Nvidia’s Market Cap hits 2T and the Start of Canadian Bank Earnings

[00:00:00] Welcome back to the Canadian Investor Podcast. We're back for a earnings and news episode.

[00:00:20] I'm here with Dan Kent, as I'm like, well, I mean, there's some simple stuff, but you can also like just follow a recipe, right? It's not bucket science. That's why when HelloFresh or Good Food come out with the 60% off the first box or whatever, I love that.

[00:01:44] Throw it in the fridge and whip it out. point you've seen a lot of takes on the quarter from in Nvidia. So, you know, personally, I think obviously that it was a blowout quarter. I think you can't really say otherwise as an investment. I think this is where it gets a mean the growth rate, the valuation, there's a lot of things involved. There's no doubt it's a great business, but at the same time, will it be a great investment? I think that's where the debate lies in. But having said that, let's talk about the results here. So revenues increased 265% over a year for Q4,

[00:04:24] which is pretty wild, but even the increase from Q3 to Q4

[00:05:28] year and the increased 200 basis point from Q3 alone earnings per share was up 765% over a year and 33% for Q3.

[00:05:30] So get used to these numbers.

[00:05:32] That's kind of how their quarter went.

[00:05:34] They're just these really large numbers which are definitely hard to wrap your head around

[00:05:40] sometimes.

[00:05:41] I don't know about you but just reading that it's just like it's mind blowing. crazy. Yeah, like you would think this would have to plateau at some point because I mean, this is probably all like a lot of preemptive purchases maybe by big tech and all that kind of stuff. You wouldn't think, I mean, it can't really grow at this pace for a long time, but who knows how long it'll keep up for? I mean, especially with so many new AI platforms rolling out recently.

[00:07:01] Yeah.

[00:07:02] And I think that's the debate, right?

[00:07:04] Is how long can Nvidia grow this? from that. And what was interesting when the host asked him about concentration risk because and the host cited that customers, one customer represents 20% of their revenue. It's actually 19% but because I was reading their annual report in the risk section, they don't say who their customers are, but concentration risk of customer is one of the risk and they

[00:08:22] do state that there's one customer that represent 19 seeing this and they are saying, how can I get a piece of those margins? So that is something that it may take a year or two or even longer, but just speaking on you know stocks trading at kind of crazy valuations, I'm surprised I actually didn't state which customer makes up the 20%. They just said a major customer.

[00:11:00] I mean I guess maybe they can't state it but I mean.

[00:11:03] I think they can, they just don't want to.

[00:11:05] Yeah.

[00:11:06] I think that's probably, I mean nothing,

[00:11:07] I don't think nothing forces them. $24 billion in Q1. So that would be a 9% increase versus Q4 or a 233% increase year over year. So I think a lot of people have gotten used to them to beating the guidance. So we'll have to see. Look, I'm not saying it's a, and I think you agree with me, like I think it's a very good company. That's not what we're debating, but there are some risks associated with it.

[00:12:21] And a good company doesn't mean necessarily good returns

[00:12:25] if you don't get the right valuation Whether you're just starting your investing journey or you've been investing for years, the Globe and Mail is a great way to invest in your financial knowledge. As Canada's largest business newsroom, the Globe and Mail offers an expansive array of business, investing, and personal finance content. From understanding investment basics like the difference between GICs and bonds, to

[00:13:41] making sense of macro trends and policy decisions, the Globe and Mail's business and personal

[00:13:46] finance journalists have you covered. including Teladog that I'll be talking about a bit later, but you can start us off with Lightspeed. Yes, Lightspeed has taken a pretty big hit from peak numbers in 2021. I mean, headline numbers were not that bad. It posted beats on all fronts, but it was kind of guidance and a little bit in terms of gross transaction volume

[00:15:01] that caused the stock to take a pretty big hit

[00:15:04] on earnings day.

[00:15:05] So revenue was 239 million. to that slowing volume. The company made this comment, the company remains cautious on near-term prospects due to a still uncertain macroeconomic environment and the pace of unified payments, adoptions in international markets. In addition, the fiscal fourth quarter is historically the company's weakest quarter for gross rely on it. So high value clients, they define them as customers who generate more than 500K or one million in annual gross transaction volume. They increase by 7% year over year. But on the other hand, the locations processing

[00:17:41] under 200,000 in gross transaction volume have decreased.

[00:17:44] Now I found it a bit of exposure to small and medium businesses, which are just getting, which are really struggling right now. And I kind of mentioned like, look no further than the sebus situation and in January, like how many businesses, you know, couldn't pay it back outright, or they needed

[00:19:04] to get a loan to bite them now. But I mean, it was a pretty rough quarter.

[00:20:21] They can't really do anything about it.

[00:20:23] I mean, when the situation improves,

[00:20:25] I would imagine the numbers will improve.

[00:20:28] They're pretty cheap right now. And I think my my biggest criticism for light speed and I've criticized them a little bit over the years But my biggest was that it's a very competitive space point area Yeah, and I just have a hard time seeing how like they might have a nice Profitable little business, but I don't know to which point they can really scale profitability without getting some more intense

[00:21:46] Competition that's probably yeah my biggest thing with them

[00:22:45] people are mortgaging their houses, spending left, right, and center. You have government stimulus. I mean, at some point, the party's over and then it takes some time, but now I think we're

[00:22:52] starting to see the repercussions of that. I mean, we've been seeing it for a little bit,

[00:22:57] but even more so now. Yeah. I don't want to give the impression that it's specifically

[00:23:04] isolated to light speed. This was a ton of companies that went through this, even Shopify.

[00:24:06] maybe they'll be able to kind of eke out some free cash flow there. Yeah, they still burn through quite a bit of cash for sure But yeah

[00:24:09] That's good. No, that's a good overview now

[00:24:11] We'll move on to another pandemic darling here Teladoc. So Q4 in full year results

[00:24:16] It's been a while since I've talked about them

[00:24:19] One of the reason is I don't follow them as closely as I used to because I used to own it

[00:24:24] I don't anymore. I sold it was in the $35 range. So I was pretty well into profit I even trimmed when it was close to the top So but I I still kept a pretty decent position the acquisition for Livongo was completed in late 2020

[00:25:43] 2021 was a great year, but it was also still in the midst of it below the price I bought it. I could have sold it sooner, but I kept my shares, you know, because I wanted to give them the benefit of the doubt. And then last year I just decided, look, it's going in the wrong direction I'm gonna sell. And, you know, maybe they could have turned things around and could have been higher now. I'm

[00:27:02] definitely glad I did because I got a better price than if I would have sold it now. But I just wanted was doing this bad, like three, what was it? 8% revenue growth? Yeah, so for the results, yeah, exactly. So for the year revenues were up 8% to 2.6 billion. For the quarter, it was only up 4% showing that there was some clear deceleration here. And that's always something for people that are looking at results,

[00:28:21] something you can kind of pinpoint pretty quickly, right?

[00:28:23] So if you see a big divergence on a growth rate

[00:28:26] between the full year, but again it's those write downs I talked about so it's not a very good comparator here. They generated a decent amount of free cash flow though and that's been the case for Teldot for a little bit of time now. They generated $339 million and that was a 95% improvement over last year.

[00:29:45] Free cash flow per share And the last thing I'll say is they're trading at seven times free cash flow, which is, yeah, that's pretty cheap. I mean, I think there might be some upside here.

[00:31:00] I'm not a hundred percent sure.

[00:31:01] Of course it's difficult because clearly

[00:31:04] on the revenue side, definitely a bit of debt. So about 1.5 billion on the balance sheet.

[00:32:20] And then if you compare it to that with cash macro trends and policy decisions. The Globe and Mail's business and personal finance journalists have you covered. For a limited time for the Canadian investor podcast listeners, the Globe is offering unrestricted access said, it's still at 6%, 5% or 6%. So yeah, that sounds about right. The same storeflow came in at 1.7 billion. So it pretty much spent all of its free cashflow on buybacks.

[00:36:20] So that would be an 11% increase from last year.

[00:36:23] It's still growing its e-commerce sales

[00:36:25] at a double digit pace.

[00:36:27] So this is a pretty important metric as well vegetables, I like to make sure they're- Produce especially. I mean, it's, I would, we did this during the pandemic too. I don't think they charged you during the lockdown period. They just did it, but now I'm pretty sure they charge you a fee to put the order in. But if we look at the grocers coming out of the pandemic, Loblaws is like miles ahead of the others.

[00:37:40] So over the last three years, it's gained 140%.

[00:37:44] The next closest is Metro at least where I'm at that the shopping experience is definitely not the best at our no frills but I mean there it kind of smells in there and the food is that it's kind of off but I mean the cost difference is massive to the point where you know it it's definitely worth it.

[00:39:01] They release guidance so they expect earnings back pretty much like over the since 2017 except for 2019 and 2020, I think, but yeah. Yeah, no, exactly. I think that, no, I think that was a great overview.

[00:41:42] Do you want to go with BMO and Bank of Nova Scotia?

[00:41:45] And I think I'll definitely have some things just overall all Canadians, but I mean, it's pretty clear that a lot of Canadians don't have a lot of money to invest right now, and we're seeing that in trading volumes dip and new listing fees with a company like TMX Group are pretty much non-existent. So the average Canadian is struggling to save and invest right now, which ultimately impacts capital market revenue

[00:43:00] to an extent.

[00:43:01] The one thing, overall revenues dipped 8%.

[00:43:05] This is kind of, I mean, that's the general sense I got as well. So the biggest things, at least for me,

[00:44:24] for the takeaways was the loan loss provisions that. I'm kind of summing up, but you remember what I... Yeah. So it says the 154 million provision for credit losses on performing loans in the current quarter, which is loans, like performing loans are loans that are still getting paid,

[00:45:41] but they project will go unpaid. So on those performing loans, they say it was primarily just like having to renew and then it's reamortized and then there's not supposed to be this issue going forward. But that's definitely something to keep an eye on and for those who are interested in this bank, I definitely encourage you to look at their presentation because they give a good breakdown of their mortgage maturity schedule,

[00:47:03] which I think it's really important for any of then next week, I think we'll probably dedicate most of the episode for a bank earnings. Yeah. Scotia had a better quarter. So this is probably a relief to many as the bank has had a lot, you know, they've had a few rough years.

[00:48:21] Although adjusted earnings dipped by 8%,

[00:48:23] revenue grew by 6%.

[00:48:25] So this is a pretty stark contrast to BMO, basis international revenue was up 9% while net income is up 5%. So again, it's only one quarter. I mean, we'll see how it goes moving forward because it, like I said, it's, it's been one of the main drags on the business. They've primarily in, in Latin America, they expanded very rapidly over there over the last few years and it just hasn't worked out

[00:49:40] at all. So they reported a much better quarter on a PCL front. So if you remember like Scotia So the Canadian banking segment, especially like the big decline is the one thing that surprised me. Just a huge decline in their PCO ratio on the Canadian retail loan end. Yeah, yeah, I know. And I think we had talked about that. I think it was one of the first episodes we did together on the podcast when we looked

[00:51:04] at bank earnings last quarter. And you can see the total amount because what you'll see in the headlines in the quarter is just what they set aside for that quarter specifically in addition. So it does in factor in maybe, you know, there's just loans that had been taken off the books. Like there's a whole lot of different things that are in factored in. So looking at the balance sheet, you can actually see how much do they have right now?

[00:52:21] Yeah.

[00:52:22] Yeah.

[00:52:23] Like the 962 million would be what they set aside that quarter.

[00:52:25] Yeah.

[00:52:26] Yeah.

[00:52:27] That's it.

[00:52:28] Yeah. I think you do have some BMO, right? Because they have the least extra mortgages or one of the worst. Yeah, BMO was actually, I have BMO Royal and TD. They make up, I think at this point, like maybe 7% between all three of them. I don't own a ton of banks. I mean, I know a lot of Canadians are huge, huge, huge into banks. I mean, I know whatever we do anything

[00:53:40] in regards to the banks over at stock trades,

[00:53:43] like the reaction, like the interaction with the posts Yeah, and I think that's alluring. I would just say, look, and we've had some interactions on Twitter as well, where people get very passionate. And if people wanna invest in bank, that's completely fine, right? Is there money? But just make sure you understand the business at least decently well. I know banks can be complicated, but at least having some KPI,

[00:55:00] some key performance indicator that you can focus on

[00:55:03] and when you see that things aren't trending the right way,

[00:55:05] or they are, then you's even worse over that timeframe.

[00:56:22] So I think it's not ready to declare it. Not, you know, kind of a dud over the last while, but who knows if it strings together a bunch of successful quarters, it could turn things around. Whereas, you know, a bank like BMO

[00:57:40] clearly looks to be struggling right now, so.

[00:57:43] Yeah, yeah, I think either way,

[00:57:45] I think it's good to give it a bit of time.

[00:57:47] Yeah.