The TSE stock index was basically flat (+0.31%) over the monthly period ending August 2^nd, 2023, and up 2.85% over the past year. The 2^nd quarter GDP in Canada slowed to 1% while in the USA it grew 2.4%. Consumer spending in Canada was resilient, but still slowing in Canada. The IMF upgraded global GDP outlook to 3% (2.8% in April), but global economic risks remain tilted to the downside with disappointing Chinese economic recovery as one reason, as well as simmering geopolitical tensions. The June CPI was 2.8% in Canada and 3% in the US. The Federal Reserve and the BOC both raised their policy interest rates by 25 bps during July and suggested that more hikes may be necessary. With this background, the following table shows the top and bottom performers during the period.

Badger Infrastructure Solutions Ltd (BDGI)

The number one performer for the monthly period ended August 2, 2023 was Badger Infrastructure Solutions Ltd (BDGI) (formerly Badger Daylighting) whose stock was up  19.89% and 11.39% for the past year. This stock has bounced around over the past year: three times it has closed over $32  (3 peaks)and twice about $25 (2 valleys); it is  now back to the level of August 2022. BDGI is the largest provider of non-destructive excavating and related services in North America. Its key technology is the Badger Hydrovac^TM, which is used primarily for safe excavation around critical infrastructure and in congested underground conditions. 

BDGI announced record revenues for the first quarter of 2023 on May 3^rd:  Revenues at $143.2 million were up 25.5%; Adjusted EBITDA at $24 million was up over 100%; Net earnings were $2.8 million ($0.08 per share) compared to a $5.3 million loss in the prior comparative period. On June 15, 2023 the proposed quarterly dividend was raised to $0.1725  per share.

BDGI is focused on asset utilization and operational discipline to improve revenue growth and margin levels. The need for near and long-term reinvestment in North America’s critical infrastructure is a growing opportunity for BDGI.

TFI International Inc (TFII)

The 2^nd best performer during the monthly period was TFI International (TFII) whose stock was up 15.82% and 38.36% over the past year.  The stock price advanced some 24% from August of 2022 to a top of $170.56 in late February 2023, from which it dropped to $150.93 in mid June and has since risen to the current level.

TFII , a trucking company, is a North American leader in the transportation and logistics industry, operating in the United States and Canada.  It employs some 24,000 people and has 11,800 trucks and 34,000 trailers.

Revenues for the quarter ended June 30, 2023 were $1.8 billion compared to $2.4 billion  in the prior year period. This result was due to reduced volumes for $518 million and the sale of CFI for 162.2 million. Adjusted EBITDA at $300.3 million was down 32%; net income at $128.2 million was down 53.7%. These results were below expectations. Management will be focusing on improving margins in the LTL segment (45% of revenue) through adjusting headcount  and rationalizing its real estate footprint. It should be noted that M&A opportunities abound and TFII has the financial heft ($178 million cash on hand) to take such advantage as may develop. Finally, TFII should be able to capitalize on the bankruptcy of Yellow Freight a large US trucker.

Enthusiast Gaming  Holdings Inc (EGLX)

The number 3 best performer in the monthly period was Enthusiast Gaming (EGLX) whose stock was up 15.38%, while down 65.75% over the past year. Last August the stock was trading at $2.47 and had fallen to present levels by the end of October from which it has bumped along, reaching a low in early June  2023 of $0.55. Nasdaq approved a 180 day extension to Oct 30, 2023 to regain compliance with its listing requirements (Stock price needs to b higher than $1).

EGLX is building the largest media platform for video game and esports fans to connect and engage worldwide. Through its proprietary mix of digital media and entertainment assets, it has built a vast network of like-minded communities to deliver the ultimate fan experience. This vertically integrated media platform engages a diverse, youthful and affluent audience who are watching, reading and consuming gaming content.

Results for the first quarter of 2023 were announced on May 15,2023: Revenue at $24.9 million was down 9.1% due to a 15% decline in Media and Content Segment; Gross profit however at $16.8 million was up 24% and the net loss was reduced to $8.7 million, or by 28.7%. Debt maturity was extended by a year and cash on hand was $3.5 million. Paid subscriptions, Brand solutions and Total video views were all up significantly Y/Y.

The new CEO, Nick Brien, who clearly has his hands full, noted that the rapid transformation from a collection of entrepreneurial assets to an enterprise-scale platform company built around a single technology stack is underway.

Trisura Group Ltd (TSU)

The third worst performer for the monthly period was Trisura Group Ltd(TSU) whose stock was down 11.05% , and 26.21%  YTD.  It is a specialty insurance provider operating in the surety, risk solutions, corporate insurance, fronting and reinsurance segments of the market in the USA and Canada. It was the third best performer in May. The stock price has bounced around over the past year: A high of $41.19 in early August 2022, to a low of $30.83 in mid September; Back up to $46.37 in early December only to fall back to $31.31 in late April, closing at $33.42.

Results were announced May 11^th:  Insurance revenue at $639.1 million was up 58.3% over the comparable prior period 1 year ago, primarily due to an increase of 70.1% in US Fronting operations to $459.3 million; net investment income at $10.7 million was up 150%; but net income was $14 million ($0.30 per share) down 40.1% ,primarily due to losses on the run-off of a US program. ROE was down to 4.1%. due to a writedown of reinsurance recoverables and the runoff loss. TSU easily meets all regulatory capital tests, has surplus cash and an undrawn $50 million revolving credit facility. Long tail liabilities represent an ongoing risk in this business , which TSU management must constantly be alert to.

Aritzia Inc (ATZ)

The second worst performer in the monthly period was Aritzia Inc (ATZ) whose stock was down 32.49% and 47.56% YTD. Over the past year the stock peaked on November 7, 2022, drifted to the end of June  2023 and then dropped precipitously to current levels. It was the second worst performer in April 2023.

ATZ is a vertically integrated design house, home to an extensive portfolio of exclusive brands for every function and individual aesthetic operating from an innovative global platform offering Everyday Luxury on line and in its 114 boutiques in Canada and the USA.

Results for the 13 weeks ended May 28, 2023, announced on July 11^th , were the likely  catalyst for the stock price action. While revenues at $462.7 million were up 13.1% over the prior comparable period, cost of goods were up 24.5%, SG&A expenses were up 27.6%, net income at $17.5 ($0.15 per share) million was down 47.5%, and adjusted EBUTDA at $31.6 million was down 54.6%. The already swollen inventory increased 3.7% in the period to $485million. Results were attributed to inflationary pressures, normalized markdowns, warehouse costs related to inventory management, preopening costs for new boutiques and foreign exchange headwinds.

In its outlook for fiscal 2024, management projected net revenue to increase 2% to 7%; gross profit margin to fall a further 300bps; SG&A to increase 300bps as a percent of revenue. The company’s growth has clearly slowed.

Telus International (CDA) Inc (TIXT)

The worst performer in the monthly period was Telus International (TIXT) whose stock was down 40.5%  and 65.1% for the past year. The high of $40.15 for the past year occurred  in early August 2022, it then fell to an intermediate low of $26..13 in mid November, drifted down further to $19.72 in mid June 2023  from which it fell precipitously In mid July. It was the third worst performer in April.

TIXT is a leading digital customer experience innovator that designs, builds, and delivers next-generation solutions, including artificial intelligence (AI) and content moderation, for global and disruptive brands.

Results for the first quarter of 2023 were announced in early May: Revenues at $686 million were up 15%; Salaries at $428 million were up 25%; operating income at $46 million was down 30%; net income at $14 million ($0.05) per share)was down 59%. Adjusted EBITDA at $155 million was up 9%.  Willow Tree (a complementary European operation) was acquired for $1.2 billion during this period and the credit facility was expanded to $2billion to provide $850 million toward the purchase.

The apparent catalyst for the precipitous  stock price decline was the disappointing announcement , on July 13^th of a preliminary view of 2^nd quarter results: Revenue up a meager 6-7% ; Net loss in range of 7 to 10 million and adjusted EBITDA down 20 – 22% YOY. The full year outlook was revised accordingly. This prediction was born out with the 2^nd quarter results announced on August 4, 2023: Revenues at $667 million were up 7%; expenses at $651 million were up 18% and a net loss of $7 million was recorded. Management announced a focus on cost cutting. 

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Disclosure: The analyst(s) responsible for this report do not have a financial or other interest in the securities mentioned.