Stock Talk Podcast Episode 301 Show Notes

You are listening to KeyStone’s Stock Talk Podcast – Episode 301

Great to chat with you again. This week, I will kick off our YSOT segment answering a viewer question on 5N Plus (VNP: TSX), a global producer of specialty semiconductors and performance materials. Powered by record quarterly profitability, the stock is up 62% over the past year and I will let you know why the good times could keep rolling if growth continues. Brennan answers a viewer query on Opera Limited (OPRA: NASDAQ), a profitable, cash rich U.S. small cap which operates an alternative digital web browser. The segment ties into his recent article on the Alphabet antitrust case. Brett answers a viewer question on D2L Inc. (DTOL: TSX), a provider of online education through a single cloud platform which saw its stock rebound somewhat last week after a solid FY 2026 Q1 report. Brett will let you know if it can continue. Last, and certainly least, noted fashion icon, Aaron Dunn looks at the quarterly report and outlook that sunk Canadian fashion juggernaut lululemon athletica inc. (LULU: NASADAQ) last week.

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

Poll Question

YSOT 5N Plus Inc. (VNP: TSX) – Viewer Request

5N Plus is global producer of specialty semiconductors and performance materials. They focus on developing and manufacturing advanced materials that are essential components for a wide range of products in critical industries.

Here’s a breakdown of their business:

• In Specialty Semiconductors: 5N Plus produces ultra-high purity metals and compounds, often with “five nines” (99.999%) purity or more (thus the “5N” in their name). These materials are crucial for applications in:
  • Terrestrial Renewable Energy: They are a major supplier of materials like cadmium telluride (CdTe) for thin-film solar modules, which convert sunlight into electricity.
  • Space Solar Power: They develop and manufacture multi-junction solar cells for satellites and spacecraft, powering critical space missions.
  • Imaging and Sensing: Their materials are used in radiation detectors for medical imaging (e.g., X-rays, gamma rays), security, and defense applications.

• Performance Materials: This segment focuses on materials that enhance the performance of various products, including:
  • Health and Pharmaceutical: They produce bismuth-based Active Pharmaceutical Ingredients (APIs) for over-the-counter medications (like antacids), antibiotic creams, and other human care products.
  • Technical Materials: This includes things like low melting point alloys (used in aviation and other industries) and various bismuth chemicals that serve as lead replacements in different industrial applications (coatings, pigments, electronics).

Q1 2025 Financial

Revenue increased by 37% to $88.9 million, compared to $65.0 million in Q1 2024. The increase is primarily attributable to higher sales in the terrestrial renewable energy and space solar power sectors under Specialty Semiconductors, and higher bismuth-based products sales under Performance Materials.

Adjusted EBITDA in Q1 2025 increased by 77% to $20.8 million, compared to $11.7 million in Q1 2024, driven by higher volume in the terrestrial renewable energy and space solar power sectors, and better prices over inflation.

Adjusted gross margin increased by 51% to $30.4 million in Q1 2025, favourably impacted by the same factors as above. Adjusted gross margin as a percentage of sales was 34.2% in Q1 2025, compared to 30.9% in Q1 2024.

Net earnings in Q1 2025 were $9.6 million or $0.11 per share, compared to $2.5 million or $0.03 in Q1 2024.

Caution

Risk on Tariff Fears May Have Pulled Forward Q1 Sales in 2025

“In an environment of ongoing global trade volatility, our customers are acting decisively to secure the advanced materials they require from reliable partners, and we are their trusted choice.”

Backlog stood at $260.9 million, representing 268 days of annualized revenue as at March 31, 2025, 58 days lower than at the end of last year, primarily due to the timing of contract signings and renewals under Performance Materials net of the revenue realized during the quarter.

Net debt was $92.3 million as at March 31, 2025, compared to $100.1 million as at December 31, 2024, reflecting an increase in cash. The company’s net debt to EBITDA ratio stood at 1.60x as at March 31, 2025.

Valuations:

• 2024a PE (Adj EPS): ~32.2x.
• 2025e PE (Adj EPS): ~25.2x.
• 2024a EV/EBITDA: ~10.6x.
• 2025e EV/EBITDA: ~9.1x.
• 2026e EV/EBITDA: ~7.9x

Conclusion:

5N Plus is a critical Western supplier of specialty semiconductors and performance materials for the solar, extra-terrestrial energy, and medical imaging / bismuth API markets. Its products are essential to each vertical, and it appears from customer behavior around recent contract extensions and incremental spot demand that VNP may have a solid moat.

Trailing valuations are high, but if growth projections for 25% compounding for the next decade are correct, the stock could be attractive – we expect quarterly lumpiness.

Monitor – sales pull-forward in Q1 with customers building inventory pre-emptively in a trade war environment is a risk.

YSOT Opera Limited (OPRA:NASDAQ)  – Viewer Request

Opera is a digital web browser & content platform that offers a portfolio of desktop & mobile web browsers (Opera One, Opera GX, Opera Mini), content recommendation engines (News) & AI products (Aria) globally.

The company’s Shares trade on the NASDAQ via American Depository Share.

And most of the company’s revenue is from Advertising, while the remainder is through their search revenue.

The company’s share price has performed quite well since its ADS IPO in late 2018 at a price of approximately $12.00 per share. Where it now trades at just about $18 per share – but it has been a very volatile ride up to this point.

But lets first take a look at the company’s revised strategy which has led us to now pull the company out in our U.S. Small-Cap sweeps a few times now.

Well, in 2021 Opera shifted its strategic focus to expanding marketing and distribution activities in Western markets which have higher Annual Average Revenue Per User (or ARPU) customers while reducing spending in certain emerging markets. This strategy was bolstered by the launch of its Opera GX Gaming browser in 2019 which produces an ARPU of more than three times higher than its corporate average.

And we can see this switch of strategy as its MAUs for Opera GX in Q1 2025 were 10.4% of total users, up from 8.8% in Q1 2024 and 6.4% in Q1 2023 – so the company is maintaining momentum with its focus on its Opera GX platform. And this has also allowed the company to grow its ARPU from $0.51 in Q4 2020 to $1.94 in Q1 2025.

Now quickly looking at the financial results compared to the same period last year, revenue was up 40% to $143M, led by strong growth in advertising revenue, Free cash flow was up 45% to $12M and Adj. EPS was up 28% to $0.22 per share.

The balance sheet is also very healthy with net cash per share of $1.05 per share…

So fundamentally, you can see what has generally attracted us to the company…

But there are several key risks from the business include:

1. The Chinese Ownership control
2. High Competition from players like Google’s Microsoft Chrome and Microsoft’s Bing, as well as the risk of changing Consumer Preferences.
3. And lastly the company’s Google Search Agreement to be the default search for its browsers – which is in the crosshairs of the DOJ.

Now in our U.S. Small-Cap report which will be published this week, we include a mini report on Opera, and I go into more detail in the business analyzing its current valuations in relation to its historical multiple, as well as its guidance, and where we think a decent price for the business would be, given the risk factors…

But here I wanted to switch gears and segway into the recent article which we published on our website regarding the Google Antitrust Case…. As like I justed noted, Opera has an exclusive agreement with Google which was extended through 2025 to be the default search engine on Opera’s Browsers. And the revenue which they earn from Google could be at risk depending on the outcome of the Antitrust case.

So as many of you are likely aware, Google has been in the crosshairs of the Department Of Justice (DOJ) regarding monopolies in (1) Search Business and (2) its Search Advertising Business.

Now I go into full detail into how the cases have been progressing within the article, compare the cases to Microsoft’s Antitrust case from the early 2000’s, and discuss the next steps for the trial.

But regarding its Search antitrust case – the DOJ has requested that Google receive a ban on its lucrative deals that make its search engine the default on browsers (such as Mozilla’s Fire Fox and Opera’s browsers) as well as devices like Apple iPhone.

Now the Judge’s final decision for its Search business is expected to come in August of 2025 – which google will likely appeal – but if Google does receive a ban from these type of deals, it will force Opera to seek out different partners within its search business. Now 33% of Opera’s revenue came from its search business in the last quarter – and it is not quite clear how much of this revenue would be at risk if Google’s agreements were halted… but its certainly material and something to think about if one is looking at Opera as a potential investment.

SO IF YOU ARE INTERESTED IN OUR FULL MONITOR REPORT ON OPERA, OR OUR GOOGLE ANTITRUST CASE ARTICLE – Head over to our website or click on the link in the description.

YSOT D2L Inc. (DTOL:TSX) – Viewer Request

D2L Inc. or DTOL on the TSX is a provider of online education through a single cloud platform. The company serves over 18 million K to 12, higher education and corporate education users across North America, Europe and Australia.

The stock is trading at $14.41 a share and has a $793 million market cap. The stock had a strong end of 2024, but has since fallen back down to slightly above our initial look at the stock last September.

The stock continues to trade below its 2021, IPO of $17. But given the hot IPO market during that period the stock has performed well in comparison to many IPO’s during the same period, even with it falling slightly since.

For the last quarter, fiscal Q1 2026,  which the company just reported last week, also figures are in US dollars.

Subscription revenue was up 11.1% to $47.7 million, while professional services fell 8% to $5.1 million, causing total revenue to grow by 8.9% to $52.8 million. The subscription revenue is recurring and generally contracted and has terms between 3 to 5 years, so revenue growth should generally be consistent and not overly lumpy. As well, the company has the benefit of low customer concentration, with no customer representing more than 10% of revenue.

The company operates internationally, but primarily in the US and Canada, and it is impacted by currency fluctuations on a constant currency basis; revenue grew by 10.5%.
Adjusted gross profit, which removed the impact of amortization and stock compensation, grew by 14.7% to $37.7 million, at a margin of 71.3% and increased from 67.7%. The increased margin was due to increased efficiency and optimization.

But, Management did mention that Q1 margin was a bit higher by about 100 basis points than the expected run-rate, so expect closer to 70% for the year.

Adjusted EBITDA grew to $9.3 million from $4.0 million at a 17.6% margin.

Net income grew to $3.3 million from $572 thousand.

Operating Cash flows are negative as the company does receive upfront cash payments with a seasonal low in Q1 and a seasonal high in Q2. As long as the company manages its working capital, this is an overall positive.

Speaking of working capital, the company has a strong net cash position. The company holds $92.5 million in cash and has leases of $11.9 million with no other debt, causing a net cash of $80.6 million. I will note as well that the company has a $5.0 million contingent consideration from the acquisition of H5P last year, with the payment to occur in Fiscal Q3 2026.

Shifting to guidance for the fiscal year.

The company maintained its initial guidance with the Q1 earnings. The company expects subscription revenue of $194 to $196 million, 7-9% growth, Total revenue of $219 to $221 million, implying 7-8% growth.

Adjusted EBITDA is expected to be between 32 million and $34 million at a margin of $15%. This is a 17.5% implied growth from the midpoint.

Over the medium term, which is until 2028, management expects 10-15% annual revenue growth, and an Adjusted EBITDA margin of 18-20%.

The company is trading at a forward EV/EBITDA of 15.3 times, and an EV to sales of 2.3x times off of management’s guidance.

What I like is the recurring revenue model, seeing that consistent growth, the structure of the contracts is longer, which is beneficial and provides reliability, which SaaS companies don’t always have. The company does have a strong balance sheet, which is always great to see. The company is now pushing further into GAAP profitability, which in the prior year, we saw the company just edging into profitability. The company does actually benefit from AI with its Lumi offering, giving it an edge over legacy edtech offerings, which D2L actively is replacing. Lastly, the company has the balance sheet strength to acquire companies, but the M&A market is mixed right now, with better companies having a significant premium and the poor performers sitting on the market. Management mentioned that it is waiting for acquisitions that fit its strategy, which it has a building pipeline for, but there have been none in the last quarter. An acquisition can be a catalyst for the company, but of course it can be negative if the acquisition is done poorly, so you never want to see a forced acquisition just to acquire.

A short term risk for the company is the macro economic and policy risk in the US at this time, which could cause both stock price swings as well as fundamental volatility depending on where the policy lands.

Overall, the company is trading near fair value; you could argue it is a slight discount at this time, but I wouldn’t call it a screaming discount either at this time.