Note: All amounts in Canadian dollars unless otherwise
indicated.
First Quarter 2015 Highlights
- Total revenue of $35 million for
the quarter, up $6 million, or 20%
from previous quarter and up, $14
million, or 70% from same quarter last year.
- Average loan portfolio outstanding was $864 million, an increase of $146 million or 20% from the previous quarter and
up $459 million or 113% from the same
quarter last year.
- Gross loans receivable of $906
million at March 31, 2015, up
$75 million, or 9%, from previous
quarter and up $489 million, or 117%
from same quarter last year.
- Adjusted net interest income of $27.1 million, up 42%
compared to Q1 2014, and up 9% compared to Q4 2014.
- As at March 31, 2015, the
estimated collateral value coverage on net loans receivable was
approximately 161% on a portfolio basis with a range between 100%
and 250% on an individual loan basis. Furthermore, the
watch-list loans had an asset coverage of 112% and non-watch-list
loans had an asset coverage of 176%. It should be noted that
there is no cross collateralization of the asset coverage as
between borrowers.
TORONTO, May 13, 2015 /CNW/ - Callidus Capital
Corporation ("Callidus" or the "Company") (TSX: CBL),
reported strong loan portfolio and revenue growth in the first
quarter of 2015. Callidus, which provides flexible and
innovative asset-based loans, primarily to growth and distressed or
troubled companies, today reported its financial results for the
quarter ended March 31, 2015, and provided an update on the
current state of its business.
Newton Glassman, Executive
Chairman and Chief Executive Officer of Callidus said "We again
achieved strong performance against many of our key metrics.
We are particularly pleased with the significant level of growth in
our loan portfolio while maintaining solid credit quality.
The continued growth of Callidus Lite will improve overall
credit quality, lower the provision for credit loss while
maintaining ROE and net income targets since Callidus Lite loans
support higher leverage that will offset the dilution to a blended
gross yield."
"We want to address head-on our performance regarding earnings
related metrics. To assist in attaining our ROE target we
will slowly increase our leverage as our loan portfolio continues
to grow. As previously mentioned, we are confident in our
ability to deliver against our stated long term goals, recognizing
our quarter-over-quarter performance may be lumpy."
"These results clearly underscore the integrity of our business
model and platform as a senior secured asset-based lender to
primarily growth and distressed companies, and the effectiveness of
our growth strategy focused on driving organic growth
in Canada, the expansion of Callidus Lite, tapping the sizable
U.S. market, and identifying opportunities to acquire loan
portfolios on advantageous terms."
Current state of the business, as at May 11,
2015:
- With closings that management believes are imminent, we
estimate gross loans receivable of $961 million, with total
loan facilities of approximately $1.2 billion. As at
May 11, gross loans receivable stood
at $910 million.
- The pipeline of potential new loans typically ranges from
approximately $450 to $600 million.
As an indicator of the size of the market, the pipeline has
recently increased dramatically to $1.1
billion, recognizing that not all these potential
transactions will result in signed back term sheets and close.
Included in this $1.1 billion figure
are seven recently identified potential transactions
including two significant proposed transactions; one to a company
going through a restructuring process and another to a proven
financial sponsor in support of a growth opportunity
transaction.
- Signed back term sheets of $208 million, up $9
million (approximately 5% quarter over quarter) from what was
reported in Q4 2014. Historically, Callidus has closed on
approximately 60% to 80% of signed back term sheets.
- Liquidity of $176 million consisting of $54
million of cash and cash equivalents and $122
million in available undrawn credit facilities. In
addition to the $176 million above,
there is also $156 million now
available from Catalyst Fund V's first closing. Fund V
availability would increase to approximately $360 million, assuming Fund V achieves its "hard
cap" of US$1.5 billion.
- Total debt (net of cash and cash equivalents) of $391
million, or 43% of gross loans receivable.
- Management estimates net income of approximately $80
million and an ROE of 17-19% would have been achieved if the
average gross loans receivable of $910 million had been
outstanding for a full year.
- As at May 11, 2015, Callidus had 37 loans outstanding, the
largest of which was a US$95 million facility (of which
approximately US$59 million is outstanding), and the
smallest of which was a $2 million facility. The average
loan amount funded was $25 million, down $1
million (approximately 4%) from Q4 2014.
- In April 2015, the Company
increased the amount of its existing Revolving Credit Facility by
US$37.5 million to US$300 million in
the aggregate. The increase was the result of an increased
commitment from an incumbent bank in the syndicate and a new
commitment from an international bank.
- In addition to 2 new loans representing $40 million in total credit facilities,
$15 million in net repayments were
received from existing borrowers.
- Subsequent to quarter end, we received repayments for 2 loans
totaling $22 million consisting of
(i) an $8 million partial permanent
repayment of a loan to a borrower that we had previously disclosed
had emerged from CCAA protection as was anticipated and as a result
of this and a $16 million partial
repayment received and disclosed previously, the borrower has a
much improved and sustainable capital structure that we believe may
soon support conventional financing; and (ii) a $14 million (88% of the outstanding loan to that
borrower) partial permanent repayment of another loan.
Financial Highlights
|
|
|
|
Three Months
Ended
|
Three Months
Ended
|
($ 000s)
|
31-Mar-15
|
31-Mar-14
|
Dec. 31,
2014
|
Y/Y
Change
|
Q/Q
Change
|
Average loan
portfolio outstanding (1)
|
$864,324
|
405,251
|
718,562
|
113%
|
20%
|
Total revenue (after
derecognition)
|
35,091
|
20,696
|
29,194
|
70%
|
20%
|
Gross yield
(1)
|
17.9%
|
20.4%
|
18.6%
|
|
|
Adjusted net interest
income (1)
|
27,125
|
19,155
|
24,816
|
42%
|
9%
|
Net income
(loss)
|
15,989
|
-152
|
21,019
|
n/a
|
-24%
|
Earnings per share
(diluted)
|
$0.31
|
($0.01)
|
$0.42
|
n/a
|
-26%
|
ROE
|
13.6%
|
n/a
|
19.5%
|
|
|
Notes:
|
(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.
|
Highlights of the first quarter, relative to the last
quarter:
- Adjusting for: (i) the difference between the statutory tax
rate of 26.5% and our effective tax rate of 30% and (ii) a
temporary one-time revenue adjustment of US$1 million resulting from a State statutory
issue that we anticipate will reverse in future quarters, our EPS
(diluted) was $0.34.
- In January 2015, the Company
increased the amount of its revolving senior credit facility by
US$62.5 million to US$262.5 million
in the aggregate and extended its term to January 2019.
- Provision for loan losses for the quarter decreased
$2.5 million from the same quarter
last year, while write-offs were nil. Relative to year end, our
specific provision for credit losses has decreased by $0.4 million. The decrease was due to the
reversal of specific provisions for $0.7
million for two watch-list loans as a result of improved
underlying collateral positions offset partially by an increased
provision for 2 watch-list loans in the period of $0.3 million.
- In the quarter, 3 new loans representing $68 million in total credit facilities were
extended. In addition to these new loans, $31 million in net funding was provided to
existing borrowers.
- Earnings per share (diluted) of $0.31, a decrease from
$0.42 last quarter, recognizing that
Q4 2014 EPS was positively affected by the net impact of the
clarification of the Catalyst guarantee and the adoption of the
collective allowance.
- With the continued success of Callidus Lite, gross yield for
the quarter was within our target range at 17.9%, a decrease from
20.4% for the same quarter last year, and from 18.6% for the fourth
quarter of 2014. Our yield was 19% on our core product and
15% on Callidus Lite. The decrease in yield on our core product was
due primarily to the temporary one-time revenue adjustment of
US$1 million noted previously.
- ROE was 13.6% compared with 19.5% in the fourth quarter of
2014. The decrease was primarily attributable to the positive net
impact to ROE for Q4 2014 of the clarification of the Catalyst
guarantee and the adoption of the collective allowance noted
previously.
- Net income was $16.0 million, down from $21 million in Q4 and up significantly from a
loss in same period last year. Again, the decrease was primarily
attributable to the positive net impact to Q4 2014 net income of
the clarification of the Catalyst guarantee and the adoption of the
collective allowance noted previously.
Loan Portfolio
As of March 31,
2015, the loan portfolio consisted of 35 loans with an
aggregate gross loans receivable amount outstanding of $906 million. This compares with 32 loans and
$831 million outstanding as of
December 31, 2014. As of March 31, 2015, the largest loan facility was
US$95 million and the smallest loan
facility was $2 million. A
higher component of Callidus Lite loans, which are used as an
origination and retention product for borrowers with improving
credit quality, produces a stronger credit profile for the
portfolio.
As of March 31, 2015, the loan
portfolio was distributed 64% in Canada and 36% in the U.S. by dollar amount
funded.
The Corporation's loans are diversified across a variety of
industries, with the "technology and hardware" industry and the
industrials industry comprising the largest segments. The largest
loan in the "technology and hardware" industry is to a company
whose loan is secured primarily by investment grade and insured
accounts receivable and inventory. Callidus will often target
sectors that are experiencing a downturn as such borrowers may be
under financial pressure and may be unable to access capital from
traditional lenders.
In connection with managing and monitoring its loan portfolio,
Callidus establishes what it calls a "watch-list", borrowers with a
deteriorating financial condition or that otherwise meet certain
credit and/or operational criteria warranting closer monitoring and
supervision. Callidus takes a more proactive approach to ensuring
compliance with loan terms and obligations, in turn while allowing
the Company to thereafter better manage the risk of default and/or
loss for watch-list accounts. As of March
31, 2015, there were 9 loans that were on the Company's
watch-list and these loans represented 26% of gross loans
receivable. As of March 31, 2015, of
these 9 loans, a total specific loan loss provision of $22.4 million had been taken, and a corresponding
$22.0 million asset related to the
Catalyst guarantee was recorded. As of March
31, 2015 the collective allowance was $ 6.4 million.
It is not uncommon for Callidus to deal with borrowers
undertaking some form of financial restructuring given the nature
of its business. As the Company operates in the distressed
lending sector, a formal or informal restructuring process offers
an efficient tool to protect the collateral, often at higher yields
than what would otherwise be available. Callidus uses a
variety of techniques to mitigate potentially challenging
situations, ranging from a cooperatively managed out of court
liquidation to a full court process in order to minimize any risk
of loss. The Company's association with Catalyst, the performance
leader in the Canadian distressed private equity sector and one of
the best in the world, provides immense value. As of March 31, 2015, there were 5 of 35 loans that
were going through a formal restructuring process representing 15%
of gross loans receivable. As of March 31,
2015, for these 5 loans, a total loan loss provision of
$1.6 million had been taken (part of
the $22.4 million loan loss provision
referred to above) and a corresponding $1.6
million asset (part of the $22.0
million asset referred to above) related to the Catalyst
guarantee was recorded.
Since 2006, Callidus has advanced 95 loans representing total
credit facilities of $1.8 billion of
which 58 loans have been fully repaid or realized. Of the 58 loans,
50 loans were fully repaid in the normal course. The other 8
loans went through a form of restructuring, with 5 loans fully
repaid and the remaining 3 loans resulted in an aggregate loss of
$4 million (less than 70bps since
2006 of realized losses based on commitments). As at May 11, 2015, 37 loans are outstanding
representing total credit facilities of approximately $1.2 billion. In the current portfolio, 5 loans
are going through a form of restructuring. As of March 31, 2015, the portfolio included 3
companies directly or indirectly involved in the oil and gas
industry, representing 11% of gross loans receivable. As of
March 31, 2015, for these loans, no
loan loss provision or corresponding guarantee was recorded.
Catalyst Fund V Participation
As noted in our press
release of April 27, 2015, Catalyst
recently announced the first closing of its most recent fund,
Catalyst Fund Limited Partnership V ("Catalyst Fund V"), with
US$650 million of capital
commitments. Catalyst Fund V is targeting aggregate commitments of
US$1.25 billion with a hard cap
of US$1.5 billion.
In accordance with the terms of the participation agreement,
Catalyst Fund V is now entitled to participate in the funding of
new loans originated by Callidus. This provides Callidus with
access to additional funds to finance the expansion of our loan
portfolio at cost and without standby fees on those funds.
By funding a portion of the growth, Catalyst Fund V will acquire
a participation interest in the new loan portfolio and will assume
all of the risks and rewards associated with that participation
interest. The portion of the new loan portfolio owned by Fund
V will be derecognized from Callidus' balance sheet for the
purposes of IFRS.
Callidus will also have the first right to acquire Catalyst
Fund V's interest in the loan portfolio, dollar for dollar to
the funded amount plus accrued and unpaid interest. If
Callidus acquires Catalyst Fund V's interest in the loan portfolio,
Fund V will also provide a principal guarantee of its percentage
ownership interest in the relevant loans.
In addition, any increase in Fund V's participation
interest as it issues more units will mean its principal guarantee
will proportionately cover a larger proportion of the Callidus loan
portfolios, thereby reducing Callidus' risk with respect to those
loans.
Normal Course Issuer Bid
On May
12th, Callidus announced that the Toronto Stock
Exchange ("TSX"), had accepted the Corporation's notice of
intention to undertake a normal course issuer bid. Under the
terms of the normal course issuer bid, Callidus may acquire up to
2,561,396 of its common shares, representing 5% of
the 51,227,920 common shares comprising Callidus' total
issued and outstanding common shares as of May 11, 2015.
Callidus also confirmed its plans to enter into an automatic
share purchase plan with GMP Securities L.P. for the purposes of
conducting the normal course issuer bid. The plan will ensure that
Callidus has no discretion over trading in respect of its common
shares during the term of the normal course issuer bid.
Callidus announced its intention to submit a notice to undertake
the normal course issuer bid to the TSX on April 27, 2015. Callidus determined to undertake
the normal course issuer bid after receiving advice of its
financial advisors as, in the opinion of management, its common
shares have recently traded in a price range that does not reflect
the underlying value of the Corporation. Callidus believes
that any purchases under the normal course issuer bid will benefit
all persons who continue to hold common shares by increasing their
equity interest in the Corporation.
Effective Tax Rate
As disclosed in prior quarters, our
effective tax rate was higher than the statutory tax rate. This was
due primarily to the tax treatment of share compensation expense.
We anticipate that the effective tax rate will revert to the
statutory tax rate over time, as share compensation expense
decreases for the awards granted to date. This is due to a greater
amount of share compensation expense recognized earlier, on a
graded vesting basis over the three-year vesting period of the
options.
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.
Conference call
Callidus will host a conference call
to discuss Q1 2015 results on Thursday, May 14,
2015 at 8:30 a.m. Eastern Time. The dial in number
for the call is (647) 427-7450 or (888) 231-8191 (reference
number: 37190283). A taped replay of the call will be
available until May 21, 2015 at (416)
849-0833 or (855) 859-2056 (reference number: 37190283).
SOURCE Callidus Capital Corporation