The Caldwell Partners International Issues Fiscal 2018 Third Quarter Financial Results

  • Third quarter revenue of $18 million.
  • Operating profit of $1.3 million.
  • Board declares 26th consecutive quarterly dividend.

TORONTO, July 10, 2018 /PRNewswire/ – Retained executive search firm The Caldwell Partners International Inc. (TSX: CWL) today issued its financial results for the fiscal 2018 third quarter ended May 31, 2018. 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

May 31

Nine Months Ended
May 31

2018

2017

2018

2017

Professional fees

$17,942

$14,443

$47,769

$41,737

License fees

$86

$81

$229

$218

     Revenues

$18,028

$14,524

$47,998

$41,955

Cost of sales

$13,099

$10,771

$35,416

$30,717

Expenses

$3,648

$3,131

$9,690

$8,911

     Operating profit

$1,281

$622

$2,892

$2,327

Investment income (loss) from marketable securities

$2

($142)

$6

($142)

     Earnings before tax

$1,283

$480

$2,898

$2,185

     Net earnings after tax (1)

$987

$224

$1,667

$1,253

     Net earnings per share

$0.048

$0.011

$0.082

$0.062

 

1.

As a result of the new substantively enacted tax rate, the Company's US entity deferred tax balances were adjusted during the second quarter, resulting in additional deferred tax expense of $204 during the nine-month period ending May 31, 2018. No such expense was incurred in the prior year.

 

"This was an outstanding quarter, bringing the firm to a new high-water mark for revenue," said John Wallace, chief executive officer. "Our search teams throughout our geographic regions drove strong growth in both search volume and the value of assignments, despite pressure from foreign currency rates. We are especially pleased with the quarterly profit of our UK operations. With the largest level of new bookings and revenue in a single quarter in our history, we are positioned well for the fourth quarter. The significant increase in volume and our sustained focus on strategic additions to our partner team is creating search execution support needs, for which we will continue to hire in the fourth quarter."

Wallace continued: "There is a lot of positive momentum inside our firm right now – our updated brand has been very well received since its debut, and we are excited about the recent expansion of our Agile Talent offering with the launch of our Value Creation Advisory Solution. We have an exceptional team of talented professionals at every level, all working towards a common goal – to provide value to our clients and shareholders – and it shows."

The Board of Directors today also declared the payment of a quarterly dividend of 2.0 cents per Common Share payable to holders of Common Shares of record on July 19, 2018 and to be paid on September 13, 2018.

Financial Highlights (all numbers expressed in $000s)

  • Operating revenue:

Third Quarter

    • Professional fees for the third quarter of 2018 increased 24.2% (up 28.2% excluding an unfavourable 4% variance from exchange rate fluctuations) over the comparable period last year to $17,942 (2017: $14,443).
      • Third quarter professional fees in the US were up 22.8% (up 28.9% excluding an unfavourable 6.1% variance from exchange rate fluctuations) to $13,492 (2017: $10,988). This was the result of increases in the Average Number of Partners, Number of Assignments per Partner and Average Fee per Assignment.
      • Third quarter professional fees in Canada were up 10.0% to $3,527 (2017: $3,205). A higher Average Fee per Assignment and a higher Number of Assignments per Partner were partially offset by a lower Average Number of Partners.
      • Third quarter professional fees in Europe were up 269.2% (up 252.7% excluding a favourable 16.5% variance from exchange rate fluctuations) to $923 (2017: $250), with a lower Number of Assignments per Partner being more than offset by a higher Average Number of Partners and a significantly higher Average Fee per Assignment.
    • License fees from our licensees in Latin America and New Zealand for the use of the Caldwell brand and intellectual property for the 2018 third quarter were $86 (2017: $81).

Year to date

    • Professional fees for the first nine months of 2018 increased 14.5% (18.4% excluding an unfavourable 3.9% variance from exchange rate fluctuations) over the comparable period last year to $47,769 (2017: $41,737).
      • Year to date professional fees in the US were up 14.0% (up 19.6% excluding an unfavourable 5.6% variance from exchange rate fluctuations) to $35,526 (2017: $31,166). This was the result of increases in the Average Number of Partners, Number of Assignments per Partner and Average Fee per Assignment.
      • Year to date professional fees in Canada were up 9.6% to $10,710 (2017: $9,773), with a higher Average Fee per Assignment and a higher Number of Assignments per Partner being partially offset by a lower Average Number of Partners.
      • Year to date professional fees in Europe were up 92.1% (up 83.2% excluding a favourable 8.9% variance from exchange rate fluctuations) to $1,533 (2017: $798), with a lower Number of Assignments per Partner being more than offset by the higher Average Number of Partners and higher Average Fee per Assignment.
    • Year to date license fees for the nine-month period ended May 31, 2018 were $229 (2017: $218).
  • Operating profit:

Third Quarter

    • For the third quarter of 2018, increased revenue ($3,504), partially offset by increased cost of sales ($2,328) and expenses ($517) increased operating profit by $659 to $1,281 (2017: $622).
    • Third quarter cost of sales increased 21.6% (25.9% excluding a favourable 4.3% variance from exchange rate fluctuations), or $2,328 to $13,099 (2017: $10,771).
    • Expenses in the third quarter increased 16.5% or $517 over the same period in the prior year to $3,648 (2017: $3,131). Excluding exchange rate variances, expenses increased $603 or 19.3% over the same period last year. This constant currency increase was the result of expenses from our partner conference held in the current quarter this year versus the second quarter in the prior year ($376), higher bonus accruals on firm performance ($94), foreign exchange losses on intercompany loans and US dollar bank account balances in the current period versus gains in the prior period ($65), increased marketing costs due to brand update initiative ($62) and a net increase across other expense categories ($6).
    • Excluding exchange rate variances, operating profit increased $695 to $1,317. On a segment basis, $621 of operating profit was from the US ($926 net of intercompany license fees), $388 of operating profit was from Canada ($83 net of intercompany license fees) and $272 was from Europe.

Year to date

    • Year to date, higher revenue ($6,043), partially offset by higher cost of sales ($4,699) and expenses ($779) increased operating profit by $565 to $2,892 (2017: $2,327).
      • Year to date cost of sales increased 15.3% (19.5% excluding a favourable 4.2% variance from exchange rate fluctuations), or $4,699 to $35,416 (2017: $30,717).
      • Year to date expenses increased $779 over the same period in the prior year to $9,690 (2017: $8,911). Excluding exchange rate variances, expenses increased $1,020 or 11.4% over the same period last year. Constant currency increases were the result of share-based compensation expense caused by an increase in the share price in the current year versus a decline in the share price in the same period last year ($225), increased marketing expenses related to our brand update initiative that is now complete ($210), firm-wide search team practice meetings for business development and training being held during the current year but not in the prior year ($182), a reduction in the final Hawksmoor acquisition earn-out amount payable recognized in the prior year with no such reduction in the current year as the amount was fully settled ($115), increased business development costs on higher revenue ($113), and net general increases across other categories ($175).
    • Excluding exchange rate variances, operating profit increased $716 to $3,043. On a segment basis, $1,710 of operating profit was from the US ($2,513 net of intercompany license fees), $1,566 of operating profit was from Canada ($763 net of intercompany license fee revenue) and Europe's operating loss was $383.
  • Net earnings after tax:
    • Third quarter net income was $987 ($0.048 per share), as compared to $224 ($0.011 per share) in the comparable period a year earlier.
    • Year-to-date net income was $1,667 ($0.082 per share), as compared to $1,253 ($0.062 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

As at

May 31

August 31

2018

2017

Assets

Current assets

Cash and cash-equivalents

10,460

10,917

Marketable securities

5,620

5,048

Accounts receivable

9,964

9,393

Prepaid expenses and other assets

1,929

1,848

27,973

27,206

Non-current assets

Restricted cash

137

133

Marketable securities

177

172

Advances

168

503

Property and equipment 

1,480

1,699

Intangible assets 

115

178

Goodwill 

2,902

2,761

Deferred income taxes

1,488

1,650

Total assets

34,440

34,302

Liabilities

Current liabilities

Accounts payable

2,352

2,044

Compensation payable

15,813

15,896

Dividends payable

408

408

Income taxes payable

485

636

Deferred revenue

189

1,107

19,247

20,091

Non-current liabilities

Compensation payable

1,146

958

Provisions

105

133

20,498

21,182

Equity attributable to owners of the Company

Share Capital

7,515

7,515

Contributed surplus

15,000

14,992

Accumulated other comprehensive income

1,221

850

Deficit 

(9,794)

(10,237)

Total equity

13,942

13,120

Total liabilities and equity

34,440

34,302

 

THE CALDWELL PARTNERS INTERNATIONAL INC.

CONSOLIDATED INTERIM STATEMENTS OF EARNINGS

(unaudited – in $000s Canadian)

Three months ended

Nine months ended

May 31

May 31

2018

2017

2018

2017

Revenues

Professional fees

17,942

14,443

47,769

41,737

License fees

86

81

229

218

18,028

14,524

47,998

41,955

Cost of sales

13,099

10,771

35,416

30,717

Gross profit

4,929

3,753

12,582

11,238

Expenses

General and administrative

3,234

2,903

8,782

8,275

Sales and marketing

395

277

964

716

Foreign exchange (gain) loss

19

(49)

(56)

(80)

3,648

3,131

9,690

8,911

Operating profit

1,281

622

2,892

2,327

Investment income (loss)

2

(142)

6

(142)

Earnings before income tax

1,283

480

2,898

2,185

Income tax expense

296

256

1,231

932

Net earnings for the period attributable to owners of the Company

987

224

1,667

1,253

Earnings per share

Basic and diluted

$0.048

$0.011

$0.082

$0.062

CONSOLIDATED INTERIM STATEMENTS OF 

COMPREHENSIVE EARNINGS

(unaudited – in $000s Canadian)

Three months ended

Nine months ended

May 31

May 31

2018

2017

2018

2017

Net earnings for the period

987

224

1,667

1,253

Other comprehensive income (loss):

Realization of loss included in net income

142

142

Unrealized (loss) gain on marketable securities

(17)

37

72

190

Cumulative translation adjustment

53

219

299

191

Comprehensive earnings for the period attributable to owners of the Company

1,023

622

2,038

1,776

 

THE CALDWELL PARTNERS INTERNATIONAL INC.

CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY

(unaudited – in $000s Canadian)

Accumulated Other Comprehensive

Income 

Unrealized

Cumulative 

Gains on

Contributed

Translation

Marketable

Total

Deficit

Capital Stock

Surplus

Adjustment

Securities

Equity

Balance – September 1, 2016

(10,572)

7,295

15,025

841

338

12,927

Net earnings for the nine month period ended 

May 31, 2017

1,253

1,253

Dividend payments declared

(1,213)

(1,213)

Employee share option plan share issue

220

(33)

187

Realization of losses included in net earnings

142

142

Change in unrealized gain on

marketable securities available for sale

190

190

Change in cumulative translation adjustment

191

191

Balance – May 31, 2017

(10,532)

7,515

14,992

1,032

670

13,677

Balance – September 1, 2017

(10,237)

7,515

14,992

428

422

13,120

Net earnings for the nine month period ended 

May 31, 2018

1,667

1,667

Dividend payments declared

(1,224)

(1,224)</

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