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Caldwell Issues Fiscal 2020 Fourth Quarter and Full Year Financial Results

·20 min read
  • Fourth quarter revenue of $11.3 million.

  • Fourth quarter operating profit of $2.3 million.

  • Annual revenue of $58.2 million.

  • Annual operating profit of $3.8 million.

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.

As a leading provider of executive talent, Caldwell enables clients to thrive and succeed by helping them identify, recruit and retain the best people. (CNW Group/The Caldwell Partners International Inc.)
As a leading provider of executive talent, Caldwell enables clients to thrive and succeed by helping them identify, recruit and retain the best people. (CNW Group/The Caldwell Partners International Inc.)

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


THREE MONTHS ENDED
AUGUST 31

YEAR ENDED
AUGUST 31


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.

  • Operating revenue:


    Fourth Quarter

  • Operating profit:
    Fourth Quarter

  • Net earnings after tax:

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.

Cision
Cision

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SOURCE The Caldwell Partners International Inc.