Canadian Quarterly Earnings Pulse - Q4 2023

Michael Huynh Mar 28, 2024
Headline image for Canadian Quarterly Earnings Pulse - Q4 2023

This week, we continue to summarize the broader pulse of public Canadian companies by looking into another set of quarterly earnings (previous post).  

Below, we highlight the Macro, Industry and Corporate trends that we have observed along with quotations from 5i coverage company executives. In this weeks Earnings Pulse, we note underlying themes of some companies that are trying to get fit in term of cost control and executives’ view on how the quality of the businesses matter in tough times, as well as some companies with secular tailwind that continue to do well despite a challenging macro environment.




Artificial intelligence tools will be adopted across the product suite

“In 2023, we brought nearly a dozen AI-enabled tools through our Shopify Magic product suite. We're one of the first platforms to bring AI-generated product descriptions to market and made solid progress towards building Sidekick, a first of its kind AI-enabled commerce assistant. As part of our winter edition a few weeks ago, we introduced new features to our Shopify Magic suite of AI tools. These new generative AI tools simplify and enhance product image editing directly within the product image editor in the Shopify admin. With Shopify Magic, merchants can now leverage AI to create stunning images and professional edits with just a few clicks or keywords, saving on cost and time. ” – Shopify Inc. (SHOP) President, Harley Finkelstein


Tough macro conditions made inventory management more challenging

“The increase in activewear sales was fueled by higher volumes driven by POS as well as higher levels of customer replenishment than the prior year. We specifically benefited from healthy POS levels and continued strong performance in key growth categories, such as fleece and ring spun T-shirts which translated into favorable mix versus last year. Finally, our international sales were down 24% in the quarter despite some POS recovery as difficult macroeconomic conditions in these markets lead to lack of inventory replenishment compared to the prior year. Turning to the hosiery and underwear category. The sales increase was fueled by higher volumes driven by a combination of POS with pockets of strength notably in global lifestyle brands as well as the continued rollout of programs in the mass retail channel.” – Gildan Activewear Inc. (GIL) CFO, Rhodri Harries


Environment, social and governance continues to be a key pillar for businesses to operate

“We've made strong progress on our 3 key strategic pillars: optimizing our capacity, fostering innovation, and implementing our next-generation ESG strategy. We have also successfully executed on several components of the financial framework we laid out. While our revenue growth during 2023 was hindered by an industry-wide soft demand environment driven by the challenging macroeconomic backdrop, we have nonetheless continued to drive market share gains in key product categories, and this positions us well as we move forward, leveraging our strong capabilities in the target markets that we serve.


High-quality, predictable business demonstrates resiliency amid geopolitical uncertainty and a challenging macro environment

“2023 showcased the predictability of our business amid continued geopolitical instability, persistent inflation and rising interest rates. This is as a result of the 98% of Enbridge's earnings being generated from either cost-of-service or take-or-pay contract assets. Our debt portfolio is less than 10% exposed to floating rate volatility. Our customer base is over 95% investment grade, and 80% of our EBITDA is earned from assets with protection against inflation.” – Enbridge Inc. (ENB) CEO, Gregory Ebel


Despite increasing interest rates and a slower housing market, financial companies with strong execution continue to perform well...

“Our quarterly earnings per share increased 12% year-over-year, where again delivered more than 15% ROE. Our Board of Directors authorized a dividend payment 20% higher than the prior year. These are good results achieved despite a slower housing market resulting from Bank of Canada tightening. This is also our first fiscal quarter to align with other publicly traded banks. We recognize that the fiscal year-end change adds complexity of interpreting results.” – EQB Inc. (EQB) CEO, Andrew Moor


...and provision for credit loss for loans in the residential market is expected to moderate

“In reaffirming our 2024 guidance today, we believe we have started the year well and we're set up to see stronger performance in the next few quarters. Sales activity in residential markets increases and based on our expectations for our securitization activities. We also expect provisions for credit losses will moderate in the second half of the year. Understanding this is a busy day of bank reporting, I will highlight just a couple of important developments, beginning with brand awareness and customer growth. In January, we launched our "Second Chance" campaign, featuring Eugene and Dan Levy.” – EQB Inc. (EQB) CEO, Andrew Moor



E-commerce continues to enjoy a long-term tailwind from the shift to digital commerce

“So let's go into more detail on the key accomplishments for the quarter that further demonstrates the progress we are making to strengthen our position as a leader in unified commerce. I will first quickly touch on our Black Friday/Cyber Monday results before diving into our products, channels and international. Starting with the incredible success of our merchants on Black Friday/Cyber Monday. In that 4-day period alone, our merchants collectively generated $9.3 billion in sales, representing 24% growth over the prior year. Approximately 61 million consumers worldwide purchased from brands powered by Shopify, over 17,500 merchants made their first sale and more than 55,000 merchants had their highest selling day ever on Shopify.” – Shopify Inc. (SHOP) President, Harley Finkelstein


The market outlook for advertising spending next year is promising

“The market outlook for 2024 is optimism and customer spending is projected to grow 2024, so all the signs are showing that we're moving in the right direction. For me, the number one indicator is the illumin Self-Serve revenue. And we keep seeing that growth, bringing in more customers, customers are liking the program and the system and spending more on it. And therefore, we're seeing the growth in Self-Serve revenue. With that, I will now open the floor for questions.” – illumin Holdings Inc. (ILLM) CEO, Tal Hayek


Businesses with recurring cash flow generation is crucial for shareholder return over time...

“As we reflect on 2023, I want to remind everyone why our business is a first-choice investment opportunity. Our assets generate strong, reliable and growing cash flows that are underpinned by low-risk, commercial frameworks and a stable balance sheet. We consistently and sustainably return capital to shareholders and late last year announced our 29th consecutive annual dividend increase. 2023 was a hallmark year for growth at Enbridge with approximately $23 billion of announced acquisitions and $10 billion of new projects adding both greater visibility and duration to our growth outlook. And consistent with our vision, we continue to develop Enbridge's lower carbon strategy, benefiting the enterprise and supporting an appropriately paced global energy transition.” – Enbridge Inc. (ENB) CEO, Gregory Ebel


...and the key determinant of value creation is the return on equity (ROE) over the long term

“We filed our mainline tolling settlement with the Canadian energy regulator in December and expect an expedited review process. Our customers will receive the competitive and responsive service they are accustomed to, Enbridge will earn attractive risk-adjusted returns and the mainline will continue to feed North American and global markets with a long-term source of safe, secure and affordable energy. When approved, the mainline will continue to earn an attractive risk-adjusted return on equity between 11% and 14.5%.” – Enbridge Inc. (ENB) CEO, Gregory Ebel


Despite a challenging commercial real estate sector, commercial services companies still deliver modest organic growth

“Well, thank you, Stephane, and welcome, everyone, to our fourth quarter conference call. Bienvenue à tous. Merci d'être présents. Overall, I'm pleased with our results in the fourth quarter. Our business service Canada segment was able to deliver modest organic growth while maintaining a 9% adjusted EBITDA margin despite the challenges we are reading about in the commercial real estate sector. As you know, the segment's principal exposure in commercial real estate is in Class A office towers, which makes up approximately 1/3 of our Canadian portfolio. Despite all of the negative headlines about commercial real estate, we believe that Class A buildings will not disappear, that facility services will still be required and that vacancy caused by tenant moving or reducing space requirements will be filled with new tenant demands. Our business service U.S.A segment also had a good quarter with 10% organic growth and an adjusted EBITDA growth of 14% over the prior year. During Q4, we completed the acquisition of the U.S. Facility Service business of ATALIAN Global Services, which added approximately 2,000 employees to our teams and considerably strengthened our footprint in the Northeast U.S.” – GDI Integrated Facility Services Inc. (GDI) CEO, Claude Bigras


Corporations across industries are more aware of rightsizing the businesses’ cost structure

“We have been making good progress in this regard and are on track with our plans. Finally, at the beginning of Q1, we were informed that by one of our large customers that they would be undergoing a supplier realignment in Q1, which will negatively affect our segment organic growth rate during 2024. Due to our flexible cost structure, we have rightsized our cost and when paired with our new business wins, we will be able to mitigate almost completely the net impact of this loss. Our Ainsworth Technical Service segment faced some challenges in Q4 with underperformance on a few large projects in the U.S.” – GDI Integrated Facility Services Inc. (GDI) CEO, Claude Bigras



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Tech companies continue to be more disciplined in term of cost control

“Before turning to our outlook, a few comments on our perspectives underpinning our expectations for 2024. From a macro perspective, we expect the same resiliency from our merchants and their buyers that we experienced in 2023. We expect our existing merchant cohorts to continue to deliver strong growth, coupled with our ambitions to continue to add more new merchants of all sizes, from entrepreneurs to large enterprises and channels, including off-line and B2B. In 2024, we plan to remain disciplined on head count growth and continue to find more ways to use AI and automation to be even more efficient operationally. We will lean into growth opportunities and provide the essential go-to-market support while continuing to execute with the operational discipline that we demonstrated this past year in order to deliver a compelling mix of growth and profitability. ” – Shopify Inc. (SHOP) President, Harley Finkelstein


Companies choose to delist from large exchanges to save costs

“Moving on to the next slide of NASDAQ delisting. As previously announced on September 11, 2023, the company voluntarily delisted and ceased trading on the NASDAQ capital market. Simultaneously, we initiated the deregistration process from the SEC, eliminating significant cost burdens and reporting requirements, which is consistent with our cost containment initiatives I referenced earlier. And given today's macroeconomic environment, we feel these actions were appropriate and will allow us to utilize our capital more effectively to enhance overall shareholder value. However, we expect a significant portion of these savings will not be realized until 2025.” – illumin Holdings Inc. (ILLM) CEO, Tal Hayek


Significant insider purchases and aggressive buybacks could be positive signals in the near term

“As of December 31, 2023, the company has acquired 445,000 common shares under this program with an average purchase price of CAD 1.52. And as you can see on the next slide, in 2023 we repurchased over 5.7 million shares for a total consideration of $14.4 million excluding related SIB expenses. As I noted in the previous slide, our current NCIB initiative has acquired an additional 828,000 shares since January 1, 2024 from now running total of 1.3 million shares to date. We are committed to this undertaking given the current valuations. And as you heard Tal mention in his earlier remarks, there is also a substantial purchase of shares by insiders of the company.” – illumin Holdings Inc. (ILLM) CEO, Tal Hayek


Well-managed entities run a leverage profile within a manageable range

“And given the strength of our free cash flow, even with the significant return of capital during 2023, our net debt finished at $993 million at year-end with a net debt leverage ratio of 1.5x, well within our 1x to 2x targeted debt levels. This brings me to a few thoughts on our GSG strategy and our outlook for the year ahead.” – Gildan Activewear Inc. (GIL) CFO, Rhodri Harries


Great companies reward shareholders for decades

“Thanks, Sandie, and good morning, everyone. In the next few weeks, we will mark our 20th year as a publicly listed company. While we have not quite reached that milestone yet, it does appear that we will be able to celebrate the best 20-year total shareholder return of any bank on the TSX and on the S&P 500 when we opened the Toronto Stock Exchange that morning. We achieved benchmark setting performance 1 quarter at a time. And you can see from our most recent results, Canada's Challenger Bank continues to work well for our customers while rewarding our investors.” – EQB Inc. (EQB) CEO, Andrew Moor


Flexible cost structure and disciplined working capital management produce healthy free cash flow

“Our flexible cost structure enables our business to be resilient. Looking forward, 2024, I feel we are well-positioned to deliver growth. Competitively, we are the largest facility service provider in Canada and amongst the largest in North America. Our reputation is excellent and our culture is entrepreneurial and dynamic. Financially, our free cash flow profile is improving due to the working capital management strategy we are implementing.” – GDI Integrated Facility Services Inc. (GDI) CEO, Claude Bigras


Companies mentioned:


Shopify Inc. (SHOP)

Q4 Revenue Growth: 23.6% |  Q4 EPS Growth: N/A



Q4 Revenue Growth: -7.5%  |  Q4 EPS Growth: N/A


Q4 Revenue Growth: 8.7%  |  Q4 EPS Growth: 93.2%


Enbridge Inc. (ENB)

Q4 Revenue Growth: -15.8%  |  Q4 EPS Growth: N/A


Q1 Revenue Growth: 8.0%  |  Q1 EPS Growth: 3.9%



Q4 Revenue Growth: 5.8%  |  Q4 EPS Growth: -35.3%


These are quotes from just some of the more than 60 Canadian companies we cover at 5i Research. To view their recent reports you can search for their tickers in the Reports section. If you are not a member and would like to gain access to these reports as well as the Q&A service where you can ask and search questions on these companies, you can fill in your information below to sign up for a free trial.

Take Care,

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