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Caldwell Partners International Inc (The)
Symbol CWL
Shares Issued 25,505,693
Close 2021-04-08 C$ 1.82
Recent Sedar Documents

Caldwell Partners earns $370,000 in fiscal Q2

2021-04-08 17:18 ET - News Release

Mr. Chris Beck reports

CALDWELL REPORTS STRONG REVENUE GROWTH IN ITS TRANSFORMATION

Talent acquisition firm The Caldwell Partners International Inc. today issued its financial results for the fiscal 2021 second quarter ended Feb. 28, 2021. Financial results include those of IQTalent Partners Inc. (IQTP) beginning on the date of acquisition of Dec. 31, 2020.

Revenue highlights:

  • 33-per-cent increase in quarter-over-quarter revenue;
  • 39-per-cent increase in year-over-year revenue for the quarter;
  • 19-per-cent increase in year-over-year revenue for the fiscal year to date.

"In our year-end review we talked about our work to transform Caldwell into a high-growth technology-powered talent acquisition firm," said John Wallace, chief executive officer. "We have made great strides towards that goal since our acquisition of IQTP, as evidenced by the strong revenue growth we are seeing in all aspects of our business.

"More than just recovering from the economic impact of the global pandemic, we've had a record-setting start to fiscal 2021 -- an incredible feat and a huge tribute to the entire team of Caldwell and IQTalent Partners. Our most recent quarterly revenue of $24-million was a 33-per-cent increase over the prior quarter, nearly a 40-per-cent increase year over year, and is the highest in our firm's history. New business booking activity has been steadily rising this fiscal year and that trend of growth has continued into our third quarter."

Mr. Wallace continued: "Our merger with IQTP represents a transformational event for the firm as we evolve into a technology-focused recruitment model for the benefit of our clients. Our vision for our two organizations, working together, is for IQTP to be a constant presence at our clients, providing recurring talent acquisition support, while Caldwell will continue to be engaged for higher-level retained executive searches not in the purview of the in-house teams. Together, we provide a seamless integration of talent acquisition solutions at all levels for our clients."

Financial highlights (all numbers expressed in $000s)

The company operates through two distinct segments -- retained executive search and analytics solutions are conducted as Caldwell, and on-demand talent acquisition augmentation solutions are conducted as IQTalent Partners or IQTP.

  • IQTP's results have been included in our consolidated performance for two months beginning with the acquisition date of Dec. 31, 2020. Reference is made to note four of the company's consolidated interim financial statements and its MD&A (management's discussion and analysis) for additional information on the acquisition and the nature of business and financial results of IQTP.
  • Acquisition related expenses -- In addition to the upfront cash paid and shares issued to acquire the shares of IQTP, $5.5-million remains to be paid in future periods. This amount is being accrued and recorded as compensation expense, as the payments are contingent on employees or shareholders being actively employed on the future payment dates. This payment structure ensures the teams viewed as critical to the business have a strong incentive to stay. In addition, as this forms part of compensation expense, these amounts are fully deductible for income tax purposes. These amounts will be recorded as acquisition-related expenses within the consolidated statements of earnings and will continue to suppress the profitability of IQTP by approximately $270 per month for the first 12 months, reducing to approximately $191 in the following 12 months. The amounts are paid in United States dollars and will fluctuate with exchange rates.
  • Revenue:
    • Revenue for the second quarter of 2021 increased $6,775, or 39.1 per cent.
      • Professional fees for the second quarter of 2021 increased $7,113, or 42.1 per cent (45.7 per cent excluding an unfavourable 3.6-per-cent variance from exchange rate fluctuations) over the comparable period last year to $24,009 (2020: $16,896). Caldwell's professional fees increased 16.7 per cent to $19,724 (2020: $16,896) and IQTP added $4,285 ($4,361 less $76 of eliminated intercompany revenue), representing the two-month postacquisition results during January and February.
      • Direct expense reimbursements decreased $338 due to decreased expenses incurred on travel for the company's partners and candidates due to pandemic-related travel restrictions resulting in a shift in the search process.
    • Revenue for the six months ended Feb. 28, 2021, increased $6,826, or 19.3 per cent.
      • Professional fees for the six months ended Feb. 28, 2021, increased $7,609, or 22.1 per cent (23.9 per cent excluding an unfavourable 1.8 per cent variance from exchange rate fluctuations) over the comparable period last year to $42,062 (2020: $34,453). Caldwell's professional fees increased 9.6 per cent to $37,777 (2020: $34,453) and IQTP generated $4,285 ($4,361 less $76 in eliminating intercompany) representing the two month postacquisition results during January and February.
      • Direct expense reimbursements decreased $783 due to pandemic-related travel restrictions resulting in a shift in the search process.
  • Operating profit:
    • Operating profit for the second quarter was $53 (2020: $332). The $279 decrease relates to:
      • An increase in gross profit ($2,213) resulting from $805 contributed by IQTP and a $1,408 increase from Caldwell. Caldwell's changes came from higher revenue, net of direct expense reimbursements ($7,113) on improved search demand, less associated cost of sales ($5,056) and with the benefit of government stimulus grants ($156).
      • Higher selling, general and administrative expenses ($1,848) caused by the acquired business of IQTP for the two months post the acquisition date of Dec. 31, 2020 ($767), and increased expenses at Caldwell ($1,081). The increased Caldwell expenses were caused by:
        • Increased share-based compensation expense, the result of a 114.2-per-cent increase in average share price during the quarter ($1,552); and higher bonus accruals from exceeding targeted performance ($126); offset by:
        • Favourable variances from lower occupancy costs resulting from the exit of permanent leased locations in Dallas and London, where the company's teams have reverted to work from home and flexible space arrangements ($171), a consulting project in the prior year to generate a strategic road map for the company's Caldwell Analytics growth initiative, which did not recur in the current year ($161), lower marketing and business development expenses due to reduced travel as a result of COVID-19 restrictions ($115), favourable exchange rate variances ($50), and miscellaneous net favourable variances across smaller cost areas ($100).
      • Acquisition-related expenses ($644) consisting of IQTP purchase price structured as compensation expense ($540), and costs related to legal, tax and financial diligence ($104).
    • Operating profit for the first six months of the year was $1,480 (2020: $727). The $753 increase relates to:
      • An increase in gross profit ($2,949) resulting from $805 contributed by IQTP and a $2,144 increase from Caldwell. Caldwell's changes came from higher revenue, net of direct expense reimbursements ($3,324) on improved search demand, less associated cost of sales ($1,446) and with the benefit of government stimulus grants ($266).
      • Higher selling, general and administrative expenses ($1,327) caused by the acquired business of IQTP for the two months post the acquisition date of Dec. 31, 2020 ($767), and increased SG&A expenses at Caldwell ($560). The increased Caldwell expenses were caused by:
        • Unfavourable variances from operating expenses from the acquired business of IQTP for the two months post the acquisition date of Dec. 31, 2020 ($767), increased share-based compensation expense, the result of a 123.0-per-cent increase in average share price during the first six months of the year and an increase in performance factors from exceeding targeted performance ($1,752); and higher management bonus accruals from exceeding targeted performance ($312); offset by:
        • Favourable variances from lower occupancy costs resulting from the exit of permanent leased locations in Dallas and London, where the company's teams have reverted to work from home and flexible space arrangements ($418), the company's annual partner meeting held in the first quarter of the prior year but not in the current year due to travel restrictions ($381), lower marketing and business development expenses due to reduced travel from COVID-19 restrictions ($346), lower consulting costs related to the company's Caldwell Analytics growth initiative ($250), favourable exchange rate variances ($47), and miscellaneous net favourable variances across smaller cost areas ($62).
      • Acquisition-related expenses ($869) consisting of IQTP purchase price structured as compensation expense ($540), and Caldwell incurred costs related to legal, tax and financial diligence review related to IQTP during the quarter ($329).
  • Net earnings after tax:
    • Second quarter net income was $370 (1.6 cents per share), as compared with net income of $316 (1.5 cents per share) in the comparable period a year earlier. On Dec. 27, 2020, changes to the PPP were enacted in the United States, permitting expenses that were paid with forgiven PPP loan proceeds to be tax deductible. This overrides previous Internal Revenue Service guidance disallowing deductions for these eligible expenses. As a result of this legislative change, approximately $2,132 in additional tax deductions are available in the company's fiscal 2020 U.S. tax filing, resulting in a reduction of current taxes payable of approximately $562 at the current U.S. effective tax rate of 27.2 per cent. As a result, a $562 reduction in income tax expense has been recorded for the three-month period ending Feb. 28, 2021.
    • Net income for the six month period ended Feb. 28, 2021, was $1,304 (5.9 cents per share), as compared with net income of $778 (3.8 cents per share) in the comparable period a year earlier.

For a complete discussion of the quarterly financial results, including a detailed segment analysis, please see the company's management discussion and analysis posted on SEDAR.

About Caldwell Partners International Inc.

Caldwell Partners is a technology-powered talent acquisition firm specializing in recruitment at all levels. Through two distinct brands -- Caldwell and IQTalent Partners -- the firm leverages the latest innovations in AI (artificial intelligence) to offer an integrated spectrum of services delivered by teams with deep knowledge in their respective areas. Services include candidate research and sourcing through to full recruitment at the professional, executive and board levels, as well as a suite of talent strategy and assessment tools that can help clients hire the right people, then manage and inspire them to achieve maximum business results.

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