The Canadian Investor - Rogers drama, Netflix, Chipotle, Hexo, and more!

Episode Date: October 28, 2021

In this Thursday earnings and news episode, we talk about the following topics: Our take on the rumours that Paypal wanted to acquire Pinterest The ongoing drama between Ed Rogers and the rest of his family Sebastien St-Louis leaving as CEO of HEXO DWAC, the SPAC that will be taking public Trump Media & Technology Group Earnings from Ropert Technologies, Restaurant Brands International, Chipotle Mexican Grill, Netflix, Corus Entertainment and Intuitive Surgical Tickers of stocks discussed: PYPL, PINS, ROP, RCI-B.TO, QSR.TO, CMG, DWAC, HEXO, CJR-B.TO, ISRG https://thecanadianinvestorpodcast.com/ Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital See omnystudio.com/listener for privacy information.

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Every single day this week, we have tons of companies reporting. And later in the week, we have jam packed days of earnings reports, big tech. It feels like the entire S&P is reporting this week. So this week and next week, we will have jam packed earning shows and should be some interesting discussions that come out of it. Simon, let's kick off with a story that was hot last week with PayPal potentially acquiring Pinterest and then now maybe them walking it back. What's going on here? Yeah. So news came out last week that PayPal and Pinterest were talking about Pinterest being acquired by PayPal. The reported price was

$70 a share for Pinterest or $45 billion. Then news came out that PayPal said they would not be acquiring Pinterest right now. So who knows what will happen, whether they're still looking into their options, but I think it seems to be off the table. There was a lot of hot takes I could see on Fintwit. A lot of people were for it, against it. The more I was thinking about it, I own shares of both. I started a small position in Pinterest. The more I was thinking about it, the more I was actually thinking it might be a good idea for PayPal to do that because we've talked about it before. People go on Pinterest and they're looking for inspiration and they're open to buying things. And PayPal could continue increasing the

monetization on the ad side for Pinterest if they bought it. But let's keep in mind that the monetization per user is still well below comparables in the social media ad space for Pinterest. So there's definitely some big upside there. And on top of that, PayPal could continue to create this sort of super app ecosystem that they're doing a bit like Square is doing. One thing to think about is that PayPal could use Pinterest as the form of payment for any Pinterest related purchases. And like Angelo said on the Stratosphere forms, they could even leverage their own buy now pay later functions within that. So to me, there's a lot of synergies that could happen. If a deal does happen in the future, I think all comes

down to what price is paid for Pinterest. Clearly, you don't want to overpay for it, but there's definitely a lot of potential in synergies for the two. The one thing where I might be a bit more reluctant is if there starts being a bidding war in the future and PayPal is still interested, then that might be a little trickier on their end to make it work. These are two great businesses with potentially very long runways for growth. I just don't know if they're better together, but I don't know the correct answer because like you said, there are some synergies that could be brought up together. And I think it's also worth mentioning that PayPal is not new to being part of a company with a retail and buying

aspect with their history with eBay, right? So what's old is new again, right? With PayPal. You know what? I don't think this deal is going to happen. Even when this came out last week, I was like, I don't see this happening. I put this at a very unlikely scenario that this deal actually goes through. It looks like they're walking it back. Shares of PayPal are down 10% on this news of this deal since it's come out. I look at PayPal as this is an opportunity to potentially buy it. This deal doesn't go through, which I think is what will happen in the fact that it won't go through.

And then you're left with a great asset in PayPal at a good price. So that's my particular take on it. They're both great companies. I don't know if they're better together. I think the execution risk of actually integrating these synergies is quite high and quite expensive. They're two massive companies. So a merging of culture also creates a lot of deals, a lot of issues, sorry. And when acquisitions happen, the real case is that most acquisitions fail. Like statistically, most acquisitions fail. Now, companies that do small acquisitions and bolster on new features into like a software

stack, those are great acquisitions and those pan out wonderfully. But with two large entities like this, the clash of cultures and the execution risk is very real from my perspective. Yeah, yeah. I mean, those would all be risks. I definitely just, I approach it more with the upside that's potentially there. And I think the user base that's under monetized, that's the biggest thing. But I'll add to what you said though, this type of acquisition, like the price they would pay would be by far the largest acquisition that PayPal has ever made. I can't remember on top of my head, but I think the largest one before that was just a few billion dollars. So there's definitely some

risk there, but we'll see. We'll see what comes of it if something happens in the future or whatnot, but it was definitely some interesting news to see for sure. Yeah. Quick shout out to you, Simon, by the way, because if you're listening and you hear him just a little bit sick, Simon is under the weather, but he is an absolute champ for coming on and doing the podcast. So we salute you, Simon. You're a tough guy. All right. Roper Technologies, a company that I own in my own account, reported Q3 revenue increased 22% to 1.46 billion. EBITDA from continuing operations increased 21%. EBITDA being earnings before interest, taxes, depreciation, and amortization. Earnings before interest, taxes, depreciation, and amortization.

That was up 21%. Now, the number that stood out to me, organic revenue was up 12%. This is incredible for a grow by acquisition company. Roper Technologies is a group of 40 plus technology companies. It's very similar to a consolation software, except they do big deals, not small, little vertical market software deals. Roper also signed definitive agreements to divest, aka sell, three of their companies. And they are worth 3.15 billion in the sum of the three sales. Now, this is very interesting because those three businesses are part of its process and industrial type of companies. And it is very interesting to see Europa transition

and divest these industrial process businesses. And they basically say, you know, they're sensitive to cyclicals and commodities in general. And this pivot that they're doing, like many software acquirers are, is buying recurring revenue, high margin, sticky, vertical market software. And these types of companies cash flow regardless of the macro environment, and they have higher margins. They then take this cash flow and buy more businesses. They've done a great job. The stock is up 33% since last October. It's another one of those grow by acquisition type technology companies, really sticky customer base and a great organic revenue growth line from this company. So it's good to see that. Yeah, yeah, definitely. I know that business

better. And for me, I always kind of see it as the US equivalent of consolation software, although I know they're a bit different because of the size. Yeah, that's a reasonable take though. They both are grow by acquisition niche players and the fact that the companies they own are very niche and that's what makes them great. Yeah, exactly. Now, we'll move on for some Canadian drama. This makes the CN Rail story look like child's play.

Well, that one was boring the whole time. So, I'm glad that we have something fun now. Okay. So, people will probably know that we have something fun now. Okay. So people will probably know what we're going to be talking about. So Ed Rogers housed it as the chair of Roger Communications. News came out that he was housed last week after he tried to replace current CEO Joe Natale with the company CFO Tony Staffieri. Last month since then, Tony Staffieri has left the company CFO Tony Staffieri last month. Since then, Tony Staffieri has left the company.

What's so crazy about this is Joan and Tally actually found out about the plan while Ed Rogers was discussing it with Tony Staffieri. Ed Rogers accidentally pocket dialed him. So that's how we found out of the plan last month when they were talking about it, which is just, it's hilarious because first of all, you know, you're part of a major communications company and you can't even like figure out that you can

pocket dial people. It's so good. Yeah, I know. It's so funny. And then Ed Rogers will remain on the board. But like I said, no longer chair of the board. What is amazing, and this is happening still while there's a proposed deal to merge with Shaw Communications. But to make things even weirder is Ed Rogers came out this week saying that he was reinstated as the chair of the board. But the company said that was not true, and his family members, including his mother and siblings, said that was also not true. It's important to know, though, that Ed Rogers does control 97.5% of the vote in terms of share votes. There's different classes of shares for Rogers, but now I think it's going to court in BC because they're saying you can't do that. It's a bit of a mess to be honest. If I own shares of Rogers, which I do not, this would probably be a signal for me to consider selling. I mean, you don't want to be a shareholder and seeing this kind of thing happening.

and seeing this kind of thing happening. This is so messy and so good. I love the juiciness because we have had drama in Canadian markets lately, but not juicy drama like this. So this is what we need for the podcast. Look, Rogers has been a frankly useless stock for a long time now. The share price has done nothing. You've collected a nice dividend. But meanwhile, TELUS and BCE have been great investments for shareholders and you've collected a dividend on those as well. So when I look at the three major telcos, the three major telcos, Rogers, Bell, and Telus. Rogers would be the last one I'd own. So you mentioned here potentially moving on and moving to a different telco. If that's where you want to be, if that's where you want to live, you want that big dividend. Look, Telus is doing great. They're innovating. They're doing all these new lines of business and actually seem to be doing great. They're innovating. They're doing all these new lines of business and actually seem to be reinvesting at an efficient rate. And then Bell, I mean, rock solid. You're going to collect

that dividend. There's a reason that Roger shares have gone nowhere. And this is a telling tale sign to the culture there that I think has kind of existed for a long time. It seems very stagnant and just not a horse I'd bet on for the long term personally. Yeah, Brayden, what do you think they're going to talk about for the Christmas dinner? Oh God, I know, right? How awkward is this? Oh, it's so funny. It's just funny how like family members are feuding together too. It's just, oh man, it's just so good. I'm sure we'll hear about more coming out next week or month. It seems like straight out of a TV show, to be honest. Hey, you know what? This could be our venture into the media space. We're going to make a

Rogers drama. 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. Speaking of Canadian co's, kind of restaurant brands, international ticker QSR reported global system wide sales growth of 11%, which is pretty good. For those who are not familiar with QSR, it's Tim Horton's Burger King and Popeye's Louisiana chicken. So that's basically their fleet. Now Burger King system sales grew 25%. And I got to give it to Burger King. They actually have done really well over the last decade. And

year to date unit growth and pipeline to keep RBI on track to pre-pandemic levels in 2021 and accelerate into 2022 is their goal. They did return 425 million of capital to shareholders through dividends and share buybacks. Now, when you look at this company, you've got to look at the three segments. There's the Tim Hortons, the Burger King, and the Popeyes. Now, all of them were actually doing pretty solid. Tim Hortons had 11% sales growth, Burger King had 12% sales growth, and Popeyes had 4.4% sales growth, which looks like the worst. But if you look a year back, Popeyes did 21.5% of system sales growth, while the other ones were double-digit decline. Popeyes has been the growth engine for this business for as long as I can remember now, and they continue to get it done. So it's good to see that Tim Hortons and Burger King are

rebounding past the pre-pandemic levels and accelerating. But you know what? But you know what? It's one of those boring companies that seem to consistently deliver just okay results. I don't have anything really hot take beyond that. What do you think about this, Simon? kind of the theme here where it'll be steady, slow growth, maybe a little bit of decline here and there. It seems like the different segments over like two, three, four year period, one will do better than the other and then it kind of switches over. I know Tim Hortons, they've kind of struggled with expanding the brand outside of Canada. And like I've said before, they're looking to do it in China. I have some family in Syracuse in the States. And for a while, they had a bunch of Tim Hortons there. And now they're all gone. And my cousin's husband is actually annoyed by it because he loved their coffee. And now every time they go in Buffalo, there's a Tim Hortons there.

So he actually grabs a coffee every time they go in Buffalo. So that's just a little anecdote. Timmy Ho's. Yeah, it kind of shows some of the challenges of growing the tim hortons brand outside of canada it's been a challenge for them and it's not new news that they've been trying to expand beyond these borders for the tim hortons brand and it's largely been a mixed bag of results and I lean towards mostly failures. But you know what? The Burger King segment is actually interesting to me because I think Burger King is horrible.

And then I went to Europe and Burger Kings are everywhere. They're everywhere. They're as popular as like McDonald's and stuff. And in Spain, for instance, they're on every corner. So I'm like, what is this all about? It's so strange every corner so i'm like what is what is this all about it's so strange right so i'm like what is this all about so i got some burger king in barcelona and it was good oh so there's something there's something to that where the food seems to be better in europe and they're doing better in europe maybe because they have different recipes i don't know what it is, but there's something to that. I know it's not the same company, but like I've been in Asia before and KFC over there is huge.

In Asia, they really love it. I was in Taiwan, it was everywhere and apparently also in mainland China. So, I don't know if it's just in different areas of the world, different kind of brands are more attractive to people, but no, that's interesting. Different ingredients too, right? Exactly. No, that's interesting. I'll be on the lookout if ever I go to Europe. I want to contrast this to QSR or RBI,

whatever you want to call it, to Chipotle Mexican Grill, ticker CMG, because they are competitors, but they're valued so differently. RBI trades at 28 times earnings, which is higher than I was expecting, and five times sales, while Chipotle trades at 70 times earnings and 10 times sales. So for our purposes, it has basically exactly twice the multiple on revenue and earnings. And ironically, it's actually twice the market cap almost exactly as well. So why is this? Why is this?

The reason is system-wide sales growth and same-store sales growth. Those numbers for Chipotle are crushing it. This is the twin engine for retail. You need both. You have growth of locations and then growth in sales of each location that you actually open. This is the twin engines of retail and this is what drives serious growth. So that same store sales number, SSS, is very key, but also the system-wide sales growth that they'll talk about includes the growth of opening new locations. Chipotle saw revenues grow 22%. Same store sales growth was 15%. So much organic growth within their stores. Digital sales were up 8.6%. In two and a half years, the company's loyalty program has now gathered 24.5 million members. And CEO Brian Nichols says there's still lots of room to grow. This company's projecting same store sales growth in the low to midget double digits.

This is one of those boring business assignments that have had unreal execution and they grow same stores repeatedly at 10 to 20%. It's one of those dominoes pizza scenarios where it's like, how much more organic growth can they suck out of these locations when they're just selling food? It makes no sense, yet they keep doing it. And you got to give it to the management team. Yeah, yeah, exactly. I mean, it's a very different business than QSR for sure.

And I think what probably helps them a lot too is, you know, I think of Chipotle automatically, I'll think of something healthier that most of the offerings from QSR. That's just kind of my idea of it. I know they have different meal items. So I don't know if that's been a growth factor for them, people kind of behavior switching a bit to their business. But you can't argue with the results. They've been doing quite well. I think it's also just people love burritos. And they've been trendy over the past five years, including myself. I love a good burrito. Oh, me too. I cannot say no to a good burrito. I love Mexican food as a whole. So, I mean, I can definitely see that.

Now, we'll move on to something completely different. DWAC is the new meme stock, it looks like. So DWAC is a SPAC and it was up 840% last week. News came out last week that the SPAC will bring to the public Trump Media and Technology Group. So the company will eventually have a new social media side but there's nothing out yet and it seems like there won't be anything out for months i've seen reports as there's a ton of bugs with the app and so on and it looks like trump himself will own 50 of the company when the acquisition is completed all that to say i wanted to talk about it just mainly because it looks like it's uh the new meme stock because I

had a look at Wall Street Bets over the weekend and I did not have to scroll very far to see posts on DWAC and people making a killing. And let's keep in mind, you can look at the price when you hear this episode, but SPACs always start trading at $10 per unit. So it's way, way up. And we've talked about this before in a recent episode about gambling in the stock market. So that is really, for me, what people are doing here. Whatever your thoughts are about Trump, it just seems like there's no real fundamentals behind it. It's just people trying to bid it up and trying to sell those shares to the next highest bidder. Do you know what Trump Media and Technology Group is right now with their assets? It is a PowerPoint presentation.

That is all this company is. If you're buying shares of this stuff, it's a complete joke. It's completely gambling. You're going to look around and see this stuff pop up all the time. This is not new where some random garbage company gets pumped really high. The fundamentals are completely detached from reality. And you have to just go, that's not a business I'm putting my capital in and move on. Don't kick yourself. If you look back at it and see more and more people pile into the bubble, it's just not worth spending a single second on it. The presentation that they came out with

had that they were going to become a competitor to Facebook or whatever. It's like, okay, good luck. You have no engineering. And that they were going to actually start rivaling cloud competitors, Azure, AWS, and Google Cloud. And then they had a fourth logo in the disruption to cloud, which was Stripe, the payments company. Completely unrelated. This is a joke. This PowerPoint presentation is a complete joke. Whoever made it has no idea that Stripe is not a cloud infrastructure company. And that just sums it up right there for me. This is junk. Don't spend a single second looking at it ever again. Yeah. And when I saw the news i actually

tweeted i'd rather own gme or amc the reason why i tweeted that is because they actually have like businesses behind this is a real business exactly so that's the reason why i tweeted that obviously anyone who's been listening to us for a while knows that i i would know it on gme or amc but that was the reasoning behind my tweet. Now we'll move on. Some more Canadian news. Ex-CEO Sébastien Saint-Louis exits after activist investors slam his performance. So he's leaving Ex-CEO. The activist investor in question is Adam Arviv.

He sent a letter to the board slamming his leadership, even saying that he's expressed concern regarding diluted financing, the CEO not being aligned with shareholder interests, and a lack of basic business skills. And I'll elaborate a bit more on that. I can't say that I really disagree with Adam here. XO is down close to 95% since its peak of April 2019. Let's remember though that XO had a reverse split of 1 to 4 in December 2020 so that's why it may look a bit odd if you're looking at share counts and so on. They've heavily diluted shares over the years. July 31st 2018 they had 193 million shares. By July 31st 2020 they increased their share count by 150%.

And that did not include the issuance of another 69 million share that was just announced to buy Red Can. If we include that, their reverse split adjusted share count has increased 295% since July 31st, 2018. So that's exactly what you don't want a business doing. Diluting share and making good acquisition is one thing and obviously not diluting to this extent, but XO has not done a good job with acquisition. They are still not profitable. They're burning cash quickly. Last year, they had a negative free cash flow of 200 million and although this year they aren't burning cash as quickly they're still not close to being free cash flow positive and they're not alone here so someone did tweet about aurora cannabis and it's very similar with aurora as well

you can even question some of the decisions made by canopyopy. Because if we remember in 2017, 2018, 2019, there was like an acquisition spree for these businesses. They were paying crazy multiple just to get bigger and get more production when they had no idea of what the market would look like once it's legalized. Because, you know, they were making guesses. No one knew what the marijuana market would be because it was a black market. So I remember at the time, like I was thinking, I was seeing things that would say, oh, a few billion dollars market up to like 15, $20 billion. So it just goes to show, I mean, we've talked about it before, probably, I think it was in the early episodes of the podcast that it was probably best to wait and see.

And that's the exact reason here that it was best to wait and see what would happen. Exactly three years ago, October 2018, is when share prices in marijuana stocks went to levels that were completely detached from fundamentals. You mentioned here that this stock is down 95%. It is not alone in a basket of marijuana stocks that are down almost entirely. They're now trading for a few pennies compared to the huge runs they went on. compared to the huge runs they went on. And this goes back to what we talked about with the marijuana business in Canada is that when these companies were hyped up

and had crazy valuations, they were acting like the addressable market of Canadian legalization was massive. And the fact of the matter is, is it's just not. We have 38 million Canadians. And let's be honest here, Simon, people who wanted to smoke a joint on the weekend could have done that regardless of if it being legal or not. So the assumption that legalization was going to make this in some huge total addressable market was so short-sighted and anyone looking at something trading at 215 times sales like this thing did back then would have never entered a position. So I don't have anything

more to say than that but it's been a disaster for a few of these names. There's no question. Yeah. That's an understatement. Yeah. 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. dot com for details. That is questtrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, 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. Let's move on to Netflix. Wow, Netflix. Netflix added 4.4 million new subs in the third quarter, easily beating the expectations. Now, Squid Game, the show, the Korean sensation, is the biggest TV show ever quoted in Netflix. They made a hefty contribution to its quarterly subscribers growth, which doesn't surprise me. Revenue increased 22.7% year over year, which is very impressive for a business at this size now. They generated 1.1

billion in free cashflow. And this is significant, Simon, like 1 billion in free cashflow. This business is significantly benefiting from operating leverage. They finally captured operating leverage, Simon. I never thought it would happen. And now they are generating a significant amount of free cash flow. And maybe we should just double click on that for a second, Simon, because I did not expect this operating leverage to just kick in like this and it's self-sustaining and generating that much free cash with how much they're spending on content production. I am shocked. And I'll be first to say it. I was wrong. I didn't think this would be possible in 2021. So good for them. They did post in their earnings release share of US TV time as of September of this year. So Netflix is only,

according to this study, 6% of total US TV watching time. 6%. 28% of that is streaming. So the rest is cable, broadcast, and other. So 28% of US TV time is captured in streaming. And Netflix has the biggest chunk of that, but it only represents 6% of this large pie. They're indicating that we have not reached saturation in terms of streaming and TV time because cable is still bigger than streaming. And they're saying, hey, look, this transition is still got lots of room to grow. So I don't think I myself or many people have given Netflix enough credit. I think they're really onto something now. They have this huge subscriber base. It's recurring revenue. It's going to cashflow for a long, long time. It is the stickiest streaming service. And I think that we need

to double click on how wildly large the impact on pop culture is, some of the stuff they're creating. A show like Squid Game rises to popularity, becomes viral, and this global sensation, like overnight, right? In one week, it became this global phenomenon. The reason for this is distribution scale advantage, and Netflix has that. We talk about this so much with tech companies is distribution is king. I think the operating leverage and cash this business will legit be massive. I'm happy to admit that I was wrong. They're reaching a scale where operating leverage is very real here and subscriber growth globally still has a long runway. I think that they're onto something and the Netflix bulls deserve some credit because it's an incredible business and now it's actually cash flowing. Yeah, yeah. And I mean, if I look back, I think I started

my subscription with them back in 2012 and haven't stopped since. So, I mean, it goes to show though that they were first in the space too.. So they probably have, you know, an advantage on that standpoint where they know how to do it a bit more efficiently than some of the newcomers in the space. What will be interesting to keep an eye on, in my opinion, will be the whole AT&T divesting of its ass and then merging with Discovery, HBO and all that. So all in one that platform how it will do maybe like in the next five years so that'll be an interesting one if it picks up some market shares because it has some potential blockbuster titles but also some i don't know i would say like almost like brain dead tv like hgtv and all that stuff where you kind of half look and you

play on your phone or whatever yeah so it'll be interesting those house flipping shows man they're addictive those are addictive yeah and um i wanted to ask you did you watch squid games i did yeah i watched it what do you think i mean i thought it was uh obviously if you're not into gory shows it's not for you but i thought it was an interesting concept definitely put i think they were trying to get take a little bit of a stab at maybe the current financial system and how people get into that yep so kind of that take was interesting and you know a good little twist by the end as well so yeah, yeah. Yeah. For those who haven't seen it, we won't give anything away, but it obviously does touch on some really interesting power dynamics that we're seeing in today's economy. And it has these group of people that are just incredibly

economically distressed. And a lot of people are. If you look broadly across the population, a lot of people are suffering. And there's addictions like gambling out there that they touch on as well that have had a big impact on the characters and their development and how they get to a certain place. But there is so much of this spending of money that people do not have. And it is only going to increase. And now I'm getting away from the squid game chat, but this is only going to increase. We're seeing this increase of everything you buy online with the ability to buy now, pay later. You get ridiculous financing options to buy something that should be so simple. If you need financing to buy something that costs $40, we're in trouble, right, Simon? That is fundamentally concerning. And I believe that the rise of social media and people trying to impress and signal status is going to only

exacerbate this issue. And the financial products that are coming away from this is this buy now, worry later schematic that I think is very concerning. So I digress from Squid Game, but it brings up some interesting power dynamic discussions and I thought the show was well done. It was a bit cringe if you watched it in the English dubs but- I got over it. I think we got over it fairly quickly. You kind of forget about it was a bit cringe if you watched it in uh the english dubs but i got over it i think we got over it fairly quickly you kind of forget about it after a while the first episode it was annoying a little bit but as long for me it's not like a french from french show that's being dubbed in english dad bugs me because i i know yeah i could be listening in its original language like lupin for example but um yeah this one i

kind of i kind of got over it after a while yeah yeah that is the beauty of being bilingual and i am very jealous of you because my french is horrific we're gonna have to do like a french episode one of these days yeah maybe you'll just i can get a french guest or something and do a special episode yeah yeah there we go it's a great idea okay so now we'll move on from netflix to another entertainment play this one is a canadian entertainment play chorus entertainment they released their q4 earnings and full year for those who don't know chorus owns media entertainment brands in canada they acquired those brands from Shaw Communications back in 2016. Amongst the brands they own, Global Television, HGTV Canada, Adult Swim, Disney Channel. They own a total of 33 specialty television channels and 15 conventional television stations. They also own 39 radio stations across Canada.

Their revenues increased 2% overall year-over-year to $1.54 billion. TV was up 3% and radio was down 6%. Net income was $194 million versus a loss of $607 million last year. However, last year that was due primarily to a goodwill impairment. So that's a non-cash item. We talk about that all the time saying how cash flow is very important. Free cash flow on the other end was down 15% to $251 million. So you see the discrepancy here. They announced a $0.06 per share dividend. The dividend has been the same since 2018. However, they actually reduced it in 2018 from $0.09 a share to $0.06. So, I mean,

lukewarm results. It's not a business personally that I would be interested in. It sounds like it's a bit more of a legacy play. I don't know if they're trying to translate some of those properties to different streaming venues. I know on Amazon, you can get a package with a lot of these properties for an extra cost. But yeah, their results overall, pretty much flat year over year. It's another one of those companies going back to what we were discussing before, which is a business with great potentially intellectual property, but they don't have distribution. And the distribution is a shrinking pie over time with television and conventional radio. I mean, like the easiest pair trade is short radio, long podcasting and streaming, right?

And this is one of those things where, yeah, the IP is valuable. I was just saying the HGTV house flipping shows are like crack. You watch one, next thing you know, you're watching a sixth episode of home flipping. So their programs and the IP are valuable, but they're probably more valuable under a different entity that has scale and distribution in this new digital world and digital distribution. Yeah, yeah, exactly. And just to reinforce that last year, for those of you listen to sports radio, Bell Media actually cut out a few of their sports radio station, including the Vancouver radio station. So it just goes to show that yes, I think radio stations are struggling a bit more nowadays. I don't know if it will

reverse trend at some time at some point in time, but definitely has been going downwards. A lot of there's a huge opportunity, right for a lot of these companies to continue their show on the radio that people know and love and just move it to a different medium. Here, we have a podcast and have distribution. We didn't have to go through the hoops of getting a radio station and investing in the capital for an entire studio and everything. There is a real opportunity for the IP of these media companies to reassess how they actually find distribution. And I think they can save themselves and pivot, but they have to act quickly. If they want to be a melting ice cube, then shareholders will

suffer long-term. Yeah, and the last thing I was going to add before we move on is just there's a lot of value for people to be able to listen to or watch something on demand, not being stuck to, you know, the show's on, I have to watch it now. The radio show's on, I have to listen to it right now.

So I think that's why we're seeing a big growth in the podcast industry, but also streaming. That's what, yeah, that's really well put. All right, last on the slate for today, Intuitive Surgical, ticker ISRG, reported their third quarter. The robotic surgery company reported procedures up 20% and shipped 336 DaVinci surgical systems in the quarter, which was an increase of 72%. Those who are not familiar with Intuitive Surgical, it is the company that builds the DaVinci surgical system. So it is a robotic surgery system and they are bought and sold as DaVinci, but the holding company is called Intuitive Surgical. Revenue was up 30% to 1.4 billion,

and they now have 6,525 DaVinci surgical systems in place, an increase of 11% on the whole inventory deployed around the world. The company also approved a three for one stock split. Now this is a company that was slowed up by COVID. I mean, a lot of surgeries were postponed. A lot of electric surgeries in particular were postponed, but now they're really ramping back up. The stock price is now reaching new highs. It's one I've talked about on the podcast here for a while, and the valuation is actually becoming more and more reasonable as the growth kind of catches up and grows into these valuation multiples. In the Stratosphere database, we have it ranked a perfect 100 growth score based on the quant for their past growth, but also

future expected growth. And then recently we've added a runway for growth score. Now it is very early in the growth curve for robotic surgery adoption. As they do more surgeries and gain more market share in these hospitals, the surgeons won't go back to the old way. This is the future of surgery and Da Vinci is by far the category leader by a very, very wide margin. Johnson & Johnson has tried to put together a respectable competition and so far their agility in being able to create a competitor has been so disappointing that it reinforces the fact that Intuitive is very smart. They are very good at what they do in building these robotic surgery systems. And creating a competitor when you're years and years and years behind. DaVinci has the talent pool and the first mover advantage here in the space.

This just reinforces how wide of a moat we think Intuitive Surgical has. It's not a cheap stock, but it's getting more reasonable as it matures and grows into these multiples. It's an incredibly good company. I don't know if you've looked into it into detail at all, Simon. I mean, I've looked into it. I would say so, so detailed, but I know enough about it. I mean, it's a razor and blade model here. And I'm not a doctor. Obviously, I'm not a surgeon. But I would think that once a surgeon knows how to use the DaVinci system and they're used to it, you know, set aside the cost of the actual machine. That is not cheap. But just knowing how to use the machine, learning to use something new afterwards, the switching cost would be extremely high on, you know, just learning. The learning curve would be very difficult for surgeons. On the one hand, it would be long, take a lot of time. And then you add in

the cost of the whole switching. I think for a lot of hospitals, it just would not make sense. Yeah, interesting. And what I found from the report incredibly encouraging is that, you know, we were talking about before about same store sales growth. Well, a similar type of growth twin engine conceptually is happening here with intuitive surgical that each installed DaVinci is doing more surgeries per year. Each system is generating more sales because they do have that razor and blades model where the system requires the tools, one-time use tools for each surgery to be replaced. So the more surgeries that each system does, the more sales that Intuitive generates on the high margin recurring revenue of the business. And so that's the truest of razor and blades.

And you're seeing that twin engine with each system having more surgeries and more sales per year once it's installed. So that speaks to the power of the surgeons like it, and they're using it more and more and the adoption of the surgeries is increasing over time. So very interesting. Another fun fact about it is it has way more peer reviewed articles by the professional field, like over 20,000 peer reviewed articles by professional field, like over 20,000 peer-reviewed articles by professional doctors speaking to the power of how good they are, and no one else is even close. There's all these fun facts we like about Intuitive Surgical, and it's a great business. For those who are wondering how we easily pull up these earnings reports, is if you go on Stratosphere and you do in the company

search, you just click there on the top left on the new platform, which is nice, by the way, it's pretty slick. You can go into the news tab on every company and it'll show their earnings news release right there if they've reported earnings recently. And it's nice to get that revenue number, that EBITDA number, that free cash flow number, right then and there, and you can get an idea of the companies you track. Thanks so much for listening, guys. We'll see you in a few days. If you haven't given us a five-star rating on your podcast player or followed us, subscribed on the podcast player, please go ahead and do that. We appreciate you guys very much. We'll see you in a few days.

Take care. 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.