Episode 189: Canva's Profitless Profit, Smiggle Slumps, Catapult Flying, CGT Debacle, the Incredible Benefits of Autonomous Cars, Firmus, and Adam Gets Run Over by a Golf Buggy
The guys discuss Canva's profit results, Smiggle's slump, Chalmer's CGT cluelessness, why we need autonomous cars now, and Adam's run in with a golf buggy.
The Contrarians catchup
Adir made it in despite a bout of food poisoning, and comes in hot with the prediction there will be a lot of flight cancellations coming because there is only 14 days of jet fuel currently in Australia, so flights will likely only take off if they’re 100% full.
Adam was almost killed twice in one week on his bike - first by a golf buggy driver who ran him down at Albert Park Golf Course and drove off, then by a frazzled driver who did a U-turn, nearly hit another car, nearly hit Adam, and then blamed him for it. “The sooner we get to autonomous driving, the absolute better.”
Waymo’s paid robo-taxi trips have grown tenfold in two years, from 50,000 per week in May 2024 to 500,000 now, expanding across Phoenix, San Francisco, LA, Austin, Atlanta, Miami, and Orlando. Adam: “Government should be prioritising this instead of all the other garbage they work on, like the suburban rail loop.”
The guys make the case for high-speed rail to decentralise Australia’s population. Adir: “No one can afford a house in the city. Every cent of Victoria’s money is being spent on the suburban rail loop instead of a fast train to Geelong. That is the problem. And the people with the pitchforks and torches are going to burn everything down.”
Catapult announced a market update: 27-28% ACV growth, management EBITDA expected to grow 50% year on year, and a Rule of 40 above last year’s 32-33%. Adir: “I take no credit, it’s all Will the CEO and the team. But I was really pleased. That’s maybe our most important metric.”
Capital gains tax: a masterclass in bad policy
The Albanese government signalled it would reduce the CGT discount from 50% to 33%, without confirming whether existing investors would be exempt. The move is being framed as targeting property investors, but the details remain scarce, and the guys argue it’s driven almost entirely by the need to secure votes from younger Australians who don’t own property, rather than any serious attempt at tax reform.
Adam: “If it’s talking about assets beyond investment properties, it’s a disincentive for people to start businesses and employ people. This is not the solution. The government should be focusing on the spending issues first, fifty billion on the NDIS, tens of billions on AUKUS, and then fix the tax system after.”
Adir: “We all know the order of politician motivations. One: get elected or stay elected. Two: get even. Three: everything else. You’re giving me two reasons in group three. The number one reason is they need votes from young people who don’t own property. That is the primary motivation.”
Adir: “I say this constantly and I hope I’m wrong. It is hard for me to see how the wholesale change required across Western liberal democracies happens before some episode of violence. Albo, instead of doing this political junk, should be focused on how do we save Western liberal democracy from itself.”
Smiggle: a cautionary tale
Billionaire retailer Solomon Lew flagged a turnaround plan for Smiggle, including introducing low-cost beauty items to arrest a dramatic slide. The kids’ stationery chain posted a first-half net profit of $101M, but strip out the disposal of Lew’s Myer stake and profits actually fell 13%. Smiggle sales peaked at $320M in 2023 and have since collapsed by more than 50%. Premier shares are back at $12, down from a brief peak of $27 in 2024.
The below gif represents what it’s like to walk into a Smiggle store.
Adir: “Smiggle never found the next thing. If you’re running a race and someone is catching you, in order not to be overtaken, you need to speed up. They never sped up. They had an opportunity to build long-term competitive advantage and they didn’t.”
Adir: “Sully should have sold it five years ago when it was worth something. Peter Alexander has a big opportunity, but there are real product quality complaints coming out of that business too. If you’re charging a premium, you cannot let the perceived quality of the product diminish. Trading at 14 times earnings, this is not cheap for a business delivering flat profit with one part going backwards and one part not what it was. This is a wait and watch.”
Canva’s not as profitable as we thought
Canva finally lodged its financial statements for 2023 and 2024. The headline numbers are impressive: revenue grew 45% to $2.1B AUD, with 220M active users and $700M in cash. But the loss was $241M in 2024, up from $232M in 2023, driven by $356M in share-based payments to staff. Co-founder Cliff Obrecht has been publicly claiming profitability - a claim Adam finds deeply unconvincing.
Adam: “Cliff’s been spending too much time with Scott and Mike. He’s trying to claim cash flow profitability is real profitability when it’s not. Atlassian ran that same line for years. Now the market has worked it out and marked them down 90%.”
Adir: “Most of us don’t get the luxury of running a business as great as Canva. When you are, you shouldn’t have to talk the way the rest of us have to talk. You should be so modest that whenever you say something, we assume it’s even better than you’re saying. That’s the mistake they make.”
Adam: “Canva is competing against Google and Microsoft, and they’re both formidable. If I could get $30B for this business, I’d be running for the hills. From a financial perspective, it’s looking a lot more like Atlassian than we thought it was.”
Five other stories worth following:
Prickly Pear Health is building an AI-powered platform focused on women’s brain health that uses voice analysis to help users understand how hormones impact cognitive and emotional health across life stages like pregnancy menopause.
An Oregon court fined an attorney $10K for submitting a legal brief containing AI-generated hallucinated citations and quotes after failed verification, highlighting risks of relying on AI search tools for legal research accuracy seriously.
Startup BioFluff is developing Savian, a plastic-free fur alternative made from plant fibers like hemp, flax, and nettle, reducing emissions significantly while biodegrading quickly, positioning it as a sustainable material for fashion brands globally.
Being a Crocs shareholder has been volatile, but high margins from proprietary Croslite foam and growing Jibbitz charm sales drive profits, with most customers buying accessories that boost revenue beyond core clog demand levels.
Eli Lilly struck a $2.75B deal with Insilico Medicine to access AI-driven drug discovery, securing rights to a GLP-1 diabetes treatment while leveraging China’s research ecosystem to accelerate development and future pipeline growth potential.