PR Newswire
TORONTO, Nov. 12, 2020
TORONTO, Nov. 12, 2020 /PRNewswire/ - Retained executive search firm The Caldwell Partners International Inc. (TSX: CWL) today issued its financial results for the fiscal 2020 fourth quarter and full year ended August 31, 2020. 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 | YEAR ENDED | |||
2020 | 2019 | 2020 | 2019 | |
Professional fees | $11,128 | $20,502 | $56,690 | $69,749 |
License fees | $24 | $71 | $177 | $700 |
Direct expense reimbursements | $102 | $398 | $1,326 | $1,689 |
Revenues | $11,254 | $20,971 | $58,193 | $72,138 |
Cost of sales | $8,696 | $14,838 | $44,352 | $53,046 |
Government stimulus grants | ($2,205) | - | ($2,446) | - |
Reimbursed direct expenses | $102 | $398 | $1,326 | $1,689 |
Gross profit | $4,661 | $5,735 | $14,961 | $17,403 |
Selling, general and administrative expenses | $2,752 | $4,460 | $11,588 | $14,074 |
Goodwill impairment | - | $1,521 | - | $1,521 |
Government stimulus grants | ($393) | - | ($393) | - |
Operating profit (loss) | $2,302 | ($246) | $3,766 | $1,808 |
Interest expense on lease liability¹ | $147 | - | $367 | - |
Investment income (loss) | ($7) | ($67) | $605 | ($211) |
Foreign exchange (gain) loss | ($128) | $105 | ($179) | $168 |
Earnings (loss) before tax | $2,290 | ($284) | $2,973 | $1,851 |
Income tax expense (income) | ($282) | $670 | $127 | $1,526 |
Net earnings (loss) after tax | $2,572 | ($954) | $2,846 | $325 |
Net earnings (loss) per share | $0.126 | ($0.047) | $0.139 | $0.016 |
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. |
"Fiscal 2020 was a year unlike any other," said John Wallace, chief executive officer. "After an incredible start to the year, the world went in a completely unexpected direction due to the pandemic and the ensuing economic uncertainty. The effect on our business has been significant, as employment levels and hiring at our clients were dramatically reduced, but it has also been the catalyst for an impressive level of innovation and adaptation inside our firm. Our team has done a superlative job of delivering outstanding and transformative leadership talent for our clients, and we have seen monthly sequential increases in new search volumes and business development activity. We remain extremely confident in the team's ability to garner market share throughout a recovering market."
Wallace continued: "As a result of quick and decisive steps to actively manage costs, preserve capital and enhance liquidity, we have come out of a challenging year in a position of financial strength. We have a balance sheet and a cash position with liquidity to operate during the current pandemic environment and do intend to make strategic investments to expand our industry, geographic and service coverage as the opportunities arise."
Financial Highlights (all numbers expressed in $000s)
Impact of the COVID-19 pandemic on our business:
We experienced record growth results leading up to the pandemic's occurrence. Fiscal 2019 revenue of $72.1 million was the highest in our firm's history, and the first half of fiscal 2020 (September 1, 2019 to February 28, 2020) was 12% higher than the same period in fiscal 2019. Since the onset of the pandemic, we have seen significant pressure on our business.
On January 30, 2020, the World Health Organization (WHO) characterized the novel coronavirus (COVID-19) as a public health emergency. At that time, there had not been a direct negative impact seen in the regions we operate in of Canada, the United States and the United Kingdom. On March 11, the WHO expanded its characterization of COVID-19 to a global pandemic. The impact of COVID-19 on the Company has been significant, impacting both revenue and costs. We were working entirely remotely beginning in March, and while we have reopened our offices as health restrictions provide, we are still encouraging our people to continue working remotely while safety concerns remain. We do not anticipate a full return to our offices until sometime later in 2021.
Government stimulus grants:
As discussed more fully in note 11 to our annual financial statements, we have participated in available stimulus grants offered by the governments in Canada and the United States to help offset the negative impact of the COVID-19 pandemic. The total amount of government stimulus grants recognized during 2020 was $2,839 ($241 and $2,598 in the third and fourth quarters, respectively). The costs are shown as offsets to the functional cost categories they applied to. Of the total, $707 was a direct grant pertaining to Canada, shown as an offset to cost of sales in the third and fourth quarters of $241 and $466, respectively. $2,132 pertained to the United States in the form of a loan that is eligible for forgiveness if certain conditions are met. We believe we have complied with the relevant provisions of the program by validly using the entire proceeds of the loan for qualifying expenses during the coverage period and have therefore concluded that forgiveness of the loan is probable. As a result, we have recategorized the proceeds from a loan to that of a government grant, represented by deductions in cost of goods sold ($1,739) and selling, general and administrative expenses ($393), respectively.
We applied for forgiveness review by our lender and the US government on September 21, 2020. It is unknown how long the loan forgiveness review process will take, with indication from our lender of up to five months. Ultimate forgiveness is dependent on the bank review and a further review by the Small Business Administration of the United States. While we believe the forgiveness criteria has been achieved, no guarantee of forgiveness can be given until formal forgiveness is received. It is possible the loan will not be forgiven and will need to be repaid.
Average Number of Partners, Annualized Professional Fees per Partner, Number of Assignments, Number of Assignments per Partner, Average Fee per Assignment, Revenue, Net of Reimbursements and Unencumbered Cash 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 the best people. Our reputation–50 years in the making–has been built on transformative searches across functions and geographies at the very highest levels of management and operations. With offices and partners across North America, Europe and Asia Pacific, we take pride in delivering an unmatched level of service and expertise to our clients.
Understanding that transformative talent is not limited to executive levels, our Caldwell Advance solution focuses on emerging leaders and advancing professionals who can also have a profound impact on a company's ability to turn potential into success. We also leverage our skills and networks to provide agile talent solutions in the form of flexible and on-demand advisory solutions for companies looking for support in strategy and operations. Caldwell Analytics is a talent optimization solution that uses highly respected, results-driven assessments to align our clients' talent and business strategies, driving better business results.
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 US, Canadian and international economies, including the impact of pandemic diseases; 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; technological advances may significantly disrupt the labour market and weaken demand for human capital at a rapid rate; foreign currency exchange rate fluctuations; affiliation agreements may fail to renew or affiliates may be acquired; marketable securities valuation fluctuations; increasing dependence on third parties for the execution of critical functions; volatility of the market price and volume of our common shares; potential impairment of our acquired goodwill and intangible assets; and disruption as a result of actions of certain stockholders or potential acquirers of the Company. 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 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 STATEMENTS OF FINANCIAL POSITION | |||
(in $000s Canadian) | |||
As at | As at | ||
August 31 | August 31 | ||
2020 | 2019 | ||
Assets | |||
Current assets | |||
Cash and cash equivalents | 14,481 | 10,623 | |
Marketable securities | - | 5,832 | |
Accounts receivable | 7,316 | 11,915 | |
Income taxes receivable | 928 | - | |
Unbilled revenue | 2,430 | 4,086 | |
Prepaid expenses and other assets | 2,553 | 2,320 | |
27,708 | 34,776 | ||
Non-current assets | |||
Restricted cash | 45 | 45 | |
Marketable securities | 71 | 85 | |
Advances | 695 | 1,047 | |
Property and equipment | 2,128 | 1,379 | |
Right-of-use assets | 7,691 | - | |
Goodwill | 1,288 | 1,313 | |
Deferred income taxes | 1,245 | 1,963 | |
Total assets | 40,871 | 40,608 | |
Liabilities | |||
Current liabilities | |||
Accounts payable | 1,764 | 3,389 | |
Compensation payable | 12,812 | 21,222 | |
Lease liability | 1,873 | - | |
Dividends payable | - | 459 | |
Income taxes payable | - | 576 | |
16,449 | 25,646 | ||
Non-current liabilities | |||
Compensation payable | 734 | 1,068 | |
Provisions | - | 49 | |
Lease liability | 6,932 | - | |
24,115 | 26,763 | ||
Equity attributable to owners of the Company | |||
Share capital | 7,515 | 7,515 | |
Contributed surplus | 15,013 | 15,005 | |
Accumulated other comprehensive income | 419 | 581 | |
Deficit | (6,191) | (9,256) | |
Total equity | 16,756 | 13,845 | |
Total liabilities and equity | 40,871 | 40,608 |
THE CALDWELL PARTNERS INTERNATIONAL INC. | |||
CONSOLIDATED STATEMENTS OF EARNINGS | Twelve months ended | ||
August 31 | |||
(in $000s Canadian, except per share amounts) | 2020 | 2019 | |
Revenues | |||
Professional fees | 56,690 | 69,749 | |
Licence fees | 177 | 700 | |
Direct expense reimbursements | 1,326 | 1,689 | |
58,193 | 72,138 | ||
Cost of sales expenses | |||
Cost of sales | 44,352 | 53,046 | |
Government stimulus grants | (2,446) | - | |
Reimbursed direct expenses | 1,326 | 1,689 | |
43,232 | 54,735 | ||
Gross profit | 14,961 | 17,403 | |
Operating expenses | |||
Selling, general and administrative | 11,588 | 14,074 | |
Goodwill impairment | - | 1,521 | |
Government stimulus grants | (393) | - | |
11,195 | 15,595 | ||
Operating profit | 3,766 | 1,808 | |
Finance expenses (income) | |||
Interest expense on lease liability | 367 | - | |
Investment loss (income) | 605 | (211) | |
Foreign exchange (gain) loss | (179) | 168 | |
Earnings before income tax | 2,973 | 1,851 | |
Income tax expense | 127 | 1,526 | |
Net earnings for the year attributable to owners of the Company | 2,846 | 325 | |
Earnings per share | |||
Basic & Diluted | $0.139 | $0.016 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS | |||
(in $000s Canadian) | |||
Twelve months ended | |||
August 31 | |||
2020 | 2019 | ||
Net earnings for the year | 2,846 | 325 | |
Other comprehensive income: | |||
Items that may be reclassified subsequently to net earnings | |||
Gain (loss) on marketable securities | 210 | (55) | |
Cumulative translation adjustment | (372) | 197 | |
Comprehensive earnings for the year attributable to owners of the Company | 2,684 | 467 |
Certain comparative figures have been restated to conform with current year presentation. |
THE CALDWELL PARTNERS INTERNATIONAL INC. | ||||||
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | ||||||
(in $000s Canadian) | ||||||
Accumulated Other Comprehensive | ||||||
Income (Loss) | ||||||
Unrealized | ||||||
Cumulative | Gains (Loss) on | |||||
Contributed | Translation | 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) | 0 |
Adoption of IFRS 15 | 1,291 | - | - | - | - | 1,291 |
Net earnings for the year | 325 | - | - | - | - | 325 |
Dividend payments declared | (1,836) | - | - | - | - | (1,836) |
Share-based payment expense | - | - | 3 | - | - | 3 |
Change in unrealized loss on | - | - | - | - | (55) | (55) |
marketable securities available for sale | ||||||
Change in cumulative translation adjustment | - | - | - | 197 | - | 197 |
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 year | 2,846 | - | - | - | - | 2,846 |
Dividend payments declared | (918) | - | - | - | - | (918) |
Share-based payment expense | - | - | 8 | - | - | 8 |
Change in unrealized loss on | - | - | - | - | 210 | 210 |
marketable securities available for sale | ||||||
Change in cumulative translation adjustment | - | - | - | (372) | - | (372) |
Balance - August 31, 2020 | (6,191) | 7,515 | 15,013 | 595 | (176) | 16,756 |
The accompanying notes are an integral part of these consolidated financial statements. |
THE CALDWELL PARTNERS INTERNATIONAL INC. | |||||
CONSOLIDATED STATEMENTS OF CASH FLOW | |||||
(in $000s Canadian) | |||||
Twelve months ended | |||||
August 31 | |||||
2020 | 2019 | ||||
Cash flow provided by (used in) | |||||
Operating activities | |||||
Net earnings for the year | 2,846 | 325 | |||
Add (deduct) items not affecting cash | |||||
Depreciation of property and equipment | 461 | 520 | |||
Amortization of intangible assets | - | 94 | |||
Depreciation of right-of-use assets | 1,565 | - | |||
Amortization of advances | 1,128 | 898 | |||
Gain on government stimulus grants | (2,132) | - | |||
Loss on disposition of assets | 103 | 20 | |||
Loss on disposition of right-of-use assets | 87 | - | |||
Reduction in lease liability due to early termination | (91) | - | |||
Interest expense on lease liabilities | 367 | - | |||
Fees received in shares | (23) | - | |||
Loss (gain) on marketable securities classified as FVPL | 625 | (177) | |||
Share based payment expense | 8 | 3 | |||
(Gain) loss on unrealized foreign exchange on subsidiary loans | (262) | 136 | |||
Decrease in provisions | - | (44) | |||
Decrease in deferred revenue | - | (449) | |||
Decrease (increase) in unbilled revenue | 1,623 | (558) | |||
Decrease (increase) in deferred income taxes | 520 | (541) | |||
Decrease in cash settled share-based compensation | (334) | (547) | |||
Decrease in goodwill | - | 1,521 | |||
Changes in working capital | (5,102) | (1,160) | |||
Net cash provided by operating activities | 1,389 | 41 | |||
Investing activities | |||||
Proceeds from sale of marketable securities | 5,207 | - | |||
Tenant inducement on right-of-use assets | 367 | - | |||
Payment of advances | (576) | (2,260) | |||
Proceeds from release of restricted cash | - | 94 | |||
Purchase of property and equipment | (1,320) | (564) | |||
Proceeds from the disposition of property and equipment | - | 38 | |||
Net cash used in investing activities | 3,678 | (2,692) | |||
Financing activities | |||||
Dividend payments | (1,377) | (1,836) | |||
Payment of lease liabilities | (2,021) | - | |||
Sublease payments received | 310 | - | |||
Proceeds from government loan | 2,267 | - | |||
Net cash provided by (used in) financing activities | (821) | (1,836) | |||
Effect of exchange rate changes on cash and cash equivalents | (388) | 225 | |||
Net increase (decrease) in cash and cash equivalents | 3,858 | (4,262) | |||
Cash and cash equivalents, beginning of year | 10,623 | 14,885 | |||
Cash and cash equivalents, end of year | 14,481 | 10,623 |
The net impact of opening balance sheet adjustments as a result of implementing IFRS 15 and 16 have been eliminated in the creation of the consolidated statements of cash flow. |
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SOURCE The Caldwell Partners International Inc.