All amounts in Canadian dollars unless otherwise indicated.
- ROE was a record 29.2%, an increase from 13.9% in the prior
quarter and 15.2% in second quarter 2015.
- Revenue of $45.9 million,
decreased 7% ($3.6 million) from
first quarter 2016 and increased 17% ($6.6
million) from second quarter 2015.
- Net income of $37.5 million, up
119% ($20.4 million) from the prior
quarter and 104% ($19.1 million) from
the prior year period.
- Earnings per share (diluted) of $0.73 per share more than doubled from
comparative periods, increasing 115% ($0.39 per share) from last quarter and 103%
($0.37 per share) from the second
quarter of 2015.
- Yield enhancements valued internally at $57.0 million with $34.8
million ($0.68 per share,
pre-tax, diluted) of that amount taken into income in second
quarter 2016.
- New securitization facility received provisional investment
grade ratings during the quarter.
- Callidus to re-start growth in the loan portfolio in the next
quarter; targeting doubling the portfolio in two to three
years.
- Senior leadership team is strengthened with the addition of a
Chief Credit Officer.
- Dividend increased almost 50% from $0.70 per share per year to $1.00 per share per year.
- Substantial Issuer Bid extended and purchase price increased to
$16.10 per share in July in response
to upward momentum in stock price.
TORONTO, Aug. 11, 2016 /CNW/ - Callidus
Capital Corporation (TSX:CBL), ("Callidus" or the "Company"),
today announced its unaudited financial and operating results for
the second quarter ended June 30,
2016.
"We achieved several milestones this quarter that add
significant value to our business and create a strong platform for
accelerating growth. The most prominent developments are the
addition of material yield enhancements to our portfolio
performance and reporting, a new securitization facility that is
expected to be finalized in the third quarter, the restarting of
growth in our loan portfolio, and the strengthening of our
executive team with the addition of an experienced Chief Credit
Officer" said Callidus Executive Chairman and Chief Executive
Officer Newton Glassman.
"In addition these significant developments, the credit
performance of our current portfolio continues to meet our
expectations. During the quarter we saw two of our clients
fully repay their Callidus loans and refinance with conventional
lenders. Another loan emerged from creditor protection.
These are good examples of the effectiveness of our processes to
identify, fund, monitor and aid in the recovery of businesses."
added David Reese, President and
Chief Operating Officer of Callidus.
Yield Enhancements
"Over one-third of the loans in our portfolio are generating
yield enhancements, which are currently internally valued at
$57.0 million and are already
contributing to income. While there will be some volatility
in the value of the yield enhancements from quarter-to-quarter, we
expect their overall value to grow with our loan portfolio." said
Newton Glassman.
- Yield enhancements are generally no-risk, zero cost options
that are granted to Callidus when the Company makes an
accommodation to an existing borrower.
- The Yield Enhancements can take many forms, including revenue
royalty streams, periodic fee arrangements, warrants and limited
equity participations.
- Agreements have been finalized on thirteen loans in the
portfolio.
New Securitization Facility
"We expect to initiate a new securitization facility with four
investment grade tranches later this year. It will provide us
with additional financing at a significantly lower cost, and will
further diversify our funding. The new facility will become
an increasingly larger part of our capital structure as our loan
portfolio grows." added Newton
Glassman.
- When finalized, the new facility will be utilized as the
primary source of funding for incremental growth.
- Debt with ratings and maturity similar to the new
securitization facility is currently trading in a range that would
represent approximately a 2% reduction in Callidus' cost of funds,
compared with the rates Callidus is paying under the current
financing facilities.
- Utilizing the facility is expected to expedite access to
funding. It is anticipated that in the future, when debt is funded
through this facility, the funding timeline will be reduced
significantly - from the current eight to 12 weeks, to
approximately two to four weeks.
Restarting Growth in the Loan Portfolio and Continuing the
SIB
"We have held our loan book constant for the past two quarters,
maintaining the ultimate flexibility to optimize the use of our
cash and generate strong ROE. With a significant build of
liquidity over the last two quarters resulting from both strong
cash from operations and the expected additional capacity from the
new securitization facility, we expect to have more liquidity
available to deploy than is required to complete our current
Substantial Issuer Bid ("SIB") and potential NCIB. As a
result, we will be re-starting growth in our loan portfolio in the
next quarter with a target of doubling it in two to three years."
said Newton Glassman.
- Under the current SIB, the Company increased the purchase price
from and initial price of $14.00 per
share (in April 2016) to $16.10 per share (in July
2016), reflecting the significant increase in the trading
price for Callidus shares since the initiation of the program.
- The current SIB is set to expire on August 30, 2016.
Strengthening the Leadership and Management Teams
"We are very pleased to announce that James ("Jay") Rogers is joining Callidus'
leadership team as Chief Credit Officer. Jay has extensive
experience in originating, underwriting and managing loan
investments, most recently for Cerberus Capital Management, L.P.
and their finance company Ableco Finance L.L.C., which specializes
in distressed lending," concluded Newton
Glassman.
- Chief Credit Officer will be responsible for managing the
aggregate risk in the loan portfolio, coordinate and manage the
work-out of certain credits, and recommend appropriate strategies
to the Credit Committee to enhance the operations and overall
quality of the loan portfolio.
- Newton Glassman will remain
Chairman of the Credit Committee.
- The Company intends to further build the senior credit team by
adding experienced underwriters over the next two quarters to
support and drive portfolio growth and quality.
Business Update (As at August 10,
2016)
- Gross loans receivable before derecognition stood at
$1,218 million.
- The pipeline of potential new loans stands at
approximately $940 million.
- Signed back term sheets and balance of funding for Project
Resolve Inc. of approximately $150
million.
- Total debt (net of cash and cash equivalents) of $479 million, or 40% of gross loans
receivable before derecognition.
- During second quarter 2016, two loans representing $60.4 million in commitments were fully repaid,
bringing the year-to-date full repayments to $163.4 million from six loans.
- The Company expects approximately $10
million in gross loans receivable of four watch-list loans
to be resolved in the coming months.
- On April 22, 2016, an issuer bid
circular and related documents (the "Issuer Bid Circular") in
connection with the Company's previously announced substantial
issuer bid (the "Offer") was mailed to shareholders. Under the
Offer, the Company offered to purchase for cancellation up to a
total of 3,571,428 common shares. In June
2016, the Board authorized an increase to the purchase price
under the Offer from $14.00 per share
to $15.50 per share. Subsequent to
the quarter, in July 2016, the Board
authorized an increase to the purchase price under the Offer from
$15.50 per share to $16.10 per share. Under the revised Offer, the
aggregate maximum purchase price payable by Callidus is
$57.5 million. During the current
year-to-date period, 1.1 million shares were purchased and
cancelled under the revised Offer.
- In May 2016, the Company
increased the amount of the senior revolving credit facility by a
further US$37.5 million to US$337.5
million in the aggregate.
- Subsequent to the quarter, in July
2016, the Company announced that it received provisional
investment grade ratings for loans to be issued through a new
securitization facility. This facility is intended to serve as the
Corporation's primary senior growth-financing vehicle going
forward. The facility, with four investment grade debt tranches
ranging from AAA (sf) to BBB (sf), is expected to be initiated at
$165 million, will augment Callidus'
existing facilities, and will allow the Company to lever the
current portfolio by an incremental $25
million. The new securitization facility will increase in
size as new loans are added. The four investment grade debt
tranches ranging from AAA (sf) to BBB (sf), represent approximately
two-thirds of the initial expected issue size.
Financial Highlights
|
|
|
|
Three Months
Ended
|
Six Months
Ended
|
($ 000s unless otherwise
indicated)
|
Jun 30,
2016
|
March 31,
2016
|
Jun 30,
2015
|
Jun 30,
2016
|
Jun 30,
2015
|
Average loan portfolio outstanding
(1)
|
$
|
1,147,323
|
$
|
1,226,881
|
$
|
928,172
|
$
|
1,187,102
|
$
|
896,248
|
Total revenue (after
derecognition)
|
45,931
|
49,540
|
39,329
|
95,471
|
74,420
|
Gross yield (%)
(1)
|
20.0%
|
19.4%
|
18.8%
|
19.7%
|
18.4%
|
Net interest margin (%)
(1)
|
12.5%
|
12.5%
|
13.5%
|
12.4%
|
13.1%
|
Net
income(2)
|
37,461
|
17,072
|
18,390
|
54,533
|
34,379
|
Earnings per share
(diluted)(2)
|
$0.73
|
$0.34
|
$0.36
|
$1.08
|
$0.67
|
ROE
(%)(2)
|
29.2%
|
13.9%
|
15.2%
|
21.6%
|
14.4%
|
Leverage ratio
(%)(1)
|
38.5%
|
38.9%
|
49.0%
|
38.5%
|
49.0%
|
(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.
|
(2)
|
Without yield
enhancements, net income would have been $11.9 million, EPS would
have been $0.23 per share, and ROE would have been 9.5%.
|
- Our Second Quarter 2016 MD&A, Unaudited Financial
Statements and Issuer Bid Circular are available on our website
(www.calliduscapital.ca) or on SEDAR (www.sedar.com).
- Average loan portfolio outstanding was $1,147 million, a decrease of 7% ($80 million) from the prior quarter, and an
increase of 24% ($219 million) from
the same quarter last year.
- The Company's performance during the second quarter was
influenced by two events – the introduction of yield enhancement
into income and a provision relating to one loan.
- Total revenue for the quarter was $45.9
million, a decrease of 7% ($3.6
million) from the prior quarter, and an increase of 17%
($6.6 million) from the same quarter
last year.
- Gross yield for the quarter was 20.0%, an increase from 19.4%
in the prior quarter, and from 18.8% in the same quarter last year.
As noted previously, gross yields can be "lumpy" quarter to
quarter.
- Net income was $37.5 million for
the quarter ($11.9 million before
yield enhancements), an increase of 119% ($20.4 million) from the prior quarter and 104%
($19.1 million) from the same quarter
last year. For the current quarter, the Company recognized a gain
on derivative assets associated with loans (the yield enhancements)
of $32.0 million as a result of the
recognition of a warrant to acquire a portion of the equity in one
of our borrowers (referred to as a yield enhancement). Earnings for
the quarter were also impacted by an incremental pre-tax provision
of $12.0 million related to the
expected loss related to Gray Aqua Group Ltd., discussed in more
detail below.
- Earnings per share (diluted) were a record $0.73 per share for the quarter ($0.23 per share before yield enhancements), an
increase of 115% ($0.39 per share)
from the prior quarter and 103% ($0.37 per share) from the same quarter last
year.
- ROE was 29.2% (9.5% before yield enhancements), an increase
from 13.9% in the prior quarter and from 15.2% in the same quarter
last year.
- Leverage ratio of 38.5% at the end of the current quarter,
which was relatively consistent with the prior quarter.
- As at June 30, 2016, the
estimated collateral value across aggregate net loans receivable
was approximately 146% with a range between 100% and 480% on an
individual loan basis. Furthermore, the aggregate watch-list loans
had an estimated collateral value coverage of 106% and
non-watchlist loans had an estimated collateral value coverage of
162%. It should be noted that there is no cross-collateralization
of the asset coverage as between borrowers.
- Provision for loan losses for the second quarter was
$14.4 million. Included in this
amount is an unusual incremental provision of $12.0 million (pre-tax) related to Gray Aqua
Group Ltd. As at March 31, 2016, the
Company had taken provisions totaling $25.4
million (pre-tax) relating to the loan to this Canadian
salmon farming operations based largely on estimates of the live
salmon inventory prepared by independent third party evaluators.
The inventory estimates were updated in the second quarter, and
indicate there are fewer fish than originally expected and that
those measured are smaller in size than previously estimated. Based
on new cash flow forecasts derived from the revised inventory
estimates, the Company deemed an incremental provision was
necessary. Callidus will continue to have the inventory
independently monitored periodically until the final harvest in
March 2017.
- Craig Boyer, a Vice President of
the Company, has elected to retire by December 31, 2016. We wish Craig well in his
retirement. In the interim, he will be facilitating an orderly
transition of his files and responsibilities.
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 very
effectively manage risk of loss. Further information is available
on our website, www.calliduscapital.ca.
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 Q2 2016 results
on Friday, August 12, 2016 at 10:00 a.m. Eastern
Time. The dial in number for the call is (647) 427-7450 or
(888) 231-8191 (reference number: 93962347). A taped replay of
the call will be available until August 19,
2016 at (416) 849-0833 or (855) 859-2056 (reference
number: 93962347).
SOURCE Callidus Capital Corporation