The Canadian Investor - Teladoc Drops and Payments Impress - Earnings Roundup

Episode Date: May 5, 2022

In this release of the Canadian Investor Podcast, we cover the following earnings releases and news: Nasdaq down 22% YTD Teladoc earnings Amazon earnings Pinterest earnings TFI international earnings Canadian national rail earnings Visa earnings Mastercard earnings Apple earnings   Tickers of stocks discussed: TDOC, AMZN, PINS, TFII.TO, CNR, V, MA, AAPL   Our Website Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital   Check out our portfolio by going to Jointci.com Sign up to Stratosphere for free 🚀 our platform for self-directed stock investing research. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense. Check out the Yes We are Open Podcast from sponsor Moneris Blue Jays Sign up linkSee omnystudio.com/listener for privacy information.

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

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My name is Brayden Dennis. As always, joined by Simon Belanger. Simon is recording on a brand new fancy laptop. And there's been some technical difficulties. I may be embarrassed to tell you how many times we've recorded this but uh here we are here we are ready to rock we must have recorded the first five minutes about eight times oh boy yeah you know gotta get it set up you know the episode what is it a hundred and bajillion at this point we're still still 166 66 look at us

and still can't figure it out. Simon, I don't know how I'm supposed to go to bed at a reasonable hour with the NHL playoffs back on because triple overtime, fire me up. I'm in. I'm staying up. Moving on to markets, the NASDAQ is down 22%. The S&P is down 15%. Are we having some fun yet? This is a feature of the market and not a bug. But are you having fun? The market's been a good ride here in 2022 of mostly pessimism and poor performance.

I mean, probably if you define fun as like stretching when it really hurts, like that's probably fun because it feels good afterwards after a while. But no, I digress. I mean, it's part of investing. You're going to have ups and downs. The markets do not go up in a straight line and you just have to stay composed and just understand that that's par for the course i i liked two things there par for the course because the golf season's back and two it is kind of like stretching you know it's you know it's

good you know it's good for you because you know that you can buy assets at better prices, but it sucks during what it's happening. So I'm going to steal that. Look, I mean, the reality is that the stock market takes the stairs up and the elevator down. And lucky for us, it takes the stairs up more often than the elevator down, just based on historical performance. So don't overthink if you're in some huge drawdowns on certain positions. We're all facing the same reality. And that same reality is that the NASDAQ is up almost 127% over the past five years. So you got to zoom out. But if it doesn't feel that good in the short term, or you haven't been a market participant long enough to have felt some of those good gains over the past five years,

just remember, you got to stick to the plan. It's earnings season right now. I'm seeing some companies report some excellent results, some mediocre guidance perhaps, but some excellent results and the share price are getting absolutely smoked. And so this is not a new phenomenon. And it's old as time. Simone, before we get into earnings, we have some Canadian companies. We've got some tech companies talking healthcare and fun stuff like that. Just want to give some shout outs.

JoinTCI.com. We set up a Patreon. Join tci.com. You can see our exact portfolios, our monthly commentary, what we're doing. It is absolutely not required. It doesn't take away from the show whatsoever. And so there's no hidden content, anything like that. We don't want to do that. but it's an additional way to support the show and you get a shout out so let's do the first round fletcher joshua sean jay sibic doug amanda max matt maria raymond mike all caps sylvania and chelsea thank you so much there's a few more trickling in uh this past day and so we'll get you on the shout outs. We appreciate you very, very much. Mr. Belanger, let's rip off the bandaid. Teladoc Q1. Yeah, so it was not a good earnings release for Teladoc. The stock was down more than 40% on the news. Let's dive into the number right away. Here are some of the big lines that came out of that earnings release. Again, all figures are year over year. Revenues increased 25% to $565 million. Access fee revenues grew 29%

to $491 million. These are fees that are paid by insurers for their members so they can use the service as they need it. They are recurring in nature. Visit only fee grew 12% to 68 million. These are fees that are pay per use. U.S. revenues grew 24% to 491 million. International revenues grew 27% to 74 million. So, so far, Brayden, I think, you know, pretty good numbers. So what gives, right? Yeah, the stock down 40 odd percent. Yeah, it seems okay. What's going on? Well, the big headline number was that they had a $6.67 billion loss.

That's a lot considering that revenues were $565 million. That's a lot considering that revenues were $565 million. This was mainly due to the write-off of $6.6 billion related to the Livongo acquisition. I will be talking a bit more about that later on here. I'll just go through a bit more numbers. They were free cash flow negative for $36 million compared to $20 million free cash flow negative last year. Their advertising and marketing costs went up 49% to $133 million. So that is part of the reason that it went down 40%. The other part was guidance. They lowered their sales guidance range from 2022 from a mid-range of 22% to a mid-range of 17%. The mid-range went from $2.6 billion to

$2.45 billion. So it's a pretty big change here. The total US paid membership guidance and visit only fee stayed the same. The high end of their total yearly visit guidance went down slightly as well. So here are my thoughts and just the way I'm reacting. Everyone knows who's been listening to a podcast. I do own Teladoc, so full disclosure here. For those who are part of our Patreon followers, you'll know as well that it's not a huge portion of my portfolio. Well, first, Jason Gerovich, which is the CEO, mentioned on the conference call a few things that will be important to keep an eye on if you're a shareholder or thinking of starting a position here. There is more competition in this space. This has led their customer acquisition

costs to go up. They're also seeing that it is taking them longer to close sale contracts for insurers than they anticipated this year. So that is one of the primary reasons for the lowered sales guidance. Gerovich also mentioned that they believe that this is it's in part due to lessened temporary regulations put in place because of the pandemic. so it makes it easier for smaller players to enter and thus increasing competition the most competition is actually seen in the mental health area and they're also seeing that the advertising costs are going up for the mental health services that they offer so clearly it was not a good quarter. I think a lot of investors are actually feeling a bit misled by management. I'm not sure if I would go that far,

but I definitely don't love that management didn't provide more transparency for the Livongo acquisition for the potential of the write-off. they should have known that at the end of last year that's what I think clearly they paid a lot for the acquisition but like you know if people are been following the name a little bit they'll realize that the acquisition was mostly stock and some cash so what's happening here is it's a most light it's a non-cash item, but it diluted shares quite a bit. So their shares actually have more than doubled over the past couple of years. And we've mentioned it before for Teladoc, especially in 2020 and 2021. The valuations was really stretched for Teladoc. I can't remember

what the actual price to sales was, but at the time, I felt like it was becoming too big of a part of my own portfolio for growth stock, even though I still believed in the vision. So I decided to trim around $250 a share. at these results and I go, the Livongo acquisition is such a stain on management. I don't know how else to say it. I know it sounds so ruthless, but I don't must know like how to value at least somewhat competitors in the space, like whether they're in your same vertical or, and this was like a lot of chronic care patients or whatever. And they clearly just paid far too much and diluted like, you know, like the SBC and the share count doubled. It's just absolute value destruction. Like, I don't know how else to say it. And so you knew that the price, you know, you were selling it like 60 times sales, because like, this is ridiculous. So

it's important to remember, like, when we talk about certain names, we might, we might recognize, you know, in the short term, this thing is crazy overpriced. And you recognize that and trimmed a bunch of your position. I know we don't like to trim positions too much, but if something gets just ridiculous, which it did, sometimes that's the right move. And it clearly was the right move. Yeah, yeah, exactly. And I agree with you they obviously overpaid for that and they should have known at the time but at the same time i think

you know to management's defense they had an idea and a vision of having a all-encompassing telemedicine or telehealth solution because right now it's very fragmented and there's not really one player that offers kind of a mental health primary care but also chronic care and just having that available can become very attractive for large insurers because they just have one solution for all their members so that's definitely the vision that they're still standing by but again i think they could have been more strategic with it maybe they didn't want to miss out on Livongo and they were afraid that a competitor would acquire it and it would affect their vision and Livongo had already built a pretty good offering when it come came

to chronic care that's kind of the other side of it but I agree with you I think you know even at the time we thought it was pretty expensive but now it's trading at just a bit more than two times sales and sales are still growing at more than 15% so it's definitely not looking expensive right now for me I'm holding I don't think I'll be buying anytime soon I'll just see what happens in the upcoming quarter. Management revised the guidance. That's fine. And they offered some good reasons for it.

But if they revise it down again, I'll have some serious doubt on management. And the last thing here is they did not provide any guidance beyond 2022. Woof. That's all I have to say. 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. All right, Amazon. You ever heard of Amazon? Any packages come to the door today, Simon?

I don't think so, no. Not today, okay. Probably tomorrow. Probably tomorrow, all right. And the dog will let you know. All right, they reported sales of $116 billion, which was up 7% year over year. So just a single digit print on the top line.

Let's go by segments because Amazon has become a complete sum of parts valuation and probably one of the most difficult businesses to value in the world. I can think of at least. It's just so many segments and there's a lot to consider. On the retail business, okay, so we haven't actually really gone into detail on the Amazon retail business, but there is first party and third party. What you'll see, 1P or 3P, okay? First party means you sell your products directly to Amazon. So when Amazon's actually fulfilling the sale, and then you are fulfilling your customer of Amazon.

Like that is your customer. So you're selling to them, and then they sell to people on their platform. Third party is you're basically using Amazon as a marketplace. You control the advertising, marketing, logistics of your product and shipping. You can still use Amazon's fulfillment program, FBA, to send products to your customers. You can still kind of use some of that logistics and infrastructure. But for the most part, you are fulfilling customers, you know, D to C who are using Amazon as a marketplace. And so that's a little bit different than selling it to Amazon as a retailer.

1P was actually down 2% in the sales and third party was up 7%. And 3P is a better business for them anyways. The margins are way better. Subscriptions were up 7%. And 3P is a better business for them anyways. The margins are way better. Subscriptions were up 11%. So that's like the prime segment. Advertising was up 24%. That's been a huge driver for this business and continues to grow. All right, everything I just said, no one cares because the real story is Amazon Web Services. At this point, you know, you're getting the retail business for free in this sum of parts analysis. You could make the case. I'm not saying that that's necessarily the case, but you could definitely go there. Amazon margins or

sorry, Amazon Web Services margins operating margin of 35%. This is up from 31% and previously 29% in the first quarter of 2019. This thing is just stupid profitable. And it puts the AWS annual run rate in sales at $73 billion after this quarter. So, you know, like I've said, you know, we're going to, we're going to reach a point when very soon when it's doing a hundred billion dollars in run rate on sales at a high 30s operating margin, it's actually insane. And a very common theme on this drawdown, and particularly poor market in 2022, you get these results and the stock fell 15%. And why? People only care about guidance right now. Labor, inflation, increased expenses, this huge CapEx, slowing growth on the retail business. The retail business sucks. A long

list of things for you to be pessimistic on Amazon. I think a lot of them are short term. And the reality is, is that this is a pretty good business. Andy Jassy, CEO says, quote, as we're no longer chasing physical or staffing capacity, our teams are squarely focused on improving productivity and cost efficiencies throughout our fulfillment network. We know how to do this and we've done it before, end quote. So the CapEx hits are obviously huge. And the 600 million square footage of warehousing they've built over the past like couple years has been very expensive. But I don't believe that that infrastructure overbuilding kind of CapEx is going to continue at this rate. Obviously, I just think logically, it seems like that's going to slow down. I just think logically, it seems like that's going to slow down. They've clearly saying that it's going to slow down and focus on productivity inside of our space, not, you know, building out new capacity. I think selling Amazon stock before, right before they slow CapEx spending is a clown move, an absolute clown move. You know, that kind of spending is not going to persist that much in the future.

So I don't understand the drawdown. I think that, you know, it's a good time to buy some of parts of some excellent businesses that are still growing. Yeah, yeah. I mean, I own a share and I'm not planning on selling it anytime soon. It's been the story of Amazon. They tend to invest quite a bit and then reap the benefits later on. And I think we're just seeing that right now. It's a vacation.

One share. 2,500 USD. That's the way. When I see these high-priced tech stocks, I'm like, hmm, one share or nice vacation? They're splitting it soon right if i remember that is the yeah i know google is sam's i forget man i can't keep up with these stocks but i think yeah i think they do anyways i'm sure google is for sure yeah um all right that's it for me on amazon if you want to take the next one here yeah now moving on to a smaller company who had i would say mixed bag

earnings release here pinterest q1 2022 again most of these figures will be year over year but there's a few that i'll mention on a sequential basis qs decreased 9% to 433 million. It's not great, but compared to Q4 2021, it actually grew 0.5%. It's not much, but it's at least trending in the right direction. North American MAU decreased 13%, but it looks like it was up on a sequential basis the reason I'm not so sure here is because in their q1 2022 release they mentioned us plus Canada however q4 2021 they mentioned us only so I if I were to guess they just they would they were including Canada anyways that would be my my suspicion

here but I just wanted to mention that there are poo which is the average revenue per user was up massively across the board 28% for global users so that's all users across the globe if we draw the dial it down to more geography base 31% for US and Canada to $4.98, 40% increase for Europe to $0.72. And then the rest of the world increased 164%, but take that with a grain of salt, because it increased from $0.03 to $0.08. Expenses, especially R&D, increased 14% and marketing 34%. That's not an issue because they had mentioned that in their 2021 full-year release in terms of their guidance for 2022. They were actually expecting a 40% increase in expenses for this year, so that's in line with that. Net loss of $5.3 million versus $21.6 million last year so improving there and they generated 206

million in free cash flow which was slightly down well down 23 percent from last year overall for me i've talked about pinterest before i do own a small position my big thing with Pinterest was to make sure that they would there those users would stabilize and of course the ARPU would keep increasing so definitely the ARPU is increasing quite well but we're still seeing year over year some user decreasing on a sequential basis. It's looking better, but I definitely want to see that trend continuing for each quarter this year. I'm giving them until the end of the year before I decide whether I want to stick with Pinterest or just move on to another investment. Two thoughts here. One is that, yes, you have been clear that your investment thesis is that ARPU increases by quite a bit and that MAU is somewhat flattened. I mean, it is kind of concerning from my perspective that they're year over year down and a sequential basically flat, sure.

So we'll give them that. If it was me, Simon, just thinking out loud, I would swap this for Snapchat. Just thinking out loud, like this kind of new age tech play. The kids are on Snapchat, bro. The kids are on, they can't get enough. And they're actually monetizing it pretty well i would swap this for snapchat um personally without without knowing a whole lot yeah the

reason why i like pinterest is just a platform is almost like users are almost asking to be advertised to just the way the way it's set up so that's why i do like this play and i don't know snapchat enough hell i don't even have the app on the on my phone so i think i would need we're talking about it last week you're gonna get it we're gonna we're gonna snap each other yeah i need to to download it play with it and see what the the hype is about with all the kids out there the kids love it all right uh let's talk about a couple Canadian transportation plays. The darling of a trucking company, TFI International, TFII.

It's dual listed on the TSX, TFII, and on the NYSE for the same ticker. Revenue was $2.2 billion, up 91%. Oh, baby. Now, it is important to remember that UPS Freight Acquisition is making a big contribution here, contributing 695 million of the 2.2 billion in revenue. So that is the biggest driver, no pun intended. Just a quick little story. I ordered some golf balls today. I ordered some Stratosphere

branded golf balls because, of course, why not? And it's fulfilled by UPS Freight, less than truckload, UPS LTL. And then it says at the bottom, UPS LTL is operated by TFI International. And I was just like, ah, yeah. I knew this acquisition went through, but I didn't think of it right away. So this is a huge acquisition they acquired. EPS of $1.57, which is up 124%, and operating income of $220 million, up more than doubled once again. Free cash flow is actually down, quote here, primarily due to working capital needs related to fuel surcharges,

as well as the company's success in deploying capital for fleet investment. And so, yeah, acquisitions were up 17%, deployed 22.4 million. You know, it's boring trucking. Don't get me wrong, it trades forever cheaply. There's always negative headlines with supply chains. Like, dude, I can't, I'm always starting to hate supply. It's the new unprecedented. It was like when people thought they were smart by using unprecedented.

Now it's supply chains. Look, I mean, the stock is at like one of its cheapest multiples, and it's 4x since 2020 in price. So it's one of the best growth value combinations of the universe of stocks that I look at at a regular basis. And so that's the update on TFI International. Yeah, I feel like probably a lot of investors are maybe just wondering how the cost pressures will affect them going forward and if they'll be able to pass that on to some of their consumers. I'm sure there'll be, or some of their affiliates, obviously. I feel like they will be able to pass some of it,

but they might have to absorb part of it. It might be why it's down a bit. Yeah, I think that there's some cyclicality in a lot of the inputs that they are looking at. And labor shortages definitely don't help with a already super constrained supply base of truck drivers but i mean there's no uh there's no story that just checks every single boxes these days it's just it always seems to be something that the market want to wants to punish it for for me i'm

going to continue to own it i think that it's underpriced given the contribution of last mile delivery in e-commerce. That has been a tailwind and a secular trend that has driven a lot of the incremental returns for this business and no one really seems to talk about it, which is just perfectly fine with me and I'll continue to own it. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission-free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer

myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are

still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. Now moving on to another Canadian business, Canadian National Rail, Q1 2022.

Revenues increased 5% to $3.7 billion. However, revenues mostly increased due to fuel surcharges that they've been charging, freight rate increases, and a few other items, not because of increased volume. Operating expenses increased 12% to $2.5 billion, mainly due to high fuel costs. Operating ratio went up 440 basis points to 67%. Operating ratio is the operating expenses as part of revenues for those who weren't sure. Earnings per share decreased 4% to $1.31. Free cash flow was up 6% to $571 million. They also adjusted their guidance a bit due to challenging worldwide economic uncertainty. I cannot blame them for doing that because as a railroad or railway or railway i mean they are dependent on a lot of macroeconomic

factors that they just have no control over one of the easiest example is if crops are not as good for a given year this is going to impact pretty heavily cnr so something to keep in mind. They revised their EPS for 2022 from 15% to 20%. Prior to that, it was a straight 20%. Free cash flow is now ranging from $3.7 billion to $4 billion. They had previously guided a straight $4 billion. And they are guiding now for full year return on invested capital of 15%. As a reminder here, CNR announced in January that it was increasing its dividend by 19% for 2022. They also announced a buyback program of up to $5 billion over a 12-month period. This was announced when they announced Tracy Robinson as the new CEO replacing Jean-Jacques Rouet, which I think as a shareholder is a great thing because of the Kansas City southern debacle. It was not a great idea to make an offer here.

It was very short-sighted by Jean-Jacques Rouet and the leadership over there to think that they would be able to make an offer with a pretty substantial breakup fee. It ended up, you know, working out for them, you know, by luck almost, I would say. But just the fact that they made that offer, knowing that regulators would most likely not approve it because the railway network of Canadian National Rail is already from east to west in Canada and goes all the way to the Gulf Coast in the US. It was really ill-advised, and I remember at the time we were talking about it, I mentioned that I would not be surprised in the short to medium term if they would be aggressively returning capital to shareholder. And that's clearly what they're doing now. This was a story that seemed to never end last year, and it still has not ended. So we're still looking to figure out what's going to happen with

the with the kc southern thing um if it goes through without kind of some of the input i don't know what else to call it but some like you know contingencies that are put on from regulators that really turn cp and kc southern into an absolute powerhouse It really turned CP and KC Southern into an absolute powerhouse. The CN story has been kind of messy with management. So, I mean, luckily, luckily, you know, you have this kind of the old Warren Buffett quote where you want to own a business so good that, you know, an idiot can run it because one day an idiot will run it. And so that's pretty much. But he's gone now. So we're all good yeah yeah uh that's my only comment there i don't i don't uh focus on the rails too much but

my analysts do and so uh if you want to go check them out on stratosphere you can get full detailed reports all right uh visa and mastercard the rails are rails are dead, right? That's what I was hearing last year. That's what I was told last year that the rails were dead. So very interesting. The reason for that is because Visa and MasterCard reported their first quarter ands per share was up 23 percent and volume on the Visa network was 3.4 trillion dollars, up 11 percent. 44 billion transactions were processed, up 19 percent, and 3.9 billion cards. So we're talking about some outrageous global scale here. And you know, it's a bear market when you get this kind of nice results, and the stock is flat. You know, it's like, you know, the stock being flat, it's like great work, great quarter. You know,

didn't fall 15%. Wonderful job. No, just rifling off with MasterCard. Revenue there was up 24%. with MasterCard. Revenue there was up 24% and transaction volume of $1.9 trillion was up 12%. So there's a reason they're a global duopoly. Revenues were up 25% and 24%, respectively, for the two companies. And transaction volumes were 11% and 12% up year over year. It's almost like they're the same business. It's almost like they do the exact same thing. Would you look at that? Yeah. Yeah. I mean, Visa and MasterCard, they're really similar businesses. Like you said, MasterCard, clearly the smaller of the two, but, you know, increasing, growing up, you know, pretty, pretty rapidly, pretty much on the same page. And then you have the third, fourth player in Amex, although Amex is mostly a bank.

And then I think Discover must be the fourth one, right? Yeah, Simon, I'm trying to focus. And my neighbor's cat just gave me a full-on heart attack. I look up above my computer screen and he's just staring at me i have no idea how long he's been staring at me but uh he's a cute little he's a fan of the podcast he's he's tuning in for the show alive here is my neighbor's cat all right let's uh let's wrap this up here with uh the biggest company on earth and then we'll uh we'll wrap this up yeah i should say it la pomme in french apple okay i was i was

confused there for a second that's how crap my uh yeah my front say you're just starting a new word but uh i i'm joking of course the french listeners all listeners will know. Apple earnings, Q2 2022. Here are the highlights of the Q2 earnings release. Overall, I think it was pretty good for Apple. There was a few not so great parts, but I'll go over it just now. Revenues were up slightly less than 9% to $97 billion. And that's in one quarter. So for people, let that sit a little bit just to realize that they almost made $100 billion in revenue in one quarter. iPhone revenues were up 5.5% year over year.

That's really impressive because they've not had an iPhone release recently aside for the iPhone SE, and that was released only the last week of the quarter. So these sales are pretty impressive considering that typically they'll see increased sales when they release new models. iPhone revenues have also not been the main source of growth for Apple revenues for several years now. I think it was like what four or five years ago when they said like we're no longer i think saying you know by segments like specifically i think they had changed about five years ago the way they were reporting it right uh it was the units yeah it was the unit they were saying the number of the actual number of phone. Exactly. That's it.

I couldn't. As we were talking, I remember it was about four or five years ago. And the bright spot continues to be services revenues. They went up 17% to 19.8 billion. They generated 70 billion in free cash flow for the quarter. That is ridiculous. Yeah, it's insane. That's an increase of 22% year over year.

$70 billion in a quarter. It's just crazy. And they authorized $90 billion in share buybacks and increased their dividends by 5% to $0.23 a share. I mean, there's a reason why Buffett really loves this company. It's one of the only tech stocks, right, that he still has, if not the only one. It was his big bet. And although he was, air quotes, late, he wasn't late at all. It's been one of the most important trades for Berkshire Hathaway.

And so he went big when he recognized something special with this company, even after everyone already even had one in their pockets. And so it's a good little lesson here that you don't have to be necessarily early. You just got to be paying attention. Yeah, exactly. And I think one of the big things to remember for Apple first, they're still growing. Maybe not crazy growth, but pretty impressive for a company this large. And second, they're generating so much free cash flow that they are just returning massive amounts of money to shareholder.

One of the big reasons that the stock was down on the release is because they mentioned that supply chain constraint. Yes, Braden's favorite three words. You're allowed to say it. I just don't want to hear it on TV anymore. That's all. Yeah, supply chain constraint. And that's real here. They could hurt revenues for the upcoming quarter by four to eight billion. And that's due primarily to some of the lockdowns that we're seeing in China, in regions where Apple produces a lot of its products. So it's something to keep an eye on. But even with that hit, I mean, obviously, Apple will be fine going forward. And it may create some opportunities for some of you that may love the business, may love to get a stake into Apple, but thought it was trading a bit too high in terms of multiple.

Well, news like this that may have more of a short-term impact can oftentimes create some really great buying opportunities. And I know, I think I read recently that Berkshire was adding to their Apple position, but they would have added more if the price didn't run up as quickly as it did. But now I think it's been back down for the past couple of months. So it may be an opportunity for those interested in that company. in that company? I, you know, my, I'm just jaw dropped to the floor hearing the scale, uh, and just the pure profit machine this company is. And it's become a tax on, you know, a lot of, it's a tax on their ecosystem is that services segment line. And it's a 30% tax on the app store. And so, you know, if you want to play, you got to play in their sandbox. If you want to find customers on a store, a virtual digital store for your application,

you got to play in their sandbox or you can not and just sell it to other ecosystems, but it's going to be worse for your business. So don't do that. Like, why would you do that? And so, you know, the, the ball's just in their court. The $90 billion in share buyback authorization, I mean, if you look at return composition over the past decade, yes, the business has executed exceptionally well. Yes, Tim Cook has been maybe one of the best founder to CEO transitions of all time. Maybe, I don't know. If you look at that, it's the buybacks that's really been rewarding shareholders and they can afford them. And they can afford them. Maybe that's the understatement of this podcast is they can afford those. Yeah, I think one thing, maybe something we can look

at at some point is just how their share count has gone down. The actual amount it's gone down over the past 10 years since Tim Cook has taken over. I think that'll be interesting. Let me tell you right now. So if you go on stridesfairinvesting.com, you go in the terminal, you search up AAPL or type Apple. Uh, you go to the financial summary tab. I'm doing this live here at the very bottom is outstanding shares in millions. Uh, that's a nice looking graph because it just goes down and down and down every single year. They had 20, this is in millions. So they had uh 26 000 was that billions yeah 26 billion shares and now down to 16 from 2012 to 21 2021 that's pretty good that's almost what 40 percent

down yeah that's that's uh something you like to see you just own a bigger share of the pie that's right and uh it's the perfect Buffett business, right? He talked about that. We didn't even talk about that today. But Saturday's AGM for Buffett and Munger there for Berkshire Hathaway, the two old lads getting after it. And they talked about American Express, how they owned, I'm making up the number, but single digit, let's say 6% of the company when they first bought shares before I was born. And now own 20% of the company and never purchased another share. That is the beauty of share buybacks.

And it's been a big story since they started their position. Just based on this graph here, when they started their position, the share count was 22, and now it's 16.8. So that's got to be nice for shareholders and the buff dog himself. All right, thanks so much for listening. Guys, we're going to go back to back, record another episode here today for you guys. If you're new here, welcome, by the way, we love you. I hope you keep listening.

We do episodes on Mondays and Thursdays. Mondays is regular shooting the shite and Thursdays is earnings releases kind of like this one you heard in your ears today. If you have not checked out Stratosphere Investing, Simon, hey, congrats. Congrats. The newest shareholder. Yeah, the shareholder. The newest shareholder of Stratosphere Technology Incorporated, my company I went full time on in six days. It'll be a year. Simon's now a shareholder. So, you know know go ahead and check that out that is stratosphereinvesting.com or type in getstockmarket.com you could easily find apple's share count just like i did by typing it in and then going to the bottom there and finding the shares outstanding yeah and if people want to find us on twitter it's cdn underscore investing

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Take care. Bye-bye. 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.