- Net income
- Net interest margin
- Earnings per share
- Return on equity
- Loans receivable
- Cash flow from operations
I can’t pretend any of these numbers are good. I will say that they aren’t exactly unexpected though. We knew the largest loan was paid off in full, reducing loans receivable. We knew revenues were going down (based o loans receivable going down and previous quarters).
But as with my last update, there is some good news that can be found if you’re looking for it. In the result Callidus reiterated that the privatization process is on track, “The Company remains optimistic that it will announce a transaction on or about the end of the second quarter of 2017”, and the number of interested parties has been whittled down to six. Listening to the conference call Newton Glassman would not say that they still expected to receive $18-$22 per share, but he strongly implied it. I’m still betting on a takeout price of $18.
During the quarter Callidus returned significant cash to shareholders – mostly through debt reduction. Percentages below are calculated as: Dollars divided by market cap (50,210,000 shares outstanding x $14.83 May 4 closing price). And keep in mind these are yields in a quarter. I won’t extrapolate these over a whole year but you’ll definitely get the picture.
- Dividends – Dividends on shares owned by Catalyst and Braslyn are paid out in shares, so the cash number looks off. But the 8% yield for a quarter works out to be 2% yield for the month.
- Share buybacks – Share buybacks were nil for the quarter. Due to the above mentioned dividends paid with shares, outstanding shares increased. -1.6%
- Debt reduction – Callidus reduced their debt by over $100 million. 13.5%
That works out to a shareholder yield of 13.9% in one quarter. I know reducing that much debt is an anomaly, which is the reason I won’t annualize this shareholder’s yield number. But I will point to this as another example of Callidus continuing to provide value to shareholders even in a down quarter. While assets and profitability went down, Callidus made sure to mitigate the negative effects by returning everything they could to shareholders.
Callidus remains an arbitrage play, but there should now be a reversion to the mean to somewhere around $16-$16.50 to reflect the likely takeover price and the discount to reflect risk a deal isn’t completed.
Disclosure: Long CBL.