Will Couche-Tard’s $65B Bid for 7-Eleven Succeed?

[00:00:01] This is The Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Braden Dennis and Simon Belanger

[00:00:14] Welcome back to The Canadian Investor Podcast. I'm here with the one and only Dan Kent. We are back for Thursday news and earnings. Finally, earnings season is really, I think, kicking off.

[00:00:26] I think we have a lot of talk to talk about, including Canadian and U.S. businesses. Any one particular you're really excited to talk about that?

[00:00:35] I would say the go easy.

[00:00:37] Go easy thing. Okay.

[00:00:39] Yeah, definitely. That's going to be an interesting topic just because we've been hammering it for like three quarters now. We've been going over the results.

[00:00:47] And yeah, that's definitely going to be an interesting one because they made a big, big debt offering and the market does not like it.

[00:00:54] Yeah, exactly. I was just checking my phone yesterday. I'm like, did they report or something? And then you had a look and you're like, no, no, they just did a big debt offering.

[00:01:02] So we'll try to unpack that. But first, last week, I think for listeners of this podcast, what probably made a lot of, you know, I made headlines a lot, at least in financial headlines was ASML's earnings.

[00:01:16] First of all, they actually reported early by accident because of technical issues.

[00:01:23] So they, you know, it's not great, especially when you're probably trying to massage the messaging, if you'd like, or make sure that people understand or investors understand what was not great about the quarter.

[00:01:34] So we'll, we'll talk, we'll unpack that and feel free to ask me some questions, Dan. I know you're not super familiar with ASML.

[00:01:42] So before I get started, all the numbers are in euros. So keep that in mind. So the earnings were released, like I said, a day early again, you know, not a huge deal.

[00:01:52] Stuff like that happens. But as you'll see, it wasn't a great quarter, especially when it came to the guidance.

[00:01:57] So it's probably something they would have liked to control the messaging a bit better with. Net sales were 7.5 billion euro, which was 2% more than the top end of the guidance they had provided the previous quarter, which clearly is good.

[00:02:12] Net system sales were 5.9 billion, 2.1 billion, which came from EUV sales. So that's extreme ultraviolet.

[00:02:21] So these are the most top end systems that they sell and 3.8 billion from DUV sales. It was driven by more sales, but also install base management.

[00:02:31] That's maintenance, but also system upgrades for existing system. So their total sell kind of includes both, not only the system sales, but also the install base management.

[00:02:41] Gross margins came in within the guidance they had provided. So that's good. But like I mentioned, what really heard the company was the net booking.

[00:02:49] So what tends to happen? Well, what happens with ASML is these systems are very expensive. Like you're talking, especially EUVs, like in the, you know, two, 300 million range, if not more for the most recent ones.

[00:03:03] So when companies are making capital expenditures, so companies like Taiwan Semiconductors, for example, which is a large client of ASML.

[00:03:11] I mean, they have to really be sure that it will be worthwhile. So when they put in these orders, obviously it does take some time to build these very complex systems.

[00:03:23] So what happened is the net bookings came in at that 2.6 billion, but analysts were projecting about double that.

[00:03:32] And that's a drop of more than 50% from the previous quarter. And 1.4 billion was EUV bookings and 1.2 billion was non-EUV bookings, which is deep ultraviolet, DUV.

[00:03:45] Those are the less advanced systems. They're not the only ones that make those, but the EUV, the most advanced, ASML essentially has a monopoly on those.

[00:03:54] Net bookings, like I said, are orders that they receive for its equipment minus cancellation.

[00:04:00] So it's definitely an indicator of future demand.

[00:04:03] So they said that the low net bookings was because of softness in the traditional end of the market with customers remaining cautious in the current environment.

[00:04:14] So traditional would not be like AI would be, for example, like memory chips.

[00:04:18] That would be an example of more traditional or CPUs that are, you know, in your computers, whereas AI is predominantly GPU.

[00:04:27] So the graphic units. China is definitely a big part of why it was slower.

[00:04:32] So they mentioned during the call that they had a lot of their backlog in 2023 and 24 was from China, which resulted in higher sales going to China as they were working through the backlog.

[00:04:43] They also said that China is now normalizing and their uncertainty regarding export control, which, you know, makes them more cautious about Chinese sale.

[00:04:53] They even said during the call, I'm kind of using that verbatim, but they're like, we're aware that you're seeing all the headlines.

[00:05:01] We see them too about the U.S. potentially imposing more restrictions.

[00:05:05] And so they really address that on. So it's not like, you know, it's not the elephant in the room.

[00:05:11] Clearly, they are aware of it. They know that investors are aware of that.

[00:05:14] So they definitely address that during the call.

[00:05:16] And of course, in something they can't really control, China sales are expected to be around 20 percent next year, which is a big draw from the close to 50 percent that it was for several quarters.

[00:05:29] Now, they expect the U.V. orders to go down overall next year and they expect U.V. part of the business to grow.

[00:05:37] So clearly, you know, there is more and more demand for the U.V. system.

[00:05:41] They mentioned that customers are not necessarily canceling their plans to build new fabs and fabs are just these basically factories where they'll actually make the chips.

[00:05:51] So, for example, you know, TSMC Taiwan Semiconductor has tons of fabs, but they said they are instead pushing them into the future.

[00:05:59] So customers are being cautious. This is what they're saying.

[00:06:03] For Q4, ASML expects total net sales between 8.8 billion euros and 9.2 billion.

[00:06:10] For the full year, they expect revenues for 2024 to be around 28 billion, which is in line with their previous guidance.

[00:06:17] They did not buy back shares during the quarter, which is actually something that's nice to see.

[00:06:23] Nothing annoys me more when a company is, you know, facing headwinds and clearly they are facing headwinds.

[00:06:29] Let's not sugarcoat things. And then they continue the buyback program.

[00:06:34] So I think it just shows that management is being more prudent here.

[00:06:38] And that's something I like to see. Any comments on ASML?

[00:06:42] I know you don't know it as well, but I'm happy.

[00:06:45] No, I knew the news that they reported accidentally early.

[00:06:51] Like, did they just report the report and then they didn't have the MD&A up and people probably started freaking out at the results?

[00:06:57] I'm not sure.

[00:06:58] Or were they able to explain it?

[00:06:59] I think it may have been, yeah, like kind of the news release went up and then they had to like scramble.

[00:07:04] That would be my assumption.

[00:07:05] But I'm not sure. I didn't see it that like when it happened. I just saw it after the fact.

[00:07:09] So I know this isn't ASML related, but back, I remember back in the pandemic, Suncor did this.

[00:07:15] So they hadn't released results yet, but if you went to their previous quarter and just changed, say it was Q2 and you just changed the two to a three, it would pop up their third quarter report before it was published.

[00:07:27] Oh, okay.

[00:07:27] And that was a big deal too. Like they accidentally, well, I don't think it was even an accident.

[00:07:31] They just didn't really think of it. They uploaded it to their website and you could get it like a full day early.

[00:07:36] So, I mean, this stuff is pretty common.

[00:07:38] Yeah.

[00:07:39] Yeah.

[00:07:39] Yeah. And that was a big freak out too, because that was during the pandemic, I think when they were not doing too well.

[00:07:46] But yeah, I mean, I don't, I've wanted to look into ASML over the last while, especially because it's drawn down so much, but I just haven't really got the time.

[00:07:54] And semiconductor stocks are definitely not my forte. I've anybody who comes along and kind of asks me about them, I generally tend to just guide them towards an ETF.

[00:08:05] Yeah.

[00:08:05] Because I mean, a lot of them are, a lot of them are so expensive right now. I mean, price to perfection, I think just buying like a broad based ETF might be the better option, depending. I mean, you obviously know, you own it, don't you?

[00:08:17] Yeah, I actually bought it back. So that's what I was going to add. So I bought it after the day after the drop.

[00:08:23] It continued dropping. So I started, I restarted a position because I had sold them around a thousand dollar share when I had them in hindsight was a pretty good move.

[00:08:33] That's pretty good, yeah.

[00:08:34] Yeah. I mean, like, obviously I make a lot of mistakes too. So like, I think people should take that with a grain of salt.

[00:08:40] But the reason why I had sold is mainly because, you know, this is not news. What I said for the 2024 guidance, like this has been known for a while that sales would be flat for this year.

[00:08:52] So like, they didn't change the guidance. This is not new. And the way I was looking at it is it was trading so expensively. And it was like investors were also disregarding like almost all the risk, which they were kind of doing when you think about it for NVIDIA and even TSMC, right?

[00:09:10] Like, you know, when you look at the valuation of these companies, it's like you feel like investors are just looking at the upside and not really the downside.

[00:09:19] And that's what I felt then with the valuation. So I decided to sell, but I still like the business longer term.

[00:09:25] And I figured if there was a pullback in valuation, I would restart a position. That's what happened. Clearly, they are facing headwinds.

[00:09:33] It could trade sideways. It could trade down in the coming years. That's very possible, especially if there is more U.S. sanctions that affect ASML, like export controls.

[00:09:43] Again, you know, I think I'm a long term investor. So I think just the fact that they're the only one producing UV machines.

[00:09:50] To me, it's very attractive when you have a really, you know, a monopoly, let's be honest, in these type of machines.

[00:09:58] So that's why I bought back in. So it's not a huge position, about 1.5% right now.

[00:10:04] Well, I mean, that's a monopoly in a crazy fast growing industry as well.

[00:10:08] I mean, it's a little different than, say, you know, a Canadian telecom monopoly or oligopoly, I guess, which is, you know, a little bit more mature.

[00:10:15] But I mean, in terms of valuation, yeah, like look at Super Micro Computer.

[00:10:19] I mean, they're down from 120 bucks a share down to like $45.

[00:10:23] And that's like in a span of what was that? They hit highs in March.

[00:10:28] So like these stocks, they're crazy expensive.

[00:10:31] I mean, there's a lot of a lot of risk when you're buying stocks at that high evaluations.

[00:10:37] Yeah, yeah, exactly.

[00:10:38] So I think, you know, to me, that's it.

[00:10:40] Like I said, you know, it could go very much sideways or down in the short term.

[00:10:45] I mean, even long term, you know, no investment is guaranteed.

[00:10:47] But I think long term, there's some good prospects there.

[00:10:51] Let's move on and go closer to home now.

[00:10:55] So the, I guess the Couchtar 7 and I saga continues.

[00:11:01] Yep.

[00:11:01] Yeah, there was a little more news.

[00:11:03] I think it was actually this morning or yesterday, but they have, I know you had said like the Quebec,

[00:11:07] the CDPQ was backing them.

[00:11:09] They've actually got, they had another backer as well that came out and told 7 and I that they should strongly consider the offer over the split,

[00:11:19] which I'll talk about the split in a bit.

[00:11:20] But I mean, when 7 and I rejected Couchtar's first offer, many thought, you know, the aggressive attempt of Couchtar to acquire them was dead in the water.

[00:11:30] But I mean, the way we discussed this and the way management was talking and I mean, the CDPQ backing the company,

[00:11:37] I had a good feeling that the bumped up offer was going to happen and it wasn't really a tiny increase either.

[00:11:44] So I believe it was last week or maybe the week before, like late couple of weeks ago, they bumped their offer by 20%.

[00:11:51] So it sits at around 64.7 billion Canadian dollars.

[00:11:55] So this is around 90% of the size of Couchtar as a company.

[00:11:59] And if this deal goes through, it will be the largest foreign buyout in Japanese history and Couchtar's largest acquisition by a long shot.

[00:12:07] And I would actually say that, and I couldn't really find anything else.

[00:12:11] It's got to be the largest acquisition ever by a Canadian company.

[00:12:14] I mean, $65 billion.

[00:12:16] I kind of looked up, you know, like the Enbridge Spectre Energy, but even that was only, you know, $28 billion.

[00:12:23] I may be way off base here, but I would have to think it's got to be pretty close to the largest, if not the largest.

[00:12:29] 7 and I Holdings is trading at a pretty big discount to the offer price, kind of highlighting just overall the pessimism from the markets overall in terms of the deal actually going through.

[00:12:39] And I mean, it looks to be trading at a near 20% discount to the offer.

[00:12:43] And apparently, so in an attempt for 7 and I to kind of hold off Couchtar's bid, they're going to, or at least they want to, they want to split out the business.

[00:12:54] So yeah, I saw that.

[00:12:56] Yeah.

[00:12:56] Yeah.

[00:12:56] What a lot of people think like 7 and I, it's not just 7-Eleven gas stations.

[00:13:01] Like they have supermarkets, they have financial companies, things like that.

[00:13:05] So...

[00:13:05] And don't forget their other segment.

[00:13:08] That's always powerful.

[00:13:09] Yeah, their other segment, whatever that is.

[00:13:11] It's bigger than the financial segment.

[00:13:13] So I don't know what is mixed into the other segment revenue, but I mean, it's...

[00:13:19] They want to take all of those businesses because typically like when you have a conglomerate, like a whole bunch of businesses mashed together,

[00:13:27] it doesn't really reflect the true value of like kind of trading for smaller than the sum of its parts, essentially.

[00:13:34] So what they want to do is they want to take all of these non-gas station businesses, the majority of them they've kind of said are not, you know, all that well performing.

[00:13:43] And they want to form a holding company called York Holdings and split them off.

[00:13:47] The gas station end of the business would be renamed 7-Eleven Corporation.

[00:13:52] And it effectively wants to do this so that it will unlock value for shareholders by effectively...

[00:14:00] If you split that gas station segment of the business off, you should see an increase in valuation from that because now it's effectively a kushtard.

[00:14:09] And it's not, you know, it's not being weighed down by the supermarkets, the financial institutions and whatever else, like you said, is lumped into that other business segment.

[00:14:17] And I mean, when you look at the company's overall operations, I think you're showing the chart right now.

[00:14:22] I mean, this is effectively a gas station company.

[00:14:26] 10 billion of the company's $12 billion in trailing 12-month revenue comes from either international gas stations or domestic, which I believe would just be, you know, gas stations in Japan.

[00:14:38] And, you know, that's...

[00:14:39] If they do split out the smaller segment of the business, if it really is weighing down that valuation, I mean, it should help quite a bit.

[00:14:48] So I do actually see the spinoff making sense.

[00:14:51] Whether or not it's enough to, like, deter people, deter investors from, you know, being attracted to this end of the deal, the kushtard offer, it's difficult to say.

[00:14:59] And as I said, it's being done to effectively show its shareholders that can increase the value of the company far and beyond what kushtard is offering at this point in time.

[00:15:08] However, the one thing that they did say, and I would imagine it's led to further discussions is, you know, initially they had said that the offer was nowhere close when they were at like 44 billion Canadian.

[00:15:18] But they now say that the valuation hurdle has been cleared.

[00:15:22] So I would say there's a bit of discussion going on there right now.

[00:15:25] And as I said this morning, they had...

[00:15:28] Or as I said earlier in the segment, they had...

[00:15:30] This morning, they had another backer come in and say, you know, that they should strongly urge, you know, consider the deal.

[00:15:36] So I would imagine that if they want to go through with this, they're going to be able to finance it somehow.

[00:15:44] And I did read somewhere, I actually don't have the article, but they do say that they're going to try and do this without much equity issuances.

[00:15:51] So a ton of it's going to come from debt.

[00:15:54] Like, I don't know, they didn't really say how much, but they don't plan to utilize much equity.

[00:15:59] It's all going to be debt.

[00:16:01] And when you consider the fact like, kushtard has about 13 billion in debt right now.

[00:16:05] So I mean, where does that level have to go with a 65 billion dollar acquisition?

[00:16:10] It seems pretty crazy, but it's not dead.

[00:16:14] I would imagine we're going to see more news in the coming weeks.

[00:16:16] It's far from dead.

[00:16:19] Yeah, I guess money talks.

[00:16:20] I mean, if they give them a nice enough premium, I think 711 or 7NI shareholders will actually decide to take it.

[00:16:28] Because even if they break up the company and they don't go with the takeover, like there's no guarantee that they'll get more value out of it.

[00:16:36] Right.

[00:16:36] No.

[00:16:37] Typically you do.

[00:16:38] But again, if you have a good offer on the table and from the Kuchel perspective, I mean, yeah, I mean, I admire Kuchel as a business.

[00:16:47] Obviously, I'm French Canadian.

[00:16:48] I grew up in Quebec.

[00:16:50] So it's a great story.

[00:16:51] But at the same time, happy to watch on the sidelines this one.

[00:16:55] I just kind of worry tackling so much debt.

[00:16:59] Yeah, I just yeah.

[00:17:00] I just worry as an investor.

[00:17:02] I just don't really want to own something with so much debt, no matter how good of a track record they are.

[00:17:08] Because, yeah, it really depends how much like what kind of debt they'll get, what interest rates they get when they refinance that debt down the line.

[00:17:17] Like there's all these different issues that could pop up, especially if they don't end up getting, you know, as much revenue as they thought out of these convenience store and as much kind of, you know, money or to the bottom line as they think.

[00:17:33] Or, yeah, profitability out of them.

[00:17:35] Yeah, the one thing about Kuchel, their operating margins are about double 7 and I's like gas stations.

[00:17:43] So there is a lot of potential there if you can, you know, make it work well.

[00:17:47] But I feel like I still don't think so.

[00:17:49] I believe in terms of yen, like the I believe the offer was around 2800 and they're currently 7 and I's trading at 2220.

[00:18:00] So, I mean, it's a pretty big discount to the acquisition price, which effectively means the market is they don't think this deal is going to go through.

[00:18:07] And I mean, even if you get through the value end of things, like do regulators really want a Canadian company stepping in and buying those assets?

[00:18:17] You know what I mean?

[00:18:18] From a regulatory standpoint, like I said, it would be the largest foreign takeover in history.

[00:18:23] So, I mean, there's other elements in that regard too.

[00:18:26] I mean, I still don't think that this deal will go through, but there's a lot more, I mean, basis for it to go through.

[00:18:33] Like there's a lot, you know, it's a lot more possible now than it was, say, even three, four weeks ago when they pretty much just shut it down and said, we're not going to talk anymore.

[00:18:41] Yeah.

[00:18:42] No, it'll be, I mean, obviously, I'm sure there's going to be more development.

[00:18:45] It's like every week there's something new coming up.

[00:18:47] So, I'm sure we will be talking again on that.

[00:18:50] Now we'll shift gears here, look at, I guess, credit related companies, two of them.

[00:18:56] First, I'll talk about American Express that had their earnings.

[00:19:00] And then you'll talk about, like you mentioned in the intro, go easy debt offerings.

[00:19:05] So, American Express ticker AXP.

[00:19:08] Revenues were up 8% to $16 billion versus the same quarter last year.

[00:19:13] However, total expenses were up 9% for the quarter versus last year.

[00:19:18] So, something to keep in mind.

[00:19:19] You never like to see expenses going up faster than revenues.

[00:19:24] Clearly, it's not a big deal here, but definitely something to keep an eye on.

[00:19:28] Net income was up 2%.

[00:19:30] Earnings per share was up 6% to $3.49.

[00:19:33] So, obviously, when you see a discrepancy like that between net income and EPS, just means that they actually bought back shares.

[00:19:41] And that's what they did.

[00:19:42] They decreased the share count by 3%.

[00:19:44] Card member spend increased 6%.

[00:19:48] And I'll show something here for our joint TCI listeners, which is very interesting for American Express.

[00:19:57] Is you have their average fee per card over, you know, quite a little bit.

[00:20:05] And I'll try to use it on an annual basis because it's more impressive.

[00:20:09] So, yeah, since 2012, the average fee for a card.

[00:20:13] So, when you're looking for a credit card, right?

[00:20:15] Some credit cards will be like a $100 annual fee.

[00:20:18] Sometimes they'll give you like a rebate for the first year.

[00:20:21] Typically, there are more premium cards that you can get a lot of like different kind of rewards, whether it's travel rewards, cash back.

[00:20:28] If you're looking for a higher percentage, you'll typically have to pay a fee for it.

[00:20:32] So, that average fee was from 2012 to 2015 was $39 or $40 per card.

[00:20:40] And then since 2016, so starting in 2016, it started at $44.

[00:20:46] And then in the most recent year, it's at $92 per card.

[00:20:53] So, they've done a pretty good job.

[00:20:57] Like I was kind of thinking like, oh, that's like almost a Costco model here.

[00:21:01] Not quite, but just getting a big share of their revenue coming from the average credit card fee that they get from issuing those cards.

[00:21:12] Yeah, and I'm pretty surprised to see that actually because, you know, there's a lot of cards coming out with cash back that pretty much have no annual fees.

[00:21:20] You'd think the competition would be pretty crazy in that regard.

[00:21:23] I mean, I used to have an Avion card that I think was $120 a year.

[00:21:27] Yeah.

[00:21:28] But the only other thing is I could always just kind of get a hold of Royal Bank and say that I'm not interested anymore and they would just waive the annual fee.

[00:21:35] Oh, really?

[00:21:36] I never really had to pay that annual fee all that much.

[00:21:39] But, I mean, I canceled that card and now I have the Costco one, which is effectively just, you know, your membership is ultimately the fee.

[00:21:46] But, I mean, I'm surprised to see that they've been able to grow fees.

[00:21:50] I mean, maybe people just don't really care all that much about credit card fees.

[00:21:53] No.

[00:21:54] Ultimately, it does.

[00:21:55] It eats into your cash back quite a bit.

[00:21:58] Yeah.

[00:21:59] I mean, I think it's just an approach that they've been taking is that I think they're targeting more like kind of targeting the perks that their new users want.

[00:22:08] And, you know, just for context here, 80% of the new accounts are actually millennials and Gen Z consumers.

[00:22:15] So, they're really trying to shift their offering to meet those.

[00:22:18] They mentioned on the call a lot that these consumers are looking really like restaurants are a big thing.

[00:22:24] So, dining out.

[00:22:25] So, they're trying to tailor their offering regarding that.

[00:22:28] And, to get back at the net card fees, they were up a whopping 18% year over year at $2.2 billion.

[00:22:36] So, that's what they're definitely generating a good chunk of their revenues from that.

[00:22:42] Not, you know, like the majority, but still a really good chunk.

[00:22:47] And, discount revenue, which are the fees collected from merchants when Amex users used their cards, that was up 4% to $8.8 billion.

[00:22:55] So, really that, you know, that credit card fee that they're charging their customer is really the one that's been growing quite nicely.

[00:23:03] Net interest income, because they are as well.

[00:23:05] We were talking before we started recording.

[00:23:07] Amex is kind of a hybrid between kind of a Visa, MasterCard, and a bank, and a traditional bank.

[00:23:14] So, they are a chartered bank in the U.S.

[00:23:16] What they do is they will issue their own cards.

[00:23:18] But, as you may have seen in Canada, like a Scotiabank may have some American Express branded cards, which go on the American Express network.

[00:23:27] But, they are being offered by Scotiabank.

[00:23:30] So, the lender is actually Scotiabank.

[00:23:31] So, it's a bit of an hybrid when it comes to that.

[00:23:34] In terms of write-off rate, it's always interesting looking at credit card companies.

[00:23:40] And, especially those who, well, the issuer is not a Visa and MasterCard because they're not the ones issuing the credit.

[00:23:46] But, you know, something like a Canadian Tire, for example.

[00:23:49] And, I will talk about them just to provide some context here.

[00:23:52] So, their charge-off rate was down 20 basis point from Q2 2024.

[00:23:58] They were up 10 basis point from 1.8% to 1.9% year over year.

[00:24:04] When I noticed that, I decided to go and see what happened last year from Q2 to Q3.

[00:24:09] And, it was unchanged during that same time period.

[00:24:12] But, that was after years of steadily increasing write-off rates from the pandemic lows because of all the, you know, money that was handed out essentially by governments.

[00:24:23] Like, let's be honest.

[00:24:24] Like, in the U.S., everyone got stimulus checks.

[00:24:26] In Canada, it was, I guess, a little more constrained.

[00:24:29] But, a lot of people also got money from governments.

[00:24:32] The write-off rates are still below Q4 2019, which was 2.2%.

[00:24:37] So, that is encouraging there.

[00:24:39] And, I think it just goes with the type of client that they have there.

[00:24:43] From everything I've seen, it seems like it's a more higher income clientele than other competitors.

[00:24:50] So, for context, Canadian Tire's net write-off rate for their credit card, their latest quarter was 6.7%.

[00:24:58] So, that's compared to, let's just say, rounded up 2% here for American Express.

[00:25:02] So, it's definitely not bad.

[00:25:05] It's definitely manageable for an American Express considering the interest that they get on those credit cards too.

[00:25:11] And, obviously, they're completely different kind of customer base.

[00:25:15] So, keep that in mind.

[00:25:16] Different geographies.

[00:25:17] I'm well aware of that.

[00:25:18] But, I just wanted to provide some context because depending on who issues a credit card and what demographic they actually cater to, you'll have very different charge-off rates for, you know, for credit cards.

[00:25:32] So, it's the same products, but, you know, if your customers are typically lower income, then, you know, chances are that the net write-off rate will be higher.

[00:25:41] But, if you have really affluent clients, then the charge-off rates will likely be lower.

[00:25:47] They added a total of $1.4 billion in provision for credit losses.

[00:25:51] That was down 5% versus last year.

[00:25:54] But, it was still up 7% quarter over quarter.

[00:25:57] So, something to keep an eye on, obviously, if you own a bank or interest in any banks or any financial company, you know, credit losses is something you should always be checking.

[00:26:08] If that's something you're not checking, not keeping an eye on, then you don't know what you own.

[00:26:13] I hate to be blunt, but that's what it is.

[00:26:16] If you're not keeping an eye at least on that and a few other important metrics for financial institutions, you just simply don't know what you own.

[00:26:24] So, they also raise their guidance slightly for a full year earning per share.

[00:26:28] So, I think overall, pretty good quarter.

[00:26:31] I mean, it's interesting to look at them and then contrast with other types of financial companies that will be, obviously, will be doing the big banks when they come up.

[00:26:41] And probably, I think it's maybe in a month or so.

[00:26:44] But, we'll also be looking at, you know, buy now, pay later, how those are faring.

[00:26:49] So, all different kind of financial companies and I'm sure we will see very different results depending on what type of product they offer and to who.

[00:26:58] Yeah, and I would imagine, like, I wonder if this, the credit card fees, how they've been able to grow that so much is definitely an impact of the demographic they're targeting as well.

[00:27:08] I mean, you probably think like a higher income individual would be more than willing to pay an annual fee.

[00:27:14] Whereas somebody who's just looking for a credit card, you know, just to, you know, get by is probably not.

[00:27:19] And like, if we look at Canadian Tire, they have no annual fee on their card and their charge off rates are that much higher.

[00:27:24] I mean, maybe there's something there.

[00:27:26] Yeah.

[00:27:27] Yeah, because I'm looking at their cards right now and they do have cards that have no annual fees.

[00:27:35] So, that's not new.

[00:27:36] But if you go, I think they're reserve card.

[00:27:40] So, I'm going to show my screen.

[00:27:41] Oh, yeah, that's the most expensive one.

[00:27:44] Oh, like a big, yeah.

[00:27:45] Like, and you need a particular amount of income.

[00:27:47] I think it used to be like their black card, right?

[00:27:50] Yeah.

[00:27:50] So, it still looks black.

[00:27:52] So, the reserve card, so I'm looking at it.

[00:27:55] So, it has an annual fee of $600.

[00:27:58] And if you want additional card on that same account, it's $200 extra.

[00:28:03] But you get 60,000 Aeroplan points and the potential to get another 25,000.

[00:28:10] So, yeah, I mean, I think you probably accumulate pretty quickly.

[00:28:14] Yeah.

[00:28:15] Yeah.

[00:28:15] So, it's like you earn three times the points on Air Canada, two times on dining and food delivery,

[00:28:21] and 1.25 times everything else.

[00:28:24] I'm not sure the value of points, but it must be pretty good because American Express is not accepted everywhere.

[00:28:30] And you're still paying $600 for the annual fee here.

[00:28:35] Yeah.

[00:28:35] I mean, it's pretty crazy.

[00:28:36] That is a huge annual fee.

[00:28:38] You must be spending a lot on that card to have a net benefit.

[00:28:42] Yeah.

[00:28:43] That's crazy.

[00:28:44] Yeah.

[00:28:44] Zero Aeroplan cards.

[00:28:45] So, if you're like, you know, if you make a, you're pretty high earner and you travel a lot,

[00:28:50] I think it's probably like worth it.

[00:28:53] Like someone who travels a whole lot, you probably rack up a whole lot of points.

[00:28:58] Oh, yeah.

[00:28:58] And you make up for the annual fee and then some.

[00:29:02] Yeah.

[00:29:02] I mean, clearly it's working.

[00:29:04] Like you said, they've, what have they more than doubled their fee over the last fall?

[00:29:07] Yeah, pretty much.

[00:29:08] People are paying it.

[00:29:09] I mean, I would imagine for the most part, people paying annual fees on credit cards.

[00:29:13] It's probably not a net benefit, but that depends.

[00:29:17] That's just my guess.

[00:29:19] Yeah.

[00:29:20] So, we pay, so we have a shared credit card, my wife and I.

[00:29:24] And so, we pay, I think it's 120 bucks for the fee.

[00:29:28] And we typically get in cash back.

[00:29:30] Like we put most of our expenses on there, like 1500 bucks a year.

[00:29:34] Yeah.

[00:29:34] So, it's a pretty good trade-off.

[00:29:37] We've looked at some, you know, less expensive ones.

[00:29:41] And that one was the one that made the most sense for us.

[00:29:44] But it's not $600.

[00:29:46] Like, let's be honest.

[00:29:46] Yeah.

[00:29:47] And like, I had the Avion and they don't cover airline taxes.

[00:29:52] So, I mean, I would go to redeem a flight to Mexico.

[00:29:55] That would be $700.

[00:29:56] The taxes would be $300.

[00:29:58] And then they would charge me $100 annual fee.

[00:30:01] I'm like, man, it's not even worth the cost.

[00:30:03] But yeah, it's clearly it's working.

[00:30:05] Yeah.

[00:30:06] Yeah, exactly.

[00:30:08] So, I guess let's switch gears here and go with GoEasy debt offering that you were mentioning.

[00:30:14] And then we'll finish this off with TFII International.

[00:30:18] Yeah.

[00:30:18] So, the confusing thing with GoEasy and the reason you thought they reported results is

[00:30:23] they made a pretty big debt offering.

[00:30:26] And because of the size of the offering,

[00:30:28] it had to release some prelim Q3 results to the possible buyers of that debt.

[00:30:33] And as a result, they had to release them publicly.

[00:30:36] So, they made, because I've never seen GoEasy report prelim quarterly results.

[00:30:43] Like, some companies will do it, but it's pretty rare.

[00:30:45] So, in this situation, it was just because of this offering.

[00:30:48] So, they offered $350 million US dollars in senior unsecured notes and $150 million Canadian

[00:30:56] in senior unsecured notes.

[00:30:58] So, a senior unsecured note is effectively a debenture that is higher up on the totem pole

[00:31:04] in terms of repayment priority.

[00:31:06] Typically, they refer to them as notes when they have shorter maturity dates.

[00:31:10] So, a bond and debenture are very similar debt instruments, but a bond is often backed.

[00:31:17] Actually, it's backed by collateral from the company.

[00:31:19] Whereas a debenture, you're simply relying on the company's reputation to pay it back.

[00:31:24] So, debentures often carry higher rates of interest because they have no collateral backing.

[00:31:29] There's higher risk.

[00:31:30] So, pretty much all debentures are bonds, but not all bonds are debentures.

[00:31:34] It's pretty much the way you can look at it.

[00:31:35] So, those senior unsecured notes effectively say they're high on the priority list in terms

[00:31:41] of repayment, but they're not secured by any assets that the company owns.

[00:31:45] And because they're a note, they typically have maturity dates of, I believe it's anywhere

[00:31:50] from one to five years.

[00:31:51] These ones are maturing in 2030.

[00:31:54] So, we're talking about six years.

[00:31:56] And in terms of the...

[00:31:58] I'll talk a bit about the pricing of it because they issued the pricing earlier this

[00:32:02] morning.

[00:32:02] I had a quick chance to look over it.

[00:32:04] But I will talk about the details because, again, we talked about this before.

[00:32:06] It's a tad confusing.

[00:32:08] But in terms of the prelim results, which I'll get to first.

[00:32:11] So, they said that portfolio loan growth will be around $235 million to $260 million.

[00:32:17] So, last quarter, the company reported loan growth of around $286 million.

[00:32:21] So, this is a bit of a decline.

[00:32:24] It could come in ahead.

[00:32:25] Again, these are prelim results, but it's a bit of a dip on a quarter over quarter basis.

[00:32:29] It expects the total yield on their loans to come in at 33% to 34%.

[00:32:33] And this would, again, be...

[00:32:35] Yeah.

[00:32:36] It's crazy.

[00:32:36] I always, like, every time we look at this name, I'm like, oh my God, like, the yields

[00:32:40] on it.

[00:32:41] It's insane.

[00:32:41] You wonder why they can keep charge-off rates as high as they are.

[00:32:44] And you look to this and it's because the loans that keep getting paid are at ridiculous

[00:32:49] prices.

[00:32:49] So, and this, again, this is after the government came in and put in regulations on APRs.

[00:32:57] So, this number was much higher.

[00:33:00] And just to add to that, so people, like, they may find this really high, but at the end of

[00:33:05] the day, right, in a free market, which obviously there is a cap on what they can charge, but

[00:33:10] at the end of the day, these companies are offering these loans because there is a demand

[00:33:15] for them.

[00:33:16] Yeah.

[00:33:16] The rate has to be high because they realize that a higher than normal portion of these

[00:33:23] loans will be, have to be, like, you know, charged off.

[00:33:27] They won't be paid back.

[00:33:28] And that's how they are able to become, to be profitable is the difference between what

[00:33:33] they collect in interest and what they end up, you know, charging off.

[00:33:37] And obviously, there are other expenses, you know, they're still able to be profitable.

[00:33:41] So, I think you have to be careful thinking that the government should always lower that

[00:33:45] lower and lower and lower because at some point, it will just not make sense for these

[00:33:50] businesses if the cap is so low that, you know, the charge off just doesn't make sense.

[00:33:55] It's not profitable.

[00:33:57] Then they'll just stop, you know, offering these services.

[00:34:00] I'm not saying it's not, you know, it's not a little bit of a predatory aspect to it.

[00:34:04] But at the end of the day, it is something that is used by consumers.

[00:34:09] Sometimes it may be a last resort type of deal.

[00:34:12] So, I just wanted to provide this additional context because sometimes people will see,

[00:34:17] like, those APRs and they'll think, like, oh my God, this is criminal.

[00:34:20] But you have to think about, you know, the business case behind it too.

[00:34:26] Yeah.

[00:34:26] And I'll say, I'm pretty sure that the APR regulations in the United States are not as

[00:34:31] stringent here so they can, they can charge even more.

[00:34:33] I'm pretty sure.

[00:34:34] I think it varies from state to state in the US.

[00:34:38] Yeah.

[00:34:38] Yeah.

[00:34:38] And I mean, like you said, like, there's a lot of people who go to these companies because

[00:34:43] they're in a terrible position financially to like no fault of their own.

[00:34:49] Like they just can't really get by.

[00:34:50] But there's also a lot of people who go to these companies who've completely mismanaged

[00:34:53] their finances, like on their own doing.

[00:34:56] And like these companies need to accommodate for that risk, which is, and like you said,

[00:35:01] I mean, if you keep lowering regulations, there might not be a market for it.

[00:35:04] And then that ultimately, you know, people can't access money like this, which I mean,

[00:35:08] some people would not mind at all if companies like this disappeared.

[00:35:11] I mean, it, I, it just depends really on your, your overall outlook on that.

[00:35:15] And, uh, you know, like you said, a lot of people view this as predatory.

[00:35:20] Yeah.

[00:35:20] I wouldn't mind that those companies disappear.

[00:35:22] Also people that would never need those services.

[00:35:25] Yeah, exactly.

[00:35:26] That has a high correlation.

[00:35:27] Like I'm not trying to say whether it's right or wrong, but I just want to mention that yes,

[00:35:33] or as a reason why they charge these high rates is because they know that there's going to be

[00:35:38] a higher proportion of loans that won't be paid back.

[00:35:41] Yeah.

[00:35:41] Like you don't tap into the subprime market unless you need to.

[00:35:46] Like if you can get a bank from a, from a, or sorry, a loan from like a reasonable institution

[00:35:50] at a reasonable rate of interest, you're not just going to go to the subprime market where

[00:35:54] the rates are much higher, but so in terms of this is actually what really kind of alarmed

[00:36:01] me on the quarter.

[00:36:01] And I think like when they made the debt offering yesterday, they fell around three or 4%.

[00:36:06] And then today, once the, again, I'll talk about it a bit.

[00:36:09] Once the actual offering of the price came out there, they're down like eight or 9% as

[00:36:13] I'm, as I'm talking about this, they expect charge off rates to come in at 8.75 to 9.75%.

[00:36:20] So again, this one is a bit alarming to me for the most part.

[00:36:25] You'd think they'd have a better idea as to where charge off rates are coming in at.

[00:36:29] They've been, they've been increasing over the last three, four quarters, nothing drastic,

[00:36:34] but you know, small increases taking up five basis points, 10 basis points, 15 basis points

[00:36:39] a quarter.

[00:36:40] So last quarter was 9.3%.

[00:36:42] So to me, I would be, I would say absolutely shocked if this number came in anywhere close

[00:36:48] to 8.75%, but I imagine they'd still believe it can get there if it's included in the bottom

[00:36:55] end of their range.

[00:36:56] But if we go to the top end of the range, that is no doubt concerning as well, because if they're

[00:37:01] listing 9.75 as the top end of their, of their charge off range, they obviously think

[00:37:05] that it could get to that point.

[00:37:08] And this is a company that typically targets a nine to 10% charge off rate.

[00:37:12] They've maintained that sort of charge off rate for a very long time.

[00:37:16] So, I mean, although that would be in line with guidance, that 45 basis point jump would

[00:37:22] be one of the larger jumps in quite some time.

[00:37:24] And I do believe it, it spooked the market a bit in that regard.

[00:37:29] And you know, yesterday it fell a bit.

[00:37:31] And then this morning they announced the actual pricing of the new notes that they're issuing.

[00:37:38] So effectively they're issuing us debt and they're issuing Canadian debt.

[00:37:42] The us debt will be at 6.875% and the Canadian debt will be at 6%, but then they, they're getting

[00:37:50] into some currency swaps and things like this that is effectively going to reduce the cost

[00:37:54] of that U S debt down to 6%.

[00:37:56] But the thing is, is they said they're going to use these proceeds to purchase all of its

[00:38:03] outstanding senior unsecured notes due in 2026 that are at 4.375%.

[00:38:09] The only thing is it didn't really list the dollar amount of how much those unsecured notes

[00:38:15] are.

[00:38:16] I would imagine like we spoke about before, like they have to be getting additional financing

[00:38:20] here because if it's just a, you know, a repayment for repayment, it just doesn't really

[00:38:24] make sense.

[00:38:24] It's up, you know, 2.7%.

[00:38:27] And again, I didn't really get to dig into this pretty very closely because it came out

[00:38:32] this morning, but that's a pretty costly increase on the debt, which I think is why the market

[00:38:38] did not like it much at all.

[00:38:41] And I would imagine like the company would only really do this if they're getting access to

[00:38:45] more financing.

[00:38:47] Yeah, they, they probably, I think, I mean, my, I don't know my speculation and that's what

[00:39:21] we're talking about.

[00:39:22] Yeah.

[00:39:24] That's when you want to invest in, not when revenues are booming, profits are booming,

[00:39:29] because that's usually when more and more distressed consumers access these subprime services.

[00:39:37] And while they still have a job, while they can still make the payments, yes, everything

[00:39:41] looks great.

[00:39:41] But when things starts turning around, that's when, you know, you, you know, it's not great,

[00:39:48] obviously for earnings, things start going sideways.

[00:39:51] And to me, that's when you start look, you should start looking at these kinds of companies as an

[00:39:56] investor is when, yes, it starts getting pretty ugly.

[00:40:00] That's when you should look at investing in them.

[00:40:02] I know it's counterintuitive, but that's when you're going to be able to get the company at a

[00:40:09] much more reasonable price than when, you know, revenues are just booming and, you know, net income is

[00:40:14] just booming as well.

[00:40:15] Yeah, because obviously, I mean, like I've said a couple of times before, this company does very

[00:40:20] well when the economy is poor, but there's a very fine line there. It needs to be, you know,

[00:40:25] poor enough that more and more people are tapping the subprime market, which is the case. Like they,

[00:40:29] in their last quarter, they reported the highest credit rating ever among their consumers, which

[00:40:33] is not like, they'll kind of say it's a good thing, but really that just means, you know,

[00:40:38] more high quality buyers are having to tap into the subprime market, which can kind of give you an

[00:40:43] indicator on just the cost of living crisis here. Like just, you know, the people are struggling to

[00:40:49] get by. So ultimately that I don't really see that as a good thing. But again, like you got that fine

[00:40:54] line where the economy has to be bad, which it has been for a while and which is why go easy. It's

[00:40:59] just reporting crazy results, but it can't get so bad.

[00:41:03] The biggest wildcard for them or the biggest issue for them would be like if unemployment starts

[00:41:09] rising pretty quickly, that would be a pretty terrible outcome for them. Cause then you know

[00:41:14] that there's a decent cohort of their customers that have lost their job and they were probably

[00:41:21] struggling to make the payments to begin with. And then if you have no income, clearly the chances

[00:41:27] are that, you know, it becomes a write-off or increasing pretty rapidly.

[00:41:31] Yeah. And I mean, if you tap into these, like I said, you really don't tap into these markets

[00:41:36] unless you need to. So, I mean, if you're a consumer that's in a boatload of debt and you have a whole

[00:41:41] bunch of loans, which ones are you going to prioritize? I would say these types of loans are

[00:41:45] probably going to be the ones like if you got a mortgage, you have a vehicle payment, you're

[00:41:49] making those payments before you ever pay this loan, whatever you have it, you know, taken out for.

[00:41:55] But yeah, it's the charge-off rate, like that 1% range in charge-off rate expectations,

[00:42:03] considering the fact that they report earnings in probably a month, that's a really wide range for

[00:42:10] me, which... Yeah. Yeah.

[00:42:12] I think it just shows they don't really know. That's... Yeah.

[00:42:15] The wider the range, the more and the shorter the time period just means that they...

[00:42:20] Yeah.

[00:42:21] They realize there is a lot of variance that could be possible there.

[00:42:25] Yeah. Like if they were report... Say they just reported earnings two weeks ago and it's like

[00:42:30] two and a half months until they report again, but it's not. It's like, it's a month and that like,

[00:42:35] you know, a 1% difference in charge-off rate is when you have a loan portfolio that big is a big

[00:42:41] difference.

[00:42:42] Yeah. No, I think that's kind of a good overview of what happened there. We'll keep an eye out

[00:42:47] when they report to see, yeah, definitely that charge-off rate, what happens. Now,

[00:42:53] we'll move on to the last name on the list. You're up again, Dan, so you know this name pretty well.

[00:42:58] I know Braden owns that as well. So he's been a big believer in TFII International.

[00:43:04] So do you want to go over that to finish off the podcast? We have about 10 minutes left because I

[00:43:10] have a hard stop, you know, at 2 p.m. we're recording today. So yeah.

[00:43:15] Yeah. I mean, this one will be pretty quick. It wasn't really a good quarter for TFII. I think

[00:43:19] it was like a, it was an expected quarter. I don't even think the stock is down all that much

[00:43:24] right now, but they missed expectations, both revenue and earnings. And it's pretty clear that

[00:43:30] the economy is starting to hit operations. I mean, it's been hitting operations for a while,

[00:43:34] but we're starting to see that kind of increase. So if we look to year over year shipping levels,

[00:43:39] they've pretty much declined across the board. So package and courier shipments decreased by 0.27%.

[00:43:45] U.S. less than truckload by 7.38%. And Canadian less than truckload is effectively flat.

[00:43:51] U.S. less than truckload revenue fell by 4.7%. And Canadian less than truckload fell by 2%.

[00:43:56] But it's pretty important to note that the majority of the business, I ran the calculations,

[00:44:01] is around 480 million of 617 million of less than truckload revenue does come from the United States.

[00:44:08] So this is a company that, you know, it banks a lot on the United States. That

[00:44:12] top line dip is going to have much more of an impact. The company's truckload segment saw an 80%

[00:44:17] increase in revenue, but the bulk of it was just acquisitions. They said that the acquisitions in

[00:44:22] the truckload segment contributed around 450 million to revenue. So when we factor that out,

[00:44:27] it actually had a decline in that segment. Logistics, much the same story. So revenue

[00:44:32] increase, but if we strip out acquisitions, it declined. Free cashflow generation remains

[00:44:37] pretty strong coming in at 272 million. This is actually a pretty notable increase from quarter

[00:44:42] over quarter from third quarter of 2023, but it remains below 2022 levels. And they took a pretty

[00:44:50] prudent approach with this cashflow. I actually didn't get to look at how many shares they bought

[00:44:55] back because you had mentioned, you know, the share buybacks when the stock is facing headwinds.

[00:44:58] I don't know how many shares they did buy back, but they paid back out of that free cashflow

[00:45:03] generation. They took about 130 million of it and paid down some debt related to a acquisition they

[00:45:09] made, which is like a specialty truckload company. So operating ratios, they've continued to creep up

[00:45:14] over the years as well. Not by anything crazy, but it's certainly noteworthy. I mean, if you're,

[00:45:19] if you're not aware, operating ratios are used by quite a few companies, but like they're more

[00:45:23] prevalent in the transportation industry. So they compare a company's revenue to its operating

[00:45:27] expenses. So TFI came in at 89.6%. That's 1.1% higher year over year and about 3.5% since 2022.

[00:45:36] So ultimately the lower the operating ratio, the better. So an operating ratio of 89.6% effectively

[00:45:43] says that TFI spends around $89.60 to generate a hundred dollars in revenue. In terms of outlook,

[00:45:50] the companies- It's like the opposite of the operating and operating margin.

[00:45:54] Yeah. Yeah, pretty much. Yeah. And they, uh, like the rails use it too, but the rails have much

[00:45:59] better operating ratios. I think they're in like the 60% range around there. So in terms of outlook,

[00:46:05] the company is pretty muted, but they've been muted for, for quite some time. So their entire

[00:46:11] outlook is pretty much just a warning of how bad the economy can get and, uh, really hammer home that,

[00:46:16] you know, it's going to be management's ability to navigate the current environment that should help

[00:46:20] drive stronger results over the longterm. But overall there's, there's not much to read inside

[00:46:25] of their outlook, except the fact that they pretty much tell you that it could get worse. And again,

[00:46:29] like these results aren't really all that surprising. We're seeing it pretty much across the board for

[00:46:33] all transportation and logistics companies, including the railways. And I mean, cyclical

[00:46:38] stocks, they're, they're going to be cyclical. Yeah. I think we talked about FedEx not too long

[00:46:43] ago. I can't remember. I think it was FedEx or UPS, but, uh, one of those. And, uh, yeah,

[00:46:48] they, they're facing headwinds. I mean, it's not, it's not surprising at this point. I was looking

[00:46:53] at the total share outstanding. So they haven't, I mean, it's possible if there has been stock-based

[00:46:59] compensation that would affect this a little bit, but from the looks of it, they haven't really bought

[00:47:04] back much shares since, uh, pretty much all year since last year. So you can really see the share

[00:47:11] count going down up until, uh, pretty much December of like December of last year was kind of last

[00:47:19] quarter where it was down versus the previous quarter. And then it just, uh, yeah, it's been kind

[00:47:25] of flat, I would say increasing ever so slightly ever since. So they're either not buying back a lot,

[00:47:32] at least not enough to compensate for a stock-based compensation if that's what they're doing. So

[00:47:37] I would probably, you know, agree with you that they're being prudent here.

[00:47:42] Yeah. Like if you look at their shares outstanding in 2020, they were 93 million. And then at the start

[00:47:47] of 2024, they were 84 million. So they were buying back and now they're, they're 84 million again.

[00:47:53] So it's, it's effectively been, been flat. And I know they do, they do issue shares for

[00:47:58] acquisitions quite a bit. So their, their count is, you know, it kind of jumps all over the place

[00:48:01] a bit, but, uh, I mean, it, it does make sense if you, it'd be weird if they issued the outlook

[00:48:08] that they did about how harsh the economy could get. And they were sitting there buying back shares

[00:48:12] because it could get worse. Right. And I mean, this is just the way it works with cyclical stocks

[00:48:17] that are heavily reliant on the economy. And a TFI is, is definitely one of those.

[00:48:21] Yeah. Or you can do the airline way and you buy back shares before the pandemic. And then when the

[00:48:27] pandemic hits, you're completely screwed and dependent on government bailouts. So yeah, exactly.

[00:48:32] Yeah. Especially when it comes to cyclical businesses, to me, management should always

[00:48:37] err on the side of caution just because you never know what's going to happen. Obviously the pandemic

[00:48:43] was like, you can call it black swan event. It was not predicted, right. That came out of the blue

[00:48:48] for, I would say most people. Um, so you have to keep that in mind, but whenever you're a cyclical

[00:48:54] company, I think you have to be careful buying back too much stock because you know, you got to use cash

[00:48:59] to do that ideally. And some use debt, but, uh, uh, you have to use cash to do that. And it's cash

[00:49:07] that you don't have in case things, you know, take a turn for the worst. So I think it's, it's really

[00:49:12] good to be proven there.

[00:49:13] Yeah. I mean, we've seen it with, and this is a company I own and I actually still do like it,

[00:49:17] but, but BRP like Bombardier recreational, like they, the one thing I'll say about Bombardier is

[00:49:23] they have consistently like throughout their entire history bought back shares. But even in the midst

[00:49:29] of like, you know, 2022, 2023, they're revising guidance downwards every single quarter. They

[00:49:34] really have no idea where the environment is going. And they're still like, even over the last

[00:49:38] couple of years, they've still bought back over 10% of their shares. And like, obviously I think

[00:49:42] over the longterm, those buybacks will be, they'll be fine. But over the short term, like they,

[00:49:47] they paid a pretty big price scooping back those shares when ultimately, you know, they could,

[00:49:51] they might be able to get them for way cheaper in the future, depending how bad it gets. So yeah,

[00:49:56] it's share buybacks, especially.

[00:49:58] Yeah. For me, it's more the lack of flexibility, right? Like you end up putting yourself like

[00:50:03] hoping for the best. Like, I'm not saying BRP is a well-managed company overall, but

[00:50:08] it's just, yeah, when you do that and there is a low probability event that happens or something

[00:50:15] that doesn't go as planned, you just, you just kind of take out some flexibility and then you have

[00:50:20] to resort to, you know, if you need money desperately, then that's never a good situation

[00:50:24] either. So it's, yeah, I just, I'd rather companies be more on the side of caution when

[00:50:30] it comes to that.

[00:50:31] Yeah, definitely. Especially when you are, when you just like, as an operator, these companies,

[00:50:35] you know, there's going to be poor times. That's just the way cyclicals work. I mean,

[00:50:40] there's going to be, you know, a lot of peaks and a lot of bottoms in terms of their stock price.

[00:50:46] Yeah, no, definitely. So I think that's a great point to, uh, to end it on because yes,

[00:50:50] I do have to go have some commitments soon. I, we appreciate all the support, everyone listening.

[00:50:57] We will be doing a mailbag episode soon. I got tons of questions. Uh, we do get a whole lot

[00:51:03] of emails. We try to respond to most of them. You know, we do appreciate all the comments,

[00:51:09] the feedback and, you know, sorry to those that were not able to respond to, uh, we do try our

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[00:51:20] So we'll be doing that soon because, uh, we'll be traveling both of us in the first week of November.

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[00:51:59] week. The Canadian investor podcast should not be construed as investment or financial advice.

[00:52:05] The hosts and guests featured may own securities or assets discussed on this podcast. Always do your

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