The Canadian Investor - Why Oracle Is Spooking Markets and a Red-Hot 2024 Canadian IPO

Episode Date: December 18, 2025

Canadian CPI surprised slightly to the downside, but food inflation is still biting, with big moves in staples like beef and coffee. We also break down the shakeup at Lululemon as the CEO steps down, and why investors appear to be welcoming change. On the Canadian side, we dig into Group Dynamite’s eye-popping results and what’s behind the momentum. Finally, we tackle the name that’s been weighing on markets. We wrap with WSP’s latest acquisition and why grid modernization could be one of the more compelling “picks and shovels” angles to the broader AI buildout. Tickers of Stocks Discussed: LULU, ORCL, WSP.TO, GRGD.TO Our New Youtube Channel! 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  Web player - The Canadian Real Estate Investor Asset Allocation ETFs | BMO Global Asset Management Sign up for Fiscal.ai 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.

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This has to be one of the biggest quarters I've seen from this company in quite some time. Welcome back to the Canadian investor podcast. I'm back with Dan Kent. We are back for a news and earnings episode. It's going to be a fun one. I wasn't sure what there was going to be. And then it feels like there was a slew of news and earnings. report that just happened in the last couple of days. I think it's going to be a really fun one

before we get started. Everything's good on your end then, preparing for the holidays. Yeah. Yeah, it doesn't look like we're going to get a Santa Claus rally this year, but it seems mostly like a big piece of coal over the last week. But I think a lot of, well, at least one of the pieces of news we'll talk about today is I think what's actually probably driving the market down a bit over the last while. But yeah, it's going to be a good episode. Yeah, the company. any of that seems to be in the markets down. So stay tuned for that. It'll be a bit further down here.

Now, CPI came out for November Canadian CPI, so that's inflation. Of course, the actual numbers were 2.2% year over year. So that's the headline number. Obviously, it's something that's not too bad, but the expectations were actually a bit higher, 2.3 to 2.4%. So on the surface, headline number, pretty good. versus October it was up 0.1%. Gasoline was down 7.8% year over year, but up 1.8% versus October.

Similar kind of patterns here that we saw for energy, which is a big broader category than just gasoline. One of the most worrisome aspects here were food inflation. Now, it was up pretty eye-popping, so it was up 4.2% year over a year, and 1.1.1.2%. 1.3% versus October. It's funny because I don't know about you. I did see some items at my local grocery store that kind of surprised me. A few items that like yogurt, especially, that I hadn't seen that high in prices until recently.

So I don't know if it was a one-off. It was a lob-laws. Typically stuff's a bit more expensive. But definitely some food inflation here. Have you seen some things on your end that's going up? Oh, yeah. I mean, the most obvious thing, and you'll talk about it, would be the price. of beef. Like, I, I grew up on a, on a cattle ranch when I was younger, so we ate a lot of

beef. And I mean, price wise, I mean, when I was younger, even when I had just graduated and started buying it, like, beef was like the cheapest thing you could buy. And now it's, like, it's like a luxury item. It's crazy how expensive it is. Yeah, exactly. And look, it wasn't just beef. And the increase, actually, I said 4.2% you over a year, but there was a year increase of 3.4% in October. So it's not just isolated here to November itself. And you said beef was up 17.7% while coffee up a whopping 28%. I'm just rounding up here. And I definitely saw that. I've seen the price of coffee go up in the last four or five months. And apparently this has a in big part about the U.S. tariffs because the U.S. are actually putting tariffs or

war-putting tariffs on coffee imported to the U.S., and apparently a lot of this coffee is actually then imported to Canada, so it gets tariffs in the U.S., and then obviously Canada, even though we put down the reciprocal tariffs, we have those elevated prices. So it'll be interesting whether that goes up or down in the coming months. Tiff McLem actually talked about it yesterday. We're recording this on the 17th, and that was one of his arguments that food inflation next year should ease a little bit, shouldn't be as bad. So we'll have to see whether that's true or not.

Fresh fruit on the other hand was up 4.4%. So for the vegetarians listening to us, you're also not out of the food price increase. And obviously this is not good. This is, I honestly think that sometimes people focus a bit too much on the headline numbers. But when you have something like food nets going up, that impacts everyone. but especially those who have no margin in their budget.

I mean, it is a need. It's an essential need, right? When you think of the Maslow Pyramid, that's one of the top items that you need food to survive. So that's what's really concerning here. And all of this before the holidays, when people are trying to spend time with the family, it's just not great.

And then if you start looking at corn inflation, which, of course, strips out this kind of more volatile items, and that's what the Bank of Canada uses as a gauge for the most part, both CPI trim and medium, which are two of the core inflation metrics, cooled significantly. So they're now back down around 2.8%. And that was down from 3%. But not really reassuring for consumers when you're talking about food, whether headline CPI is down a bit or core CPI is down.

if you're having trouble buying essentials like food, it's definitely an issue. And keep in mind here that there could be higher headline inflation number starting this month, January, and into February. Because if people maybe not remember, it was one of Trudeau's last desperate moves to cling on to power last year was the removal of the GST. So that GST holiday that started, I believe, on December 15, up to February 15. So you're going to have base effects where last year prices were lower because of this GST holiday and we're not having that this year.

So you could see the headline number go up as well during that two month period. Yeah, I think if you look to what people were mostly complaining about through inflation over the last few years, it's probably been food. So I mean, the core, like the headline number is low, but like people really don't care when, you know, their food is going up 5%. And I think they did warn that it was going. up as well, like a month ago, they said food was probably going to go up, like they said upwards of 5% next year. It's crazy the tariffs on coffee. Like, I don't understand that because the U.S. cannot produce.

Because you would think in theory they would put the tariffs on to produce it domestically, but they can't really, which is, yeah, it's, I don't know. Don't want to get into that. Well, I mean, you know, yeah, exactly. It's not that everything that Trump says or does makes a whole lot of sense, but they were removed. I guess they're realizing that higher food inflation is definitely not a good thing. I think midterms are happening next year, if I remember correctly.

So if they want to keep a hold of the Republican, the Senate, and the House, they'll have to make sure that they're doing much better on that front. So anyways, that's kind of it for the CPI data, not to go too long about it, because we do have quite a bit to go to talk about this week. Now, Lulu Lemon CEO stepped down. So Calvin McDonnell, who has been seen. CEO of Lou Lemon since 2018 announced that he was stepping down as CEO. The move is effective January 31st, 2026.

He'll continue to be a senior advisor until March 31st, 2026. Their current CFO and chief commercial officers will act as co-ceos while they're searching for a replacement after he's left after that effective date. The stock was up 10% on the announcement. So clearly, investors, are indicating that they were looking for a change at Lul Llemon. And although Lulimin has struggled in the past two years, it's hard to say that his tenure was not successful.

I mean, the revenues have more than 4x during his tenure, good enough for a compounded annual growth rate of 20%, which is not nothing to do over that time period. Earnings per share has grown at a 30% clip per year, and free cash flow per share at a 19% clip. And Lulu had no presence in, China until 2021, which is now its second largest market after the U.S. It surpassed Canada.

And the problem here is that it was also at the helm when Lululemon during the pandemic, which of course was not easy to navigate, but a lot of retailers saw headwinds from it, especially clothing because people had a lot of money to spend, not a whole lot of activities to do. So Llemon definitely benefited from that. But they also sheled out $500 million on the mirror acquisition 2020, and they rode down about or rode off 90% of it. They actually discontinued selling mirrors back in 2023.

And people who are listening to this are like, what the hell is this? It was basically a mirror that you could like, I think there was like a screen integrated and you could work out, do a home workout with it. So they did. Definitely paid at the peak for that. It flop. And I think some of, well, the reasons where I think he's probably leaving right now is two of the biggest issues that Lou Lemon are facing now are that the products are not resonating well with its consumer base. And that's something that was identified about two years ago and they have yet to rectify at this point. So they're still struggling from that. They also have products that sell of a premium. So if you don't produce something that consumers, one, that resonate, with them, then it's definitely an issue when you start selling things that sell out of

premium. And you can start seeing this in their inventory levels, which are hitting their highest on record right now. Sure, the business has grown, but it's just really the international business supporting that. And the most worrying here is that their sales in the U.S. have essentially stalled over the last, I think, year, year and a half, if not declined a little bit. And the U.S. is their largest market or the Americas, if you include Canada. of that. So we'll have to see what the next CEO does, but they, they definitely have a lot on their plate, whoever they, they choose at the helm of Lou Lemon. And don't get me wrong, still very profitable, but it's one of the reason why I sold is there's a lot of uncertainty

with Lou Lemon. Yeah, I wonder if this was a, like a force stepping down, probably. I mean, eventually. Yeah, well, there was their chief product or design officer, whatever the name was, right, that stepped down. I think it was last in 2024 in the spring. So you think that was the first domino or resign or step down. I can't exactly remember, but they love the company. That was the first domino to fall. And I feel like shareholders and major investors probably gave them the benefit of the doubt. But now it's been more than a year and a half since then. And results are still lacklustered. Yeah. I mean, it's pretty typical for them to get rid of the top person. I mean, to try and turn it around.

We've seen it with Starbucks was another one that was struggling for a while, and then they eventually kind of overhauled the management. But it's pretty hard to get these companies back on track again. I mean, we've seen it with Nike as well. I mean, they're struggling too. It's kind of weird, like, especially the company will go over next. It's like there's, I don't know what the difference is between companies, like say, a Lulu Lemon or a Nike and a company like Eritzia that's doing so well

or like a, you know, group dynamite that will go over next. It kind of seems like they're both like they're not exactly, none of it is exactly cheap clothing, but two companies seem to be doing well and the other two are struggling. It's, it's interesting. Yeah. And I mean, I'm showing here for joint TCI subscribers, the U.S. sales, and you can see the U.S. cell are essentially stagnant here over years. So we'll have to see how it goes. But that's a problem when it's your biggest market. And to answer your question, I think it just comes down to fashion.

At the end of the day, fashion is incredibly hard to predict. And your products have to be on point, especially if it's not something that's discount retail in terms of or discounted fashion or fast fashion. You can make a case where fast fashion at least, you know, there's a price point and makes sense for people. But if you were more and more people are struggling financially and have to limit the amount of dollars that's going out of their budget on clothing, they're going to be more selective if they still buy this premium stuff. I think it just comes down to that. would be my biggest thing. Having cash on hand is essential for any business. Traditional business accounts hit you with high fees

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I encourage you go on there and follow me, search me up, some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas, and using the analytics tools. So go ahead, blossom social in the app store, and I'll see you there. Let's talk about the next one here. Another fashion play that's on fire. Yeah. Contrary to Lou Lemon, so you want to talk about group dynamite, I believe.

Yeah, like, I have no idea. I remember that my mom buying clothes from them when I was a kid. So it's been around for some time. It's been around for like a very long time because I, they sell garage, which I've heard of garage for quite a while. Yeah. But they just IPOed last year. So like they haven't traded for that long and a lot of people have been bringing this company up to me. And I mean, I didn't even know they were public.

But I'm not surprised that people have brought it up because, I mean, it's been on an absolute tear. It's up around 350% on the year. And it's not really, you know, this isn't kind of an AI, like hype type company. This is a company that's actually growing at an absurd pace and kind of the share prices is starting to reflect this. So they're kind of similar in the fact that, you know, with Eritzia where they make women's apparel under the garage and dynamite brands. So they kind of cite their. main competition, which would be Eritzia or something like American Eagle. So revenue is up 40%.

Net income has nearly doubled. Free cash flow is nearly tripled and comparable sales growth is nearing 32%. And it's interesting because this has been one of the first times I've actually seen a CEO mentioned the K-shaped recovery, which is kind of interesting. I mean, they, like he mentioned. Maybe they've been listening to the podcast. Yeah, they might have been listening to the podcast because they mentioned like they are benefiting from the K-shaped.

They're saying, you know, from which part of the K there? The upper K. Oh, yeah. So much so that they are, they have a lot of stores and lower tier malls and they're cutting those out. They're getting rid of those stores and they're moving in the malls with higher income level consumers. What did they call them?

Investment grade malls or something like that. They called them that they're going to be moving a bunch of the stores in because they're, they're benefiting a lot from that area of the market. And one of the crazy things about this company is it's definitely. Ultimately, it's the highest margins I've seen from a fashion retailer, like by a long shot, actually. So gross margins are in the mid 60% range and they have 40% plus adjusted EBITA margins. The one thing the company did mention is that the EBITA margins are likely unsustainable. They had kind of mentioned that some tariff pressures easing plus some, you know, inventory management over the last, you know, the short term is probably going to send the margins downward.

But I mean, even if you look at something like Nike, I believe they're in the 40% range in terms of growth. gross margins. Ritsia, 45%. I think Lulu is one of the higher ones, but even then, they're like low 50% range. So margins are very interesting. As again, I haven't seen a company with this high, especially in fashion retail. So they revised their guidance on the year. They're now expecting comparable sales growth on the upper end to come in at 27%. So previously this was around 20%. So there's a pretty big boost of guidance. And another interesting thing here, and I guess would actually be like potentially bearish thing for me is the company is planning a UK expansion next year. And why I kind of find this interesting is you have a company like Eritzia, which they started

out in Canada. They expanded the U.S. They're kind of making the U.S. its main focus and doing very well. Group Dynamite is taking a bit of a different approach. So it started in Canada. It's expanding fast in the U.S., but now it's going to branch out a third, like to a third area, the U.K., which I mean, to me, I kind of like a Ritzie's approach, like the U.S. market is absolutely massive. I don't really think there's a reason to go overseas until you absolutely have to. But we'll see how it works out. They, you know, a lot of people probably didn't even know this company was publicly traded. I definitely didn't.

And they ended up issuing a $2.30 special dividend this year, like $2.30 per share. So they probably generating so much cash flow that they don't really know what to do with it over the short term here. So they're dishing it out as a special dividend. I mean, some could probably take that as a bearer sign as well. But, yeah, if you're a shareholder, you're getting a big dividend. Yeah, no, it's, that's an interesting one. Again, I think it all goes back to clothing. I was looking at their website a little bit just to get a sense of the prices here.

Just looking at jeans and I'm not that well versed in women's clothing. So you'll want to take my apologies for that. But, you know, like it's not crazy expensive for jeans. I've definitely seen worse than that. So talking about, you know, $80 to $150 as a whole, but a lot of stuff around $80, which is, you know, not cheap, cheap, but not unreasonable for jeans. So I guess they're more in the kind of middle,

not too expensive, yeah, mid-tier fashion prices. Yeah, which would kind of be the same as Eritzia. I think Eritzia is more expensive, but not, again, they both fall in like that mid-tier fashion company. line. Yeah, they've just had, it's been crazy the last while. Fairly expensive, I guess, in terms of valuation. But I mean, obviously when you're, when you have this good a result, the markets are going to reward it. Yeah, no, exactly. Now, let's move on to, uh, what's, uh, likely have been dragging markets down here. So people may have, yeah, they may guess which

one. So it's really a Oracle, right? That seems to be every day, it seems like there is a bad news coming out about Oracle, and they had the recent earnings calling. I think it kind of started with all of that. So I'm just going to show here, Oracle. I mean, I think it's down about 45% now from the peak after, if people remember the September quarter when they posted, so they released their earnings.

I think it was around September 9th or 10. They said that their RPO's, which is essentially a form of backlog, had just completely gone off the charts. And the markets were just going crazy about that. You saw, and I'm just going to share it here. So there you go. So, yeah, people can see it on Joint TCI.

So you saw the backlog go from $140 billion to $455.455 in September, and now it's jumped to $523. So that was that big jump that we saw in December for 138, to 455, essentially the market went crazy. I think Oracle was up, what, like 35% on the new? 40%. I think 40% plus, yeah. And then it made round trip very quickly back to...

Yeah, and we talked about it on the podcast. And not that these backlogs don't have solid footing in terms of the customers. There's really two big questions is for us that we talked about. it was first they have to execute on that and how is how are they going to fund like this is a lot of capital expenditures a lot of cap eggs but the other reason is even if they do realize everything how profitable is it going to be that's the other big reason because they have a legacy hard margin software business this is not high margin software business this is really low margin stuff sure you get big volume but it's low margin so that those were our concerns and i guess

we were right to be concerned because it's down 45% since then. It's down more than it was like it's down even compared to the pre-reporting that. It's probably down like 10% from that point too. Yeah. And I think the one thing, you know, there's lots of companies report backlogs. Like you can think of, I mean, we talked about them a few weeks ago, like a Toramont or something. Like they report a backlog. But it's a little bit different because Oracle's RPO's like it doesn't even have the infrastructure built two.

supply where you look at a backlog like a well WSP global we'll go over next where you know that backlog it doesn't require them to build out you know spend I don't even know what Oracle is going to spend it just have to yeah basically it requires them to have the resources to do it like basically resources that are effective are are applied to other projects right yeah whereas you know Oracle for them to you know hit a lot of these RPO's like they need the infrastructure built So it's a lot different of a definition of backlog, I would say. It's like it's not as, I would say it's much more speculative than, you know, an equipment company or an engineering company. So revenues on the good side of things, revenues were up 13% for the quarter.

Operating income was up 8%. Earnings per share was up 86% but lower if you look at the adjusted I think was up 50, 60% range, the adjusted numbers. Free cash flow was a whopping negative 12 billion. while CAPX was $10 billion, and that's significant because historically Oracle has generated tons of Cree cash flow. And this negative 12, sorry, was a, yeah, negative 12 billion, I believe, or negative 10, anyways, I may have the numbers, but it's a big number here. And that's because Oracle has been a casual generating machine. Like I said before, that software business is high margin. For fiscal year 2026, the current year, they now expect to spend 15 billion more in CAPEX than they had stated in the previous quarter, which should be in the ballpark now of 50 billion or 50 billion or so.

And that's a trend that we're seeing with all the hyperscalers, right? They're definitely increasing the CAPEX spending. They made a point on the call to say that the vast majority of CAPEX is going to revenue generating equipment and not land buildings or power that are. covered by leases. Now, it is true that most of what they're doing, they're actually entering into these long-term lease agreement with companies that are actually building the data centers, the actual building itself, which is not that great of a business to be the landlord for these, just to clarify, I think people tend to think it is. There's a reason why more and more of the hyperscalers are leasing it and not building it on their own. And the problem is they have close

to $250 billion in lease commitments over the next two decades. That's also another problem. Oh, man. Yeah, they generated, like, they used to generate 10 to $12 billion in terms of free cash flow every single quarter. And now they've swung like, you know, that's a, yeah, February 2024, they generated $12.5 billion, which would have been their highest quarter and since, you know, pretty much 2021.

So you're talking about a $25 billion swing in free cash flow. like highly profitable company turning into like a cash burning company and yeah they as you had mentioned like they're turning it into revenue generating assets but that doesn't necessarily mean it's going to be profit generating assets exactly like and just looking at it here I'm sharing the the annual free cash and it's quite consistent right like you're looking at the worst year was like 2022 looking back at back to 2016 but for the most part it was at at least a $8.5 billion up to $14 billion in free cash flow. And then if you look at the trailing 12 months, which of course includes this latest quarter, it's a negative $13 billion. And that's a

trailing 12 months. And I think that's a better indicator because obviously free cash flow can be a bit more volatile on a quarter to quarter basis. But I think that's a really good illustration of why the markets are definitely worried on the cash flow perspective. And an analyst on the call actually asks how much money Oracle needs to raise to fund its AI growth plan. And they didn't really answer. So they had the classic non-answer. Although they gave a little bit of information,

they went out and said that they read what analysts are saying, and that analysts were saying it would be upwards of $100 billion. And they just said that it would be less than that. That's a pretty big range. And that's just funding that they'll need, right? So they're probably using cash flow, of course, money they're generating, even though they're negative. they're using money generated for there

and then they have to fund it with something else and they said that funding to support the CAPEX can be done through public bonds, banks and private debt and this is one the reason that the stock is down 40% plus from its peak because even if it's less than 100 billion that's a whole lot of money to be raised and keep in mind they added 30 billion in the last year in debt and now it stands at around 125 billion

so they're either going to be adding a whole lot more debt to finance this or they're willing to have to dilute shares and at some point they may be forced to dilute share even though they didn't say that on the call if you get to a point that markets start being nervous and they say okay well you can always find someone that'll finance your dead but they'll do it at a certain cost and the riskier it gets the more the interest you'll pay so oracle may find itself at some point say look we're better off issuing shares i'm not saying they will but that's definitely a risk. Plus, of course, the RPO backlog is not as high margin revenue, like their legacy software,

like we mentioned. So you have essentially these RPO's, some from companies that are not profitable at all, like OpenAI, so there's uncertainty there because what, you know, at some point funding will dry up for Open AI if they don't have a path to profitability, unless you think that people will throw money at in the abyss forever. but I don't think that's usually markets do come to their senses. You also have massive CAPEX required to realize these RPOs, and you need to issue massive amounts of debt equity to cover that CAPEX, plus the revenue is low margin.

Those are essentially the four big elements that I think are causing Oracle to be down. And then to make things worse, there's an article that came out from the Financial Times today that reported that Blue Owl Capital, which has been fined. financing a lot of the data centers that would be used for Oracle's expansion, and essentially Oracle would be leasing those on a long-term basis. The report was that they walked away from a roughly $10 billion project in Michigan, and the deal would have involved Blue Owl owning the facility and leasing it back to Oracle or Blue Owl and a group of other likely equity investors. Now, that's not great because it could also be a sign that they're starting,

to see that these are not the best businesses owning these data centers. And I was reading another article before we started recording and it was someone who made a fortune in real estate. And essentially that's what he was saying. It's like he's not sure how good of a business it is and what value these buildings will have down the line. You're paying what ton billion to build one. If you want to sell it five to ten years down the line, there's almost no transaction to fall back on. And so what's the actual value of these buildings? So there's just a whole lot of uncertainty around Oracle. And we'll see whether it just continues bringing down that AI hyper-scaler sector with it.

But it's definitely been the name that it seems like every day there's a bad headline about Oracle. Well, yeah, when you were talking here, I was trying to find the tweet. But somebody had mentioned that their credit default swap, like volume, which is effectively just a hedge kind of against the default. of the debt, like the volume in those surge to like the highest point since the financial crisis. So I mean, in a way, like, you know, there's been no point in roughly the last 17 years where the credit markets view Oracle's debt as riskier than they do today, which is probably, you know, driving down a lot of the price as well. But yeah, there's there's so much uncertainty here. There's so much spending like that you just, there's no guarantee that this ever works out.

No, exactly. And some of the hyperscalers are able to. to already monetize that. I think Meadow is doing a pretty good job. Google, I think it may be not as much as Microsoft, but they're definitely integrating it in a whole lot of products, that's for sure. And Microsoft, a lot of its business offerings, but you have other players that it's starting,

it's taking more time to start, like, justify a whole lot of that CAPEX. And I was listening to podcasts a couple of days ago, and I can't remember me, I was a famous investor. I can't remember who it was, but essentially it was saying that as bearish case, too, is a lot of those hyperscalers, how profitable they've become, was in big part because of the infrastructure that was laid during the tech boom in the 1990s. Because for the most part, they didn't have to do massive Cappex investments and they were reaping the benefits of, sure, businesses that expand and were scaling very well. but now they're entering another phase

where they actually have to make massive Cappex investments and who knows how well they'll be doing the next five to 10 years because of that. So I thought it was an interesting point of view whether you agree with it or not. It's a moot point and just putting the argument out there. But anything else to add before we move on

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there talking, sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the app store and I'll see you there. We can go over WSP. So WSP is one I own. I don't know if you own it. I don't think you do. No, it is on my radar. So WSP really really like the business. I may own it at some point in the near future, but for now I do not own. So they made another pretty big splash. They're buying TRC companies. So they're a US-based engineering and consulting firm. So the price was around $4.5 billion Canadian. And this will make WSP the largest engineering and design firm in the United States. I believe on a revenue basis. I think on an employee basis. They're still not the biggest, but anyways, they're getting up there. To me, this is kind

of a big bet on grid expansion. So this is what TRC's main focus is power and energy. So they did this last year, I believe it was last October. They bought power engineers, which also kind of furthers this bet. Essentially, they kind of want to be the first firm people call when, you know, it comes to grid modernization, renewable energy, etc. The deal will be funded with 732 million in equity, $118 million in private placement from the Quebec pension plan. And the remainder is through debt. So I believe the offering in terms of shares was at $230. But the company actually, you know, WSP, typically when you see these offerings, they dip down to kind of the offering price, but WSP didn't. I don't know if it's just because, you know, the actual equity issuances are not

a huge chunk of the deal or if the market just really likes the deal, the acquisition is expected to be immediately accretive to earnings, which is might be another reason why it didn't dip. Just by accretive, meaning, you know, even after they issue those shares, it's expected to increase earnings per share. So, you know, not every share issuance is dilutive, meaning it but decreases earnings. You can have some share issuances that actually help you as an investor. This would be one of them. So I think low, low single digit accretive immediately. And then they expect high single digit once it's kind of all, you know, the synergies that the integration is all kind have, you know, finished.

They paid 14.5x adjusted EBITA. So right now, WSP Global is trading for around 13 and a half X. So, you know, pretty standard, I would say leverage ratios will bump from 1.5x to 2.5x on the closing of this deal, but WSP does expect to get it back to sub 2x in a year. The one thing I did like and one of the main reasons why I own WSP is first off, they make a ton of these acquisitions and they can do so because, you know, leverage ratios are really not that high. Like 1.5X is not that high. You see many, I mean, I guess it's probably a poor example because it's infrastructure

heavy, but it's the only one I can think of at this point. But most of the telecoms are like close to 4x, I think. So like you can move, you know, you got a lot of cash to kind of make acquisitions at that leverage ratio. And the fact that it's going to be immediately accretive, that's exactly why they probably think they can get the leverage ratios back down to sub 2x, which again just kind of opens them up to being able to make more deals. They're picking up recently in a big way.

I mean, they made a lot of deals. There was another one. There was a UK firm they bought not too long ago. I think, I can't remember the name of it. Ricardo, I think it was. Don't quote me on that, but I think that's it. They kind of seem to be moving more towards the electric electrification of everything. Yeah.

And the best part is they kind of have the balance sheet to continue doing it. So quick close on this first quarter at 2026, but yeah, it looks like a pretty good deal. Yeah, it's kind of crazy. I was looking at the free cash flow per share for WSP, one of my favorite metrics to look at here for companies and it just keeps growing. Yeah. It's over the last 10 years, it's grown at a pace of 28% on the year over year, well, on compound annual growth rate.

So pretty amazing. Yeah, a company that definitely is very much on my radar. And I think one, I may start a position very soon because I think people, I think people who have been listening to the podcast for a while I'm a bit

nervous about the whole AI space and the hype around it and obviously we're seeing what's happening

with Oracle who knows maybe that's just a little blip and then it'll keep going up as a whole but it's

dragging a whole lot of its peers down but I do think one one sector or one play that I really

like on that is what businesses could benefit from that whole boom so I think the pure play AI, I think those, I think there's a little bit more uncertainty, whether they are good

investments or not, but those companies that are the Pixen shovel or are building the electric grid, things like that, or even the minerals and that are required for that, I think those are really interesting in my opinion. So I'm not saying whether it's a buyer or sell, of course not, but those are the plays I'm really looking at because I think you can get some decent value compared to the hype around those more pure play AI. Yeah, if you think about it, like if you're worried about the fact that, you know, a lot of these hyperscalers or maybe these companies won't be able to be that profitable after they do all these buildouts, like WSP is getting paid long before a shovel even hits the ground.

So it's, it's kind of a different element there. It's had a pretty rough end to the year. I don't really know why, but yeah, it's, I really like it. The acquisition's good, too. I would imagine they're going to be making more. They're a company that does make quite a few, but they made bigger splashes as of late. And this is, this is definitely one of them. Yeah, I would say it was probably just a valuation thing.

Yeah. Just looking at the valuation here had gotten, just looking at the price of free cash, so like pretty, pretty high had gone and pretty expensive. Now it's back at definitely more reasonable levels. So it could be just a valuation reason, maybe people taking some profits to that have been holding the company in the stock for a while. So I'm not quite sure, but I think this is a good point to end it. I think it was a fun episode.

We had a lot to go through, a lot of news and earnings kind of mix a little bit of both, some Canadian stuff, some U.S. stuff. We do appreciate the support for anyone listening. If you have a few minutes, can give us a five-star review on Apple Podcast or Spotify. That would be great. And for those who are looking for additional content from us, we post our monthly portfolio on join tcii.com the ad-free version of the podcast is also on there and you also get my parents portfolio update and the full videos that we record they're all posted on

there so for those interests in there if not it does help us help people find us discover the show if you give us a five-star review just takes a few minutes very much appreciated on that note and then I think this one's going to be one of our last recordings of the year I think we have a few left. So happy holidays. Merry Christmas. Happy, happy, happy new year to everyone listening. And hopefully you enjoy the time with your family during the holidays. And we will be back with a regular episode. We won't miss a beep. We're recording some additional stuff in advance. So regular episode Monday and Thursday through how the holidays are just doing some additional recordings right now. Thanks for listening. The Canadian Investor podcast should not be construed as

investment or financial advice. The host and guest featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with a financial professional before making any financial or investment decisions.