Fourth Quarter Earnings Recap

The fourth quarter 2024 earnings season has concluded for Canadian-listed companies.

In case you missed it, I published my Fourth Quarter Earnings Preview about a month ago, sharing some predictions and companies to watch. Let’s review those predictions and see how they played out!

Strong Quarter Expected: iFabric (TSX: IFA)

iFabric offers a range of innovative apparel products, including high-performance sports apparel, medical protective apparel, consumer protective apparel, and proprietary treatments that impart intelligent properties to fabrics.

Based on the company’s pre-release, I was looking for quarterly revenue of $10.2 million or more, but most importantly, a profit margin of 20% to 25% and a solid outlook for 2025.

Revenue came in at $10.5 million, growing 55% year-over-year. However, the profit margin was lower than my expectations at 11% (EBITDA margin of 18%). Regarding outlook, the company expects another year of double-digit sales growth in 2025 despite the tariff uncertainty. I thought the guidance was too vague, but I understand that we live in an uncertain world right now.

Overall, this was a solid quarter, but not enough to get the market excited yet.

Stock price when profiled (March 25): $1.06

Closing stock price yesterday (April 30): $1.00

Return: - 6% ❌

Underdog to Watch: Omni-Lite Industries (TSX-V: OML)

Omni-Lite develops and manufactures mission-critical, precision components utilized by Fortune 100 companies in the aerospace and defence industries.

The thesis here was that I felt expectations were really low for this quarter, and we could see an upside surprise, considering that Omni-Lite’s results tend to be somewhat lumpy and unpredictable from quarter to quarter.

Well, no luck this time. Revenue grew a mere 5% year-over-year in Q4 with a slightly negative EBITDA. The full-year performance was still strong, with 28% revenue growth and 260% EBITDA growth. The strong performance was heavily weighted in the year's first half, as shown in the quarterly performance table below.

The silver lining is that I was right about the low market expectations going into the quarter. Even with slightly disappointing results, the stock barely moved.

Stock price when profiled (March 25): $1.09

Closing stock price yesterday (April 30): $1.08

Return: - 1% ❌

Underdog to Watch: Rubicon Organics (TSX-V: ROMJ)

Rubicon Organics is a vertically integrated Canadian licensed producer (LP) of premium organic cannabis products.

As you’re probably aware by now, I’m a big fan of the Canadian cannabis industry currently (read my thesis HERE). I believe Rubicon is one of the best LPs in the sector given its track record of revenue growth and positive cash flow generation. I was expecting more of the same going into the quarter.

For this third pick, the results didn’t disappoint! Rubicon came out with a record-high net revenue, growing 42% year-over-year with positive adjusted EBITDA, operating and free cash flows. This kind of performance is almost unheard of in the Canadian cannabis space.

These results were met with a big yawn from the market. After a short-term share price spike, the stock drifted lower (presumably due to overall market volatility throughout April) before rebounding towards the end of the month. That said, I think my call was directionally correct.

By the way, Rubicon will present at an event I’m organizing in Montreal on May 28. If you’re around, please join us to hear their pitch! Details can be found here: Rivemont MicroCap Cocktail – Canadian Cannabis Special

Stock price when profiled (March 25): $0.55

Closing stock price yesterday (April 30): $0.485

Return: - 12% ❌

Tread Carefully: Biorem (TSX-V: BRM)

Biorem is a cleantech company that designs, manufactures and distributes a comprehensive line of high-efficiency air emissions control systems used to eliminate odours, volatile organic compounds, and hazardous air pollutants.

Biorem was up against tough comps in Q4, given that both their Q4 2023 and previous quarter (Q3 2024) had been very strong. I was expecting to see a revenue decline both sequentially and year-over-year.

This one played out as expected. Revenue still came in at a respectable $9.3 million, but declined 24% year-over-year and 37% sequentially. What was more worrisome was the weak gross margin performance (17%), leading to weak bottom-line performance (5% EBITDA margin and 2% net profit margin). The company attributed the gross margin issue to lower revenues and the accrual of costs for a project that may require some rework.

I was hoping for a stock pullback to buy shares, but considering the margin issues, I might wait a bit more and see if these issues get resolved over the next few quarters.

Stock price when profiled (March 25): $2.50

Closing stock price yesterday (April 30): $1.85

Return: - 26% ✅

Beaten Down Wild Card Pick: Cematrix (TSX: CEMX)

CEMATRIX is a manufacturer and supplier of cellular concrete products. This unique cement-based material delivers cost-effective, innovative solutions to the infrastructure, industrial (including oil and gas) and commercial markets.

Despite its sizeable order backlog ($74 million before reporting the quarter) and solid balance sheet ($9.9 million in cash), Cematrix’s stock price has suffered since mid-2024 due to unforeseen delays in delivering its backlog, leading to short-term revenue declines.

I thought the release of Q4 results would cap off a disappointing year and allow investors to look forward to a stronger 2025. As expected, quarterly revenue was down 47% year-over-year (down 34% for the whole year). The CEO reiterated his expectation that 2025 will be the best year in the company’s history, implying revenue growth of 50%+ over 2024.

The lone analyst who covered the stock (Beacon Securities) going into the quarter had the company trading at an expected 2025 EBITDA multiple of only 2.2 times!

After these quarterly results, I wasn’t surprised to see the stock rebound off the bottom. The market is always forward-looking!

Stock price when profiled (March 25): $0.18

Closing stock price yesterday (April 30): $0.24

Return: + 33% ✅

Recap

April started with Trump’s Liberation Day tariff announcement, which led to an unusually volatile (and down) month in global markets. I think that distorts the picture slightly when looking at the short-term performance of the stocks mentioned here.

The first two predictions (iFabric and Omni-Lite) didn’t pan out, but didn’t lead to significant losses either.

The remaining three were accurate. I think these were the right calls from a fundamental standpoint, although one stock didn’t go in the expected direction in the short term (Rubicon).

I’m pretty happy with the overall results!

Besides those predictions, there weren’t many financial highlights for me this quarter. Unlike previous quarters, where we saw spectacular gains following a handful of earnings reports, there weren’t many huge winners. The only one I can think of is Renoworks Software (TSX-V: RW), which gained 45% in the days following its earnings release.

I actually saw more disappointments and losses. A few notable ones were:

• ADF Group (TSX: DRX) with okay results but a poor 2025 outlook due to tariffs. The stock declined as much as 34% on the day following the earnings release before recovering somewhat.

• Goodfood Market (TSX: FOOD) posted quarterly revenue down 23% compared to the previous year, with a significant decline in active customers. The macro environment seems to be quite challenging for the meal kit company. The stock lost as much as 31% over the next seven days.

• Tilray Brands (TSX: TLRY) reported relatively flat revenue but took a $699 million asset impairment charge during the quarter. Even with the benefits of its scale and several adjustments for non-cash charges, the company still posted an adjusted net loss. Fortunately, that’s what the Rubicons of the world are up against in the cannabis sector. Tilray’s stock declined as much as 26% in the days following the news. And if you’re wondering, the stock is down over 97% from its 2021 peak.

April was super busy, and there are several more news items that I plan to highlight in my “Good, Bad, and Ugly” report next week. Stay tuned for that!

Let me know how this earnings season turned out for you!

Did you nail any of your predictions? Did you score a significant gain or avoid a painful loss?

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Disclaimer

This publication is for informational purposes only. Nothing produced under the Stocks & Stones brand should be construed as investment advice or recommendations. Mathieu Martin, the author, is employed as a Portfolio Manager with Rivemont Investments. This publication only represents Mathieu Martin’s own opinions and not those of Rivemont. Rivemont may own positions and transact on any securities mentioned in this publication at any time without prior notice. At the time of this writing, the Rivemont MicroCap Fund holds shares of Omni-Lite Industries (TSX-V: OML), Rubicon Organics (TSX-V: ROMJ), and Renoworks Software (TSX-V: RW). Always do your own research and consult a professional before making investment decisions.

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