, you know, if one of them decides to say, okay, I think we're good in terms of, you know, the buildup, or maybe we're going to start looking at some options from AMD, for example, maybe they're not as, you know, has performance or high performance as the NVIDIA chips, but, you know, is it, is the cost performance ratio better for the NVIDIA chips? And is it good enough for what we want to accomplish?

And I think you have to be really careful with that, even if they do produce the best chips, at some point, it's such a lucrative market. I mean, we just talked about the margins, the margins are so high. Competitors are seeing this, they are seeing this and they are saying, how can I get a piece of those margins? So that is something that it may take a year or two or even longer, but even if they don't have the best option that's equally as good as NVIDIA, if the price point is so much lower, it's going to start impacting NVIDIA's revenues. And then you get also into the risk of being overly reliant on one producer because a lot of people think NVIDIA produces the chips. They actually design the chips and then the chips are produced by mostly Taiwan semiconductor company, which predominantly located in Taiwan.

And then you get into the whole geopolitical risk. What happens if there is a Chinese invasion of Taiwan? All the risk associated with that. if there's a chinese invasion of taiwan all the risk associated with that but if you listen to people talking about nvidia that are bullish they basically like honestly they literally brush aside all the risk they just focus on the upside and that's when the alarm bells go on for me is when you hear people talk and it's only upside and no risk yeah and i mean it was much the same i remember in like 2020, 2021, it was kind of the same with Tesla.

I mean, a lot of people were, you know, brushing off the risks there. I mean, just crazy prices on their vehicles and now they're having to consistently cut. And I mean, I think Nvidia's in a bit better position than something like that, but just speaking on, you know, stocks trading at kind of crazy valuations,

I'm surprised they actually didn't state which customer makes up the 20%. They just said a major customer. I mean, I guess maybe they can't state it, but... I think they can. They just don't want to. Yeah. I think that's probably... I mean, I don't think nothing forces them.

I think some companies, when you look at earnings, regardless of the sector, they will specify the customers. Yeah. Some won't. But you can, I mean, just by the cost of these chips, I can imagine that a lot of it is just, you know, everything surrounding cloud infrastructure. I think that's it. So, yeah. Well, and you see like how OpenAI has exploded over the last while. Like I would, if I were to bet, would would say it's microsoft for sure and at what point does you know you know

a ton of capital spend now kind of flatten out once they've kind of got everything you know infrastructure built out things like that but uh yeah i don't know it's gonna be interesting yeah and they're they're guiding for a pretty good quarter as well. A lot of people are kind of banking on them exceeding this guidance. So they're guiding for revenues to be $24 billion in Q1. So that would be a 9% increase versus Q4 or a 233% increase year over year. So I think a lot of people have gotten used to them to beating the guidance. So we'll have to see.

Look, I'm not saying it's a, and I think you agree with me, like I think it's a very good company. That's not what we're debating, but there are some risks associated with it. And, you know, a good company doesn't mean necessarily good returns if you don't get the right valuation and the future doesn't exactly pan out exactly how you see it to grow into whichever valuation you paid for it yeah i kind of say like price to perfection pretty much yeah it's not saying like it can't continue to go up but i think like at this point everything needs to go right which like i said that six months ago but everything is most certainly going right which is why it's

like just absolutely ripping right now. But yeah, it was a pretty good quarter. I'm happy to look on the sidelines, but I say that. And I think I calculated and I probably have like a couple thousand dollars in NVIDIA just through index funds. So I'm kind of half on the sidelines. I have, yeah, I do have some exposure through my index fund. So I'm more than happy to just kind of look from the sidelines. It's fascinating. We'll have to see where it goes.

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. To stay into the tech space, do you want to go over Lightspeed commerce earnings? I think they came out a couple weeks ago. I know it was a very popular holding for our listeners, at least during the pandemic. I know it's gone. It's falling down from grace, along with a lot of very expensive companies that were trading at high multiples in 2021, including Teladog that I'll be talking about a bit later. But you can start us off with Lightspeed.

Yes, Lightspeed, it's taken a pretty big hit from peak numbers in 2021. I mean, headline numbers were not that bad. It posted beats on all fronts, but it was kind of guidance and a little bit in terms of gross transaction volume that caused the stock to take a pretty big hit on earnings day. So revenue was 239 million earnings per share came in at 8 cents. So expectations were for 236 and 2.7 cents in earnings. So the main issue for the company here, at least in the short term, is we're kind of starting to see a bit of weakness in terms of the economy and it's starting to reflect in lightpeed's results. So gross transaction volume, which is pretty much the amount of sales

the company's customers drive like through their say point of sale systems, it was only up 3.6%. So the previous six years, Lightspeed had grown gross transaction volume by 20%, 115%, 51%, 54%, 37%, and 49%. So it came out with 3.6%, which is way, it was way lower than anyone had expected. And then in addition to that slowing volume, the company made this comment.

The company remains cautious on near-term prospects due to a still uncertain macroeconomic environment and the pace of unified payments adoptions in international markets. In addition, the fiscal fourth quarter is historically the company's weakest quarter for gross transaction volume performance. So to me, the fact they mentioned that the fourth quarter is the weakest probably means they think it's going to come in weaker than it is now. So you might even see a decline in volume. So that will certainly be interesting to watch. And then their subscription revenue has witnessed a pretty big slowdown. So it grew year over year 6%, whereas in previous years, it wasn't unusual for it to grow 20, 30, 40%.

So the company's strategy over the last bit is to spend its efforts focusing on high volume locations. So the reasoning for it is pretty simple. There's much lower likelihood a business that's generating a million dollars in transaction volume is going to churn and cancel their subscription to Lightspeed over a company that is generating a hundred thousand dollars in volume. So when times get tough, the business generating at a hundred thousand, they probably won't be able to maintain the systems where a company generating 1 million will still probably rely on it. So high value clients, they define them as customers who generate more than 500K and or 1 million in annual gross transaction volume. They increase by 7% year over year.

But on the other hand, the locations processing under 200,000 in gross transaction volume have decreased. Now I found it a bit odd because they had no problem telling you how much their high volume clients had grown, but they didn't state any numbers on how much their low, I wouldn't call them low value clients, but like the smaller businesses decreased. But when you think about it, if they're growing, you know, 500 K and $1 million businesses by 7% a year, gross transaction volumes up 3.6%. I think they're losing a lot of small to medium sized businesses maybe. Not necessarily permanently, but maybe right now when business is slowed, they're churning their subscription, they're canceling just when times get tough.

So that was one of the main risks with Lightspeed for quite a while was their reliance on small to medium sized businesses. And again, yeah,iance on small to medium-sized businesses. And again, yeah, it's easy to read between the lines. They're losing more low-value clients than they're picking up in high-value clients, which is resulting in the slowdown. But ultimately, I don't really think there's anything that they could do about it. I mean, it's mostly just an economic thing. They have, like I said,

a ton of exposure to small and medium businesses, which are just getting, which are really struggling right now. And I kind of mentioned like, look no further than the SEBA situation in January, like how many businesses, you know, couldn't pay it back outright or they needed to get a loan to pay it back.

Yeah. It probably explains why, because I'm on Fincha.io and I was pulling the KPIs and the total customer locations. They actually stopped reporting that in the Q4 of last year. So the total location. So I'm assuming that they had an inkling that it was probably going to be flat or start trending down.

Because even before that, it it was as you can see it was leveling out to 167,000 168,000 from pretty rapid growth and kind of leveling out and I mean it's just interesting because oftentimes I mean we saw that with Apple and how they reported iPhone sales right years ago they've changed from the unit amounts to the total dollar amount so that's probably why they did that as they were starting to see some weakness in those smaller locations yeah and mostly in the in the 2020 well 2020 might have been organic but i'm pretty sure uh when they acquired Order, which was in 2021, that's probably what caused a big boost. And same with Teladoc. They paid a lot of money for some of those acquisitions, which has come back to bite them now. But it was a pretty rough quarter. They can't really

do anything about it. When the situation improves, I would imagine the numbers will improve. They're pretty cheap right now. I think they have $800 million in cash on the balance improves. I would imagine the numbers will improve. They're pretty cheap right now. I think they have like $800 million in cash on the balance sheet and they're trading at what, a market cap of, trying to load my screen here, my mouse is. So they've got a market cap of 2.8 billion and they have, I think 800 million US in cash. So I mean, it seems pretty cheap here. I own a pretty small position. I've been in and out of this stock like so many times since it IPO'd. I bought it on IPO and I've probably sold it four or five times since. So it's been a crazy ride for this one, but I still own a pretty small

position, but it wasn't the best quarter. Yeah, I know. And you're right. And not a lot of really no long-term debt, which is kind of, at least it's're right. And not a lot of really no long term debt, which is kind of at least it's it's a positive. And I think, you know, it's important to look at both sides here. Obviously, things are slowing, but I think that's probably more reflection of the economic environment. And I think my my biggest criticism for Lightspeed and I've criticized them a little bit over the years, but my biggest was that it's a very competitive space point of sales yeah and i just have a hard time seeing how like they might have a nice profitable little business but i don't know to what point they can really scale profitability without getting some more intense competition that's probably yeah my biggest thing with them yeah

and they've kind of tried to expand beyond like point of sale like originally they were pretty much just a pure play point of sale company but now they do quite a bit of commerce stuff they actually like if you go to like a golf course website and book a tea time like they run like a tea time booking platform for a lot of golf courses. And yeah, they, it's an interesting company. I mean, small position for me, like I said, it's pretty speculative at this point in time, the pandemic run up was just absolutely nuts. I think at one point, like they're $18 right now. I think at one point they might've hit $150. It was a 160. They got up to 160. It was, uh, it was It was crazy. Not a good quarter, but I'm still holding.

Well, that's what happens when you're in a zero interest rate environment and money is flowing, people are remortgaging their houses, spending left, right, and center. You have government stimulus. I mean, at some point, the party's over and then, you know, it takes some time. But now I think we're starting to see the repercussions of that. Just, I mean, we've been seeing it for a little bit, but even more so now. Yeah, and it's not exactly like it's not. I don't want to give the impression that it's like specifically isolated to Lightspeed. Like this was a ton of companies that went through this.

Even Shopify. Shopify took an absolute beating off uh 2021 highs so it's uh it was an interesting thing that was grow yeah anything that was growed and i would say even more so if they were growing quickly but were not profitable those got hit the hardest yes which was light speed in its the true definition yeah do they generate free cash flow or i believe this quarter they might have been positive i'd have to double check that i mean they they mostly measure on an adjusted EBITDA basis and they came in positive there that's kind of their profitability target i think they might have generated i'll have to check yeah but i like to look at more as a year

basis because obviously it's super um volatile but still not quite at least for the trailing 12 months but it'll be interesting the next 12 months maybe they'll be able to kind of eke out some free cash flow there yeah they still burn through quite a bit of cash for sure. But yeah, I think that's good. No, that's a good overview. Now we'll move on to another pandemic darling here, Teladoc. So Q4 in full year results. It's been a while since I've talked about them. One of the reasons is I don't follow them as closely as I used to because I used to own it.

I don't anymore. I sold it around actually this time last year. And I just want to go over quickly why I sold my position last March. Management, like you said, like you implied, so management had several acquisitions when the markets were extremely highly valued. One of them particularly was extremely expensive and quite massive. And that was when they acquired Livongo, extremely expensive and quite massive. And that was when they acquired Livongo, which is a company focused on chronic care. You know, I gave management the benefit of the doubt here because they said, look, we paid a high price, but we're building an integrated telemedicine platform, which should

provide growth and really differentiate us compared to other platform where people have like kind of one stop shop for all their telemedicine needs. But we said it at the time, the price paid was really high. And granted, there was a lot of stock that was involved, but it diluted shareholders quite a bit. But I still figured I would give management some time to kind of prove themselves. And I also had bought the stock when it was in the $35 range so I was pretty well into profit I even trimmed when it was close to the top so but I still kept a pretty decent position the acquisition for Livongo was completed in late 2020 2021 was a great year but it was also still in the midst of the pandemic and And it was comparing results, obviously, to pre-acquisition. So results definitely, you know, we have some base effects there when you integrate a new business. So that definitely boosted the results.

The problem is that growth started slowing in 2022 and expenses started increasing. They also had a massive write down tied to the Livongo, actually several write downs tied to the Livongo acquisition, write downs tied to the Livongo acquisition showing that it clearly didn't wasn't going the way they had intended and in my view things were not going the way management had told shareholder at the time of the acquisition I gave them basically two years from the time they acquired Livongo and I didn't see improvement in the results like they were saying and if anything it was actually starting to go a bit more sideways not quite but they were still growing but the

growth had slowed significantly like I said I trimmed some of my position near all-time highs but I also sold a big chunk of it below the price I bought it I could have sold it sooner but I kept my shares you, because I wanted to give them the benefit of the doubt. And then last year, I just decided, look, it's going in the wrong direction. I'm going to sell. And, you know, maybe they could have turned things around and could have been higher now. I'm definitely glad I did because I got a better price than if I would have sold it now. But I just wanted to explain to that because that's the whole process I went through

for people that would be listening and maybe are sitting on losers. You know, sometimes it might be right to sell. Sometimes it might not. I think it's important to also not make any rash decisions and just have a good framework behind it. No, yeah, definitely. The one thing I was looking at,

because I actually read here the valuation of of it it seems pretty cheap right now like it's down it's down like i don't even know what this would be it's got to be down like 90 something percent from its highs yeah something like that but uh yeah it's crazy i i haven't paid too much attention to teledoc like i own i'm pretty sure everybody knows here. I've spoke about a few times. I own Well Health, which is a little bit of a Teladoc play, but not necessarily. They have a lot of patient care facilities and things like that. But I didn't know that T-Doc was doing this bad. Like three, what was it? 8% revenue growth. Yeah. Yeah. So for the results, yeah, exactly. So for the year, revenues were up 8% to 2.6 billion. For the quarter, it was only up 4% showing that there was some clear deceleration

here. And that's always something for people that are looking at results, something you can kind of pinpoint pretty quickly, right? So if you see a big divergence on a growth rate between the full year and the quarter quarter whichever way it is it'll tell you either the quarter you know things are accelerating or decelerating or about the same right if if it's the same so i think i always find that interesting because you can look just very quickly and get a glimpse of what exactly how the the business is trending it essentially lines up with their guidance for 2024. For the full year, actually for 2025, for the full year, they are guiding 3% increase in revenue if we take the

midpoint of the range they gave. And obviously, it's kind of a continuation of the fourth quarter after 4% growth. So this is my view. Honestly, the business seems to be stalling a little bit here. A 3% increase is at best going to keep up just with inflation in 2024. I think it's safe to say that inflation will be at least 3%, maybe a bit more. So to me, the business is essentially flat in terms of sale. The net loss was much better than the previous year. But again, it's those write-downs I talked about. So it's not a very good comparator here. They generated a decent amount of free cash flow, though. And that's been the case for Telda for a little bit of time now. They generated $339

million, and that was a 95% improvement over last year. Free cash flow per share is actually trending up. I was kind of surprised because they did a lot of dilution over the years so i was surprised to to see that uh yeah knowing i know you know telling doc a little bit were you kind of surprised to see that as well yeah because when you look at like what would that chart be from 2017 so shares outstanding have gone from 46 million to 167 million over this same time period yeah somehow like free cash flow for per share has gone from what is that negative 70 cents to two dollars ten cents or is that yeah that's per share yeah per share yeah yeah it's uh that's pretty surprising i didn't even know the company was cash flow positive, to be honest.

Yeah, I knew they were. I mean, they were on and off. Obviously, there was 2020. Yeah. That was kind of an outlier there. But yeah, that is something from a gap perspective, from an earnings perspective. I can't recall them ever producing a positive quarter, but free cash flow, definitely. And the last thing I'll say is they're trading at seven times free cash flow, which is, that's pretty cheap. I mean, I think there might be some upside here. I'm not a hundred percent sure. Of course, it's difficult because clearly on the revenue side, it's not really growing. So you're kind of banking on management to get more efficient and just provide some, yeah, some better margins overall. I guess that remains

to be seen, but seven times free cashflow, if they can keep it similar or improve slightly, you know, there might be a little bit of upside going forward. I think that the correction may be a bit overdone for them but we'll have to see obviously could go either way but just based on that i think you know there could be a worse price to pay if you're interested in telemedicine play yeah it seems reasonably cheap i mean the one thing about a three percent top line growth eventually, like you can only improve margins so much until you need money coming in the top to turn out money into the bottom. So a 3% growth rate is not the best, which is why it's probably trading really cheap. And it looks like it has quite a bit of debt as well.

Yeah, I think they picked on some debt, if I remember correctly, from the acquisition of Livongo. I'm just pulling the numbers here. So yeah, a little bit, definitely a bit of debt. So about $1.5 billion on the balance sheet. And then if you compare it to that with cash, yeah, so $1.1 billion of cash. So not too bad. Probably a net debt position of $ 400 million or so, but still something to keep in mind where you look at a light speed where they had a net cash position,

but on the other end, they're burning money where Teladoc is not. So I think it's probably a similar situation. Close. Yeah. Except light speed is still growing top line at least by 20 to 25%. Thus far, I mean, who knows moving forward just because of, I mean,

I don't think too many people are bullish on the Canadian economy, but it'll be interesting. 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. Do you want to go on to Loblaw? Yeah, if you want to talk about Loblaw, and then we'll do a quick overview. You did some good notes about BMO and Scotiabank reporting, first of the big banks. Yeah, so Loblaw continues to report pretty strong results, which is a controversial subject for many, especially politicians. Revenue is up 3.7%. Same-store sales are up 2% for its food retail and 4.6% on its shoppers drug Mart segment.

So when we look to same store food sales, 2% is actually lower than, you know, what you, the, and cause this is on a year over year basis, like, uh, 2023 versus 2022. So that's actually, if you consider food inflation is, I can't remember what we said, it's still at 6%, 5% or 6%. Yeah, that sounds about right. This same store food sales of 2% is actually lower. So actually that was on a sequential basis that was quarter over quarter. So it's grown 2% quarter over quarter. On a full year basis, So it's grown 2% quarter over quarter. On a full year basis, revenue increased 5.4% and adjusted earnings per share by 13.6%.

Same store food sales increased 3.9%. So the point is still there. It's not as high as inflation, food inflation, but it's still, it's relatively high. Drug retail increased by 5.4%. relatively high. Drug retail increased by 5.4%. So the company's shoppers drug mart segment, particularly with pharmacies and prescriptions and stuff, I think is what is driving most of the growth right now. And it's also buying back a ton of shares. So it purchased $1.72 billion worth of shares over the course of the year. And since 2020, Loblaw has reduced its overall share count by more than 16%. I think it was actually close to 17%. So the company has been on a pretty crazy buyback spree, which is definitely helping their earnings growth. So it posted returns on

capital 11.5%, which is a 70 basis point increase from last year. Debt to adjusted EBITDA came in at 2.3X, which would be 10 points lower than last year. And free cashflow came in at 1.7 billion. So it pretty much spent all of its free cashflow on buybacks. So that would be an 11% increase from last year. It's still growing its e-commerce sales at a double digit pace. So this is a pretty important metric as well, because it kind of shows you how permanent the shift to online ordering would be. So they would have had some pretty tough comparables during the pandemic and coming out of the pandemic, and they're still growing on top of those numbers at a double digit clip.

Really? growing on top of those numbers at a double digit clip so really yeah 10.6 percent and i i believe like during the pandemic they were growing it at like a 30 some percent pace and i figured for sure you would eventually see a decline but they're still they're still growing at a double digit clip i mean some people just like ordering online and i'm pretty sure they'll pick your order for like a like a small fee they'll go through and yeah and then you just like park in one of those spaces and they'll come pick it yeah we did that when they had all the lockdowns yeah we did that like for a couple months but uh i still like going in person and uh you know touching my fruits and vegetables i like to make sure produce especially i mean it I would, we did this during the pandemic

too. I don't think they charged you during the lockdown period. They just did it. But now I'm pretty sure they charge you a fee to put the order in. But, um, if we look at the grocers coming out of the pandemic, Loblaws is like miles ahead of the others. So over the last three years, it's gained 140%. The next closest is Metro at 43% and Empire at 3%. So that would be total returns, dividends reinvested. So this isn't all that surprising. As Loblaws, it's got the widest moat, I think, in terms of Loblaws stores. I believe every Canadian on average is only around nine kilometers away from a Loblaws branded store. So they have a huge, huge moat in that regard.

But they also have the largest discount element out of all the major grocers. I know Metro, we don't even have Metros here, but I know they do have in the East, they have some discount brands. But Empire really struggles in that regard i mean i know they're shutting down sobies and safeways to try and convert them into like discount stores i have mentioned this before i used to be a pretty regular so we shopper but i don't know if i'll ever shop there again it's just the prices are just absolutely absurd so i just go to no frills i will admit at least where i'm at that the shopping experience is definitely not the best at our no frills, but I mean, it kind of smells in there and the food is,

it's kind of off, but I mean, the cost difference is massive to the point where, you know, it's definitely worth it. They release guidance. So they expect earnings per share to grow in the high single digits. Earnings growth will outpace revenue growth and capital expenditures to be around $2.2 billion, which is, it's a hundred billion higher, a hundred million higher than last year. So it clearly feels that share price is still discounted despite, you know, a massive run up in price over the last while, as it plans to allocate a significant portion of free cash flow for share repurchases. And as we can see last year, it pretty much spent all of it on that. So it stated that tailwinds from the attractiveness of its discount brands

will be one of the main reasons that it continues to grow at a high single digit pace moving forward. Yeah, that's pretty crazy. I'm looking at how much they've generated in free cash flow and in terms of share repurchases. It's pretty amazing just to see that over the last few years. Yeah, they bought back a ton of shares. And I mean, they were really cheap for a long time. Like Loblaws didn't move anywhere in price and they just kept buying back shares for quite a few years. Yeah, it seems like they've been at least I'm looking at the quarterly info. So over the years, yeah, it's been just increasing.

So they've bought back pretty much like over since 2017, except for 2019 and 2020. I think they're, yeah, except for a couple of years, they've bought back what looks like pretty much like a billion in stock every single year since 2017, which is pretty, pretty amazing. Yeah. And I mean, they did so at, like, if you look at that 2017 to like 2020, 2021 spot, like they stayed cheap for quite a while. And I mean, even now that they've gone up 140 over the last while they're still going to buy back a ton of shares so they clearly don't believe

the stock is even expensive right now even though it's gone up quite a bit yeah i mean maybe it's all those uh galem uh weston commercials that are really uh driving the sales yeah that guy that guy's tough are those still playing like we don't have cable do you uh i don't have tv no you don't have tv either no so for those who do have cable and not just on demand uh feel free to let us know on twitter if uh galem is still being featured in those president choice commercials because i i did not like i did not understand why they kept like using him for pr because he's not the most charismatic no definitely not yeah it made the situation worse i think but yeah yeah no exactly i think that no i think that was a great overview do you want to go with uh bmo and bank of nova scotia and i think i'll

definitely have some things to add here um here and there because i was able to look a little bit at the results too yeah so this is just like a quick overview i i think we'll go more in depth next week when they like all reported so yeah bmo definitely had a rough quarter like scotia banks was pretty good but bmosO's, it was rough. So headline numbers look pretty rough. They reported earnings of $2.56 when the expectations were for $3.02. So the capital markets division saw a near 20% decline in revenue. And this kind of aligns with, this is probably a month or two ago,

I pulled that study from TD Bank where it said 47% of Canadians didn't contribute to their investment accounts in 2023. The context of the study was a bit weird. I don't know if it's like people who invest with TD or people who have accounts didn't contribute or just overall all Canadians. But I mean, it's pretty clear that a lot of Canadians don't have a lot of money to invest right now. And we're seeing that in trading volumes dip and new listing fees with a company like TMX group are pretty much non-existent. So the average Canadian is struggling to save and invest right now, which ultimately impacts capital market revenue to an extent. The one thing, overall revenues dipped 8%. This is kind of, I think this was way under what people expected.

I don't think there was a decline in revenue projected. And provisions for credit losses jumped to 627 million. So this was higher than the 514 million expected. And it's nearly triple on a year over year basis. So the higher provisions, at least for me and probably a lot of other people who kind of look into these banks a little more in depth, it could come as a bit of surprise. Because for many, the main narrative here in terms of the PCLs is a Canadian housing market. But BMO has the lowest exposure to residential mortgages as a percent of its total portfolio at 22.9%. That's their Canadian exposure. I believe they have, I think, total maybe 26%, 27% with US mortgages involved. Yeah, that's right. But when you compare this to something like CIBC, which is over 51%, it's really low exposure to

the housing market. So the high PCLs was a bit of a surprise for sure, especially like the big increase. So overall, just not a good quarter from BMO. I don't know if you want to put your thoughts in there and then I'll move on to Scotia. Yeah, I mean, that's the general sense I got as well. So the biggest things, at least for me, for the takeaways was the loan loss provisions that had a pretty big jump. Even when you look at a sequential basis, because you'll see media will try to say, oh, it's like year over year.

I think it almost doubled year over year. But again, I think you want to make sure with the banks especially, and depending on the kind of business that are reporting, but with the banks looking on a quarter over quarter basis i think it brings you a lot of insights as well because you know a lot of those loans that they have were already originated you know last quarter so it's kind of a continuance so they're probably i don't know if they're seeing some more softness i know in the results they were saying it's more of a method that they were changing a little bit. Maybe they weren't being conservative enough. So that's why they adjusted it that way. It was really weird. I send it to you. I can't remember the exact wording, but

just very strange the wording they were using. I think they were almost trying to convey that their loan portfolio hadn't got worse. It was just their methodology that was different. Something like that. I'm kind of summing up, but you remember what I... Yeah. So it says the 154 million provision for credit losses on performing loans in the current quarter, which is loans, like performing loans are loans that are still getting paid, but they project will go unpaid so on those performing loans uh they say it was primarily driven by portfolio credit migration and model updates yeah yeah so yeah i guess yeah that's about it's very vague yeah it's very vague exactly so i think that's the the one note and the other the other thing obviously they don't have as much mortgage exposure as you just

said compared to other banks like CIBC or even I think Bank of Nova or Scotiabank also has some pretty significant mortgage exposure. But BMO is one of those banks with those variable rate mortgages with fixed payments. And a lot of these are in negative amortization. So they said they still have 23 billion worth of these mortgages that are negatively amortizing. And that's down 23% quarter over quarter. So clearly, they're making some progress there, whether it's people switching to fixed rates, or people just like we're having to renew and then it's reamortized and then there's not supposed to be this issue going forward. But that's definitely something to keep an eye on. And for those who are interested in this bank, I definitely encourage you to look at their presentation

because they give a good breakdown of their mortgage maturity schedule, which I think it's really important for any of the Canadian banks, clearly some more than others, probably more of CIBC, obviously, compared to BMO. But it's interesting, they break that down. They also do some projections on what the average increased payment will be. They're just projections, because obviously, they don't know for sure, because interest rates will vary down the line. Yeah, it was a rough quarter. I mean, the one positive side would be that the Bank of the West acquisition is going pretty good for them. That was like a regional bank that they bought in the United States last year.

Yeah, didn't they buy that like right around the whole like regional bank? It was, but they purchased it before, but i don't think it had closed yet and i know td with uh what was that bank called first horizon maybe they backed out yeah but bmo went through and closed it and uh apparently it's going pretty well so that's a good sign but move on to scotia or do you have anything else yeah yeah let's do it and i think we'll wrap it up and then next week i think we'll probably dedicate most of the episode for a banker and yeah scotia had a better quarter so this is probably a relief to many as the bank has has had a lot you know they've had a few rough years although adjusted earnings dipped by 8%, revenue grew by 6%. So this is a pretty stark contrast to BMO, which is 8% decline. So on the Canadian banking end of things, the bank saw total loans decrease by 1%.

So mortgages were down 5%. Business loans were up 9%. And credit cards were up quite a bit, 18%. This is a pretty big increase in credit card balances over the last while. A lot of the strong results- I know why. What's that? I know why, because you're richer than you think. Yeah, exactly. Don't bump your credit limit. You're richer than you think. Yeah, exactly. It's okay. Take on as

much debt as you want. You can buy whatever you want. They're richer than you think too. A lot of the strong results on the quarter was fueled by its international banking segment, which has been like such a drag on the business for many, many years. So on a quarter over quarter basis, they grew revenue by 11%, adjusted earnings by 35%. On a year over year basis, international revenue was up 9% while net income is up 5%. So again, it's only one quarter. I mean, we'll see how it goes moving forward because like I said, it's been one of the main drags on the business. They've primarily in Latin America, they expanded very rapidly over there over the last few years,

and it just hasn't worked out at all. So they reported a much better quarter on a PCL front. So if you remember, like Scotia reported like big PCLs last quarter, which seemed like an attempt to play catch up to maybe underestimating them previously. So total PCLs last quarter were 1.256 billion, which was way, way higher than anyone had expected and was a 50% jump from even the quarter prior. So this year, this quarter, they reported PCLs of 962 million, which brought their PCL ratio down by 15 basis points or 0.15%. So it sat at 0.5. They saw a huge improvement in its Canadian banking segment in terms of PCLs as it nearly cut its PCL ratio in half, it went from 63 basis points to 34.

And its international PCLs sit at 135 basis points, which is a 16 basis point increase or 0.16% increase quarter over quarter. So the Canadian banking segment, especially like the big decline is the one thing that surprised me. Just a huge decline in their PCL ratio on the Canadian retail loan end. Yeah, I know. And I think we had talked about that. I think it was one of the first episodes we did together on the podcast when we looked at bank earnings last quarter. And that

was our biggest thing. When we started comparing the total amount on the balance sheets for allowance for loan loss provision or provisions for credit losses, you could tell as a percentage that Scotiabank was definitely under the other big banks. That's one thing we had looked at. So it made sense that they put in more money for loan loss provisions last quarter. And now it seems to be normalizing, although it's still quite significant in amounts, let's be honest. And for people looking to see how much banks actually have set aside on their balance sheet. So you have to go into their balance sheet and you'll see there's going to be something like provision for credit losses, allowance for loan losses, loan loss provision, something like that. There's all, they're all different synonyms. You'll see it on

the balance sheet and you'll see what they've set aside there. And you can see the total amount because what you'll see in the headlines in the quarter is just what they set aside for that quarter specifically in addition. So it doesn't factor in maybe there's just loans that been taken off the books. There's a whole lot of different things that aren't factored in. So looking at the balance sheet, you can actually see how much do they have right now. Yeah. Yeah. Like the 962 million would be what they set aside that quarter. Yeah. That's it yeah yeah i mean it it wasn't like an exceptional quarter but i think the fact that they came in like with a much quieter quarter in terms of pcls maybe maybe brought some relief i think like right now as of this morning it's up like three four percent whereas bmo i think is is trading down

three or four percent That's down 5%. So, I mean, it was a pretty good quarter from Scotia and a pretty bad quarter from BMO. But I think if Scotia would have came in with higher PCLs, it would have probably been a different story. So I think this is kind of... Because it was such a jump last quarter that it probably spooked a few people. But overall, it's not the hottest start for Canadian banks, but it's not like it was unexpected.

No, I think that's fair. And I mean, I don't own any banks and I've been very critical of banks, but I know you do own some. I think you do have some BMO, right? Because they have the least mortgages. Yeah, BMO was actually, I have BMO, Royal, and TD. They make up, I think at this point, like maybe 7% between all three of them. I don't own a ton of banks.

I mean, I know a lot of Canadians are huge, huge, huge into banks. I mean, I know whatever we do, anything in regards to the banks over at StockTrade, the reaction, the interaction with the posts or the video or anything just goes through the roof. Canadians love their banks, which I mean... There are episodes when we talk about Canadian banks, like we get a lot of people listening, that's for sure. And I mean, look, they're good banks.

Like overall, I mean, our financial system, our banking system in Canada has been pretty resilient if you look back. And I think that's why a lot of people like them is because they held their own during the great financial crisis, whereas the U.S. was really struggling. And clearly we have, you know, six very large banks. Our Canadian banks would be some of the largest banks even in the U.S. if they were in the U.S. That's how big they are. But then again, the U.S. has like 4,000 banks, right? There's a lot of regional banks. So I think there's that. They have like a history of paying dividends that I think is attractive to a lot of people. I mean,

Scotia is yielding what, close to 7%, I think right now? Yeah, they got a big yield. High sixes. Yeah. And I think that's alluring. I would just say, look, and we've had some interactions on Twitter as well, where people get very passionate. And if people want to invest in bank think that's alluring. I would just say, look, and we've had some interactions on Twitter as well, where people get very passionate. And, you know, if people want to invest in bank, that's completely fine, right? It's their money. But just make sure you understand the business at least decently. Well, I know banks can be complicated, but at least having some KPIs, some key performance indicator that you can focus on. And when you see that things aren't trending the right way or they are, then you can adjust your investment accordingly, whether you add or subtract. But I've noticed a lot of people tend to be focusing on the yields. And the main argument

is that, well, they've been paying a dividend for 80 years or whatever the amount of time is. Some of them almost 200. Yeah, 200, like whatever the amount of time. And yeah, it's a great track record, but you know, nothing's forever. And I think you also have to focus on the business and that, you know, what's been happening for 100, 200 years, whatever the amount of time, there's no guarantee that it will continue indefinitely in the future. And I think that's just really important. And at the end of the day, do you want your investment, including dividends, to outperform the market or underperform it? And Scotiabank, we were talking about that earlier. I mean, they've literally underperformed the TSX-60 any time frame you looked at over the last 10 years. Yeah, they've had a horrible time.

Yeah, I think the only one they outperformed was the three months where they outperformed by like 50 basis points, probably because it's a bit up today, to be honest. That's probably the main reason right there. And obviously, if you compare it to the S&P 500, then it's even worse over that time frame. So I think it's just important to remember that. And if you like the peace of mind that a high dividend gives you, and you don't care as much about the total returns, that's fine. I mean, that's your money. But I think it's really important for me, at least I try to look at it from a mathematical basis. And if your assessment of it, if my assessment of

Scotiabank, for example, would be that going forward, it's going to outperform the market, then I may consider investing in it. But I just have a hard time believing that they'll outperform the market. Yeah. And I mean, like if you look at Scotiabank historically from, so I took like ZEB, which would be BMO's like banking ETF, and I put them against Scia, which would have some of Scotia's drag on that fund. And it's still like ZEB has returned 4X what Scotia Bank has returned over the last 10 years. It's been a pretty weak bank. I mean, whether it will be moving forward, I mean, who knows? The main drag on it is the Latin American exposure. It has been for a long time. the main drag on it is the latin american exposure it has been for a long time it posted a pretty good quarter i'm not ready to declare it not uh you know kind of a dud over the last while but who knows if it strings together a bunch of successful quarters it could turn things around

whereas you know a bank like bmo clearly looks to be struggling right now so yeah yeah i think either way i think it's good to give it a bit of time. Yeah. Don't make a decision just based on one quarter. I think that's probably the biggest takeaway, I would say, but I think we're running a bit long here. I think that's a good episode.

Thank you, Dan, for doing most of the research on those two banks. I know you like the banks and the Twitter interactions you get from the banks as well. I don't even have to say anything on it anymore. They just come at me. They just tag you. They just tag me.

And if you're new to the podcast, definitely we appreciate if you can take a few minutes and just give us a review. Apple Podcasts, 5 Star on Spotify just helps people finding us easier with their algorithm and all that good stuff. You can find us on Twitter. I'm at Fiat underscore iceberg and Dan at stock trades. Underscore CA. Underscore. Yeah. Okay. Underscore CA. I'll get there by the end of 2024. I promise. So yeah. So I think that's it. Anything else you want to say before we wrap up? No, that's it.

Thanks for listening, everybody. 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.