TORONTO, Nov. 6, 2014 /CNW/ - Callidus Capital Corporation
("Callidus" or the "Company") (TSX: CBL), a provider of flexible
and innovative asset-based loans, announced today an update on the
current status of its business and provided its 2014 third quarter
financial results, for the three and nine-month period ended
September 30, 2014[1].
We continue to see exciting growth and opportunities in each of
our targeted strategic growth areas.
Canadian Market Opportunity - The IPO and our status as a
public company has increased our profile in the Canadian market. We
are seeing increased interest from prospective clients which has
resulted in an increase in our pipeline. In addition, with better
access to capital and a strong balance sheet, we are better
positioned to respond expeditiously to a variety of client loan
requirements including size and structure. We continue to believe
that the Canadian market offers an attractive opportunity for our
core lending product.
US Market Opportunity - As discussed in the IPO
prospectus, we are active in the U.S. in originating, managing and
underwriting U.S. based loans. Our new U.S. originator has
broadened the range and scope of opportunities that we are seeing
and we expect our activity in the U.S. to advance. Although the
U.S. market has a different competitive dynamic and different
bankruptcy process than Canada, we
have the track record and experience to successfully operate in
this important strategic market.
Callidus Lite - We are pleased to report continued growth
in the deployment of Callidus Lite as an expansionary loan product.
Year-to-date, we have successfully closed three Callidus Lite loans
representing $62 million in
commitments. As previously disclosed, this product offering
provides an attractive alternative for borrowers seeking growth
capital or those with an improved risk profile as compared to
borrowers of the Callidus legacy products. We continue to believe
that there is a significant opportunity as a result of a
discontinuity in the credit markets where borrowers cannot
otherwise source potential capital and this product fills this gap.
This has the potential of significantly increasing our activity in
the Canadian and U.S. markets.
Portfolio Acquisitions - We also continue to closely
monitor the market for portfolio acquisitions and will pursue these
acquisitions opportunistically.
Additionally, we are now actively exploring potential corporate
acquisitions and believe that there are a number of complementary
and highly synergistic businesses that could fit with our strategic
and operational objectives. Although no such transactions are
imminent, we believe that we have the management capabilities to
identify, negotiate and integrate these acquisitions.
Further, Catalyst Fund Limited Partnership IV has advised
Callidus that it intends to sell its $50
million participation interest in the loan portfolio on or
before December 31, 2014. The
participation agreement between Callidus and Catalyst Fund Limited
Partnership IV provides the Company the option to acquire all or
part of the interest in the loan portfolio at par plus accrued
interest and fees. Callidus expects to complete this acquisition of
100% of the remaining participation interest thus eliminating the
need for accounting for derecognition of this $50 million participation interest on a go
forward basis.
In addition to pursuing these strategic growth initiatives, as
disclosed previously, we hired new originators in Seattle, Washington to cover the Pacific
coast, British Columbia, and
Alberta, and in Montreal to cover each of the Quebec and Eastern Canadian markets. These 2
new originators are delivering on our expectations. Both
originators have identified and advanced a number of prospective
opportunities. We are working on a number of signed back term
sheets sourced by these orginators and expect to close these
financings over time. Additionally, as disclosed previously, we
have added to the underwriting, finance and field examination
groups to support our existing platform and our increased lending
activity.
Overall, we are very pleased with the performance of our
business across a number of operating and financial metrics. Our
loan book continues to grow ahead of our expectations while we
continue to enforce our very strict lending criteria. We have a
differentiated and unique offering for borrowers and the successful
growth of the business demonstrates that we are tapping into the
burgeoning demand for our core lending products. In addition,
we are pleased that we are delivering on our required return
thresholds as evidenced by our gross yields while maintaining
disciplined underwriting standards. The operating leverage in
our business is compelling as demonstrated by the improvement in
our adjusted EBITDA margin from 78% on the IPO to 80% for the three
months ended September 30,
2014. We continue to generate significant cash flow which is
being redeployed in the growth of our business.
__________________________________ 1Amounts
expressed are before derecognition, unless otherwise indicated. For
further information about derecognition as it relates to the
Company's initial public offering, please refer to the final
prospectus filed with the various securities regulatory authorities
through Canada on April 15, 2014 ("Final Prospectus").
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Current state of the business, as at November 4, 2014:
- Gross loans receivable of $684
million, with an aggregate committed amount of $856 million
- Pipeline of potential new loans has been ranging from
approximately $500 million to $600
million and is currently in the upper end of that range
- Signed back term sheets of $172
million. Historically, Callidus has closed on
approximately 60% to 80% of signed back term sheets. Callidus
closed on loans with aggregate commitments of $169 million in the third quarter, as compared to
$126 million in the second quarter.
The number of closings in the third quarter was somewhat adversely
affected by the focus on integrating and training new hires
- Callidus cash position will support $188
million of additional loans upon completion of anticipated
changes to the financing arrangements at 60% leverage.
Management has concluded that although a long term leverage target
of 40% is desirable, in the shorter run leverage could be allowed
to exceed 70%. Catalyst managed funds have now committed to
provide such leverage to fund continued growth if and when required
by Callidus due to unfavourable market conditions for an equity
offering (i.e. the cost of capital being greater than that at the
time of the IPO)
- Total debt of $246 million
(before derecognition), or 36% of gross loans receivable (before
derecognition), which we could increase to approximately 38% based
on the estimated undrawn availability
- Management estimates net income of approximately $62 million after derecognition, had the average
gross loans receivable of approximately $684
million been outstanding for a full year2
In addition to new loans, from September
30, 2014 to November 4, 2014,
$29 million in net new funding was
provided to existing borrowers.
As at November 4, 2014, there were
30 loan commitments, the largest of which was a US$75 million commitment, and the smallest of
which was a $3 million commitment.
The average loan amount funded was $23
million.
Highlights from the third quarter, relative to the second
quarter:
- Gross loans receivable of $655
million as at September 30,
2014, up 22%
- Average gross loans receivable of $609
million for the quarter, up 21%
- Gross yield of 20.0%, down from 20.8%
- Adjusted EBITDA margin of 80.4%, up from 79.4%
- Adjusted net interest income of $23.5
million, up 18%
- Net income of $13.2 million, up
74%
- Earnings per share (diluted) of $0.27, up 50%
During the third quarter, 6 new loans totalling $174 million in commitments were extended and 2
loans were fully repaid totaling $15
million. Additionally, $45
million in net funding was advanced to existing
borrowers.
Financial Highlights
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|
|
|
Three Months Ended
September 30
|
Nine Months Ended
September 30
|
($ 000s)
|
2014
|
2013
|
2014
|
2013
|
Average loan
portfolio outstanding (1)
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$ 608,925
|
$ 257,875
|
$ 500,991
|
$ 230,198
|
Total revenue (after
derecognition)
|
26,182
|
13,640
|
69,852
|
35,161
|
Gross yield
(1)
|
20.0%
|
21.2%
|
20.6%
|
20.4%
|
Adjusted EBITDA
(1)
|
21,057
|
10,531
|
55,734
|
26,471
|
Adjusted EBITDA
margin (1)
|
80.4%
|
77.2%
|
79.8%
|
75.3%
|
Adjusted net interest
income (1)
|
23,453
|
12,554
|
62,663
|
31,939
|
Net income
(loss)
|
13,246
|
719
|
20,740
|
(1,230)
|
Earnings per share
(diluted)
|
$
0.27
|
$
0.03
|
$
0.55
|
$ (0.06)
|
Notes:
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(1)Refer to
"Description of Non-IFRS Measures" in the MD&A. 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.
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_______________________________________________
2Calculated on a consistent basis as described in
Management's Discussion and Analysis ("MD&A") for the period
ended September 30, 2014.
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Third Quarter of 2014
During Q3 of 2014, total revenue increased $13 million and adjusted net interest income
increased $11 million from the same
period in the prior year, as a result of a $351 million (136%) increase in the average loan
portfolio outstanding to $609 million
in the current quarter.
Adjusted EBITDA margin increased 3.2% (from 77.2% to 80.4%) as a
result of benefitting from operating leverage in the business due
to growth in the loan portfolio.
Net income increased $13 million
and earnings per share (diluted) increased $0.24 from the same period in the prior year.
The movement in earnings per common share was attributable to
full repayment of the principal balance of the participating
debenture that resulted in profitability in the current
year-to-date period as a result of the initial public offering and
related transactions.
Year-to-Date September 30,
2014
Year-to-date, total revenue increased $35
million and adjusted net interest income increased
$31 million from the same period in
the prior year, as a result of (i) a $271
million (118%) increase in the average loan portfolio
outstanding to $501 million
year-to-date, and (ii) a 0.2% increase in the gross yield to 20.6%
year-to-date.
Adjusted EBITDA margin increased 4.5% (from 75.3% to 79.8%)
as a result of benefitting from operating leverage in the
business due to growth in the loan portfolio.
Net income increased $22 million
and earnings per share (diluted) increased $0.61 from the same period in the prior
year. The movement in earnings per common share was
attributable to full repayment of the principal balance of the
participating debenture that resulted in profitability in the
current year-to-date period as a result of the initial public
offering and related transactions.
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 company's assets, its enterprise
value and borrowing needs. Callidus employs a proprietary system of
monitoring collateral and exercising control over the cash inflow
and outflows of each borrower, enabling Callidus to very
effectively manage any risk of loss.
Forward-Looking 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.
SOURCE Callidus Capital Corporation