Caldwell Reports Second Quarter Results

Rhea-AI Summary

The Caldwell Partners International reported its fiscal Q2 2023 results, showing significant declines in professional fees and net earnings. For the quarter ended February 28, 2023, consolidated professional fees dropped to $21,450 from $39,808 a year ago. Revenues decreased to $21,583, leading to a gross profit of $3,184, down from $9,537 in Q2 2022. The firm incurred a net loss of $2,320, with a basic EPS of $(0.090). The CEO noted a stabilization in hiring demand but at lower levels than last year, citing economic uncertainties. Additionally, IQTalent reduced staffing to balance costs with declining revenue and is set to spin off its software business to further cut expenses. The company aims for profitability this fiscal year while focusing on its service offerings.

Positive

• The company anticipates a return to profitability in fiscal 2023.
• Spin-off of IQTalent's software business will further reduce costs.

Negative

• Consolidated professional fees fell to $21,450, down 46% year-over-year.
• Net loss after tax was $2,320, compared to a profit of $3,502 in Q2 2022.
• Basic EPS decreased to $(0.090) from $0.137 in the same quarter last year.

TORONTO, ON / ACCESSWIRE / April 13, 2023 / Talent acquisition firm The Caldwell Partners International Inc. (TSX:CWL)(OTCQX:CWLPF) today issued its financial results for the fiscal 2023 second quarter ended February 28, 2023. 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								Six Months Ended
			2.28.23				2.28.22				2.28.23				2.28.22
Professional fees - Caldwell			16,705				27,258				33,680				53,850
Professional fees - IQTalent1			4,745				12,550				11,459				24,272
Consolidated professional fees			21,450				39,808				45,139				78,122
Direct expense reimbursements			133				135				352				251
Revenues			21,583				39,943				45,491				78,373
Cost of sales			18,266				30,271				39,191				60,703
Reimbursed direct expenses			133				135				352				251
Gross profit			3,184				9,537				5,948				17,419
Selling, general and administrative expenses4			6,070				3,820				11,159				9,774
Restructuring expenses2			-				-				2,530				-
Acquisition-related expenses3			204				690				879				1,491
Operating (loss) profit			(3,090	)			5,027				(8,620	)			6,154
Finance (expenses) recovery			(56	)			(194	)			64				(178	)
(Loss) earnings before tax			(3,146	)			4,833				(8,556	)			5,976
Income tax expense (recovery)			(826	)			1,331				(2,293	)			1,729
Net earnings (loss) after tax			(2,320	)			3,502				(6,263	)			4,247
Basic earnings per share		$	(0.090	)		$	0.137			$	(0.242	)		$	0.166

1. Professional fees of IQTalent are presented net of elimination of intercompany revenue.
2. Restructuring expenses includes $2,264 of severance expense for staff reductions at IQTalent and $266 in onerous lease costs at Caldwell for the sublease of our San Francisco office as a result of our transition to a remote work environment.
3. Acquisition-related expenses consist of transaction fees and IQTalent purchase price structured as compensation expense, which ended on 12/31/22.
4. Selling, general and administrative expenses include a benefit from a lower share price reducing share-based compensation expense by $357 compared to a benefit in the second quarter last year of $1,688, ii) $521 of costs for our annual partner conference held in the current second quarter this year and in the third quarter last year, iii) $323 in higher professional fees primarily related to due diligence advisory and legal fees on two transactions ultimately not completed due to diligence results and iv) other variances of $75 discussed in our quarterly MD&A filed on SEDAR.

"The second quarter brought stabilization in overall hiring demand, albeit at levels that were lower than the same period last year - a record-breaking fiscal year for us," said John Wallace, chief executive officer. "Clients who have been broadly talking about resuming hiring have, in part, pushed those plans further into calendar 2023 pending more certainty on evolving economic conditions. At Caldwell, our executive search team is a group of seasoned professionals who have experience advising clients through multiple economic cycles; they're using their expertise to find business in a suppressed market."

"At IQTalent, our on-demand talent acquisition augmentation business, we saw further revenue erosion in the first part of the quarter, followed by stabilization in the past several months. As a result, in January IQTalent reduced staffing levels to the stabilized business demand to lower costs and minimize operating losses at current professional fee levels. Our March 1 spin off of IQTalent's software business and related development team will further reduce costs going forward."

Wallace continued: "We remain optimistic about our ability to return to profitability in the fiscal year and have full confidence in the strength of our spectrum of service offerings, our team and our future. Our clients value our ability to provide seamless support for their talent acquisition needs at all levels and we are focused on identifying opportunities to cross-collaborate between our two business segments."

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 at www.sedar.com.

About Caldwell Partners

Caldwell Partners is a technology-powered talent acquisition firm specializing in recruitment at all levels. Through two distinct brands - Caldwell and IQTalent - the firm leverages the latest innovations in AI 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.

Caldwell Partners' common shares are listed on The Toronto Stock Exchange (TSX:CWL) and trade on the OTCQX Market (OTCQX:CWLPF). Please visit our website at www.caldwell.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, software that we license from third parties, our ability to successfully recover from a disaster or other business continuity issues, successfully integrating or realizing the expected benefits from our acquisitions, adverse operating issues from acquired businesses, 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 governmental and tax law rulings; our ability to generate sufficient cash flow from operations to support our growth and fund any dividends; 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.

For further information, please contact:
Investors:
Chris Beck, CPA, President and Chief Financial Officer
cbeck@caldwellpartners.com
+1 (617) 934-1843

Media:
Caroline Lomot, Director of Marketing
clomot@caldwellpartners.com
+1 (516) 830-3535

TABLES:

THE CALDWELL PARTNERS INTERNATIONAL INC.
CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
(unaudited - in $000s Canadian)

		As at				As at
		February 28				August 31
		2023				2022
Assets
Current assets
Cash and cash equivalents			8,821				35,668
Accounts receivable			14,976				22,882
Income taxes receivable			3,337				1,280
Unbilled revenue			5,445				6,495
Prepaid expenses and other assets			3,541				2,758
			36,120				69,083
Non-current assets
Investments			753				736
Advances			1,051				241
Property and equipment			1,904				2,035
Right-of-use assets			4,147				5,345
Intangible assets			170				190
Goodwill			11,267				8,928
Deferred income taxes			7,767				4,730
Total assets			63,179				91,288
Liabilities
Current liabilities
Accounts payable			4,944				4,021
Compensation payable			21,904				43,866
Lease liability			1,285				1,817
			28,133				49,704
Non-current liabilities
Compensation payable			1,222				2,105
Lease liability			3,952				4,414
			33,307				56,223
Equity attributable to owners of the Company
Share capital			12,554				12,554
Contributed surplus			15,154				15,045
Accumulated other comprehensive income			1,921				960
Total equity			29,872				35,065
Total liabilities and equity			63,179				91,288

THE CALDWELL PARTNERS INTERNATIONAL INC.

CONSOLIDATED INTERIM STATEMENTS OF EARNINGS		Three months ended								Six months ended
		February 28								February 28
(unaudited - in $000s Canadian, except per share amounts)		2023				2022				2023		2022
Revenues
Professional fees			21,450				39,808			45,139			78,122
Direct expense reimbursements			133				135			352			251
			21,583				39,943			45,491			78,373
Cost of sales expenses
Cost of sales			18,266				30,271			39,191			60,703
Reimbursed direct expenses			133				135			352			251
			18,399				30,406			39,543			60,954
Gross profit			3,184				9,537			5,948			17,419
			14.8	%			24.0	%		13.2	%		22.3	%
Selling, general and administrative			6,070				3,820			11,159			9,774
Restructuring expenses			-				-			2,530			-
Acquisition-related expenses			204				690			879			1,491
			6,274				4,510			14,568			11,265
Operating (loss) profit			(3,090	)			5,027			(8,620	)		6,154
Finance expenses (income)
Interest expense on lease liability			66				107			136			219
Investment income			(57	)			(2	)		(217	)		(7	)
Foreign exchange income (loss)			47				89			17			(34	)
(Loss) earnings before income tax			(3,146	)			4,833			(8,556	)		5,976
Income tax (recovery) expense			(826	)			1,331			(2,293	)		1,729
Net (loss) earnings for the year attributable to owners of the Company			(2,320	)			3,502			(6,263	)		4,247
(Loss) earnings per share
Basic and Diluted		$	(0.090	)		$	0.137			(0.242	)		0.166
Diluted		$	(0.090	)		$	0.135			(0.242	)		0.163
CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE EARNINGS
(unaudited - in $000s Canadian)
	Three months ended											Six months ended
	February 28											February 28
			2023				2022			2023			2022
Net (loss) earnings for the period			(2,320	)			3,502			(6,263	)		4,247
Other comprehensive income (loss):
Items that may be reclassified subsequently to net earnings
Loss on marketable securities			(7	)			(66	)		(11	)		(92	)
Cumulative translation adjustment			157				(136	)		972			121
Comprehensive (loss) earnings for the year attributable to owners of the Company			(2,170	)			3,300			(5,302	)		4,276

THE CALDWELL PARTNERS INTERNATIONAL INC.
CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY
(unaudited - in $000s Canadian)

														Accumulated Other Comprehensive
														Income (Loss)
														Cumulative				Loss on
		Retained Earnings/								Contributed				Translation				Marketable				Total
		(Deficit)				Share Capital				Surplus				Adjustment				Securities				Equity
Balance - August 31, 2021			(1,672	)			12,157				15,063				215				(11	)			25,752
Net earnings for the six month period ended
February 28, 2022			4,247				-				-				-				-				4,247
Employee share option plan share issue			-				122				(22	)			-				-				100
Share-based payment expense			-				-				9				-				-				9
Loss on marketable securities available for sale			-				-				-				-				(92	)			(92	)
Change in cumulative translation adjustment			-				-				-				121				-				121
Balance - February 28, 2022			2,575				12,279				15,050				336				(103	)			30,137
Balance - August 31, 2022			6,506				12,554				15,045				1,043				(83	)			35,065
Net loss for the six month period ended
February 28, 2023			(6,263	)			-				-				-				-				(6,263	)
Share-based payment expense			-				-				109				-				-				109
Loss on marketable securities available for sale			-				-				-				-				(11	)			(11	)
Change in cumulative translation adjustment			-				-				-				972				-				972
Balance - February 28, 2023			243				12,554				15,154				2,015				(94	)			29,872

THE CALDWELL PARTNERS INTERNATIONAL INC.
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOW

(unaudited - in $000s Canadian)
		Six months ended
		February 28
		2023				2022
Cash flow provided by (used in)
Operating activities
Net (loss) earnings for the period			(6,263	)			4,247
Add (deduct) items not affecting cash
Depreciation of property and equipment			223				176
Depreciation of right-of-use assets			987				1,064
Amortization of intangible assets			27				25
Amortization of advances			408				332
Interest expense on lease liabilities			136				219
Share based payment expense			109				9
Gain on unrealized foreign exchange on subsidiary loans			(68	)			(91	)
Right-of-use asset impairment			297				-
Changes in working capital			(18,847	)			(18,000	)
Investing activities
Acquisition of business, net of cash acquired			(2,179	)			(314	)
Investment in convertible promissory note			-				(629	)
Purchase of property and equipment			(59	)			(113	)
Payment of advances			(1,186	)			(255	)
Repayment of advances			211				-
Net cash used in investing activities			(3,213	)			(1,311	)
Financing activities
Payment of lease liabilities			(1,231	)			(1,167	)
Proceeds from share issuance under employee stock option plan			-				100
Sublease payments received			-				29
Net cash used in financing activities			(1,231	)			(1,038	)
Effect of exchange rate changes on cash and cash equivalents			588				320
Net decrease in cash and cash equivalents			(26,847	)			(14,048	)
Cash and cash equivalents, beginning of year			35,668				29,214
Cash and cash equivalents, end of period			8,821				15,166

SOURCE: Caldwell Partners International, Inc.

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FAQ

What were Caldwell Partners' financial results for Q2 2023?

Caldwell Partners reported Q2 2023 revenues of $21,583, a gross profit of $3,184, and a net loss of $2,320.

How did professional fees change for Caldwell Partners in fiscal Q2 2023?

Consolidated professional fees for Caldwell Partners fell to $21,450 in Q2 2023, a decrease of 46% from $39,808 in Q2 2022.

What is the outlook for Caldwell Partners following their Q2 2023 results?

The company remains optimistic about returning to profitability in fiscal 2023 despite current challenges.

What impact did IQTalent's staffing changes have on Caldwell Partners' financials?

IQTalent reduced staffing levels to align with stabilized business demand, impacting overall revenue.