All amounts in Canadian dollars unless otherwise indicated.
- Preliminary discussions with a select, second-stage group of
potential bidders in the Privatization Process (the "Process") are
advancing well.
- NCIB commenced in January; an Automatic Share Purchase Plan was
put in place and purchases began in April. As at May 2, 2017, the Company had purchased 232,460
Common Shares pursuant to the NCIB.
- Six loans were fully repaid during the quarter for proceeds of
$377.4 million.
- Total revenue of $36.4 million
decreased 25% ($12.1 million) from
fourth quarter 2016 and 26% ($13.1
million) from first-quarter 2016.
- Net loss of $3.5 million for
first-quarter 2017 compared to a net loss of $58.5 million in the prior quarter and net income
of $17.1 million in the prior-year
period.
- Earnings per share of $(0.07) per
share for first-quarter 2017 compared to $(1.16) per share in the prior quarter and
$0.34 per share for first-quarter
2016.
|
The Company has
revised its disclosure and approach with respect to its use of
non-IFRS financial measures this quarter in this press release, in
connection with an Ontario Securities Commission continuous
disclosure review. These revisions to the Company's
disclosure, are intended to give greater prominence to IFRS
financial measures, consistent with CSA Staff Notice 52-306
(Revised) – Non-GAAP Financial Measures, and to simplify the
overall presentation of financial results. Certain non-IFRS
measures – namely net income, ROE and EPS measures that
incorporated unrecognized yield enhancements and/or excluded
provision for loan losses - presented in previous press releases
are not included in this release, nor will they be included in
future releases. Therefore, readers should refer to the
presentation of non-IFRS measures in this press release and not the
presentation included in the March 30, 2017 press
release. The Company has worked closely with key
stakeholders, including shareholders and auditors, in developing
the new presentation framework which we believe continues to
provide our investors with useful and clear insight into the
Company's performance while complying with applicable regulatory
requirements. Revised disclosure presentation is provided for
fiscal 2015 and 2016, as well as the current disclosure for the
three months ended March 31, 2017.
|
TORONTO, May 3, 2017 /CNW/ - Callidus Capital
Corporation (TSX:CBL), ("Callidus" or the "Company"), today
announced its unaudited financial and operating results for the
first quarter ended March 31,
2017.
Financial Highlights
|
|
|
|
For Three Months
Ended
|
For the Year
Ended
|
|
($ 000s unless
otherwise indicated)
|
Mar 31,
2017
|
Dec 31,
2016
|
Mar 31,
2016
|
Dec 31,
2016
|
Dec 31,
2015
|
|
Net loans receivable,
end of period
|
$
|
581,134
|
$
|
817,191
|
$
|
915,245
|
$
|
817,191
|
$
|
935,130
|
|
Gross loans
receivable, end of period(1)
|
1,016,135
|
1,313,994
|
1,157,734
|
1,313,994
|
1,220,715
|
|
Average loan
portfolio outstanding (1)
|
1,218,125
|
1,282,593
|
1,226,881
|
1,218,691
|
1,021,553
|
|
Gross yield
(%)(1)
|
20.2%
|
20.1%
|
19.4%
|
19.5%
|
18.9%
|
|
Total
revenue
|
36,415
|
48,486
|
49,540
|
188,126
|
171,306
|
|
Net interest margin
(%)(1)
|
7.7%
|
11.1%
|
12.5%
|
11.7%
|
13.0%
|
|
Net income
|
(3,518)
|
(58,542)
|
17,072
|
1,153
|
61,952
|
|
Earnings per share
(diluted)
|
$(0.07)
|
$(1.16)
|
$0.34
|
0.02
|
1.22
|
|
ROE (%)
|
(3.3)%
|
(49.5)%
|
13.9%
|
0.2%
|
12.9%
|
|
Unrecognized non-IFRS
yield enhancements, end of period(1)
|
110,400
|
110,700
|
-
|
110,700
|
-
|
|
Recognized yield
enhancements(2)
|
5,800
|
(23,800)
|
-
|
14,400
|
-
|
|
Leverage ratio
(%)(1)
|
39.9%
|
40.4%
|
38.9%
|
40.4%
|
50.9%
|
|
|
|
(1)
|
Refer to
"Forward-Looking and Non-IFRS Measures" in this press release.
These financial measures are not recognized measures under IFRS and
do not have a standardized meaning prescribed by IFRS. Therefore,
they may not be comparable to similar measures used by other
issuers.
|
|
(2)
|
Recognized yield
enhancements are recorded in the statement of income before
derecognition in total revenues (Q1-2017: $7.0 million) and in loss
on derivative assets associated with loans (Q1-2017: loss of $1.2
million).
|
Our First Quarter 2017 MD&A and Unaudited Financial
Statements are available on our website (www.calliduscapital.ca) or
on SEDAR (www.sedar.com).
- Net loans receivable after derecognition at the end of the
period were $581 million, a decrease
of 29% ($236 million) from the prior
quarter, and a decrease of 37% ($334
million) from the same quarter last year; primarily as a
result of the largest loan in the portfolio being repaid in the
quarter.
- Average loan portfolio outstanding(1) was
$1,218.1 million, a decrease of 5%
($64.5 million) from the prior
quarter, and a decrease of 1% ($8.8
million) from the same quarter last year.
- Gross loans receivable before derecognition(1) was
$1,016.1 million at March 31, 2017, down 23% ($297.9 million) from December 31, 2016.
- Gross yield(1) for the quarter of 20.2%, was
relatively unchanged from the prior quarter and up 4% (80 bps)
compared to first-quarter 2016.
- Provision for loan losses of $19.4
million was recorded in the statement of income for the
current quarter, of which approximately 85% consisted of interest
charged on certain loans, compared to $86.3
million for the previous quarter and $7.9 million for the prior-year quarter.
- Net recognized yield enhancements for the quarter totaled
$5.8 million, including $7.0 million of interest and fees, which were
partially offset by a $1.2 million
adjustment in the fair value of equity options in one
borrower.
- The leverage ratio(1) of 39.9% at the end of the
first quarter was 50 bps lower than at the end of 2016.
Business Update (As at May 3,
2016)
Privatization Process – In total, 19 interested parties signed
non-disclosure agreements to enter the first stage of the
Process. In March 2017, Callidus
announced that, based on the expressions of interest, the Process
had moved to the second stage, with six or fewer
firms. Preliminary discussions with the smaller, second-stage
group are advancing. Goldman, Sachs & Co. is acting as
Financial Advisor to the Special Committee of the Board of
Directors with respect to the Process.
The Company remains optimistic that it will announce a
transaction on or about the end of the second quarter of
2017. However, there can be no certainty that a transaction
will be concluded, what price or terms may be offered or accepted,
or if the Process will be concluded on the anticipated
timeline. The timing and/or successful conclusion of the
Process could be influenced by the level of complexity of the
structures presented, the time required to negotiate key agreements
(such as a Shareholders' Agreement), and the number of parties that
ultimately participate in the Process.
Loan Portfolio – As a result of ongoing, continuous process
changes and improvements, we have revised our measure of growth
prospects, referred to as our pipeline of potential borrowers, to
capture a broader range of deals to better reflect the
opportunities we are pursuing. This pipeline measured on a gross
basis is currently approximately $1.7
billion, with $80 million in
signed-back term sheets. If presented on a basis consistent with
past reporting parameters, the pipeline measure at March 31, 2017 was $760
million, and currently stands at $730
million.
The Company remains committed to the goal of doubling the loan
portfolio over the next two to three years. The Company has engaged
search firms and is in the latter stages of hiring additional
personnel to expand the deal team, with the goal of adding a total
of two to four professionals – some of which will be originators
and others will be underwriters - to support future growth in the
loan portfolio.
The Company continues to employ a prudent and cautious approach
in evaluating new loan prospects. Changes in the credit market
are largely being driven by an influx of available capital, which
has put downward pressure on pricing for all risk categories of new
loans. Callidus will continue its stringent review and
analysis of new prospects to ensure the quality of new loans and
their associated collateral remains within our standards.
During the quarter, six loans were fully repaid generating
$377.4 million in cash from the
repayments. Included in the loans that were fully repaid was the
largest loan in the portfolio, financed approximately 72% by
Catalyst Fund V through its loan Participation Agreement. As a
result, the largest portion of the cash and fees received on the
loan repayments (approximately $206
million of the $377 million)
was returned to Catalyst Fund V.
Net loans receivable decreased from year-end due to these
repayments as well as the acquisition of Bluberi Gaming
Technologies Inc. ("Bluberi") in the first quarter of 2017. In
February 2017, Bluberi (a digital
slot gaming company) emerged from formal restructuring proceedings
in Canada as a going
concern. As a result and under the terms of its secured
creditor agreement, the Company gained control of the operating
assets of the borrower.
As a result of our existing facilities, loan repayments, and the
availability of funds from Catalyst Fund V under the Participation
Agreement (assuming a participation rate of 75%, a leverage ratio
of 50%, and other availability), at March
31, 2017 we had sufficient liquidity to support
approximately $600 million of new
loans.
Yield Enhancements and Provision for Loan Losses – At
March 31, 2017, the total recognized
yield enhancements taken into income over the last four quarters
totaled approximately $20.1 million
(or $0.40 per share).
Provision for loan losses of $19.4
million was recorded in the statement of income for the
current quarter. The majority (approximately 85%) of this
provision related to interest charged on certain loans. This
compares to $86.3 million recorded in
fourth-quarter 2016, and $7.9 million
in first-quarter 2016.
Normal Course Issuer Bid – In January
2017, Callidus announced it had received approval from the
Toronto Stock Exchange to commence a normal course issuer bid (the
"NCIB") with respect to the Company's common shares (the "Common
Shares"). The NCIB commenced on January 27,
2017 and will terminate on the earliest of January 26, 2018, the date on which Callidus has
purchased the maximum number of Common Shares permitted under the
NCIB, or, the date on which the NCIB is terminated. Under the NCIB,
Callidus may purchase, in the normal course through the facilities
of the TSX, up to 2,495,839 Common Shares, representing
approximately 5% of its issued and outstanding Common
Shares. Any Common Shares purchased pursuant to the NCIB will
be cancelled by the Company. As at May 2,
2017, the Company had purchased 232,460 Common Shares at a
weighted average price of $17.73 per
Common Share, for a total cost of approximately $4.1 million through the NCIB.
Changes to Credit Facilities and Liquidity – As previously
announced, in early 2017, the Company extended the terms of three
of its main credit facilities to take into account the expected
conclusion of the Privatization Process under the current
timeline. The facility extensions completed were as
follows:
- In January 2017, the Company
extended the revolving period of its revolving credit facility by
six months to July 2017 and amended
the amount of the facility to US$275
million with an expandable feature to increase it to
US$325 million if requested, subject
to lender approval. All other terms remain substantially
unchanged.
- In March 2017, the Company
extended the maturity of its senior debt from March 2017 to the earlier of September 2017, and the date when a privatization
transaction closes. All other terms remain substantially
unchanged.
- In March 2017, the Company
extended the maturity of its revolving unsecured subordinated
bridge facility from April 2017 to
October 2017. All other terms remain
substantially unchanged.
The Company monitors potential liquidity requirements to ensure
that they can be readily met by its available sources of short-term
funding.
Forward-Looking and Non-IFRS Statements
Certain statements made herein contain forward-looking
information. Although Callidus believes these statements to be
reasonable, the assumptions upon which they are based may prove to
be incorrect. Furthermore, the forward-looking statements contained
in this press release are made as at the date of this press release
and Callidus does not undertake any obligation to update publicly
or to revise any of the included forward-looking statements,
whether as a result of new information, future events or otherwise,
except as may be required by applicable securities laws.
The following table outlines certain significant forward-looking
statements contained in this release and provides the material
assumptions used to develop such forward-looking statements and
material risk factors that could cause actual results to differ
materially from the forward looking statements.
|
Forward-looking
Statements
|
Assumptions
|
Risk
Factors
|
Significant Future
Events/Milestone Assumptions to Support the Top End of the
Valuations
|
Updates for the
Current Year
|
|
The fair value of the
derivative asset associated with loans represents a warrant to
acquire a 10% equity interest in a borrower with a total value of
$14.5 million (unrecognized value of $12.6 million) on March 31,
2017.
|
The valuation
technique primarily used a discounted cash flow on an anticipated
project that the borrower expects to secure with the following
significant unobservable inputs and estimates:
(1) Risk adjusted discount rate (contract): 16%
(2) Risk adjusted discount rate (terminal): 20%
(3) Annual average EBITDA (EBITDA margin): US$79.0 million
(21%)
(4) Contract probability: 95%
(5) Capital injection of US$32 million assumed to occur in
2017
|
Significant risk
factors that could cause actual results to differ materially from
the estimates used in the valuation of the warrant include: the
borrower's ability to secure the project contract, the borrower's
ability to complete an equity transaction, the borrowers' ability
to achieve the forecasted EBITDA targets, unexpected changes in
working capital requirements, political risk associated with the
country of operations, competitor risk and execution risk. A 10%
decrease or increase in the cashflows would result in a valuation
range between $11.3 million to $17.7 million.
|
(1) Borrower
finalizes contract documentation without material delays
(2) Borrower completes capital injection transaction in 2017
(3) Borrower is able to execute project and achieve forecasted
results
(4) Political risk does not materially disrupt contract
cashflows
|
|
|
Fair value of
controlling interest in borrower expected to recognize into income
upon disposition is estimated at $110.4 million on March 31,
2017.
|
The valuation
technique used a discounted cash flow with the following
significant unobservable inputs and estimates:
(1) Risk adjusted discount rate: 16.5%
(2) Long term growth rate: 10.0%
(3) Annual average EBITDA: $30.4 million
(4) Significant new business from a large diversified gaming
company in Canada that is commonly controlled by the Catalyst
Capital Group Inc.
|
Significant risk
factors that could cause actual results to differ materially from
the estimates used in the valuation include the borrower's ability
to secure new business from a large diversified gaming company in
Canada, the borrowers' ability to achieve the forecasted EBITDA
targets, competitor risk and unexpected changes in working capital
requirements. A 10% decrease or increase in the cashflows
would result in a valuation range between $87.7 million to $133.2
million.
|
(1) Callidus and
commonly controlled enterprise are able to reach an agreement for
deployment of 7,000 slot machines
(2) Borrower is able to achieve forecasted results
|
Callidus obtained
control of the underlying borrower
|
The Corporation discloses a number of financial measures in this
press release that are calculated and presented using methodologies
other than in accordance with IFRS. The Corporation utilizes these
measures in managing the business, including performance
measurement and for valuation purposes, and believes that providing
these performance measures on a supplemental basis to its IFRS
results is helpful to investors in assessing the overall
performance of the business of the Corporation.
Description of Non-IFRS Measures
Management uses both IFRS and non-IFRS measures to monitor and
assess the operating performance of the Corporation's operations.
Throughout this press release, management uses the following terms
and ratios which do not have a standardized meaning under IFRS and
are unlikely to be comparable to similar measures presented by
other organizations:
Average loan portfolio outstanding is calculated before
derecognition for the annual periods using daily loan balances
outstanding. The average loan portfolio outstanding grosses up the
loans receivable for (i) businesses acquired, (ii) the allowance
for loan losses, and (iii) discounted facilities. This information
is presented to enable readers to see, at a glance, trends in the
size of the loan portfolio.
Gross yield is defined as total revenues before
derecognition divided by the average loan portfolio outstanding
after adjusting for loans classified as businesses acquired. While
gross yield is sensitive to non-recurring fees and yield
enhancements earned (for example, as a result of early repayment),
the Corporation has included this information as it believes the
information to be instructive given the frequency of receipt of
non-recurring fees and enables readers to see, at a glance, trends
in the yield of the loan portfolio.
Gross loans receivable is defined as the sum of (i) the
aggregate amount of loans receivable on the relevant date, (ii) the
loan loss allowance on such date, (iii) the book value of
businesses acquired as they appear on the balance sheet, and (iv)
discounts on loan acquisitions. The following is a reconciliation,
before and after derecognition, of gross loans receivable to net
loans receivable in the Statement of Financial Position and a
summary of gross loans receivable as at March 31, 2017 and December 31, 2016.
|
|
|
|
|
|
($ 000s)
|
After
Derecognition
Mar 31,
2017
|
Before
Derecognition
Mar 31,
2017
|
After
Derecognition
Dec 31,
2016
|
Before
Derecognition
Dec 31,
2016
|
|
Loan
facilities
|
$
1,080,607
|
$1,088,792
|
$
1,176,642
|
$
1,421,771
|
|
Gross loans
receivable
|
1,012,595
|
1,016,135
|
1,100,304
|
1,313,994
|
|
Less: Discounted
facilities
|
(7,575)
|
(7,575)
|
(7,575)
|
(7,575)
|
|
Less: Allowance for
loan losses
|
(184,349)
|
(184,384)
|
(164,973)
|
(166,732)
|
|
Less: Allowance for
businesses acquired
|
(19,359)
|
(19,359)
|
(19,359)
|
(19,359)
|
|
Less: Businesses
acquired
|
(220,178)
|
(220,178)
|
(91,206)
|
(91,206)
|
|
Net loans
receivable
|
$
|
581,134
|
$
|
584,639
|
$
|
817,191
|
$
|
1,029,122
|
Net interest margin is defined as net interest income
divided by average loan portfolio outstanding.
Return on equity ("ROE") is defined as net income after
derecognition divided by quarterly average shareholders'
equity. Return on equity is a profitability measure that
presents the annualized net income available to shareholders'
equity as a percentage of the capital deployed to earn the
income.
Yield enhancement is defined as a component of a lending
arrangement that Callidus negotiates in addition to the original
loan agreement including but not limited to additional fees, profit
participation arrangements and equity and equity like
instruments. Should a value be determined for the enhancement
and depending on its contractual nature, the related amount may be
recognized in the statement of comprehensive income as a part of
interest income, fee income or gain/loss on derivative assets
associated with loans, may be recognized as an available-for-sale
equity interest with value changes recorded in other comprehensive
income/loss ("recognized yield enhancements"), or, may be
unrecognized, which includes yield enhancements related to
controlling interests ("unrecognized non-IFRS yield enhancements"),
depending on the appropriate accounting treatment under IFRS.
Leverage ratio is defined as total debt (net of
unrestricted cash and cash equivalents) divided by gross loans
receivable before derecognition. Total debt consists of the senior
debt, revolving credit facilities, collateralized loan obligation
and subordinated bridge facility.
The non-IFRS measures should not be considered as the sole
measure of the Corporation's performance and should not be
considered in isolation from, or as a substitute for, analysis of
the Corporation's financial statements.
About Callidus Capital Corporation
Established in
2003, Callidus Capital Corporation is a Canadian company
that specializes in innovative and creative financing solutions for
companies that are unable to obtain adequate financing from
conventional lending institutions. Unlike conventional lending
institutions who demand a long list of covenants and make credit
decisions based on cash flow and projections, Callidus credit
facilities have few, if any, covenants and are based on the value
of the borrower's assets, its enterprise value and borrowing needs.
Callidus employs a proprietary system of monitoring collateral and
exercising control over the cash inflows and outflows of each
borrower, enabling Callidus to manage risk of loss. Further
information is available on our website,
www.calliduscapital.ca.
Conference Call
Callidus will host a conference call
to discuss first quarter 2017 results on Thursday, May 4, 2017
at 8:00 a.m. Eastern Time. The dial in number for the
call is (647) 427-7450 or (888) 231-8191 (reference
number: 40040881). A taped replay of the call will be
available until May 11, 2017 at (416)
849-0833 or (855) 859-2056 (reference number: 40040881).
SOURCE Callidus Capital Corporation