- Second quarter revenue of $14.9 million.
- Operating profit of $0.7 million.
- Board declares twenty-fifth consecutive quarterly dividend.
Toronto, Ontario– April 5, 2018 – Retained executive search firm The Caldwell Partners International Inc. (TSX: CWL) today issued its financial results for the fiscal 2018 second quarter ended February 28, 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)
*Months Ended May 31
|Three Months Ended May 31||Nine Months Ended May 31|
|Professional fees||$14,854||$ 13,665||$29,827||$27,294|
|Cost of sales||$11,244||9,725||$22,317||19,946|
|Operating profit||$707||$ 606||$1,611||$1,705|
|Investment income from marketable securities||$ 2||–||$4||–|
|Earnings before tax||$ 709||$ 606||$1,615||$1,705|
|Net earnings after tax (1)||$ 270||$ 267||$680||$1,029|
|Net earnings per share||$ 0.013||$ 0.013||$0.033||$0.051|
As a result of new substantively enacted tax rate, the Company’s US entity deferred tax balances were adjusted during the quarter, resulting in additional deferred tax expense of $204 during the current year’s second quarter. No such expense was incurred in the prior period.
“Our partner and support teams extended their strong results from the first quarter,” said John Wallace, chief executive officer. “We saw a notable increase in new bookings across all geographies, particularly in the back half of the second quarter, and have positive momentum going into the third quarter. Additionally, we have significantly increased revenue and narrowed our losses in the UK as our new partners begin to gain traction in the marketplace. We are committed to the region’s growth and do look forward to moving into new, more cost effective, office space in London, during the third quarter.
Wallace continued: “We remain focused on the recruitment of new partners and teams who will both broaden our client-facing capabilities and who will further contribute to increasing and sustaining revenues and profitability. We do expect to announce additional partners over the course of the last half of the current fiscal year.”
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 April 16, 2018 and to be paid on June 11, 2018.
Financial Highlights (all numbers expressed in $000s)
- Professional fees for the second quarter of 2018 increased 8.7% (up 12.1% excluding an unfavourable 3.4% variance from exchange rate fluctuations) over the comparable period last year to $14,854 (2017: $13,665).
- Second quarter professional fees in the US were down 1.2% (up 3.5% excluding an unfavourable 4.7% variance from exchange rate fluctuations) to $10,489 (2017: $10,621). Increases in the Average Number of Partners and Number of Assignments per Partner were more than offset by a lower Average Fee per Assignment in local currency and compounded by unfavourable exchange rate fluctuations.
- Second quarter professional fees in Canada were up 27.5% to $3,799 (2017: $2,979). A higher Average Fee per Assignment and a higher Number of Assignments per Partner were partially offset by a lower Average Number of Partners.
- Second quarter professional fees in Europe were up 770.8% (up 722.5% excluding a favourable 48.3% variance from exchange rate fluctuations) to $566 (2017: $65). The addition of one new partner in the second half of 2017 and another in the first quarter of the current year resulted in a higher Average Number of Partners and increased activity during the quarter resulting in a higher Number of Assignments per Partner and Average Fee per Assignment. Given the low number of partners in the region and recent tenure of two of the three, the Company expects ongoing quarterly revenue fluctuations and profit suppression as the newly hired partners transition into the Company.
- License fees from our licensees in Latin America and New Zealand for the use of the Caldwell Partners brand and intellectual property for the 2018 second quarter were $67 (2017: $62).
Year to date
- Professional fees for the first six months of 2018 increased 9.3% (13.3% excluding an unfavourable 4.0% variance from exchange rate fluctuations) over the comparable period last year to $29,827 (2017: $27,294).
- Year to date professional fees in the US were up 9.2% (up 14.8% excluding an unfavourable 5.6% variance from exchange rate fluctuations) to $22,034 (2017: $20,178). Increases in the Average Number of Partners and the Number of Assignments per Partner were partially offset by a slightly lower Average Fee per Assignment which was consistent in local currency but negatively impacted by unfavourable exchange rate fluctuations.
- Year to date professional fees in Canada were up 9.4% to $7,183 (2017: $6,568), 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 11.3% (up 6.0% excluding a favourable 5.3% variance from exchange rate fluctuations) to $610 (2017: $548), with a lower Number of Assignments per Partner and Average Fee per Assignment being more than offset by the higher Average Number of Partners.
- Year to date license fees for the six-month period ended February 28, 2018 were $143 (2017: $137).
- For the second quarter of 2018, increased revenue ($1,194), increased cost of sales ($1,519) and lower expenses ($426) increased operating profit by $101 to $707 over the comparable period in the prior year (2017: $606).
- Second quarter cost of sales increased 15.6% (19.3% excluding a favourable 3.7% variance from exchange rate fluctuations), or $1,519 to $11,244 (2017: $9,725).
- Expenses in the second quarter decreased 12.5% or $426 over the same period in the prior year to $2,970 (2017: $3,396). Excluding exchange rate variances, expenses decreased $374 or 11.0% over the same period last year. This constant currency decrease was the result of the lack of partner conference expenses in the current quarter as the annual partner conference will be held in the upcoming third quarter this year versus the second quarter in the prior year ($341), and decreases in corporate salaries and bonus accruals ($72). These declines were partially offset by net increases across other cost categories ($39).
- Excluding exchange rate variances, operating profit increased $158 to $764. On a segment basis, $485 of operating profit was from the US ($718 net of intercompany license fees), $380 of operating profit was from Canada ($147 net of intercompany license fees) and Europe’s operating loss was $158.
Year to date
- Year to date, higher revenue ($2,539) higher cost of sales ($2,371) and higher expenses ($262) decreased operating profit by $94 to $1,611 over the comparable period in the prior year (2017: $1,705).
- Year to date cost of sales increased 11.9% to $22,317 (16.0% excluding a favourable 4.1% variance from exchange rate fluctuations) from $19,946.
- Year to date expenses increased $262 over the same period in the prior year to $6,042 (2017: $5,780). Excluding exchange rate variances, expenses increased $417 or 7.2% 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 ($309), firm-wide search team practice meetings for business development and training being held during the current year but not in the prior year ($181), 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 marketing expenses related to our brand update initiative ($99), increased business development costs ($87), increased partner recruitment expenses ($54), increased consulting expense ($53) and general increases across other categories ($72). These unfavourable variances were partially offset by the lack of partner conference expenses to-date as the annual partner conference will be held in the upcoming third quarter this year versus the second quarter in the prior year ($341), decreases in legal fees on general matters ($87), decreases in corporate salaries and bonus accruals ($82) and increases in foreign exchange gains on intercompany loans and US dollar bank account balances ($43).
- Excluding exchange rate variances, operating profit decreased $20 to $1,685. On a segment basis, $1,585 of operating profit was from the US ($2,084 net of intercompany license fees), $680 of operating profit was from Canada ($181 net of intercompany license fee revenue) and Europe’s operating loss was $654.
- Net earnings after tax:
- Second quarter net income was $270 ($0.013 per share), as compared to $267 ($0.013 per share) in the comparable period a year earlier.
- Year-to-date net income was $680 ($0.033 per share), as compared to $1,029 ($0.051 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 Partners
Caldwell Partners is a leading international provider of executive search and has been for more than 45 years. As one of the world’s most trusted advisors in executive search, the firm has a sterling reputation built on successful searches for boards, chief and senior executives, and selected functional experts. With offices and partners across North America, Europe, Latin America and Asia Pacific, the firm takes pride in delivering an unmatched level of service and expertise to its clients.
The Caldwell Partners’ Common shares are listed on The Toronto Stock Exchange (TSX: CWL). Please visit our website at www.caldwell.com for further information.
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.
For further information, please contact:
Investors & Analysts:
Chris Beck, CPA, Chief Financial Officer
The Caldwell Partners International
+1 617 934 1843
Caroline Lomot, Director of Marketing
The Caldwell Partners International
+1 516 830 3535