KeyStone’s Stock Talk Show, Episode 227.

We have a great show for you this week. In our YSOT segment, Aaron answers a listener question on Northland Power (NPI:TSX), a global power producer established in 1987, focused on advancing the clean energy transition by generating electricity from renewable sources. The stock, which pays a 5% dividend, is down 36% in 2023 and 47% over the past year. Aaron, let’s you know if the declines make Northland a potential buy or if they are symptomatic of a larger issue with the business that should have you on the sidelines. I will answer a listener question on Tecsys Inc. (TCS:TSX), a provider of supply chain software solutions for the healthcare and complex distribution verticals. Like many small to mid sized software firms, Tecsys’s stock has been cut in half form its pandemic highs and a listener asks if this dividend paying software firm with a cash rich balance sheet is now on-sale. Brett takes a look at Arm Holdings (ARM:NASDAQ) which conducted its initial public offering or IPO last week. Arm is a designer of computer chips intended to run on a battery. The company’s designed or at least partially designed components are in 99% of smartphones. Brett will let you know if Arm is worth any attention in your portfolio. In our Star & Dog segment Brennan’s Star of the Week is Thorne Healthtech Inc. (THRN:NASDAQ), which is up 38% in the past month, 174% YTD, and up 118% since we highlighted the stock as a MONITOR in our “US Under $2B Market Cap Special Report” released for clients June of this year. His Dog of the Week is: AI Artificial Intelligence Ventures Inc. (AIVC:TSX-V),which is actually up approximately 65% since June of this year – let’s see how the young man spins this one!

Let’s get to the show – we welcome my cohost, Mr. Aaron Dunn and the killer B’s, Brett, with Brennan.

Tecsys Inc. (TCS:TSX)

Price: $28.00

Market Cap: $411.43 Million

Company Description: Based in Montreal, Tecsys is a provider of supply chain software solutions for the healthcare and complex distribution verticals. The company’s software covers warehouse management, distribution and transportation management, supply management at point-of-use, distributed order management along with financial management and analytics. Tecsys primarily sells its solution on a SaaS basis and has over 1K customers in 15 countries.

Q1 Fiscal 2024 Highlights

  • Total revenue rose 22.7% to $41.98 million from $34.2 million in Q1 fiscal 2023.
  • SaaS revenue increased by 44% to $11.5 million.
  • Adjusted EBITDA was $3.2 million, up 114% compared to $1.5 million reported in Q1 last year.
  • EOS was $0.08 per share, compared to $40 thousand or nil per share for the same period in fiscal 2023.

Tecsys exited the quarter with net cash of $31.9 million, so the balance sheet is strong.

Financial Guidance:

Tecsys is reiterating previously presented financial guidance as follows:

FY24 GuidanceFY25 Guidance
Total Revenue Growth10-15%n.a.
SaaS Revenue Growth35-37%n.a.
Adjusted EBITDA Margin6%8-9%


Revenue growth is decent at the midpoint of guidance at roughly 12.5%, and SaaS growth of 35-37% is strong but implies a slowing through the year as Q1 came in at 44% and SaaS revenues remain under 30% of total revenues.  The adjusted EBITDA margin at 6% is low – moving to 8-9% is the right trajectory for FY 2025, but that is still a low number particularly for a software driven company.


Current valuations are premium with a trailing Enterprise Value/EBITDA of 38.84, price-to-cash-flow of 68.2, and PE of ~125.

On a forward looking basis the EV/EBITDA based in FY 2024 estimates is 33.2x and the PE is ~88.8x, lower, but high across the board for a company looking at revenue growth in the range of 12.5%.

Our Take:

Tecsys is a solid Canadian software success story, growing revenues in US dollars over the past 10 years from $41.1 million in 2024, to $121.5 million over the past 12-months.

Operating income has been more volatile:

And to be frank, operating earnings, cashflow and adjusted EBITDA margins are low. This is partially due to the fact that, while its SaaS offering is growing, it remains under 30% of the business – hardware and service revenue making up the majority of revenues. Hardware can be lower margin. The company also continues to spend to take advantage of what it believes is a large and underserved market opportunity – the strategy has grown sales smartly, to the point it trades with a price-to-sales of roughly 2.5 on a trailing basis or which is below its peers in the range of 3 but lead to volatile profitability over the past decade.

Tecsys has a strong track record of revenue growth, a strong balance sheet and the normalization in supply chains, retail and logistics, should enable its end markets to begin focussing on improvements such as Tecsys’s solutions rather than just surviving. However, the company’s profitability margins and valuations at present make it too rich for our models and we continue to just Monitor the company.



Arm Holdings just symbol ARM on the Nasdaq currently trading at roughly $56 after IPOing at $51 just last week, which was at the high end of their expected IPO range. Arm is a designer of computer chips intended to run on a battery. Arm compute platforms are the most power-efficient on the planet and continue to push the thresholds of performance to enable the next generation of smart, AI-capable, visually immersive, and increasingly autonomous experiences on everything from the tiniest sensors to the smartphone to the automobile and to the data center. ARM-designed or at least partially designed components are in 99% of smartphones using Risc V architecture which is a significant difference from x86 which Intel and Amd processors use the main selling point is that Risc V is significantly more power efficient.


Before we get into the financials, we can look at the road to its IPO. Arm was previously a public company, Arm was taken private by Softbank in 2016 for an acquisition price of $32 billion a 43% premium after trading on the London exchange and the Nasdaq for 20 years. Then in 2020 Nvidia announced that it was looking to acquire Arm but was effectively blocked by regulators ending discussions in 2022, Nvidia was looking to acquire the company for $40 billion. Now for its current IPO the company was valued at $54.5 billion and is now trading at just under a $60 billion market cap.

During that period, revenue increased from $1.56 billion in 2015 prior to being taken private to $2.7 billion in 2023 a CAGR of 7.1%.


Moving to the current financials, we don’t have the same granularity as the company did not need to report previous quarterly earnings, so as far as quarterly earnings we have fiscal Q1 2024 and Q1 2023 numbers, as well as fiscal 2021 2022 and 2023 annual results in the company’s prospectus.

During its first quarter of fiscal 2024, the company had total revenue of $675 million down from $692 million in the prior year. Similarly for revenue for fiscal 2023 was effectively flat at $2.7 billion, but that was a large jump from the $2 billion revenue in fiscal 2021.

As the company only designs and licenses its architecture and tools it has a great gross profit margin of 95.4% for the quarter a key difference from other semiconductor companies.

Net income of $105 million versus $225 million or $0.10 and $0.22 on a per share basis, notably lower due to increased research and development costs as well as SG&A. The increased expenses were almost entirely due to share-based compensation which isn’t uncommon for companies just before or after an IPO. Share compensation increased to $158 million from $13 million.

Additionally, as the company is IPO it has accelerated the company’s restricted stock unit plan causing the pro-forma post-IPO company to have a lower net income for the last quarter of $100 million lower than the $105 million, and significantly lowering fiscal 2023 net income from $524 million or $0.51 per share to $141 million or $0.14 per share, these changes are a one-off but worth looking at given the high share expenses due to the IPO as many analysts will likely adjust these figures in the coming quarters.

4) Moving on to the balance sheet and cash flows,
Arm has a strong net cash position of $1.8 billion including leases.  Arm did have an operating cash flow deficit of $114 million versus a deficit of $231 million in the prior year, but this was largely due to accrued compensation benefits in both years being paid of $447 million and $541 million respectively. Looking at the trailing twelve months the company did have positive operating cash flows of $856 million, so the quarterly deficit is just a result of payment timing of those benefits and as a whole, the company is cash flow positive.


Arm’s valuations clock in at a trailing price to sales of 22 times, and a trailing price to earnings of 143 times which is effectively meaningless at that multiple. Similarly, its price-to-cash ratio is still 67 times which is very high.


Our Take,

Like many IPO’s Arm’s price came in hot, immediately trading above the IPO price which was already on the high end of the range.

The company offers a unique product to the semiconductor space but is still at the cyclical whims of the semiconductor industry causing slightly lower revenue year-over-year.

But the major issue with Arm is its extreme valuations even ignoring PE due to the quirks of the compensation price to sales is high,  price to cash flow is high, especially given the weak macro backdrop for the industry at this time you’ll be waiting out a recovery before a return to growth which has not even been great since being taken private.

Arm would just need to be significantly cheaper to make it appealing.

The Dog of the Week is: AI Artificial Intelligence Ventures Inc. (AIVC:TSX-V)

The stock is actually up approximately 65% since June of this year where it is trading with a Price of $0.265 and a Market Cap of $36.4 Million – and you may be asking yourself…. “how is this stock a dog Brennan when it’s up over the past few months?”

Well, on June 29th, 2023, the company changed its name from ESG Global Impact Capital Inc to AI Artificial Intelligence Ventures Inc, which it had just changed its name to in 2020.

Slide 2

So now if you go to their website – this is what you see – “AIVC is an investment management company with a focus on investing in early-stage AI companies in the emerging AI growth sector.”

But of course their filings make no claim of AI Investments, and simply state that the company’s goal is to build a portfolio of investments with a view to participating in income and capital growth from the sale of investments.

Slide 3

As of May 31st, the company’s investment portfolio was $4.3M. But only 8 companies in the portfolio generate any meaningful revenue and all remain far from operating profit:

  • AIML Resources – Changed name to AI/ML Innovations which is a digital healthcare business using artificial intelligence (AI) and machine learning (ML) – just starting to generate revenue.
  • Everyday People Financial – consumer lending etc.
  • Jackpot Digital Inc. – Electronic table games to casino operators
  • Leef Brands Inc. – Cannabis manufacturer
  • Numinus Wellness Inc. – Phsychodelic assisted therapy
  • Odd Burger Corp. – plant based food technology
  • Planting Hope Company – plant based foods
  • Wonderfi Technologies – owns crypto asset trading platforms.

So seeing the name change to AI, and the highly speculative portfolio primarily invested in companies which are junior miners, have no revenue, or even when they do have revenue they have limited exposure to AI – despite the strong share price performance this year, I am classifying AI Artificial Intelligence Ventures as a dog!

Slide 4

The Star of the week is: Thorne Healthtech Inc. (THRN:NASDAQ)

The stock is up 38% in the past month, 174% YTD, and up 118% since we highlighted the stock as a MONITOR in our “US Under $2B Market Cap Report” released for clients June of this year.

Where its currently trading at:

Price: $10.16

Market Cap: $550 million


Thorne HealthTech develops solutions for personalized health and wellness – and provide supplements to their customers.

The company breaks its operations into two segments:

  1. Direct-to-consumer (DTC): Thorne sells its products to consumers online through its own websites as well as Amazon.
  2. Professional & Business-to-Business: Wholesale customers that include health professionals and retail stores through authorized resellers.

Thorne differentiates itself from other supplement manufacturers by offering health tests which then help cross-sell Thorne’s supplements.

In addition to tests and supplements, the company also produces OneDraw, a blood collection device. The product’s goal is to have the blood draw experience with less pain while capturing high-quality samples. The company is expecting feedback from the FDA in Q3 for unsupervised medical use but it has already received approval in Japan and the EU as of August of this year.

Slide 5

And the reason we wrote a report on the company for clients is because the business produced good growth in revenue and profitability, was doubling its manufacturing capacity with a new facility and traded with reasonable valuations, with a FWD P/Adj. E multiple of 16x and 9x Adj. EBITDA. But we were slightly hesitant on the business as earnings and cash flow have been quite volatile, and we were slightly concerned that the company wouldn’t be able to achieve strong profitability due to its share compensation and expansion plans. Nonetheless, driving the increase: 

Has been:

  1. The company’s strong financial results: (Q2 2023)
    1. Revenue Growth 33% Y-o-Y.
    2. GAAP Diluted EPS was $0.08 compared to a loss of $(0.11) for the same Q last year.
    3. And the company raised the midpoint of full-year 2023 guidance ranges for net sales of $285-$290 million (11.4% from 2022) and raised full-year 2023 guidance range for adjusted EPS to be $0.26-$0.32 (down to flat y-o-y).

So this essentially led the stock higher to about the $8.00 range…..

  1. But on August 28th, the company announced that it had entered into a Definitive Agreement to be Acquired by L Catterton for $10.20 per share in Cash and taken private, which was a 30% premium to the current share price. And the transaction is expected to be closed in Q4 of this year.

So with Thorne HealthTech’s strong financial performance and recent takeover announcement — The stock has taken our coveted status of Star of the Week. And of course, I wanted to talk about this one on the podcast because it was a stock which I pulled out from our initial screening, and again, we go through thousands of shit companies every year…. So if we are highlighting a stock as a MONITOR in one of our larger comprehensive reports, it is likely a decent business with solid fundament

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