KeyStone’s Stock Talk Show, Episode 214.

Great to be back with you this week. We have a busy show, kicking it off with a quick discussion on the influence the Big 5 – Amazon, Apple, Alphabet, Microsoft, and now Nvidia have on the S&P 500 which appears to have had a significant bounce back in the first half of 2023 – or has it? I will answer a YSOT on Pivotree Inc. (PVT:TSX-V), an end-to-end provider of e-commerce, supply chain, and Master Data Management (MDM) services, which is down 80% from its highs, despite strong revenue growth – does it finally offer value? I will let you know. Aaron answers a listener question on Canadian-based athletic giant, Lululemon Athletica Inc. (LULU:NASDAQ) which saw its share price jump last week after it reported strong Q1 2023 revenue growth and plans to double business by 2026. Brett answers a listener question on Enthusiast Gaming (EGLX:NASDAQ), the formerly high flying eSports business, which has seen its stock has fallen roughly 82% over the past year. Brett will let you know if this revenue grower is showing any signs of earning some real cash from that growth. Finally, Brennan answers a viewer question on Pyrogenesis (PYR:TSX) which designs, develops, manufactures, and commercializes plasma

processes and systems in Canada. The company previously was a Dog of the Week and a listener asks if a recent contract signing gives us reason to be more positive on the stock.

The Trillion-Dollar Club accounts for almost all the S&P 500’s gains this year

The Trillion-Dollar Club – or stocks with a market cap exceeding $1 trillion –  now comprises Apple, Microsoft, Google parent Alphabet, Amazon, and as of midday last Tuesday, Nvidia. From January to May, the group’s members have all gained over one-third in value, with Apple rising 35%, Microsoft 39%, Alphabet 41%, Amazon 43%, and Nvidia 176%. Apple and Microsoft each added over $700 billion in market cap in the past five months followed by Nvidia ($640 billion), Alphabet ($460 billion), and Amazon ($371 billion). All told, the Trillion-Dollar Club’s current members have raised their combined market cap by $2.87 trillion since the start of 2023.

What is curious, is that the total rise in the big cap index is only a hair more, at $2.98 trillion. Hence, the Club contributed 96% of the year-to-date 9.5% increase notched by the 500 this year. The Big Five market cap jumped by 46.2%, from $6.2 to $9.1 trillion. By contrast, the other 495 cohorts in the 500 posted a combined gain of just 0.3%. (these figure are mid last week). Put simply, without the giant lift from the Trillion-Dollar Club, the S&P would be flat for the year, versus posting what Wall Street touts as a strong comeback.

So the narrative of a significant bounce back from the S&P 500 would not be there without the big 5. In fact, the broader market is performing more indicative of what one might expect facing a the current macro concerns, but the power of the Big 5 is masking a flat market.

Pivotree Inc. (PVT:TSX-V)

Price: $2.82

Market Cap: $75.15 Million

Quick Public Company History: 

Listed post-pandemic in November 2020, quickly traded past $10 and topped out in the $13.50 range with a market cap in the $330 million range in the tech-related bubble. While revenues were growing, the underlying business was nowhere near worth those levels and has seen its price drop from $13.50 to $2.82 and its current market cap in the $75 million range. The viewer question essentially asks us that with the 80% drop in the share price, does Pivotree finally offer good value?

What does the company do?

Pivotree is an end-to-end provider of e-commerce, supply chain, and Master Data Management (MDM) services to >180 large- and mid-market retailers, branded manufacturers, wholesalers, and distributors in North America. The company supports clients on digital strategy, platform design and build, implementation, and hosting through to ongoing support.

Strong track record of revenue growth.

Revenues have jumped from $49.8 million in 2018 to $101.7 million in 2022. 

Operating income continues to be negative at a loss of -$8.6 million in 2022.

Q1 2023 Financial Highlights

  • Total Revenue of $25.0 million, an increase of 2.2% or a decrease of 3.6% in constant currency.
  • Total Bookings of $16.1 million, a decrease of $2.9 million or 15.3% year over year.
  • Net loss of $1.4 million compared to a net loss of $3.3 million for the prior year period.
  • Adjusted EBITDA of $0.9 million, representing 3.5% of total revenue, compared to adjusted EBITDA of $0.2 million, representing 0.8% of total revenue, for the prior year period.

Notes from management: 

Q1 saw a healthy level of bookings activity, although we are seeing the effects of extended timelines to close deals when compared to prior year experiences when we were hitting new records.”


Pivotree holds a strong balance sheet with $15.8 million or $0.59 per share in cash – 21% of its market cap in cash. The company is not profitable over the past 12 months, nor was it cash flow positive or has it posted profitability on an adjusted basis. Pivotree’s price-to-sales is roughly 0.73. Based on what we believe are optimistic FY 2023 adjusted EBITDA estimates, the company trades at roughly 15 times EV/EBITDA. Given the macro environment, and the significantly slowing in revenue growth to negative 3.6% in its last quarter on a constant currency basis and the company’s inability to produce positive cash flow historically, we are not recommending Pivotree at present.

What could change this is the company’s evolution to a products company employing its proprietary IP into projects which should progressively push recurring mix and margins meaningfully higher. This evolution is still early-on, but with PVT’s propriety IP now being deployed in >20% of its data projects – the potential is there.

YSOT – Pyrogenisis Canada Inc. (PYR:TSX)

Slide 1

The last time that I covered Pyrogenesis was last Fall, as a “dog of the week” after the stock was down 72% YTD and down 40% in a month. And at the time the stock traded at $1.08 and had a market cap of $187 million.

The reason I am covering the stock, is we received a comment on YouTube, stating that the company got its first contract. And there were many other comments on our YouTube video which both ripped into me, as well as some agreeing with my analysis that in fact the company was a dog…

And I think that it’s kind of funny that I received so much hate… as I stated “Pyrogenisis has potential…. but considering the decline in revenues and its inability to generate profit, leading to the collapse in its share price, it was in fact a dog.”

Slide 2

And today, the stock price and market cap are essentially the same as when I covered it a year ago:

Price: $1.06
Market Cap: $190 Million.

Description: PyroGenesis designs, develops, manufactures, and commercializes plasma processes and systems in Canada. And they provide engineering and manufacturing expertise, cutting-edge contract research, as well as turnkey process equipment packages to the defense, metallurgical, mining, additive manufacturing (including 3D printing), oil & gas, and environmental industries.

It offers:
DROSRITE, a process for enhancing metal recovery (aluminum and zinc industries)
PUREVAP, a process to produce high purity metallurgical and solar grade silicon from quartz; and PUREVAP Nano Silicon Reactor, which is designed to transform silicon for use in lithium-ion batteries.
The company provides plasma torches for replacing fossil fuel burners.
It offers plasma arc waste destruction systems for waste destruction.
Further, the company provides engineering and manufacturing expertise.

Slide 3

Company Updates:

On May 30th, 2023, Pyrogenesis signed an initial 5-Tonne Order for its atomized titanium metal powder produced using the company’s NexGen plasma atomization system, which includes a conditional agreement for 6 Additional Tonnes with a down Payment received. And the powder will be used for 3D printing.

There were no dollar values placed in the press release of the contract announcement, but I found on the web that 2Kg of Titanium Powder sells for about $1,500… so the initial 5,000KG would equate to about $3.7M. Which yes, is positive for the business. But I do not see it as a substantial catalyst for the business’ fundamentals.

On May 23, 2023, Pyrogenesis received approval for an 180 day extension to continue to trade on the NASDAQ until November 20th, 2023, as by this date it must have a closing bid of at least US$1.00 for a minimum of 10 consecutive days of trading.

Right now the shares trade at US$0.78 on the NASDAQ, and realistically this news isn’t a huge deal as if the stock doesn’t meet the requirements by November 20th, 2023, the company will likely just conduct a share consolidation to get the price back up into compliance with the NASDAQ trading requirements.

Slide 4

Recent Financials (Q1 2023):

Revenue was down 38% to $2.6M
Net Loss was $(6.1) million or a loss of ($0.03) per share.
And Adj. EBITDA also came in at a larger loss than the same period last year, losing $(5.8) million this year, compared to a loss of $(2.8) million last year.
As at March 31, 2023, the company had a cash position of $1.9 million, debt & leases of $6.9 million, and a net debt position of approximately $5.0 million. Keep in mind this cash balance is down from Q1 2021 when it had a cash position of $26.3 million and after subtracting debt and leases it had a net cash position of $23.0 million at that time.
So with its dwindling cash reserves, unless the business can actually get into profitability and cash flow, the business will likely have to issue shares in the future.
And because of the lack of profitability, EBITDA and cash flow, we can only value the stock off of revenue, which right now it trades with a trailing P/S of 11x.
As of May 15, 2023, revenue expected to be recognized in the future related to backlog is $30.6 million. Which is expected to occur over a maximum period of approximately 3 years… And just to do some napkin math, even if we expected that “backlog” to be realized in 2023 alone and added on top of its trailing sales to get us $48 million in potential sales for fiscal 2023 (which is unlikely), the company would still trade at 4x forward 2023 sales..


I am going to say this again… as I did last time.

Pyrogenesis has potential, and we could look at “potential future catalysts” as a few on YouTube wanted me to point out… but to us the business has yet to validate its business model as it continues to post declining sales and lacks profit or even EBITDA as a matter of fact.

Someone could invest in the business to speculate on its future catalysts, but again to us at KeyStone, we do not believe that a long-term successful portfolio is built by buying stocks like Pyrogensis and speculating on “potential catalysts” which may or may not lead the business to produce cash flow.

Plus, I would like to say that its recent contract received for Titanium Metal powder may be interesting, but as it sits right now, the contract is somewhat insignificant in driving an inflection point in the fundamentals.

All-in-all, to us, the risk continues to outweigh the potential reward for an investment. And please, for the keyboard warriors on YouTube, this is not to say that the stock will not do well over the next 3-5 years… there could be a significant contract announced for its Plasma torches, but as it sits right now, for our Growth at a Reasonable Price investment philosophy, we would not recommend the stock to our clients.


Enthusiast Gaming Symbol EGLX trading on both the NASDAQ and TSX under the same symbol.
The stock currently trades at $0.58 on the TSX with a market capitalization of $88 million Canadian. The stock has fallen roughly 82% over the past year.

So what does the company do?

The company’s core activities revolve around eSports, media, content creation, and entertainment revolving around video games.

The company has 50+ websites, 700+ youtube channels, 11 TikTok Channels, 12 Esports rosters, and 500 content creators. As well, the company operates gaming events across the globe. The company produces revenue from sponsorships and ads, subscriptions, and sales from Esports events. The company is able to target the hard-to-reach Gen Z and millennials, with 73% of its audience being from these two generations.

The company is quite young and to rapidly grow, it pursued strategic acquisition. The company grew rapidly from 2019 to 2022 through acquisitions. The acquisitions range from their esports team luminosity to U.GG a data-driven website for League of Legends, and more recently Valorant and World of Warcraft.

To fund these acquisitions the company has continuously issued shares since inception. The share count has over doubled from 72 million shares to now over 150 million shares. It would not be unlikely for the company to have a share rollback or consolidation as it will likely be delisted from the NASDAQ as it is currently trading at under $1.00.

So with the dilution, you would hope for the growth of at least revenue, but that has not been the case over the past year.

EGLX revenue fell 9% to $42.9 million for the first quarter of 2023. The largest segment Media and Content representing 83% of total revenue fell by 15% to $35.5 million off the back of lower video views and lower CPM, offset by stronger growth in brand solutions.

As part of its cost-cutting strategy, the company was able to massively increase its gross profit margin to 39.1% from 28.6% in the prior year. So, despite lower revenue gross profit was still 24% higher at $16.8 million.

EGLX still had a net loss of 8.7 million, which is an improvement from the prior year’s loss of $11 million, but still has a significant way before even achieving profitability.


This brings me to the balance sheet, it is quite weak. EGLX has a net debt position of $15 million. A current ratio of 0.9. The company is consistently operating cash flow negatively, meaning as the various expenses are coming due and it already has a weak balance sheet, the company will need to raise more capital through debt or share issuance. The company’s current debt is not cheap, at CDOR + 7.5%, which the last quarter had an effective rate of 11%, so if more debt is raised its bottom line will see more of a drag from interest. The company could of course issue more shares, but with its significantly suppressed share price, it would cause massive dilution for existing shareholders.

Our Take,

The company is not close enough to profitability, and with the balance sheet being weak it is difficult to see a path for value to be created for shareholders. EGLX does have a new CEO as of the start of Q2 which may provide some hope for shareholders, but the financial reality is poor as of now, and I would not expect this to change in the near future if ever and therefore is not a recommendation at this time.





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