Caldwell Partners International : Reports Continued Revenue Growth

-  First quarter revenue of $18.1 million, a 14% increase year over year.
-  Net earnings after tax of $462,000, a 119% increase year over year.
-  Board declares 32^nd consecutive quarterly dividend.

TORONTO, Jan. 9, 2020 /PRNewswire/ - Retained executive search firm The Caldwell Partners International Inc. (TSX: CWL) today issued its financial results for the fiscal 2020 first quarter ended November 30, 2019. All references to quarters or years are for the fiscal periods unless otherwise noted and all currency amounts are in Canadian dollars.

Financial Highlights (in $000s except per share amounts)

	Three Months Ended November 30
	2019	2018
Professional fees	$17,498	$15,169
License fees	$59	$217
Direct expense reimbursements	$519	$506
Revenues	$18,076	$15,892
Cost of sales	$13,467	$11,578
Reimbursed direct expenses	$519	$506
Expenses	$3,542	$3,379
Operating profit	$548	$429
Interest expense on lease liability	$66	$-
Investment income	$71	($41)
Earnings before tax	$553	$388
Net earnings after tax	$462	$211
Net earnings per share	$0.023	$0.010

1	Effective September 1, 2019 IFRS 16 was implemented resulting in a change to the way leases are treated and giving rise to interest expense on lease liability. During periods prior to fiscal 2020, all lease related expenses were recognized as occupancy costs and included in expenses in arriving at operating profit.

 

"This was another excellent quarter and a strong start to our fiscal year," said John Wallace, chief executive officer. "We said we were well-positioned heading into fiscal 2020, and we are pleased to be delivering on that promise with a 14% increase in revenue and a 119% increase in net earnings after tax to start our fiscal year. This improvement is due in part to a stronger US market year-over-year, and a rebound by our UK team as new business booking and business development activity has increased substantially."

Wallace continued: "We are confident regarding the overall business climate as we head into the second quarter, and remain very positive about the coming year as a whole. We continue to recruit new partners and teams to strengthen and expand our industry and geographic coverage in order to better serve our clients." 

The Board of Directors today also declared the payment of a quarterly dividend of 2.25 cents per Common Share payable to holders of Common Shares of record on January 21, 2020 and to be paid on March 16, 2020.

Financial Highlights (all numbers expressed in $000s)

• Operating revenue:

First Quarter

• Professional fees for the first quarter of fiscal 2020 increased 15.4% (an increase of 14.5% excluding a favourable 0.9% variance from exchange rate fluctuations) over the comparable period last year to $17,498 (2019: $15,169). The increase in professional fees is attributable to a higher Average Fee per Assignment of $155 ($154 excluding exchange rate fluctuations; 2019: $140) and an increase in the Number of Assignments to 113 (2019: 108). The Number of Assignments grew on a higher Number of Assignments per Partner at 2.9 (2019: 2.7) partially offset by a lower Average Number of Partners at 39.0 (2019: 39.3). On a segment basis, $12,885 of professional fees were generated from the US (2019: $10,886), $3,729 from Canada (2019: $3,813) and $884 from Europe (2019: $470).
  
  
• License fees from our licensees in Australia and New Zealand for the use of the Caldwell brand and intellectual property for the fiscal 2020 first quarter were $59 (2019: $217). Last year's results included $133 in license fees from CPGroup LatAm, with whom the Company ended its licensing relationship effective February 28, 2019.
  
  
• Direct expenses incurred and billed to clients during the fiscal 2020 first quarter were $519 (2019: $506).
  
  
• Operating profit:

First Quarter

• The operating profit for the first quarter of 2020 was $548, a $119 increase over $429 Last year. (2019: $429). The $119 increase was the result of higher Revenue, Net of Reimbursements ($2,171) partially offset by the combination of higher cost of sales ($1,889) and higher expenses ($163).
  
  
• As a percentage of professional fees, cost of sales increased 0.7% to 77.0%, up from 76.3% in the same period last year. The increase as a percentage of professional fees was due to higher partner compensation from higher average commission grid achievements on higher Annualized Professional Fees per Partner as well as partners in lower tiers earning draws greater than commission earnings (1.9% of professional fees). This increase was partially offset by lower partner support personnel compensation which is semi-fixed (down 1.3% of professional fees). Search delivery materials were flat as a percentage of professional fees.
  
  
• Expenses in the first quarter increased 4.8% or $163 over the same period in the prior year to $3,542 (2019: $3,379). Excluding the impact of exchange rate variances of $22, expenses increased $141 or 4.2% over the same period last year. This constant currency increase was the result of our holding our annual partner conference in the first quarter this year but in the second quarter of the previous year ($335). We also experienced increases in consulting costs related to growth initiatives ($98), expanded marketing expenses ($52), higher corporate staff compensation on increased headcount ($62) and general increases across smaller categories ($52). These unfavourable variances were partially offset by a decrease in share-based compensation expense, the result of a significant share price increase in the prior year period leading to increased expense in the prior year ($203), foreign exchange gains on intercompany loans and US dollar bank account balances this year versus losses last year ($167) and lower occupancy expense caused by the adoption of IFRS 16 as discussed below ($66).
  
  
• Effective September 1, 2019 we implemented IFRS 16 as discussed in the interim consolidated financial statements and related MD&A. An interest expense on lease liability of $66 (2018: $nil) was recognized during the quarter in accordance with IFRS 16. During periods prior to fiscal 2020, all lease related expenses were recognized as occupancy costs and included in expenses in arriving at operating profit.
  
  
• On a segment basis, fourth quarter operating profit was $286 (2019: $550) from Canada, $122 (2019: $125) from the US and $140 (2019: loss of $246) from Europe
  
• Net earnings after tax:
• First quarter net income was $462 ($0.023 per share), as compared to $211 ($0.010 per share) in the comparable period a year earlier.

Average Number of Partners, Professional Fees per Partner, Number of Assignments, Number of Assignments per Partner, and Average Fee per Assignment do not have any standardized meaning under IFRS and may not be comparable to measures presented by other companies. These operating measures are used by the Company to analyze its results. Please refer to section "Non‐GAAP Financial Measures and Other Operating Measures" in the Company's MD&A for a definition of these terms.

For a complete discussion of the quarterly financial results, please see the company's Management Discussion and Analysis posted on SEDAR at www.sedar.com.

About Caldwell

At Caldwell we believe Talent Transforms. As a leading provider of executive talent, we enable our clients to thrive and succeed by helping them identify, recruit and retain their best people. Our reputation–nearly 50 years in the making–has been built on transformative searches across functions and geographies at the very highest levels of management and operations. We leverage our skills and networks to also provide agile talent in the form of flexible and on-demand advisory solutions for companies looking for support in strategy and operations. With offices and partners across North America, Europe, Latin America and Asia Pacific, we take pride in delivering an unmatched level of service and expertise to our clients.

Caldwell's Common shares are listed on The Toronto Stock Exchange (TSX: CWL). Please visit our website at www.caldwellpartners.com for further information.

Forward-Looking Statements

Forward-looking statements in this document are based on current expectations that are subject to the significant risks and uncertainties cited. These forward-looking statements generally can be identified by use of statements that include phrases such as "believe," "expect," "anticipate," "intend," "plan," "foresee," "may," "will," "likely," "estimates," "potential," "continue" or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals also are forward-looking statements. The Company is subject to many factors that could cause our actual results to differ materially from those contemplated by the relevant forward looking statement including, but not limited to, our ability to attract and retain key personnel; exposure to our Partners taking our clients with them to another firm; the performance of the Canadian, US and international economies; competition from other companies directly or indirectly engaged in executive search; liability risk in the services we perform; potential legal liability from clients, employees and candidates for employment; cybersecurity requirements, vulnerabilities, threats and attacks; damage to our brand reputation; our ability to align our cost structure to changes in our revenue; adverse tax law rulings; our ability to generate sufficient cash flow from operations to support our growth and maintain our dividend; foreign currency exchange rate fluctuations; marketable securities valuation fluctuations; volatility of the market price and volume of our common shares; any potential impairment of our acquired goodwill and intangible assets; and the risk associated with license fee agreement renewals. For more information on the factors that could affect the outcome of forward-looking statements, refer to the "Risk Factors" section of our Annual Information Form and other public filings (copies of which may be obtained at www.sedar.com). These factors should be considered carefully and the reader should not place undue reliance on the forward-looking statements. Although any forward-looking statements are based on what management currently believes to be reasonable assumptions, we cannot assure readers that actual results, performance or achievements will be consistent with these forward-looking statements, and management's assumptions may prove to be incorrect. Except as required by Canadian securities laws, we do not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by us or on our behalf; such statements speak only as of the date made. The forward-looking statements included herein are expressly qualified in their entirety by this cautionary language.

THE CALDWELL PARTNERS INTERNATIONAL INC.
CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
(unaudited - in $000s Canadian)
									As at
									November 30	August 31
									2019	2019
Assets
Current assets
	Cash and cash equivalents								12,589	10,623
	Marketable securities								5,895	5,832
	Accounts receivable								9,872	11,915
	Unbilled revenue								3,853	4,086
	Prepaid expenses and other current assets								2,332	2,320
									34,541	34,776
Non-current assets
	Restricted cash								45	45
	Marketable securities								85	85
	Advances								900	1,047
	Property and equipment								1,438	1,379
	Right-of-use assets								5,124	-
	Goodwill								1,312	1,313
	Deferred income taxes								1,542	1,963
Total assets									44,987	40,608
Liabilities
Current liabilities
	Accounts payable								1,536	3,389
	Compensation payable								20,466	21,222
	Lease liability								1,679	-
	Dividends payable								459	459
	Income taxes payable								636	576
									24,776	25,646
Non-current liabilities
	Compensation payable								1,301	1,068
	Provisions								-	49
	Lease liability								4,059	-
									30,136	26,763
Equity attributable to owners of the Company
	Share capital								7,515	7,515
	Contributed surplus								15,005	15,005
	Accumulated other comprehensive income								447	581
	Deficit								(8,116)	(9,256)
Total equity									14,851	13,845
Total liabilities and equity									44,987	40,608

 

THE CALDWELL PARTNERS INTERNATIONAL INC.
CONSOLIDATED INTERIM STATEMENTS OF EARNINGS
(unaudited - in $000s Canadian, except per share amounts)
									Three months ended
									November 30
									2019	2018
Revenues
	Professional fees								17,498	15,169
	License fees								59	217
	Direct expense reimbursements								519	506
									18,076	15,892
Cost of sales									13,467	11,578
Reimbursed direct expenses									519	506
									13,986	12,084
Gross profit									4,090	3,808
Expenses
	General and administrative								3,348	3,076
	Sales and marketing								347	292
	Foreign exchange (gain) loss								(153)	11
									3,542	3,379
Operating profit									548	429
Interest expense on lease liability									66	-
Investment (income) loss									(71)	41
Earnings before income taxes									553	388
Income taxes									91	177
Net earnings for the period attributable to owners of the Company									462	211
Earnings per share
	Basic and diluted								0.023	0.010
CONSOLIDATED INTERIM STATEMENTS OF
COMPREHENSIVE EARNINGS
(unaudited - in $000s Canadian)
									Three months ended
									November 30
									2019	2018
Net earnings for the period									462	211
Other comprehensive income:
Item that may be reclassified subsequently to net earnings
	Cumulative translation adjustment								(134)	169
Comprehensive earnings for the period attributable to owners of the Company									328	380

 

THE CALDWELL PARTNERS INTERNATIONAL INC.
CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY
(unaudited - in $000s Canadian)
				Accumulated Other Comprehensive
				Income (Loss)
				Cumulative	Gains/(losses)
			Contributed	Translation	on Marketable	Total
	Deficit	Share Capital	Surplus	Adjustment	Securities	Equity
Balance - August 31, 2018	(9,854)	7,515	15,002	770	487	13,920
Adoption of IFRS 9	818	-	-	-	(818)	-
Adoption of IFRS 15	1,291	-	-	-	-	1,291
Net earnings for the three month period ended
November 30, 2018	211	-	-	-	-	211
Dividend payments declared	(459)	-	-	-	-	(459)
Share based payment expense	-	-	1	-	-	1
Change in cumulative translation adjustment	-	-	-	169	-	169
Balance - November 30, 2018	(7,993)	7,515	15,003	939	(331)	15,133
Balance - August 31, 2019	(9,256)	7,515	15,005	967	(386)	13,845
Adoption of IFRS 16	1,137	-	-	-	-	1,137
Net earnings for the three month period ended
November 30, 2019	462	-	-	-	-	462
Dividend payments declared	(459)	-	-	-	-	(459)
Change in cumulative translation adjustment	-	-	-	(134)	-	(134)
Balance - November 30, 2019	(8,116)	7,515	15,005	833	(386)	14,851
The accompanying notes are an integral part of these consolidated interim financial statements.

THE CALDWELL PARTNERS INTERNATIONAL INC.
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOW
(unaudited - in $000s Canadian)
									Three months ended
									November 30
									2019	2018
Cash flow provided by (used in)
Operating activities
	Net earnings for the period								462	211
	Add (deduct) items not affecting cash
		Depreciation of property and equipment							109	127
		Amortization of intangible assets							-	23
		Depreciation of right-of-use assets							333	-
		Amortization of advances							239	186
		Interest expense on lease liabilities							66	-
		Gain (loss) on marketable securities classified as FVPL							(64)	56
		Share based payment expense							-	1
		Unrealized foreign exchange on subsidiary loans							(162)	13
		Decrease in provisions							-	(11)
		Decrease in deferred revenue							-	(436)
		Decrease in unbilled revenue							233	297
		Increase in deferred income taxes							-	(50)
		Increase in cash settled share-based compensation							233	334
	Changes in working capital
		Decrease in accounts receivable							2,036	2,163
		Decrease (increase) in prepaid expenses and other assets							382	(53)
		Decrease in accounts payable							(249)	(294)
		Decrease in compensation payable							(759)	(3,145)
		Increase in income taxes payable							60	227
Net cash provided by (used in) operating activities									2,919	(351)
Investing activities
	Increase in advances								-	(845)
	Decrease in restricted cash								-	47
	Additions to property and equipment								(167)	(65)
Net cash used in investing activities									(167)	(863)
Financing activities
	Dividend payments								(459)	(408)
	Payment of lease liabilities								(424)	-
	Sublease payments received								76	-
Net cash used in financing activities									(807)	(408)
Effect of exchange rate changes on cash and cash equivalents									21	173
Net increase (decrease) in cash and cash equivalents									1,966	(1,449)
Cash and cash equivalents, beginning of period									10,623	14,885
Cash and cash equivalents, end of period									12,589	13,436
The net impact of opening balance sheet adjustments as a result of implementing IFRS 16 have been eliminated in the creation of
the consolidated interim statrements of cash flow.

 

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SOURCE The Caldwell Partners International Inc.