Consumers are Cutting Back and Companies are Feeling the Pinch

[00:00:01] [SPEAKER_00]: 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] [SPEAKER_02]: Welcome back to The Canadian Investor Podcast. I'm here with Dan Kent. We are back for a Thursday news and earnings episode. Mostly earnings, I would say Dan, right? But a little bit of news as well. A lot of Canadian focus. I would say it's about 60-40 Canadian focus.

[00:00:31] [SPEAKER_02]: And U.S. companies today.

[00:00:32] [SPEAKER_01]: Yeah, there's a lot of interesting news. New CEOs. I mean, a couple key economic, you know, companies that are usually typically a sign of the economic strength. I mean, Home Depot, Canadian Tire, just, you know, the health of the consumer. So it should be a pretty good episode. Air Canada as well. It's going to be interesting.

[00:00:52] [SPEAKER_02]: Or should we say economic weakness? Spoiler alert.

[00:00:55] [SPEAKER_02]: Yeah, exactly. It doesn't look good.

[00:00:57] [SPEAKER_02]: No, exactly. But we'll get started. We have a lot to cover. So first on the slate, I know there's a lot of people that hold this company that are listening to the podcast. And for a full disclosure, I do own it in my own portfolio.

[00:01:10] [SPEAKER_02]: So it's Tourmaline that will be acquiring Crew Energy for a deal that's worth 1.3 billion. If you're seeing kind of 900 or so million, a bit less is just because they're also assuming the net debt, which totals 240 million.

[00:01:28] [SPEAKER_02]: The transaction is going to be an all stock transaction. And on the news, Crew Energy shares really soared because of obviously the acquisition that came out.

[00:01:40] [SPEAKER_02]: They went up 76 percent and the transaction is set to close in October of this year and will be immediately accretive to Termaline.

[00:01:49] [SPEAKER_02]: It's expected to add 200 million in free cash flow based on the current natural gas prices for 2025.

[00:01:56] [SPEAKER_02]: So definitely very attractive in terms of an acquisition.

[00:01:59] [SPEAKER_02]: And the acquisition provides Termaline with additional high quality assets and it allows them to continue their progress to reach 750,000 BOEPD.

[00:02:12] [SPEAKER_02]: So BOEPD. I'm sure there's like a way to say it quickly, but it means barrels of oils equivalent per day.

[00:02:20] [SPEAKER_02]: It's a common unit used that helps essentially to show production on an even basis when comparing different commodities like gas and oil, for example.

[00:02:29] [SPEAKER_02]: And it's very similar if you're investing in the mining industry.

[00:02:33] [SPEAKER_02]: So and you hear the term GEO, so gold equivalent ounces.

[00:02:37] [SPEAKER_02]: So it's very similar to that where different metals, obviously, they'll kind of convert it to what they would be worth in terms of gold equivalent ounces.

[00:02:45] [SPEAKER_02]: And Termaline believes that this is an opportune time.

[00:02:49] [SPEAKER_02]: And I quote here for consolidating natural gas assets prior to imminent major growth in the North American LNG business, which is liquid natural gas in acceleration of natural gas powered electrical generation requirements across the continent.

[00:03:05] [SPEAKER_02]: So, I mean, all in all, as a shareholder, I think this is a really smart move just because, I mean, let's just be honest.

[00:03:15] [SPEAKER_02]: Natural gas prices are at historical lows right now, if people are not aware of that.

[00:03:19] [SPEAKER_02]: So I have a chart here for joint TCI.

[00:03:22] [SPEAKER_02]: Inflation adjusted prices are literally at the lowest they've been oh and over like 25, 30 years.

[00:03:29] [SPEAKER_02]: I'm not even sure if they've been like ever this low, essentially.

[00:03:33] [SPEAKER_02]: So that gives you an idea how cheap natural gas is right now compared to it is historically.

[00:03:40] [SPEAKER_02]: And like they said, there's a big case to be made that there is going to be a accruing demand for natural gas as a lot more.

[00:03:51] [SPEAKER_02]: Now, how do I say that?

[00:03:53] [SPEAKER_02]: So it would be coal power plants that are converted to natural gas to reduce emissions, for example.

[00:03:58] [SPEAKER_02]: So there's going to be increased demand for natural gas from there.

[00:04:01] [SPEAKER_02]: Obviously, you also have to go and look at the production side.

[00:04:05] [SPEAKER_02]: So if the production side increases faster than demand, then it would still put a downward pressure to prices.

[00:04:12] [SPEAKER_02]: But overall, I mean, I like the acquisition as a shareholder.

[00:04:16] [SPEAKER_02]: What's your first impressions on it then?

[00:04:19] [SPEAKER_01]: It seems pretty solid.

[00:04:20] [SPEAKER_01]: Tormeline is a company that we cover quite a bit.

[00:04:23] [SPEAKER_01]: So I will have to look into this, but I haven't yet.

[00:04:25] [SPEAKER_01]: The one thing I'll say is like, I don't really think this will be the last acquisition they make.

[00:04:31] [SPEAKER_01]: I mean, Tormeline generates a ton of free cash flow, especially like with natural gas prices being where they are.

[00:04:38] [SPEAKER_01]: And they're still, you know, printing a ton of money.

[00:04:41] [SPEAKER_01]: So I think like just with how cheap a lot of these companies are on like an earnings basis and cash flow basis, it's like the same in the oil and gas sector.

[00:04:50] [SPEAKER_01]: Like it's just there's not a lot of demand for investments in this area.

[00:04:55] [SPEAKER_01]: As I had mentioned before, like XEG, like the Canadian Energy ETF, it's realizing like its lowest demand in, you know, 25 years since it started.

[00:05:05] [SPEAKER_01]: So, I mean, as a result, these companies are cheap.

[00:05:07] [SPEAKER_01]: And I mean, the companies, the larger companies with a ton of cash, I mean, there could be a lot more consolidation because these bigger players ultimately, Tormeline, I believe they push back 100% of cash flows back to investors.

[00:05:23] [SPEAKER_01]: But that would be, you know, before acquisitions, if they feel, you know, there's profitable acquisitions out there, they're definitely going to spend the money.

[00:05:29] [SPEAKER_01]: And this initially looks to definitely be one.

[00:05:33] [SPEAKER_02]: Yeah.

[00:05:33] [SPEAKER_02]: And when prices are depressed, that's when you can make the best acquisitions.

[00:05:37] [SPEAKER_02]: Yes.

[00:05:37] [SPEAKER_02]: Because then you can really leverage if you have a strong balance sheet and you're able to generate a lot of cash flow, you can really leverage that in your paying.

[00:05:45] [SPEAKER_02]: You know, yes, it looks like a big premium to compare it to what it was trading.

[00:05:50] [SPEAKER_02]: But you have to keep in mind that, you know, there's not much demand for companies right now.

[00:05:55] [SPEAKER_02]: Investors are not really investing in this space.

[00:05:57] [SPEAKER_02]: So even with that premium, you can easily make a case that it's a really good acquisition and will probably, you know, at this rate, it'll probably pay itself within four or five years at the most at current prices for natural gas.

[00:06:11] [SPEAKER_02]: Obviously, if it goes down, it's always a possibility could take longer.

[00:06:14] [SPEAKER_02]: But if it goes up, it could pay itself within two to three years.

[00:06:17] [SPEAKER_02]: That's not out of the realm of possibility.

[00:06:19] [SPEAKER_02]: So I think you're seeing that.

[00:06:21] [SPEAKER_02]: And even in the U.S., for those paying attention to that, some of the large players over there have also been making acquisitions.

[00:06:28] [SPEAKER_02]: I think trying to get those assets while they're relatively cheap, grow it.

[00:06:34] [SPEAKER_02]: And with the expectation that down the line, there's going to be more demand for oil and gas in general.

[00:06:40] [SPEAKER_01]: Yep, pretty much.

[00:06:41] [SPEAKER_01]: And you're going to see these, you know, the major players are going to trade at more expensive valuations, whereas the smaller players, I think Crew Energy was only like a,

[00:06:49] [SPEAKER_01]: billion dollar market cap.

[00:06:51] [SPEAKER_01]: Well, I think that's post acquisition.

[00:06:53] [SPEAKER_01]: So maybe even before they were, you know, a smaller cap company, they're going to be, you know, much cheaper.

[00:06:58] [SPEAKER_01]: And these big players can just come in and, you know, scoop them up.

[00:07:02] [SPEAKER_01]: I mean, like I said, just cash flow generation, spending money on not necessarily delivering it all back to investors.

[00:07:09] [SPEAKER_01]: You know, they're going to find acquisitions like this.

[00:07:12] [SPEAKER_01]: And I would not doubt.

[00:07:13] [SPEAKER_01]: I don't think this is going to be the last.

[00:07:15] [SPEAKER_02]: No, no, totally agree.

[00:07:17] [SPEAKER_02]: So now we'll move on to completely different here.

[00:07:20] [SPEAKER_02]: But it is breaking news came out this morning.

[00:07:22] [SPEAKER_02]: So Starbucks is going to get a new CEO.

[00:07:26] [SPEAKER_02]: So do you want to go over that for us?

[00:07:27] [SPEAKER_02]: And especially since you know the company well, because you do own some shares of Starbucks.

[00:07:32] [SPEAKER_01]: Yeah, so Starbucks makes up a decent amount of my portfolio.

[00:07:37] [SPEAKER_01]: It's probably like a 5% allocation.

[00:07:39] [SPEAKER_01]: I added quite a bit when it, you know, dipped there in the low 70s, just because they've been struggling quite a bit.

[00:07:45] [SPEAKER_01]: But this morning it is kind of ripping in price.

[00:07:49] [SPEAKER_01]: I believe it's up anywhere from it was 20 to 20 percent.

[00:07:53] [SPEAKER_01]: Yeah.

[00:07:54] [SPEAKER_01]: So it's it looks right now those buys in the 70s weren't that bad.

[00:07:59] [SPEAKER_01]: But yeah, the the main news is they are bringing in a new CEO who is the Chipotle CEO, Brian Nickel.

[00:08:08] [SPEAKER_01]: He's been the CEO of Chipotle since 2018.

[00:08:12] [SPEAKER_01]: There was a lot of issues with their past CEO.

[00:08:16] [SPEAKER_01]: I mean, they did a few conference calls with him and the conference calls were borderline nightmares.

[00:08:20] [SPEAKER_01]: Um, he hasn't really done a whole lot since he took over.

[00:08:24] [SPEAKER_01]: It was only I believe he took over in it was earlier mid 2013.

[00:08:29] [SPEAKER_01]: But I mean, Starbucks has taken an absolute beating since then.

[00:08:32] [SPEAKER_01]: Whereas Chipotle since 2018, they've grown revenue by 76 percent earnings per share by 257 percent and free cash flow per share by 220 percent.

[00:08:44] [SPEAKER_01]: And nickel would have taken over in in 2018 and their share prices increased by over 250 percent over that time frame.

[00:08:53] [SPEAKER_01]: And I believe it was it was either last week or the week before that they had an activist investor that bought into Starbucks.

[00:08:59] [SPEAKER_01]: And they had mentioned that they were, you know, they made, you know, big proposed changes to the board.

[00:09:04] [SPEAKER_01]: But they had mentioned that they were open to keeping the current CEO.

[00:09:08] [SPEAKER_01]: And I did find this a bit puzzling.

[00:09:10] [SPEAKER_01]: I mean, usually something like that, especially with the struggles that they've gone through and just, you know, the kind of bad PR that has happened with Starbucks.

[00:09:19] [SPEAKER_01]: You think they'd want to overhaul the CEO?

[00:09:22] [SPEAKER_01]: And now it kind of looks like they did.

[00:09:25] [SPEAKER_02]: Well, I mean, open to keeping the CEO is definitely very like it leaves like it doesn't close any doors.

[00:09:32] [SPEAKER_02]: It's probably one of many possibilities.

[00:09:34] [SPEAKER_02]: And I would think they were probably pushing for, you know, different options.

[00:09:39] [SPEAKER_02]: And this was probably one of their preferred option.

[00:09:42] [SPEAKER_02]: But I can just think that Brian nickel is going to get some kind of awesome compensation package to to leave Chipotle to go to Starbucks.

[00:09:53] [SPEAKER_01]: Yeah.

[00:09:53] [SPEAKER_01]: And I think Chipotle stock is down.

[00:09:56] [SPEAKER_01]: It's down quite a bit.

[00:09:57] [SPEAKER_01]: I think today.

[00:09:58] [SPEAKER_01]: Yeah.

[00:09:59] [SPEAKER_01]: 10 percent.

[00:10:00] [SPEAKER_01]: So on the news, they dip 10 percent, whereas Starbucks is up, you know, 20 percent.

[00:10:05] [SPEAKER_01]: He's going to take over on September 9th.

[00:10:07] [SPEAKER_01]: So that's in a little less than a month.

[00:10:09] [SPEAKER_01]: The one thing I will say is I do think it's a little bit unfair to put it all on the former CEO, who, by the way, is completely exiting the board.

[00:10:17] [SPEAKER_01]: So he's just leaving.

[00:10:19] [SPEAKER_01]: Starbucks is what I would definitely call a luxury type item, at least the expensive end of their menu.

[00:10:24] [SPEAKER_01]: And we kind of saw this, you know, as as prior to the big dip now, like before that, you see average ticket, you know, traffic was relatively steady.

[00:10:33] [SPEAKER_01]: But average ticket was declining, which means that more people are just buying cheaper drinks on that front.

[00:10:39] [SPEAKER_01]: But now, like we're seeing just a wholesale declines everywhere.

[00:10:43] [SPEAKER_01]: But with consumers scaling scaling back, I believe, you know, anyone at the helm of the company probably would underwent, you know, much of the same struggles.

[00:10:51] [SPEAKER_01]: That said, they definitely do need some innovation.

[00:10:53] [SPEAKER_01]: And he seemed pretty dead set on just trying to ride it out and kind of hoping the brand power of the company would get consumers to return after some pricing pressures just in regards to interest rates coming down.

[00:11:05] [SPEAKER_01]: Nickel has, you know, a very solid track record in the food services industry.

[00:11:10] [SPEAKER_01]: Chipotle is very different than Starbucks, but I believe he's going to do pretty, pretty well, probably expanding the company's food options, too, which has often been, you know, a criticism.

[00:11:22] [SPEAKER_01]: You know, the lack of expansion on that front, too much focus on drinks, things like that.

[00:11:27] [SPEAKER_01]: But overall, it's going to be pretty interesting to see how he does.

[00:11:31] [SPEAKER_01]: It's definitely typically when you see these activist investors and there wasn't just one, there was two.

[00:11:36] [SPEAKER_01]: So a few weeks ago, they had one step in and then I believe last week they had another one step in.

[00:11:42] [SPEAKER_01]: Usually, you know, when this type of stuff happens, you tend to see wholesale changes.

[00:11:47] [SPEAKER_02]: Yeah.

[00:11:47] [SPEAKER_02]: Didn't he go on Chipotle, Brian Nickel, before he kind of turned around?

[00:11:53] [SPEAKER_02]: Was it Domino's, if I remember correctly?

[00:11:56] [SPEAKER_02]: That I can't remember.

[00:11:58] [SPEAKER_02]: Yeah, I think that's what I know he had done another turnaround.

[00:12:02] [SPEAKER_02]: But anyways, if it's not that, you can let us know.

[00:12:05] [SPEAKER_02]: But I'm pretty sure he had been at the helm of Domino before that and helped them turn things around because they were struggling and they had to revamp, I think, the pizza because it tasted like cardboard.

[00:12:19] [SPEAKER_02]: Not that I was a big fan of Domino's.

[00:12:22] [SPEAKER_02]: It still kind of does.

[00:12:24] [SPEAKER_01]: Yeah.

[00:12:26] [SPEAKER_01]: It's cheap, though.

[00:12:28] [SPEAKER_01]: It's very cheap.

[00:12:29] [SPEAKER_02]: Okay.

[00:12:30] [SPEAKER_02]: Okay.

[00:12:30] [SPEAKER_02]: Okay.

[00:12:30] [SPEAKER_02]: But no, I think it might be it.

[00:12:32] [SPEAKER_02]: Maybe I'm completely missing the mark here, but I'm pretty sure he was at Domino's or at least a major kind of chain before that.

[00:12:39] [SPEAKER_02]: Yeah.

[00:12:40] [SPEAKER_01]: Yeah, I can't see it.

[00:12:41] [SPEAKER_01]: I'll look as you're reading the next segment.

[00:12:43] [SPEAKER_01]: I'll look it up.

[00:12:43] [SPEAKER_01]: But it doesn't look like it was Domino's.

[00:12:45] [SPEAKER_01]: No.

[00:12:46] [SPEAKER_02]: Okay.

[00:12:46] [SPEAKER_02]: Sorry.

[00:12:46] [SPEAKER_02]: I could be.

[00:12:47] [SPEAKER_02]: That's okay.

[00:12:48] [SPEAKER_02]: Okay.

[00:12:49] [SPEAKER_02]: So while you look that up, I'll talk about Canadian Tire because obviously it's a name we follow closely.

[00:12:56] [SPEAKER_02]: I think it's one of the best proxy to see how much Canadian consumers are spending on discretionary items and non-essential, obviously, because there are solely in Canada.

[00:13:06] [SPEAKER_02]: They do have some essential items, of course, but it's a big part of their sales are non-essentials, especially when you start looking at some of the brands that they also own, some of their other stores like a sport check, for example, or Mark's Warehouse.

[00:13:21] [SPEAKER_02]: And during the call, they even said that they were challenged by a tough macroeconomic environment that continues to favor essential shopping.

[00:13:30] [SPEAKER_02]: They also mentioned that lesser indebted consumers have held up their spending more than those are more indebted, which, of course, you know, I think goes without saying.

[00:13:40] [SPEAKER_02]: That's pretty obvious in my view.

[00:13:41] [SPEAKER_02]: But given that they have lots of insight because of their financial arm business, I think it just reinforces the fact that there's more and more Canadians that are cutting back on expenses to service high levels of debt.

[00:13:55] [SPEAKER_02]: And, of course, they mentioned there's key areas, for example, Ontario and BC, where consumers seem to be struggling a bit more.

[00:14:03] [SPEAKER_02]: I think it goes a little bit with that without saying in terms, especially with people having a whole lot of mortgage debt in those two provinces and the combination of interest rate cuts from the BOC plus weaker comps leads them to believe that the second half of the year would be more favorable for them.

[00:14:22] [SPEAKER_02]: Whatever that means, obviously more favorable.

[00:14:25] [SPEAKER_02]: I think it's just a way, you know, to let people know it may not be as bad, but I think they're giving themselves a lot of leeway for the quarter that's coming up.

[00:14:34] [SPEAKER_01]: Yeah, it's been a rough, rough go for Canadian Tire over the last while.

[00:14:39] [SPEAKER_01]: I mean, their stock price has taken.

[00:14:41] [SPEAKER_01]: Well, I mean, it's trading relatively flat.

[00:14:43] [SPEAKER_01]: I mean, most of the quarter was much to be expected.

[00:14:47] [SPEAKER_01]: Yeah, there was there was I've heard that they're looking to sell their financial arm.

[00:14:52] [SPEAKER_01]: Oh, I'm not sure on that.

[00:14:54] [SPEAKER_01]: That was just kind of something I heard.

[00:14:56] [SPEAKER_01]: I haven't like looked into it.

[00:14:57] [SPEAKER_01]: But I mean, the financial arm of things is, you know, it gives you a good picture of the overall Canadian economy as well.

[00:15:03] [SPEAKER_01]: The one thing I will say on the on the back to the Domino's thing was Patrick Doyle, who was the CEO of Domino's.

[00:15:12] [SPEAKER_01]: And he's on the he's on the board of of QSR now, like restaurant brands.

[00:15:17] [SPEAKER_02]: OK, OK.

[00:15:18] [SPEAKER_01]: Yeah.

[00:15:19] [SPEAKER_01]: So that was the swap.

[00:15:20] [SPEAKER_01]: Yeah.

[00:15:20] [SPEAKER_01]: He left Domino's.

[00:15:21] [SPEAKER_01]: He was 2010 to 2018 at Domino's.

[00:15:25] [SPEAKER_02]: And OK, the article I read.

[00:15:27] [SPEAKER_02]: He was Taco Bell.

[00:15:29] [SPEAKER_02]: I think that's that's what.

[00:15:31] [SPEAKER_02]: Oh, was he?

[00:15:31] [SPEAKER_02]: Yeah.

[00:15:32] [SPEAKER_02]: One of those one of those fast food chains.

[00:15:34] [SPEAKER_01]: The headline of the article when he resigned was Domino's CEO is leaving the company after fixing the pizza chain's cardboard crust reputation.

[00:15:43] [SPEAKER_01]: Oh, there you go.

[00:15:44] [SPEAKER_01]: So it wasn't just me.

[00:15:46] [SPEAKER_02]: I didn't even see that article.

[00:15:47] [SPEAKER_02]: So, OK, thanks for clarifying.

[00:15:50] [SPEAKER_02]: But to get back here to Canadian tires.

[00:15:52] [SPEAKER_02]: So revenues were down 2.9 percent to 4.1 billion.

[00:15:56] [SPEAKER_02]: Now, revenues have been down for five of the last six quarters on a year over year basis.

[00:16:02] [SPEAKER_02]: The only exception was flat revenues in Q3 of last year.

[00:16:06] [SPEAKER_02]: So, I mean, basically the last six quarters sales have been down or flat.

[00:16:10] [SPEAKER_02]: So let's just say it how it is.

[00:16:12] [SPEAKER_02]: Excluding gas sales revenues were down 3.4 percent.

[00:16:17] [SPEAKER_02]: So it's even worse when you exclude petroleum sales.

[00:16:21] [SPEAKER_02]: Looking at each brand, here's how the revenues fared.

[00:16:24] [SPEAKER_02]: So Canadian tires revenue for the Canadian tire brand, those fell 4.8 percent.

[00:16:29] [SPEAKER_02]: Sport check down 4.2 percent.

[00:16:32] [SPEAKER_02]: Marks down 2.8 percent.

[00:16:34] [SPEAKER_02]: The only two that were saw a slight increase was Heli Hansen and their gas station.

[00:16:41] [SPEAKER_02]: And they saw revenue increases of 1.2 percent and 0.4 respectively.

[00:16:46] [SPEAKER_02]: So clearly not good.

[00:16:47] [SPEAKER_02]: On a same store sales basis, it's even worse.

[00:16:50] [SPEAKER_02]: Sales were down 4.6 percent.

[00:16:52] [SPEAKER_02]: So I don't really know what the market is thinking here because I guess the market was kind of expecting these results.

[00:16:59] [SPEAKER_02]: But it's definitely not great.

[00:17:01] [SPEAKER_02]: I think what they're focusing on is really the margins.

[00:17:05] [SPEAKER_02]: And that was one of the only bright spots here.

[00:17:08] [SPEAKER_02]: So gross margins were up 300 basis points year over year while operating margins were up 120 basis points.

[00:17:15] [SPEAKER_02]: So those higher margins actually helped them to double their earnings per share to $3.56.

[00:17:20] [SPEAKER_02]: So I'm going to assume that the market is focused a bit more on the earnings per share.

[00:17:25] [SPEAKER_02]: From my personal perspective, as an investor, growing earnings is fine.

[00:17:33] [SPEAKER_02]: And being more efficient, you know, that's something you want to see.

[00:17:36] [SPEAKER_02]: But seeing the top line decline, I would say that completely offsets the growth in earnings.

[00:17:43] [SPEAKER_02]: In my view, even though it's not a big decline, if not more.

[00:17:47] [SPEAKER_02]: I mean, when you're not growing the top line, it's not great.

[00:17:51] [SPEAKER_02]: Obviously, it's more cyclical when the economy picks back up.

[00:17:56] [SPEAKER_02]: I'm sure it'll get better.

[00:17:58] [SPEAKER_02]: But what were your thoughts on that before I finish with the financial segment of things here?

[00:18:03] [SPEAKER_01]: Yeah, there's really only so much you can do like efficiency wise until you ultimately need the top line to grow for earnings to grow.

[00:18:11] [SPEAKER_01]: I mean, the one thing I'm surprised is that the Canadian Tire segment of it is the largest fall in terms of overall revenue.

[00:18:20] [SPEAKER_01]: Like you would think something like Sport Check would be higher.

[00:18:23] [SPEAKER_01]: Because I mean, Canadian Tire, I guess, does have a ton of discretionary items.

[00:18:27] [SPEAKER_01]: But like Sport Check is pretty much pure discretionary, expensive discretionary items.

[00:18:35] [SPEAKER_01]: I mean, I don't know if I shopped at Sport Check for a long time.

[00:18:38] [SPEAKER_02]: Yeah, I guess there's seasonality to both Canadian Tire and Sport Check.

[00:18:43] [SPEAKER_02]: And I know I'm just going on memory, but Sport Check got hit real hard, if I remember correctly, a couple quarters ago as well.

[00:18:51] [SPEAKER_02]: So it's possible that sales are just a little less bad.

[00:18:54] [SPEAKER_02]: Obviously, you're still comparing on a year over year basis.

[00:18:57] [SPEAKER_02]: But it's possible that just the comps were so low last year without having looked at last year versus the previous year that it doesn't look as bad right now.

[00:19:07] [SPEAKER_01]: Yeah, I mean, like the thing about it is I think the market might be reacting reasonably because the company is just like so cheap off the bat.

[00:19:16] [SPEAKER_01]: Like it's only trading at seven and a half exits.

[00:19:19] [SPEAKER_01]: It's trailing 12 month cash flows.

[00:19:22] [SPEAKER_01]: So, I mean, it's definitely cheap, I guess, which is maybe why, you know, the market isn't reacting all that much to, you know, the slowing sales.

[00:19:31] [SPEAKER_01]: And typically when they guide to it, I mean, that's kind of why you seem we'll talk about in a bit as Home Depot.

[00:19:36] [SPEAKER_01]: Like they've been guiding the huge slowdowns for like almost a year now, but their stock price hasn't really done that much because it's, you know, when investors expect it, it's not as big of a surprise when it happens.

[00:19:47] [SPEAKER_02]: Yeah, no, that's definitely fair.

[00:19:49] [SPEAKER_02]: And I guess on the financial arm of things, I'm going to compare these versus the previous quarter, even though in their earnings release, they compare year over year.

[00:19:59] [SPEAKER_02]: I will mention a few year over year numbers, but I think it's a better, I don't know, it gives a better picture to compare quarter over quarter on a sequential basis.

[00:20:08] [SPEAKER_02]: When you're looking to see, I'm really looking to see how the financial health here of their consumers or holders of their credit cards.

[00:20:17] [SPEAKER_02]: And as a reminder, things really started to go south here for Canadian Tire last year after the Bank of Canada unpaused for two back-to-back rates.

[00:20:26] [SPEAKER_02]: If people remember in June of July of last year, which is kind of funny now looking in hindsight, they hiked twice last year and they cut twice same months this year.

[00:20:37] [SPEAKER_02]: Yeah, I kind of, I didn't clue in until we're just talking now, but just funny how that works.

[00:20:45] [SPEAKER_02]: But gross average account receivables for their credit cards was 0.5% higher compared to the previous quarter.

[00:20:52] [SPEAKER_02]: The net credit card write-off went up 30 basis points to 6.7% year over year.

[00:20:58] [SPEAKER_02]: That's the total write-off minus the recovery.

[00:21:00] [SPEAKER_02]: And if you look at a year over year basis, that's up 110 basis point if you wanted additional context.

[00:21:07] [SPEAKER_02]: And the reason why you want to look at net write-off this way is because when you have a provision for credit losses, I mean, these are provisions.

[00:21:15] [SPEAKER_02]: So there's money you set aside in case that you need to write-off, but that money set aside, some, you know, may not be required.

[00:21:24] [SPEAKER_02]: And that's why the net write-off actually gives you a better picture of what's actually happening right now.

[00:21:30] [SPEAKER_02]: The past due receivable went down 30 basis point to 3.3% quarter over quarter.

[00:21:36] [SPEAKER_02]: Again, sequential basis here.

[00:21:38] [SPEAKER_02]: And the provision for credit losses as a percentage were down both on a year and quarter over quarter basis.

[00:21:46] [SPEAKER_02]: So they've been setting a little less aside as a percentage basis.

[00:21:50] [SPEAKER_02]: But overall, I mean, things are, you know, it's kind of hit or miss here on a year over year basis.

[00:21:56] [SPEAKER_02]: It doesn't look super good.

[00:21:57] [SPEAKER_02]: On a quarter over quarter basis, it looks like it may be stabilizing a little bit.

[00:22:03] [SPEAKER_02]: It's something to keep an eye on.

[00:22:05] [SPEAKER_02]: I find it pretty interesting because they do have a whole lot.

[00:22:08] [SPEAKER_02]: They have millions of credit cards outstanding.

[00:22:10] [SPEAKER_02]: They do have insights into what people purchase, not only at their stores, but elsewhere.

[00:22:15] [SPEAKER_02]: Because, you know, if you have, I think it's MasterCard that they use.

[00:22:18] [SPEAKER_02]: So if you have a branded MasterCard at Canadian Tire, I mean, if you want to go to Costco, they accept MasterCard.

[00:22:24] [SPEAKER_02]: So you can use it there as well, right?

[00:22:26] [SPEAKER_02]: So it's just a good reminder for people is that the credit cards they own, people can use them everywhere.

[00:22:32] [SPEAKER_02]: Just not at Canadian Tire.

[00:22:33] [SPEAKER_01]: Yeah, it's not just like an exclusive Canadian Tire card.

[00:22:37] [SPEAKER_02]: I mean, that...

[00:22:38] [SPEAKER_02]: You probably get more points and stuff there, I'm assuming.

[00:22:42] [SPEAKER_02]: I don't have one myself, yeah.

[00:22:43] [SPEAKER_01]: Same thing like the Costco card.

[00:22:45] [SPEAKER_01]: Like they give you a little bit extra on purchases made there, which is...

[00:22:49] [SPEAKER_01]: Yeah.

[00:22:50] [SPEAKER_01]: I mean, it's one benefit to them having a branded card, right?

[00:22:53] [SPEAKER_02]: Yeah.

[00:22:54] [SPEAKER_02]: And one thing, it may be more anecdotal, but in Ottawa, we, I believe we still have the largest Canadian Tire in Canada.

[00:23:01] [SPEAKER_02]: This thing is massive.

[00:23:02] [SPEAKER_02]: It makes Costco look small.

[00:23:04] [SPEAKER_02]: Like that's how...

[00:23:05] [SPEAKER_02]: Oh, really?

[00:23:05] [SPEAKER_02]: Massive.

[00:23:05] [SPEAKER_02]: Oh yeah, it is massive.

[00:23:07] [SPEAKER_02]: It's two stories.

[00:23:08] [SPEAKER_02]: A massive kind of auto shop as well.

[00:23:12] [SPEAKER_02]: It's probably...

[00:23:13] [SPEAKER_02]: One of the stories is probably bigger than most Canadian Tires on itself.

[00:23:16] [SPEAKER_02]: It's just like when you look at their earnings release, the picture they have is of the store in Ottawa.

[00:23:23] [SPEAKER_01]: Oh, really?

[00:23:24] [SPEAKER_01]: Yeah.

[00:23:25] [SPEAKER_01]: I mean, the one we have like closest to me is an absolute mess.

[00:23:30] [SPEAKER_01]: I try to avoid going in there at all costs.

[00:23:33] [SPEAKER_02]: No, this one is obviously it's brand new, so it's quite nice.

[00:23:36] [SPEAKER_02]: It's I think a year and a half, two years old.

[00:23:38] [SPEAKER_02]: And what I was saying on an anecdotal basis is I remember it was like these credit card salespeople.

[00:23:45] [SPEAKER_02]: Every single time I would go to Canadian Tire, there'd be like one that I did not want to look in the eyes because I just did not want to be approached.

[00:23:53] [SPEAKER_02]: Or I'd be like, you know, I'm goodbye type of deal.

[00:23:56] [SPEAKER_02]: But I've noticed or actually now that I'm saying this in the last year, I don't think I've seen any.

[00:24:03] [SPEAKER_02]: So it may be a conscious decision on their part to kind of cut that back as they scale back as they're seeing the consumer struggle a bit more with debt.

[00:24:13] [SPEAKER_02]: And they may want to kind of scale that back a little bit.

[00:24:17] [SPEAKER_02]: Obviously, people can still apply for their credit cards and get them, but they're clearly not being as proactive.

[00:24:22] [SPEAKER_02]: That's just anecdotal.

[00:24:24] [SPEAKER_02]: It may be different in other stores, but I figure I mentioned that too.

[00:24:28] [SPEAKER_01]: I mean, whenever I go to Walmart or something, it's always you get asked credit card before you check out credit card.

[00:24:34] [SPEAKER_01]: Do you want this credit card?

[00:24:35] [SPEAKER_01]: You go to the self-checkout till it asks you before.

[00:24:38] [SPEAKER_01]: Do you want to sign up for this credit card?

[00:24:39] [SPEAKER_01]: It's relentless.

[00:24:41] [SPEAKER_01]: Even Costco, like before I had the whatever you call it, the bigger membership, like it's constant when you go to the checkout.

[00:24:48] [SPEAKER_02]: I suppose the difference is I don't know about Walmart, but I know Costco, they're not the bank, right?

[00:24:56] [SPEAKER_02]: They're not the financial provider where Canadian Tire is in that situation.

[00:25:02] [SPEAKER_02]: So they may be – Costco doesn't care, right?

[00:25:04] [SPEAKER_02]: If you don't pay your bills, it's what CIBC now that holds the credit card?

[00:25:09] [SPEAKER_01]: Yeah.

[00:25:09] [SPEAKER_01]: Well, I mean, there's got to be some incentive because they were relentless until we eventually – we were going to do it anyway, but finally we just upgraded it.

[00:25:17] [SPEAKER_01]: And yeah, it's – I mean, I don't go into Canadian Tire very much.

[00:25:22] [SPEAKER_01]: I do remember even at the one closest to me, they used to always have – they're always asking you to sign up for the cards.

[00:25:29] [SPEAKER_01]: But I haven't been inside a Canadian Tire in a very long time.

[00:25:33] [SPEAKER_02]: So I don't know.

[00:25:33] [SPEAKER_02]: Well, you'll have to go and report back.

[00:25:35] [SPEAKER_02]: Yeah.

[00:25:36] [SPEAKER_02]: Next time you go, you have to report back and say if you were approached for a credit card.

[00:25:40] [SPEAKER_02]: But that's it for Canadian Tire.

[00:25:43] [SPEAKER_02]: We'll move on.

[00:25:44] [SPEAKER_02]: We have got a couple more businesses we want to talk about.

[00:25:46] [SPEAKER_02]: So you referenced Home Depot.

[00:25:48] [SPEAKER_02]: Very interesting because they do have some things that overlap with Canadian Tire here.

[00:25:52] [SPEAKER_02]: So it'll be interesting what you have to say.

[00:25:54] [SPEAKER_02]: I know it wasn't a great quarter, so you want to break it down for us?

[00:25:58] [SPEAKER_01]: Yeah.

[00:25:59] [SPEAKER_01]: So they reported earnings that topped expectations like on revenue and earnings.

[00:26:05] [SPEAKER_01]: But they issued a few warnings about the U.S. consumer pretty much stating that the macro environment is causing a larger slowdown than expected due to people putting –

[00:26:15] [SPEAKER_01]: for the most part, they said putting off home improvement projects, which is Home Depot.

[00:26:20] [SPEAKER_01]: That's where this company is going to generate most of their money.

[00:26:23] [SPEAKER_01]: New home builds, home renovations, things like that.

[00:26:26] [SPEAKER_01]: So they reported a 3.3% decline in same-store sales company-wide with the U.S. coming in higher at a 3.6% decline.

[00:26:35] [SPEAKER_01]: Total customer transactions were down 1.8%.

[00:26:39] [SPEAKER_01]: Average ticket price fell by 1.3%.

[00:26:42] [SPEAKER_01]: And when we compare the decline in overall transactions to previous quarters, it's definitely accelerating.

[00:26:48] [SPEAKER_01]: So I'm pretty sure the last 3-4 quarters they would report a 1% to 1.2% decline in overall transactions,

[00:26:58] [SPEAKER_01]: whereas 1.8% is definitely a bump up from what they've typically reported over the last while.

[00:27:06] [SPEAKER_01]: Well, operating income was flat on a year-over-year basis, and margins have managed to stay relatively steady as well,

[00:27:13] [SPEAKER_01]: but they did guide to lower margins, which I'll talk about in a bit.

[00:27:16] [SPEAKER_01]: But earnings per share came in a penny lower on a year-over-year basis.

[00:27:21] [SPEAKER_01]: And in terms of guidance, they issued guidance in which it expects sales to increase by 2.5% to 3.5% in 2024.

[00:27:31] [SPEAKER_01]: However, this does include an extra week of sales, so there'll be 53 weeks of total sales in 2024.

[00:27:37] [SPEAKER_01]: So realistically, when we factor that extra week in, plus just overall inflation, the cost of goods just going up,

[00:27:45] [SPEAKER_01]: I mean, there's virtually no real growth here.

[00:27:48] [SPEAKER_01]: They expect comparable sales to decline by 3% to 4%,

[00:27:51] [SPEAKER_01]: which probably means for the most part the bump in sales on an annual basis will come from the 12-ish new stores they expect to open.

[00:28:00] [SPEAKER_01]: And they're guiding to operating margins in the high 13% range, which would be a pretty big dip from the 15-plus they're sitting at right now.

[00:28:09] [SPEAKER_01]: And finally, they expect earnings to fall by 1.3% on a year-over-year basis.

[00:28:14] [SPEAKER_01]: And again, that includes the additional week of sales.

[00:28:18] [SPEAKER_01]: So apples-to-apples earnings are likely to fall a bit more than this.

[00:28:23] [SPEAKER_01]: I own Home Depot.

[00:28:24] [SPEAKER_01]: It's one of the larger positions in my portfolio.

[00:28:26] [SPEAKER_01]: I'm certainly bullish over the long term just due to the housing situation in North America overall.

[00:28:31] [SPEAKER_01]: Overall, the quarter really shouldn't surprise many people as Home Depot has pretty much been guiding to this for quite a long time.

[00:28:39] [SPEAKER_01]: And as I said, the stock price really hasn't done all that much because typically when they guide to weak earnings like this over the course of a year,

[00:28:48] [SPEAKER_01]: it's typically when they do that that the stock price is kind of going to adjust back.

[00:28:51] [SPEAKER_01]: And results have generally been above what has been expected, which is a pretty good sign.

[00:28:59] [SPEAKER_01]: I mean, overall, what this does do is paint a pretty good picture of just the North American economy and how consumers are scaling back.

[00:29:06] [SPEAKER_01]: We're pretty much seeing it across the board.

[00:29:09] [SPEAKER_01]: Starbucks, McDonald's, Home Depot, Canadian Tire.

[00:29:12] [SPEAKER_01]: A lot of these companies are reporting a big slowdown as people, high prices are definitely starting to get to people.

[00:29:20] [SPEAKER_01]: But I mean, it's probably going to improve for Home Depot moving forward.

[00:29:25] [SPEAKER_01]: They just need, you know, consumers need a bit of relief before they decide to renovate their kitchen or something like that.

[00:29:31] [SPEAKER_01]: But I believe it eventually will return.

[00:29:34] [SPEAKER_02]: Yeah, and I mean, for a company and I own Home Depot, but it's a pretty small position for me.

[00:29:41] [SPEAKER_02]: But nonetheless, I think it's one of the bullish thing for Home Depots once, you know, the economy starts recovering and doing better is that they've been incredibly Amazon resilient over the years.

[00:29:53] [SPEAKER_02]: So it is one space that clearly Amazon does not think it makes sense for them to enter is the home renovation, larger products.

[00:30:03] [SPEAKER_02]: Yes, there's going to be items that overlap.

[00:30:05] [SPEAKER_02]: But, you know, you're I don't think you're going to be buying wood to build a shed anytime soon from Amazon.

[00:30:11] [SPEAKER_02]: So I think that is the bullish case for them and just a distribution network that they have.

[00:30:17] [SPEAKER_01]: Yeah. And there's another element to it.

[00:30:19] [SPEAKER_01]: Like you got to think if you're sitting at home working on something, you're working on your fence and you need something.

[00:30:25] [SPEAKER_01]: You're not going to order it off Amazon and wait one to two days for it to be delivered.

[00:30:29] [SPEAKER_01]: Right. You're just going to run to Home Depot and buy it, which creates like another kind of Modi element in that regard.

[00:30:37] [SPEAKER_01]: It's typically something you're just going to run to the store and pick up as you need it.

[00:30:42] [SPEAKER_01]: I mean, I know whenever I do something, I typically make five or six runs to the store before it's before it's completed.

[00:30:49] [SPEAKER_01]: But yeah, I don't really have any concerns with Home Depot over the long term.

[00:30:53] [SPEAKER_01]: And they have been if you think about it, like I can't even imagine pulling off a large scale renovation right now.

[00:30:59] [SPEAKER_01]: So the fact that same store sales are only declining the level that they are, it's pretty impressive.

[00:31:06] [SPEAKER_02]: Yeah. No, I think I agree with you.

[00:31:09] [SPEAKER_02]: I mean, people are just pushing back whatever they can.

[00:31:11] [SPEAKER_02]: And even in the U.S., which clearly is their largest market for Home Depot.

[00:31:17] [SPEAKER_02]: I think homeowners are getting hit pretty hard in the U.S.

[00:31:21] [SPEAKER_02]: because I've been reading quite a bit and it's not it's just a cost of living with other things and homeownership.

[00:31:27] [SPEAKER_02]: Right. You have property taxes, but also apparently home insurance is going through the roof in certain areas in the U.S.

[00:31:34] [SPEAKER_02]: But on average, as an aggregate for all of the U.S., it's going up.

[00:31:38] [SPEAKER_02]: So as you have these mandatory costs of homeownership that go up, you may push back certain things that you wanted to improve your home, but that are not necessary.

[00:31:48] [SPEAKER_02]: And that's where sales to Home Depot would kind of be hit a little bit.

[00:31:51] [SPEAKER_02]: And that's what I think I wanted to remind people is not just the things that are being sold at Home Depot may be more expensive.

[00:31:59] [SPEAKER_02]: It's everything else and the money remaining is just everything else is expensive.

[00:32:04] [SPEAKER_02]: So there's less money remaining to do any kind of, you know, these little side projects that you wanted to do that may bring value to your home, but they're not essential.

[00:32:13] [SPEAKER_01]: Yeah. And the one thing is a lot of people have to finance these.

[00:32:17] [SPEAKER_01]: I mean, not a lot of people are outlaying, you know, $30,000 in cash to upgrade their kitchen.

[00:32:23] [SPEAKER_01]: They're probably tapping into a into a HELOC or something like that, which right now, you know, rates are significantly higher than they were over the last over a long, very long time.

[00:32:34] [SPEAKER_01]: So that's going to create another another headwind, which should realistically come down.

[00:32:40] [SPEAKER_01]: I mean, you know, if they if the Bank of Canada cuts rates by another 100, 150 basis points and your HELOC is, you know, it goes from 6% to 4 to 3 and a half.

[00:32:50] [SPEAKER_01]: You might, you know, debate, you know, doing something like that again.

[00:32:54] [SPEAKER_01]: But I can't see it happening right now.

[00:32:56] [SPEAKER_02]: And even then, I think just before we move on to Air Canada, even if the rates go down rapidly, I think there are some people that will have PTSD from the rates going up so rapidly.

[00:33:08] [SPEAKER_02]: So even if they have money under HELOC and maybe they borrow when, yes, it was, you know, prime for, you know, prime was super low.

[00:33:17] [SPEAKER_02]: I can't remember what the HELOC prime like plus is, but let's say they were boring at three and a half, 4% on their HELOC.

[00:33:24] [SPEAKER_02]: They did some renovations, took a tiff at his word that rates would remain low for very long.

[00:33:30] [SPEAKER_02]: Then rates started going up very rapidly.

[00:33:33] [SPEAKER_02]: Those interest costs just mounted up on the HELOC.

[00:33:36] [SPEAKER_02]: As interest rates come down, these same people may be very reluctant to borrow too much in the fear that the same thing could happen.

[00:33:45] [SPEAKER_02]: So I think a lot of people are discounting that effect, too, is people that were snakebitten by these like very fast rising interest rates.

[00:33:54] [SPEAKER_02]: Exactly.

[00:33:55] [SPEAKER_02]: They may be reluctant to go into the same kind of behavior because it's fresh in their mind.

[00:34:01] [SPEAKER_02]: And I think a lot of people just assume, OK, rates will get lower and then everyone will pick back up where they were at.

[00:34:07] [SPEAKER_02]: Well, no, people remember it's fresh in their memory and they may put the brake on a little bit for those projects.

[00:34:14] [SPEAKER_01]: Yeah, that kitchen got really expensive really fast.

[00:34:18] [SPEAKER_01]: Exactly.

[00:34:19] [SPEAKER_01]: That's it.

[00:34:19] [SPEAKER_01]: Yeah.

[00:34:20] [SPEAKER_02]: So now we'll move on to Air Canada and we'll finish here with Go Easy.

[00:34:24] [SPEAKER_02]: I think we'll have time just because we have to finish our recording schedule a bit early.

[00:34:30] [SPEAKER_02]: So Air Canada, it wasn't a great quarter for people who have been paying attention here.

[00:34:35] [SPEAKER_02]: I'll just go over and I'll explain some more specific airline terms as well just to make sure everyone's on the same page.

[00:34:42] [SPEAKER_02]: So revenues were up 1.7% to 5.5 billion.

[00:34:47] [SPEAKER_02]: And that is definitely something that's very to take note of because people may not remember, but the pandemic was a big boom for Air Canada.

[00:34:58] [SPEAKER_02]: So our joint TCI listeners here, you'll see in terms of revenue, I have the percentage increases that Air Canada saw on a year over year basis for the quarter.

[00:35:09] [SPEAKER_02]: So it really peaked around the quarter here in terms of percentage increases.

[00:35:14] [SPEAKER_02]: So you have to keep in mind there was a base effect where during the pandemic, obviously almost no one was traveling.

[00:35:20] [SPEAKER_02]: But the peak increase in revenues was the, I guess it would be Q2 of 2022, which ended in June of 2022.

[00:35:29] [SPEAKER_02]: So it was 375 or 376% and then started going down, down.

[00:35:36] [SPEAKER_02]: And then the last four quarters, so the one ending in September of last year.

[00:35:41] [SPEAKER_02]: So Q3 2023, 19% increase.

[00:35:45] [SPEAKER_02]: Q4, 10.6% increase.

[00:35:48] [SPEAKER_02]: Q1 of this year, 6.9% increase.

[00:35:51] [SPEAKER_02]: And then the most recent quarter at 1.7%.

[00:35:55] [SPEAKER_02]: So you're seeing that the sales are literally stagnating at this point.

[00:36:00] [SPEAKER_02]: I think that's kind of safe to say, right?

[00:36:02] [SPEAKER_02]: You'd agree that it's pretty, when you see the visual, it's pretty clear here.

[00:36:07] [SPEAKER_01]: Yeah, there's a pretty good chance that there's a decline in year over year revenue next quarter.

[00:36:13] [SPEAKER_01]: I mean, it's not guaranteed, but it's looking like that's where it's going.

[00:36:16] [SPEAKER_02]: The trend, yeah.

[00:36:18] [SPEAKER_02]: And people, I think it's just important to remember this.

[00:36:21] [SPEAKER_02]: I think airlines, you really have to look at them year over year just because there's cyclicality, right?

[00:36:26] [SPEAKER_02]: People travel more during the summer months than other periods of the year.

[00:36:30] [SPEAKER_02]: So I think it's just important to remind that, remind people of that.

[00:36:33] [SPEAKER_02]: But this is definitely looking at a year over year basis.

[00:36:36] [SPEAKER_02]: And you can see that the increase is pretty much, I think it's safe to say it's kind of peaked here and could be declining.

[00:36:43] [SPEAKER_02]: We'll have to see next quarter.

[00:36:44] [SPEAKER_02]: And some of the other metrics are not looking great.

[00:36:48] [SPEAKER_02]: So all of that growth obviously came from, well, obviously, I think people can probably figure out.

[00:36:53] [SPEAKER_02]: It came from passenger revenues since cargo was actually flat.

[00:36:58] [SPEAKER_02]: Operating expenses also increased 9%.

[00:37:01] [SPEAKER_02]: So it's not great when you see expenses increasing far more than the revenues.

[00:37:06] [SPEAKER_02]: Of the 11 operating expenses that they outline on their income statement,

[00:37:10] [SPEAKER_02]: every single one increase with the exception of catering and onboard services, which declined 2.5%.

[00:37:17] [SPEAKER_02]: And those are not their most major expenses either.

[00:37:21] [SPEAKER_02]: So it just gives you an idea that it was kind of across the board here.

[00:37:24] [SPEAKER_02]: Net income and EPS both dropped by more than 50% to $410 million and $1.04 respectively.

[00:37:32] [SPEAKER_02]: Free cash flow was also nearly down by half to $451 million.

[00:37:37] [SPEAKER_02]: Now, when you're looking at airlines, you should definitely look at some of the airlines operating metrics.

[00:37:43] [SPEAKER_02]: They'll have that in each of their earnings release.

[00:37:46] [SPEAKER_02]: It gives you an idea of actually how they're doing.

[00:37:48] [SPEAKER_02]: If you own Air Canada and you don't know what these metrics are, you don't know what you own.

[00:37:55] [SPEAKER_02]: I'll just be straight up here.

[00:37:57] [SPEAKER_02]: You should be familiar with these metrics.

[00:37:59] [SPEAKER_02]: Even if you have to Google what they mean every time that you look at it,

[00:38:03] [SPEAKER_02]: which I have to refresh my memory every time I look at the metrics, I'll be honest.

[00:38:08] [SPEAKER_02]: That's fine.

[00:38:09] [SPEAKER_02]: But you should definitely be aware of these metrics.

[00:38:12] [SPEAKER_02]: And I focused in on four of them.

[00:38:14] [SPEAKER_02]: So the first one is revenue passenger mile, also known as RPM.

[00:38:17] [SPEAKER_02]: This one was up 3.8%.

[00:38:20] [SPEAKER_02]: RPM is simply the number of paying customers multiplied by the distant travel.

[00:38:24] [SPEAKER_02]: And paying customer is important here because an airline will also fly non-paying people.

[00:38:30] [SPEAKER_02]: So, for example, their crew, sometimes they will fly them from point A to point B,

[00:38:34] [SPEAKER_02]: depending if they're needed on another flight, for example.

[00:38:37] [SPEAKER_02]: So that's an important metric here.

[00:38:40] [SPEAKER_02]: Available seat mile, ASM, was up 6.5%.

[00:38:43] [SPEAKER_02]: This is simply the total number of seats for sale.

[00:38:47] [SPEAKER_02]: The passenger load factor here was down 2.2%.

[00:38:51] [SPEAKER_02]: So you get this number by dividing the RPM by ASM.

[00:38:56] [SPEAKER_02]: So the revenue passenger mile by the available seat mile.

[00:38:59] [SPEAKER_02]: And essentially it tells you what percentage of available seats that were actually filled by passenger.

[00:39:05] [SPEAKER_02]: So this is really not good.

[00:39:07] [SPEAKER_02]: So the fact that it declined is not great here.

[00:39:11] [SPEAKER_02]: There's also been a bit of a trend.

[00:39:13] [SPEAKER_02]: And I'll pull that up here for our joint TCI listeners.

[00:39:17] [SPEAKER_02]: So you'll be able to see that it's been turning around now for a couple of quarters

[00:39:22] [SPEAKER_02]: where the passenger load factor is actually trending down.

[00:39:27] [SPEAKER_02]: And on Finchap.io, they actually break it down here, which is really good.

[00:39:32] [SPEAKER_02]: So people will see here.

[00:39:35] [SPEAKER_02]: So it may look like it's not going down.

[00:39:37] [SPEAKER_02]: That's because you have to make sure you're comparing the same quarter to the same quarter.

[00:39:41] [SPEAKER_02]: So if you're looking here at December 2022 to December 2023,

[00:39:47] [SPEAKER_02]: there was a slight increase in the passenger load.

[00:39:49] [SPEAKER_02]: March 2023 to March 2024, it was about flat.

[00:39:54] [SPEAKER_02]: And then you're looking at June 2023 to this latest quarter.

[00:39:57] [SPEAKER_02]: And then you have the decline here.

[00:39:59] [SPEAKER_02]: And then it'll be interesting September 2023.

[00:40:04] [SPEAKER_02]: The passenger load was 89.8.

[00:40:07] [SPEAKER_02]: So it'll be interesting to see what it comes up in the next quarter when they report.

[00:40:11] [SPEAKER_02]: But the trend is definitely that the passenger load is trending down.

[00:40:15] [SPEAKER_02]: And that is not something that is great from an airline's perspective.

[00:40:18] [SPEAKER_02]: And the passenger revenue per available seat mile, PRAZM, if I use that as a word.

[00:40:26] [SPEAKER_02]: PRAZM.

[00:40:26] [SPEAKER_02]: PRAZM, there you go, was down 4.4%.

[00:40:29] [SPEAKER_02]: So this is also not great.

[00:40:31] [SPEAKER_02]: Essentially what this means is they are seeing their pricing power go down on a year-over-year basis.

[00:40:37] [SPEAKER_02]: So this makes sense since the passenger load is down, meaning that they'll likely have to adjust downwards their pricing to fill seats

[00:40:46] [SPEAKER_02]: because people are not willing to pay as high now for airplane tickets.

[00:40:51] [SPEAKER_02]: I mean, we've talked about it now with Canadian Tire, even in the U.S., right?

[00:40:55] [SPEAKER_02]: Home Depot.

[00:40:56] [SPEAKER_02]: We've been talking about it.

[00:40:58] [SPEAKER_02]: Companies have been saying it for over a year now is that consumers are pulling back.

[00:41:03] [SPEAKER_02]: And airfare or air travel is definitely one of those things.

[00:41:06] [SPEAKER_02]: And I think it's pretty clear now that Air Canada is seeing some pressure here as well.

[00:41:11] [SPEAKER_02]: So not a great quarter for Air Canada.

[00:41:14] [SPEAKER_02]: Definitely not a company I would right now touch with a 10-foot pole because it's probably...

[00:41:20] [SPEAKER_02]: I don't know where it's going, but my intuition would be that this may continue for a few more quarters

[00:41:26] [SPEAKER_02]: and potentially a bit longer as well.

[00:41:29] [SPEAKER_01]: Well, and I think one of the big things with airlines too, and I don't know...

[00:41:32] [SPEAKER_01]: Air Canada used to segment this because I remember I used to read it.

[00:41:36] [SPEAKER_01]: I don't know if they do anymore, but like business travel versus commercial travel.

[00:41:40] [SPEAKER_01]: And business travel is much more profitable.

[00:41:46] [SPEAKER_01]: Like back pre-pandemic when businesses used to fly people around for meetings and everything,

[00:41:52] [SPEAKER_01]: they get a company credit card.

[00:41:53] [SPEAKER_01]: They spend on the plane, things like that.

[00:41:57] [SPEAKER_01]: Like business travel was a big haul for them.

[00:41:59] [SPEAKER_01]: And I think you've obviously seen a permanent shift to a lot of these companies are just

[00:42:07] [SPEAKER_01]: understanding now they can just have a Zoom meeting right from home.

[00:42:10] [SPEAKER_01]: They don't need to meet up in a particular place for a huge conference or whatever it may be.

[00:42:16] [SPEAKER_01]: And I think the business travel end of things, from what I remember when we used to look into

[00:42:21] [SPEAKER_01]: this company, it would have been like 2017, 2018.

[00:42:25] [SPEAKER_01]: It was like a big profitable arm of the business.

[00:42:27] [SPEAKER_01]: And I have little doubt that that's being hit pretty hard right now.

[00:42:31] [SPEAKER_01]: Yeah.

[00:42:32] [SPEAKER_02]: Yeah.

[00:42:32] [SPEAKER_02]: I'm not sure.

[00:42:33] [SPEAKER_02]: I mean, I can't recall on the call.

[00:42:35] [SPEAKER_02]: It's possible that I missed it.

[00:42:36] [SPEAKER_02]: I'm looking at the KPIs here on FinChat and I just don't see it break down,

[00:42:40] [SPEAKER_02]: but it's possible they still mention in the earnings release.

[00:42:43] [SPEAKER_02]: But something to keep an eye on.

[00:42:45] [SPEAKER_02]: I'll try to focus on that next time they report.

[00:42:48] [SPEAKER_02]: I think that's it for Air Canada.

[00:42:50] [SPEAKER_02]: Just because we're short on time here, do you want to go with GoEasy and I guess how

[00:42:56] [SPEAKER_02]: it's going in the subprime market?

[00:42:58] [SPEAKER_02]: Yeah.

[00:42:59] [SPEAKER_01]: Yeah.

[00:42:59] [SPEAKER_01]: So this has been a really interesting company to follow over the last while.

[00:43:05] [SPEAKER_01]: I mean, a lot of bank stocks have been under a ton of pressure.

[00:43:08] [SPEAKER_01]: Meanwhile, a company like GoEasy is just, I think it's up like 80 some percent over the

[00:43:13] [SPEAKER_01]: last year.

[00:43:14] [SPEAKER_01]: And most of that is because the subprime market just continues to explode in Canada.

[00:43:20] [SPEAKER_01]: GoEasy loan originations came in at 827 million, which is a 24 percent increase on a year

[00:43:26] [SPEAKER_01]: over year basis.

[00:43:27] [SPEAKER_01]: The company reported continued records in terms of total application volume.

[00:43:32] [SPEAKER_01]: They hit 665,000, which is up 34 percent year over year.

[00:43:36] [SPEAKER_01]: And the interesting thing here is a lot of loans are coming from new customers, whereas

[00:43:42] [SPEAKER_01]: prior, I mean, they still had a healthy portion coming from new customers.

[00:43:46] [SPEAKER_01]: But now it's definitely a lot of their lending.

[00:43:49] [SPEAKER_01]: 71 percent of their new lending went to new customers.

[00:43:53] [SPEAKER_01]: They added 48,200 customers on the quarter, which is a company record.

[00:43:57] [SPEAKER_01]: And this has been a publicly traded company since the 90s.

[00:44:01] [SPEAKER_01]: So they have been around for a long time.

[00:44:04] [SPEAKER_01]: The most interesting thing here is their home equity products are up a whopping 55 percent

[00:44:12] [SPEAKER_01]: year over year.

[00:44:13] [SPEAKER_01]: This isn't really all that surprising.

[00:44:15] [SPEAKER_01]: I mean, many cash-strapped Canadians, they have a bunch of equity in their home just due

[00:44:19] [SPEAKER_01]: to the housing market situation in Canada and are probably trying to access it.

[00:44:23] [SPEAKER_01]: I would guess to, you know, maybe cover some day-to-day expenses or whatever it may be.

[00:44:29] [SPEAKER_01]: They surpassed the $4 billion mark for the first time in history when it comes to gross

[00:44:35] [SPEAKER_01]: loans receivable.

[00:44:36] [SPEAKER_01]: And this is actually another interesting aspect.

[00:44:38] [SPEAKER_02]: Maybe it's to pay for those Air Canada tickets.

[00:44:42] [SPEAKER_01]: Yeah, Air Canada tickets for sure.

[00:44:44] [SPEAKER_01]: Yeah, if they want to travel.

[00:44:45] [SPEAKER_01]: I mean, they mentioned that their credit scores among new borrowers reached an all-time high.

[00:44:54] [SPEAKER_01]: So they keep track of all the credits of their borrowers overall.

[00:44:59] [SPEAKER_01]: And right now, their average credit score among their borrowers has never been higher.

[00:45:04] [SPEAKER_01]: This is certainly a good thing for GoEasy, but it's likely not a good sign for the economy

[00:45:10] [SPEAKER_01]: and just the health of the Canadian consumer.

[00:45:11] [SPEAKER_01]: Yeah, I was going to say, isn't that alarming?

[00:45:13] [SPEAKER_02]: Yeah.

[00:45:13] [SPEAKER_02]: For the economy in general.

[00:45:15] [SPEAKER_01]: You could take it as one situation, meaning current borrowers of GoEasy, maybe their credit

[00:45:21] [SPEAKER_01]: scores are going up.

[00:45:22] [SPEAKER_01]: But I would actually see this as it's very likely more higher quality borrowers are now

[00:45:28] [SPEAKER_01]: having to tap into the subprime market.

[00:45:30] [SPEAKER_01]: And the reason I say this is GoEasy also reports some numbers on the overall debt levels of their

[00:45:37] [SPEAKER_01]: overall customer base.

[00:45:38] [SPEAKER_01]: And they always tend to talk about how the average GoEasy borrower has a lower debt level than

[00:45:44] [SPEAKER_01]: a non-borrower.

[00:45:45] [SPEAKER_01]: And the primary reason for that is they don't have a mortgage.

[00:45:48] [SPEAKER_01]: So a lot of the people who are with GoEasy are renting.

[00:45:51] [SPEAKER_01]: So the fact that their HELOC products are up 55% is kind of a sign that it's probably

[00:45:59] [SPEAKER_01]: new people with homes that are tapping into this market.

[00:46:02] [SPEAKER_01]: Their charge off rate came in at 9.3%, which is slowly creeping up over the last few quarters

[00:46:08] [SPEAKER_01]: in Q3 of 2023.

[00:46:10] [SPEAKER_01]: It was at 8.8%.

[00:46:11] [SPEAKER_02]: That would be their write off rate, right?

[00:46:14] [SPEAKER_01]: Yeah.

[00:46:14] [SPEAKER_01]: Yeah.

[00:46:15] [SPEAKER_01]: And I mean, a lot of people might think this is absurdly high, which it is.

[00:46:19] [SPEAKER_01]: Like typically, if you were to look at like a major bank, their charge off rate would be

[00:46:23] [SPEAKER_01]: nowhere near this.

[00:46:24] [SPEAKER_01]: But like there is a reason why GoEasy has, you know, 30% plus APRs.

[00:46:30] [SPEAKER_01]: They can offset, you know, high charge off rates by charging just ridiculous rates of interest

[00:46:35] [SPEAKER_01]: to still be extremely profitable.

[00:46:38] [SPEAKER_01]: They target anywhere from 8.5% to 10%.

[00:46:41] [SPEAKER_01]: So it's going to be really interesting moving forward to see if this starts creeping up to

[00:46:46] [SPEAKER_01]: the 10% level, what they do.

[00:46:48] [SPEAKER_01]: But I mean, over the last year, operating margins are now in excess of 40%.

[00:46:52] [SPEAKER_01]: Revenue is up by 24% and adjusted earnings are up by more than 25%.

[00:46:57] [SPEAKER_01]: And I mean, I'll say it again.

[00:46:59] [SPEAKER_01]: There, you know, there's a very fine line here between, in my opinion, between the economy

[00:47:04] [SPEAKER_01]: being poor enough that people need to head to the Sun Prime market and the economy

[00:47:07] [SPEAKER_01]: getting so poor that people can't, you know, they might not be able to pay these loans and

[00:47:13] [SPEAKER_02]: you might see those charge offs rise and they lose their job or yeah, like it's a very fine

[00:47:18] [SPEAKER_02]: line, especially if employment numbers start rolling over and create a bit of issues for

[00:47:23] [SPEAKER_02]: GoEasy.

[00:47:24] [SPEAKER_02]: But, you know, we were talking about this and one of the things I want to mention, so

[00:47:28] [SPEAKER_02]: you referred this, so gross loan originations.

[00:47:31] [SPEAKER_02]: I mean, wow.

[00:47:33] [SPEAKER_02]: There's a, for people on Joint TCI, but I'll explain it.

[00:47:37] [SPEAKER_02]: Essentially, they were, since June 2022, kind of hovering between 620 and 620 million here.

[00:47:47] [SPEAKER_02]: Yeah, it's in millions.

[00:47:48] [SPEAKER_02]: 620 million and 600, like below 700 or right around 700, kind of in that bracket.

[00:47:54] [SPEAKER_02]: And then it jumped to 826 this latest quarter.

[00:47:58] [SPEAKER_02]: So, just to show people, like, just an idea how big of a jump it was, a big, big jump here.

[00:48:05] [SPEAKER_02]: And I think it's worth noting.

[00:48:08] [SPEAKER_02]: In terms of the credit scores, yeah, it might be good to some extent for them, but if someone

[00:48:12] [SPEAKER_02]: has a good credit score and they're going to...

[00:48:15] [SPEAKER_02]: Subprime.

[00:48:16] [SPEAKER_02]: Subprime?

[00:48:16] [SPEAKER_02]: Yeah.

[00:48:17] [SPEAKER_02]: It means that they're entering, like, they're starting to get a bit desperate, right?

[00:48:20] [SPEAKER_02]: Like, they're not going to subprime if they have a good credit score and they're able

[00:48:24] [SPEAKER_02]: to get credit from a regular financial institution because they're going to be paying way higher

[00:48:30] [SPEAKER_02]: interest rate by going to the subprime.

[00:48:32] [SPEAKER_02]: So, that is something else I'd be a bit worried about.

[00:48:35] [SPEAKER_02]: Personally, I think it's probably a company you want to buy when things are real bad because

[00:48:41] [SPEAKER_02]: then the stock will be trading super cheaply.

[00:48:44] [SPEAKER_02]: Write-offs will be quite higher.

[00:48:46] [SPEAKER_02]: But it's a company that was there during the financial crisis.

[00:48:49] [SPEAKER_02]: So, they know how to manage that.

[00:48:52] [SPEAKER_02]: Yeah.

[00:48:52] [SPEAKER_02]: But at the price, and we were talking about this before we started recording, like, they're

[00:48:56] [SPEAKER_02]: trading at a PE that's, like, kind of their average historically.

[00:49:00] [SPEAKER_02]: So, I think the market is not fully pricing it the potential, you know, economic downturn

[00:49:07] [SPEAKER_02]: because that will affect a company.

[00:49:08] [SPEAKER_02]: There's no question it will affect a company.

[00:49:12] [SPEAKER_02]: Exactly.

[00:49:13] [SPEAKER_02]: Like, go easy.

[00:49:14] [SPEAKER_02]: So, it is a company that, you know, if you're into, you know, buying these kind of companies,

[00:49:18] [SPEAKER_02]: I think it's a company you want to buy when things start looking like, you know, clearly

[00:49:23] [SPEAKER_02]: the stock is taking a hit.

[00:49:25] [SPEAKER_02]: Things are looking real bad.

[00:49:26] [SPEAKER_02]: There's the write-offs or charge-offs are going up, like, quite high.

[00:49:31] [SPEAKER_02]: Then it's a company that you may want to start looking at.

[00:49:34] [SPEAKER_02]: Right now, I think there's just too much downside risk, personally, for me.

[00:49:38] [SPEAKER_01]: Yeah.

[00:49:39] [SPEAKER_01]: When you look at earnings on a forward basis, they're trading at only eight times their

[00:49:43] [SPEAKER_01]: expected earnings, which pretty much means, you know, the market does really, you know,

[00:49:49] [SPEAKER_01]: there's a lot of uncertainty as to how well those earnings will actually come to fruition,

[00:49:56] [SPEAKER_01]: which if they do, you know, if, like I said, you teeter along that line where, you know,

[00:50:01] [SPEAKER_01]: they can maintain it.

[00:50:02] [SPEAKER_01]: I mean, strong underwriting is probably massive in the subprime market.

[00:50:07] [SPEAKER_01]: I mean, you got to be really careful.

[00:50:10] [SPEAKER_01]: But, you know, if they manage to navigate their way through it and they do continue to post,

[00:50:14] [SPEAKER_01]: you know, 20% plus earnings growth, I would imagine the stock is pretty cheap on a forward

[00:50:19] [SPEAKER_01]: basis.

[00:50:20] [SPEAKER_01]: But you can see right now that the market is really, there's a lot of uncertainty about

[00:50:25] [SPEAKER_01]: their earnings potential moving forward, which is likely why it seems so cheap on a forward

[00:50:29] [SPEAKER_01]: basis.

[00:50:29] [SPEAKER_02]: Yeah, and exactly.

[00:50:31] [SPEAKER_02]: And I think that's a challenge with forward predictions.

[00:50:34] [SPEAKER_02]: And yes, you want to be forward looking all the time, but there are some companies where

[00:50:38] [SPEAKER_02]: it's easier to kind of project on a forward basis.

[00:50:41] [SPEAKER_02]: This is one that's with the current, like the economy, what's going on.

[00:50:45] [SPEAKER_02]: And clearly the Bank of Canada cutting rates, like if they start cutting real aggressively,

[00:50:49] [SPEAKER_02]: I think we've talked about that before.

[00:50:51] [SPEAKER_02]: And I did with when Rich Diaz was on the podcast.

[00:50:54] [SPEAKER_02]: I mean, people think it's good.

[00:50:56] [SPEAKER_02]: Like it's not good.

[00:50:57] [SPEAKER_02]: But if the central banks are cutting aggressively is because they're pretty much panicking and

[00:51:01] [SPEAKER_02]: they're seeing that the economy is slowing down and they're really trying to make things

[00:51:06] [SPEAKER_02]: turn around.

[00:51:07] [SPEAKER_02]: And they're usually behind the ball.

[00:51:10] [SPEAKER_02]: Like that's what it is.

[00:51:11] [SPEAKER_02]: Like central banks look at historically when they start cutting.

[00:51:15] [SPEAKER_02]: Once we, you know, we're a few years out and we actually have all the data of when like

[00:51:21] [SPEAKER_02]: the downturn or the recession actually started.

[00:51:24] [SPEAKER_02]: Usually what happens is they start cutting after we're well into a recession because they

[00:51:30] [SPEAKER_02]: they look at like a data that's backwards looking.

[00:51:33] [SPEAKER_02]: So there's always a delay with that data when they start doing the cuts.

[00:51:37] [SPEAKER_02]: So I think it's important for people to take that into account is that, you know, the reality

[00:51:42] [SPEAKER_02]: is I think we're probably going to enter a recession.

[00:51:46] [SPEAKER_02]: I'm not an economist, but, you know, we read enough statements.

[00:51:50] [SPEAKER_02]: I mean, we've been, you know, on this show, we've been telling you what companies are actually

[00:51:55] [SPEAKER_02]: saying that have data on the consumers.

[00:51:57] [SPEAKER_02]: And for the most part, they're all saying that the consumer is pulling back.

[00:52:00] [SPEAKER_02]: And the consumer is about two thirds of the economy.

[00:52:04] [SPEAKER_02]: So, I mean, we'll see what happens, but things don't last forever.

[00:52:09] [SPEAKER_02]: And usually after a recession, you know, it's cyclical, everything, you know, the economy

[00:52:14] [SPEAKER_02]: picks back up.

[00:52:14] [SPEAKER_02]: So I think you have to stay positive and look at certain opportunities as an investor that

[00:52:20] [SPEAKER_02]: may arise during those kind of economic downturns as well.

[00:52:25] [SPEAKER_02]: No, yeah.

[00:52:26] [SPEAKER_02]: Well said.

[00:52:27] [SPEAKER_02]: Yeah.

[00:52:27] [SPEAKER_02]: So I think we'll wrap it up on that, Dan.

[00:52:29] [SPEAKER_02]: It was a fun episode.

[00:52:31] [SPEAKER_02]: Again, it's much easier when we have lots of earnings and news coming up.

[00:52:34] [SPEAKER_02]: We'll be, I don't think we'll be recording next week.

[00:52:37] [SPEAKER_02]: We do have an episode pre-recorded.

[00:52:39] [SPEAKER_02]: So it's going to be a little bit different.

[00:52:42] [SPEAKER_02]: Dan is going over some ETFs you may not have heard of before.

[00:52:46] [SPEAKER_02]: So it was really fun to do that episode with you.

[00:52:49] [SPEAKER_02]: I'm also going to go over a couple different things during that episode, including a breakdown

[00:52:54] [SPEAKER_02]: of what the Yen carry trade was or full breakdown to make it as easy as

[00:52:59] [SPEAKER_02]: for people to understand because we've been hearing a whole lot about it.

[00:53:03] [SPEAKER_02]: And I find that people just throw that term out there and don't fully explain the mechanics

[00:53:08] [SPEAKER_02]: behind it.

[00:53:09] [SPEAKER_02]: So definitely join us next week.

[00:53:11] [SPEAKER_02]: I will bring my recording equipment to the cottage just in case something blows up in

[00:53:17] [SPEAKER_02]: the market.

[00:53:18] [SPEAKER_02]: We can do maybe a quick emergency episode now.

[00:53:21] [SPEAKER_01]: Yeah, that's definitely possible right now.

[00:53:23] [SPEAKER_01]: It's, there's been a lot of volatility recently.

[00:53:27] [SPEAKER_02]: Yeah, exactly.

[00:53:28] [SPEAKER_02]: But I'll still try to disconnect.

[00:53:30] [SPEAKER_02]: Yeah.

[00:53:30] [SPEAKER_02]: Um, uh, because I'll be, uh, we rented a cottage in, uh, the Montremblain area.

[00:53:36] [SPEAKER_02]: So, um, rented, yeah, like full 10 days with the family.

[00:53:39] [SPEAKER_02]: We've got a few friends coming, the parents for a few days as well.

[00:53:42] [SPEAKER_02]: So it should be a fun time just to decompress.

[00:53:45] [SPEAKER_02]: But, uh, like you, I think it'll be very hard for me to not at least exactly keep a,

[00:53:51] [SPEAKER_02]: you know, a little eye on the markets every now and then.

[00:53:55] [SPEAKER_01]: Yeah.

[00:53:55] [SPEAKER_01]: Yeah.

[00:53:55] [SPEAKER_01]: It's impossible.

[00:53:56] [SPEAKER_01]: I tried to do it.

[00:53:57] [SPEAKER_01]: I made it two days out of a 10 day vacation.

[00:54:00] [SPEAKER_02]: Yeah.

[00:54:01] [SPEAKER_01]: Okay.

[00:54:01] [SPEAKER_01]: I'll try to beat that.

[00:54:02] [SPEAKER_02]: Yeah, exactly.

[00:54:03] [SPEAKER_02]: Okay.

[00:54:04] [SPEAKER_02]: Well, thanks everyone for listening and, uh, we'll see you again next week.

[00:54:08] [SPEAKER_02]: The Canadian investor podcast should not be construed as investment or financial advice.

[00:54:13] [SPEAKER_02]: The hosts and guests featured may own securities or assets discussed on this podcast.

[00:54:19] [SPEAKER_02]: Always do your own due diligence or consult with a financial professional before making

[00:54:24] [SPEAKER_02]: any financial or investment decisions.