With first quarter earnings well-underway we have seen some big moves on the both the Canadian and US sides. We wanted to touch on a few of the big movers who have reported earnings thus far in Canada. A few companies who had big swings after reporting earnings were SHOP, HPS.A, PRL, and WELL. We wanted to highlight the key numbers from these companies below, as well as provide our take on the quarter and outlook going forward given some of the dramatic responses seen.

Shopify Inc. (SHOP)

Looking at high level metrics of revenue and EPS, SHOP appears to have had a solid quarter. No one would have guessed just by seeing these numbers that SHOP’s stock would decline by over 20% following the release. Additionally, breaking out total revenue by solution type; merchant solutions and subscription revenue both displayed strong growth of 24% and 34% from the prior year and beat estimates. What the market had issue with was SHOP's outlook. Particularly gross profit margin outlook for Q2, which the company forecasts declining 50 basis points. SHOP also said it expected revenue growth in the 'high-teens,' which was disappointing to some when estimates called for growth just under 20% for Q2. Additionally, the company raised its operating expenditure guidance which further probed cause for concern. A 20% drop in price is definitely a strong reaction to this news, but due to SHOP’s expensive valuation the market will be highly reactionary. We continue to like SHOP and the quarter in itself was good, while the company continues to have a solid growth profile.

Hammond Power Systems (HPS.A)

Prior to HPS.A releasing first quarter earnings, the stock had been a small-cap darling on a strong uptrend. What appears to be a huge earnings miss, was heavily impacted by non-cash expenses through share-based compensation when employees exercise stock options. With the growth of the company, hiring has increased, but with the shares up 242% the value of share-based compensation has increased dramatically and is charged against earnings. While this is not a positive, it is something common that high growth companies can experience. We do not think it should be a big factor driving the stock down, but the big EPS miss and high levels of stock-based compensation were a talking point leading to the stock taking a hit. Sales growth did also slow a bit from prior quarters which the market further did not like. However, HPS.A is increasing prices for Q2, and if demand is inelastic to this price change, then growth could be back up into the teens. Distribution growth was strong in the US, and the backlog rose 11.1% year over year. Margins were still decent despite a less-attractive product mix and start-up costs in Mexico. SG&A costs did rise. While not a great quarter overall and there is some reason for the sell-off, HPS.A still has plenty of potential and recently increased its dividend substantially.

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Propel Holdings Inc. (PRL)

PRL kept up the strong momentum with another good quarter featuring a dividend increase of 8% and the stock jumping 20%+. Growth was strong across essentially all key metrics such as EBITDA +73%, ROE +14%, Net Income +71%, and EPS +81%. Loans themselves increased 39%. PRL has identified the first quarter as normally ‘slower’ but results evidently broke that trend with the large demand increase PRL is seeing. Things continue to be strong for PRL with top and bottom line growth, paired with a high dividend. The only caveat we see on this stock right now is the small cap risk, but PRL is approaching a $1 billion in market cap very quickly.

WELL Health Technologies (WELL)

WELL had been faced with plenty of pressure over the last year, but the first quarter results helped to shed some of these issues. WELL saw organic growth of 13% year-over-year in the first quarter to support the solid total revenue growth. Sales guidance for 2024 was bumped up $10 million to $960+ million. Margins rose in the first quarter by 0.2% to 44.1%. EBITDA guidance is for the 'upper end'  of $125 to $130 million for the full-year 2023. EBITDA in the quarter was $28.3 million and also 2% better than expected. Free cash flow available to shareholders also increased 11% year-over-year. Management commentary seemed very positive with a clear focus on profitability and less dilution for existing shareholders going forward. WELL continues to be cheap and if it can string together future positive quarters, it may see some nice share price appreciation and multiple expansion.

Take Care,