The Caldwell Partners International Issues Fiscal 2016 First Quarter Financial Results

The Caldwell Partners International Inc. has issued its financial results for the fiscal 2016 first quarter ended November 30, 2015. 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)

Financial Overview (all numbers expressed in $000s, except per share amounts)

Operating revenue:
Professional fees for the first quarter of 2016 increased 12.1% (down 0.3% excluding a 12.4% variance from exchange rate fluctuations) over the comparable period last year to $13,945 (2015: $12,436). First quarter professional fees in the US were up 22.5% (3.6% excluding an 18.9% favourable variance from exchange rate fluctuations) to $9,973 (2015: $8,145) driven by an increase in the Average Number of Partners and higher Average Fees from favourable exchange rates partially offset by lower search volumes during the current year.

First quarter professional fees in Canada were down 20.8% to $3,369 (2015: $4,256) due to lower search volumes more than offsetting higher Average Fees per Assignment. First quarter Europe professional fees were $602 versus $36 last year. The Europe operation was acquired and initiated business on October 1, 2014, and as a result, last year's figure includes only two months of operations in which we had one partner compared to the current period which covered a full three month quarter and had three partners for its entirety.

License fees from our licensees in Latin America and New Zealand for the use of the Caldwell Partners brand and intellectual property for the fiscal 2016 first quarter were $65 (2015: nil). As the licensing agreements were signed in the fourth quarter of fiscal 2015 and first quarter of fiscal 2016, there was no corresponding license fee revenue in the first quarter of last year.

Operating profit (loss):
For the first quarter of 2016, higher revenue ($1,574) offset by higher cost of sales ($1,696) and expenses ($332) led to a decrease in operating profit of $454 over the comparable period in the prior year and a reported operating loss of $148. Included in this loss was an investment of $325 in the new European operations--reflecting the transition of two newly hired partners at the end of fiscal 2015 and a full quarter (versus two months a year ago) of operations in the London office.

Cost of sales were up 18.5% over last year (4.7% excluding increases related to foreign exchange fluctuations). As a percentage of professional fees, first quarter cost of sales was 77.6%, up 3.8% from 73.8% in the same period last year. The increase as a percentage of professional fees was attributable to higher partner compensation expense which arose from a proportional shift of more revenue from partners in higher compensation tiers combined with fixed draw amounts for some partners that exceeded commission earnings in the period (1.4%), higher search delivery personnel costs resulting from a higher average headcount hired to support added partners (2.0%) and higher costs of search delivery materials (0.4%). See the company's Management Discussion and Analysis for a further discussion of cost of sales.

Expenses were up 11.2% (2.4% excluding foreign exchange fluctuations). The 2.4% constant currency increase of $70 represented higher occupancy costs from the addition of our London location from the acquisition of Hawksmoor part way through the first quarter of last fiscal year and higher lease costs in certain US relocations ($109) and higher share based compensation expense on the increase in share price during the current quarter ($72), offset by lower management operating performance bonus accruals ($173) and general increases across other categories ($62).

On a segment basis, $388 of profit was from Canada ($164, excluding $224 in intercompany license fee revenue), the US experienced a $211 operating loss (operating profit of $13 excluding the impact of the intercompany license fees), and Europe's operating loss was $325 from the operational investment discussed above.

Net profit:
First quarter net loss was $165 ($0.008 per share), as compared to $277 of net earnings ($0.013 per share) in the comparable period a year earlier.