The Caldwell Partners International Inc. (CWL) Earnings Call Transcript & Summary

Hello, and welcome to the Annual Meeting of Shareholders of The Caldwell Partners International Inc. Please note that today's meeting is being recorded. If you participate in today's meeting and disclose personal information, you will be deemed to consent to the recording, transfer and use of same. If you disclose personal information of another person in today's meeting, you will be deemed to represent and warrant to Computershare and the corporation that you first obtained all required consents for the disclosure, recording, transfer and use of such personal information from all appropriate persons before your disclosure. [Operator Instructions] It is now my pleasure to turn today's meeting over to Executive Chair of Caldwell's Board of Directors, John Wallace. The floor is yours.

Thank you, operator, and good morning, ladies and gentlemen. It's indeed a pleasure to welcome you all today to the 2025 Annual Meeting of The Caldwell Partners International Inc. I want to thank you all for taking the time to attend this virtual meeting today. My name is John Wallace. I'm the Executive Chair of the Board of Directors. And on behalf of the Board, I will act as the Chair for this meeting. Also present on this live virtual webcast today are Chris Beck, our President and Chief Executive Officer; Shreya Lathia, our Vice President and Chief Financial Officer; and Michael Falagario, our Vice President and Corporate Secretary. As I said, on behalf of the Board, I wish to express my sincere thanks to all of you for joining today and to those who submitted their proxies in advance. As provided in the Notice of Meeting, the company is holding this meeting virtually, as we have for the last few years. As this meeting is being held virtually via live webcast, we think it is necessary to set out a few procedural rules for orderly conduct of this meeting. First, questions in respect of a motion can be submitted by any registered shareholder or duly appointed proxy holder using the instant messaging service of the virtual interface. Second, there may be questions regarding procedural matters that are directly related to the motions before the meeting may be addressed during the formal portion of the meeting. And third, any attendee can ask a question through the virtual interface. When asking a question, please indicate your name and which entity you represent, if any. All questions not related to procedural matters or the motions being -- that will be answered at the end of our -- by our CEO, Chris Beck's presentation. And for the purposes of this meeting today, voting on all matters will be conducted by electronic ballot. Registered shareholders and duly appointed proxy holders are asked to vote on each business item. And you will see on the screen all motions being brought forth at this meeting. The polls are now open. If you haven't already done so, please register your vote right away, as you will only have a certain amount of time to do so. I will now call the meeting to order. I'm informed by Mr. Falagario that 50.69% of the common shares are represented by proxy. And accordingly, a quorum is present. Notice of this annual meeting was mailed to all shareholders, together with the proxy circular in respect of this meeting. This allows us to dispense with the reading of the notice of the meeting, unless any shareholder wishes that the notice be read. I therefore declare this annual meeting to be properly constituted for the conduct of the items of business referred to in the Notice of Meeting. And the Secretary will ensure that a copy of the notice of the meeting and management information and proxy circular and an affidavit of the mailings of these materials to shareholders are annexed to the minutes of this meeting today. And to make the best use of our time, I've arranged for individuals to move and second the various motions on the matters before us today. As this is a virtual meeting, the Notice of Meeting and circular strongly encourage shareholders to vote in advance of the meeting by any of the methods described in the circular. And based on the proxies received, each matter of business to be considered at this meeting, namely the election of directors and appointment of auditors, has been approved by the requisite majority of shareholders present in person or by proxy at this virtual meeting. Our last shareholders' meeting was held on February 13, 2024, and the minutes of that meeting may be inspected by shareholders upon application to our Secretary. I would like to now ask Shreya Lathia to propose a motion to dispense with the reading of the minutes of that meeting and for the approval of those minutes. Shreya?

Mr. Chair, I move that we dispense with the reading of the minutes of the Annual Shareholders' Meeting of The Caldwell Partners International Inc. held on February 13, 2024, and that such minutes be taken as read and confirmed.

Thank you, Shreya. Mike Falagario, would you second the motion, please?

Mr. Chair, I second the motion.

Thank you, Mike. I declare the motion to be carried. The consolidated financial statements of the company as of August 31, 2024, together with the auditors' reports on these statements, were included in the annual report and were mailed to all shareholders on the supplemental mailing list. Copies of the annual report are also available electronically at caldwell.com under the Investor Relations portion. In accordance with the current corporate practice, the directors have approved these financial statements and no approval is required by the shareholders at this meeting. Our next item of business is the election of the company's Board of Directors for the coming year. Under the rules of the Toronto Stock Exchange, we are required to elect each of our directors individually so that we can report the number of votes in favor of and withholding of authority for each director individually. And our proxy form was set up to accommodate this. I would like to call upon Mike Falagario to nominate the 7 proposed members of the Board of Directors for the ensuing year. All of the proposed nominees are qualified and have signified their willingness to serve. Mike?

Mr. Chair, I nominate the following persons to serve as directors of The Caldwell Partners International Inc. until their successors are elected or appointed, subject to the provisions of the company's bylaws: C. Christopher Beck; Terry Grayson-Caprio; Darcy Morris; Richard W. Pehlke; John Wallace; John Young; Rosemary Zigrossi.

Thank you, Mike. Shreya Lathia, would you please second the motion?

Mr. Chair, I second the motion.

Thank you, Shreya. I declare the motion carried and those nominated to be elected as directors of the company until their successors are elected or appointed, subject to the provisions of the company's bylaws. And for all of those of you who don't know our Board, they're up on the screen right now. I would also like to let you know that if you do go into caldwell.com, into the Investor Relations, you can also go into the bio of our Board members. So Chris Beck, Terry Grayson-Caprio, Darcy Morris, Rich Pehlke, John Young, Rosemary Zigrossi, and of course, myself, thank you all for serving for the coming year, and thank you for supporting the Board of Directors. The next item of business is the appointment of external auditors for the current year and the authorization for the directors to fix their remuneration. The firm of KPMG LLP has been our auditors of the company since March 6, 2020. Shreya, would you please propose a motion for the appointment of KPMG LLP as auditors of the company and authorizing the Board of Directors to fix the remuneration of the auditors?

Mr. Chair, I move that KPMG LLP, Chartered Accountants, be appointed auditors of the company until the next Annual Meeting of Shareholders and the Board of Directors are authorized to fix the remuneration of such appointed auditors.

Thank you, Shreya. And Mike Falagario, would you please second the motion?

Mr. Chair, I second the motion.

Thank you, Mike. I declare the motion to be carried. All polls are now closed. Mike Falagario, would you please propose a motion for the termination of the formal portion of the annual meeting?

Mr. Chair, I propose that this meeting be terminated.

Thank you, Mike. Shreya, would you please second the motion?

Mr. Chair, I second the motion.

Thank you. I do declare this motion [indiscernible] termination to be carried. That concludes the formal portion of our meeting. But before we proceed to the presentation, I would like to take a moment to acknowledge and remember the many contributions of our past Chair, Elias Vamvakas, who has served as our company Chairman from 2019 until his passing this last year from a courageous battle with cancer. Elias was a true leader and a true friend of this firm and a shareholder. He is sadly missed. And at the same time, we do want to acknowledge and thank him for all the work that he did and again pass on our condolences to his family. So at this time, I'd like to move to Chris Beck, who will now deliver, as CEO of our company, the 2024 fiscal year's report and the company progress to date in the current year. Included in this presentation will also be our new VP and CFO, Shreya Lathia, who will also participate in this presentation. Please do add your questions, as we've already said, during the course of the meeting. We will deal with them under Chris' chairmanship at the end of the meeting. So Chris, over to you.

Thank you, John, and hello, everyone. We appreciate your attendance. I'll start with our normal formalities that we will be talking to you about our business, how it has performed, and we may also make some comments on how we feel it will perform in the future. We take it seriously and endeavor to be as accurate as we can with our beliefs, but we may be incorrect. And so we just want everyone to be aware of these disclaimers. This presentation will be made available on our website after the meeting has concluded, and you can read these all in greater depth. So what we wanted to cover today with you is just a bit of an update. Some of you will be new. We'll spend just a brief amount of time on who we are at Caldwell. As John mentioned, Shreya Lathia will give us an update on our financial performance most recently and where the business is at. And then I just wanted to cover a few areas surrounding our vision and strategy, growth and AI and technology. We'll bring John back on for some concluding thoughts, and then we'll open it up to you to answer question-and-answer period. So Caldwell, who we are. We haven't pivoted in the last year. We are a technology-powered talent acquisition firm. We do brand ourselves that talent transforms, and our purpose is to enable organizations to thrive and succeed through providing talent. This resonates with our clients in terms of not just being a pure-play executive search firm, but we also have our 2 business segments, the Caldwell executive search as well as IQTalent, again, Caldwell performing C-level executive fully retained search. We have our Caldwell analytics as a component of that. And we also have a very small component, Caldwell Advance, which is currently just 2 partners in our organization who focus specifically on roles just shy of the C-suite, not undertaken by our executive search partners, but used as a competitive, defensive mechanism to keep our competitors out from our clients. But executive search is the core of our business, representing about 80% of our combined revenues. We also have our IQTalent business providing candidate research and outreach and sourcing as well as full life cycle search done at the lower levels or in mid levels. IQTalent also differs, completely distinct operating segments, different teams as well as pricing model. Again, Caldwell retained executive search with an average of about $120,000, U.S. or Canadian, and then IQTalent billing hourly based on whether you're utilizing a sourcer or a full life cycle recruiter and only on a consumption basis and on demand. The business model within executive search is fairly straightforward. The drivers -- 3 drivers of the businesses are number of searches per partner, our volume, our average fee that we get for each assignment and the number of partners that we have in the firm. So multiplying those together gives us our revenue. So as Shreya goes through things, she'll cover some of these metrics. And then when I talk about sort of our vision and strategy and what we work on operationally, we spend our time focused on each of these 3 areas and how we can improve each one to help drive our revenue. Shreya, could you please come on and give us an update, as our Chief Financial Officer, on where the business is?

Thank you, Chris. I will be doing that. I will present the financial update for both of our segments, Caldwell and IQTalent. So starting with Caldwell. This first slide is one of the key external metrics that we refer to when gauging the business environment. We refer to a number of them, but this is a very important one for us. One of the key data points we look at is the CEO hiring outlook, which generally describes CEO confidence in the U.S. The CEO hiring outlook closely correlates with our search activities. The one exception was a deviation in the second quarter of calendar '24, which we attribute to pent-up demand from delayed hiring. But in general, excluding that, it has closely correlated with our experience. What I wanted to point out here is that the CEO hiring outlook continues to remain below the levels seen in 2019 prior to that significant upswing in the labor market. This, along with other metrics and our market experience, leads us to conclude that we continue to operate in a challenging market environment. Despite these challenging market conditions, we finished the first quarter of fiscal '25 with solid results. At Caldwell, professional fees were up 30% from the same quarter last year, driving a significant improvement in our bottom line. We finished the quarter with an operating profit of $0.2 million compared to a loss of $1.5 million in the same quarter last year. Our key performance indicators, or KPIs, reflect our financial performance. We were up on most metrics, including number of partners and number of assignments. The average fee per assignment was slightly lower than the same quarter last year, but we do expect that to potentially improve as revenue improves. While we are pleased with our first quarter results, we also recognize that we have opportunities that remain untapped. Caldwell executive search business is well diversified across industries, as you can see from that pie chart. Financial services represents almost 43% of our revenue. But within that, we are well diversified across the various sectors, including banking, insurance and asset management. Despite this diversification, we recognize that we do have white space across both industries, and we view this as an opportunity to increase market presence and growth. We also recognize that we are in a historically challenging market environment. Normalizing for volume and fee metrics, given our historical performance, we estimate that a market recovery could lift our revenue by approximately $7.9 million with our current partner base. So again, this represents an opportunity for us. Chris will take us through more details on our strategy, our medium-term strategy, so I will leave that for him, but I did want to point that out in terms of the numbers. This is a final slide on Caldwell and the revenue seasonality that we have historically experienced. Historically, the second half of our fiscal year has almost always outpaced the first half. This is driven by a number of factors, including the holiday calendar. The first half of the fiscal year includes U.S. Thanksgiving and Christmas. And the second factor that drives this second half of the year uplift is our compensation plan and the way it is structured. Excluding the pandemic year contraction, revenue in the second half of the year has outpaced the first half by an average of 26%. Now given this historical experience and barring unforeseen events, including any macroeconomical or geopolitical events, we do expect to see growth in both revenue and profitability in the second half of this fiscal year. In conclusion for Caldwell, 3 takeaways that I would like everyone to come away with. The first one, we continue to operate in a volatile hiring market. But despite this, we closed the first quarter of this financial year with a 30% increase in professional fees and a return to profitability compared to the same time last year. We also saw an improvement in most of our KPIs. And finally, I do want everyone to remember that we have a seasoned partner base, which is adept at navigating market currents, and we continue to add to our partner base to increase revenue-generating capacity and to address white spaces. Now moving on to IQTalent. Similar to Caldwell, we refer to a number of external metrics when gauging the business environment that IQTalent is operating in. One of the key metrics that we look at is the trending related to U.S. tech job postings. I do want to remind everyone that IQTalent has diversified from technology, but even so, tech still plays a key role in its revenue generation. We have noted that the average daily billing rate for IQTalent tracks pretty closely to the tech job postings. Tech job postings continue to track significantly lower than 2 years ago, and this is reflected in our daily billing rate. Similar to Caldwell, we do believe that IQTalent is operating in a challenging market. These challenging market conditions are generally reflected in our IQTalent -- in IQTalent's results. Professional fees were down 13% from the same quarter last year. However, gross profit is a silver lining. It improved by 5.1%, largely from our restructuring efforts. Similarly, operating loss, after adjusting for the onetime lease cancellation gains, improved by 80%. Overall, we are pleased with our results, and we are well on our way to seeing some growth in this segment. Practice diversification has been a key management focus at IQTalent over the past 2 years. We have succeeded in reducing tech as a revenue source from 61% in fiscal '22 to 38%. This was partly driven by the organic reduction in demand in the tech industry, but it was also driven by our sustained efforts to secure clients in other industries. Three takeaways that I would like everyone to come away with when we look at IQTalent's results. Similar to Caldwell, we continue to work in a challenging hiring market. All that said, our initiatives over the past 2 years, including restructuring, head count management and leveraging more contract employees to be more nimble to revenue changes, have impacted our gross margin and operating profit positively. We've also achieved solid synergies with Caldwell. Caldwell referrals drove 21% of IQTalent's revenue in the past 12 months. And finally, a few words on our capital and liquidity position. We use unencumbered cash, a non-GAAP measure, to track our liquidity. As of the end of the first quarter of fiscal '25, unencumbered cash was $0.6 million higher than at year-end and $1.7 million higher than the same quarter last year. We view this as a very solid liquidity position, and it allows us to reinstate a dividend at approximately a 1% yield on the average share price. We have also received approval from the TSX for a Normal Course Issuer Bid, which we plan to use as a potential anti-dilutive initiative. Our aim is to return an amount of capital to shareholders without jeopardizing our growth plans. That concludes my presentation, Chris, on the financial results. I will move it over to you now.

Thank you, Shreya. Regarding our vision and strategy, we recently had our partners together and -- answering Q&As from them and questions even internally. What is the vision for our firm? Do we want to be bigger or better? And what are our midterm goals? And we've shown this slide in different iterations before. I know it's very busy, but again, this will be posted afterwards so you can digest in more detail. But when we look at -- this is a chart of the top 20 executive search firms. And if you map them out with, on the X-axis, total number of consultants, right, number of partners; and then, on the Y-axis, revenue per partner, you get their total revenue. And thus, these bubbles are the size of their revenue, which represents the size of their market share. And you can see there's different quadrants that have sort of materialized. In the upper right-hand quadrant, we have the SHREKs, which is an acronym for Spencer Stuart, Heidrick & Struggles, Russ Reynolds, Egon Zehnder and Korn Ferry. And then in the lower right-hand quadrant, there's -- and those firms, the SHREKs, a large number of partners as well as a large revenue per partner, those are very well-known brands. And those are brands that have a lot of Fortune 500 and large company work, where not only is there more work in larger companies, but a CFO makes more in a Fortune 500 than at a mid-market firm, so they enjoy generally slightly higher average fees. Then in the lower right-hand quadrant, there are some search firms where their business model is focused on a large number of consultants but a lower revenue per partner, so it's more of a partner attraction approach. You can see 2 firms there. And then in the lower left-hand corner is what we've entitled The Pack. That's where most of the search firms sit. Those are lower revenue per consultant and lower number of consultants, so sort of boutiques as we define them. And then in this upper left-hand corner that I've put in a yellow box is what we're terming the Elite quadrant, and that's defining as revenue per consultant per partner of $1.25 million and above. And the drawing of that line is really just based on where do we see firms sort of migrating. You can see I've added a blue line at the $1.4 million mark. And that I highlight because that's the point in our compensation plan where we believe we have a favorable to general market compensation plan. Below that number, we believe that we're equal or even below market if you're billing less than $1 million, and that's by design so we can attract and retain higher-performing partners and that the lower-performing partners become somewhat self-managing out if they are not performing to the Elite definition as we've defined it over time. You can see where we were in 2008 in the lower left-hand corner. We had a 0.2% market share, approximately $700,000 revenue per partner. And now we're about at the -- just shy of the $1.5 million range. This is slightly lower than last year. Really, all firms moved down and to the left a bit compared to last year, or I should say 2022, when we had extremely favorable hiring demand, and now people are slightly lower. We are focused on building our brand, though, in this Elite quadrant. And just these 20 -- I put 20 on the bubble chart. The top 50 firms account for $4.7 billion, and we currently have about a 1.4% market share. So we do see a lot of space to grow into. As Shreya's showed you, we still have areas to fill in with our partners. But the focus is where do we go from here over time? We're currently at $74 million. We would like to see ourselves at sort of that $200 million-plus mark with -- it will result in a range, but that could be 100 partners at $2 million. But that is our focus on becoming the recognized elite executive search firm, growing our revenue at the same time we grow our brand and as we get bigger and fill in gaps, able to better serve larger companies holistically because we'll have all the search industry and functional segments complete. And as we drift up in the size of clients that we service, as I mentioned, the Fortune 500, those average fees get bigger as well. So it becomes a self-driving process if we can penetrate into those larger clients. Right now, our sweet spot is really companies in sort of the $200 million to $2 billion revenue range, as a general statement, and we are focused on moving that up over time. So the long-term vision then, again, the most -- the largest, most reputable Elite-quadrant executive search firm, leveraging our -- the brand within the brand partners we have, known as market makers, with deep relationships with our clients, $200 million to $300 million in revenue with 125 to 150 partners. And this is not an end game for the company. But when you are approaching the size of those SHREKs, which is sort of the $600 million to $800 million in revenue, the market gets very tight. There are candidate and client blockages because we agree not to recruit from clients for a period of time after placing executives there. Elbows get sharp and you just run into different types of hurdles, which is why there's an upper limit growth limiter to some extent as these firms keep growing and why you don't see an executive search firm with like a 50% market share. And this doesn't exclude other offerings, but this is our vision with our current set of offerings in terms of executive search with our analytics and perhaps a portion of our Caldwell Advance business. I've focused mostly on Caldwell executive search thus far. IQTalent, revisiting why we acquired them back at the end of 2020 to begin with, it does provide us a differentiated approach to the market, not just having elite partners, but being able to go to our clients where, in a $200 million to $2 billion company, search is not an ongoing, constant availability. It's somewhat episodic. But we can go to our clients not just to see if they have executive search needs, but to think more holistically and sit down and talk through what's their business strategy, how does human capital fit into that, and how can we accomplish what they need to do with human capital across their entire talent acquisition spectrum. And so IQTalent, our partners do appreciate having that story to take to the clients. It has also produced revenue downflow from the Caldwell executive search partners to IQTalent in terms of revenue. We have not seen upflow in terms of executive search work for IQTalent, which we did not anticipate seeing much of when we acquired them. So it is meeting the strategic notion of it from a business cross-selling perspective. But at the same time, we bought that business to help be a driver of shareholder growth. It had a historical growth rate of between 30% and 40% organic growth from the years -- I guess it was 2012 through 2020 in the pandemic, building on itself. And we've rehashed on last year's call the impact on the pandemic, that we acquired them at that bottom and then they grew 200%, as did our share price, and then came crashing down, along with the hiring demand market that we saw at our competitors. IQTalent impacted more than executive search because of that on-demand formula, which is we're here to help when you need us and you can turn us off when you don't, and people turned us off. So as Shreya mentioned, we are pleased, not excited but pleased that we've stabilized that business. The revenue has been essentially flat for all of calendar 2023 and the kickoff to -- I'm sorry, 2024. It's been flat for calendar '24 and the kickoff to '25. So at least it hasn't eroded more, and we've taken cost measures to get to at least a breakeven point on that level. But we really need to see a reengagement of that 30%- plus growth rate in this fiscal year to really meet the strategic goals that we acquired IQTalent for. And that doesn't mean that we've got a hard answer for exactly what happens if they don't meet that strategic growth, but that is why we acquired them and what we're focused on reigniting in that business. We have brought in outside sales instead of historically relying on referral and just content marketing campaigns. And that's helped a bit, but not a lot, obviously. I mentioned we've been flat. So we are hopeful that, with the U.S. election through and a lot of the uncertainties in the market out of the way, that we will see a pickup. Our executive search business, the clients are talking about increasing hiring demand. There are downward pressures, as you all are aware, such as the talk of tariffs. And that does make CEOs nervous and nervous CEOs are not good for hiring markets. But there is a lot of pipeline activity. And if IQTalent does not reengage in the 30-plus percent growth, we will look at other ways to create value with IQTalent. But it is providing a meaningful differentiator for us in the market during this time of our evaluation. So I think I've already hit on a lot of these topics in terms of why did we choose the vision that we just showed you in terms of the star Elite quadrant approach. And again, from the business side, it creates a tight, concentric firm, differentiated top producers who want to go to work together, each raising each other's game. It's a moderate level of growth in the executive search business, but one where we think there's leverage and a proven model that we have in place. From the shareholder perspective, when we look at this, and I'll show some numbers in a moment, but we do think this provides a path for shareholder returns and earnings growth and profitability. And we also think that there's a benefit that this is a lower-risk strategy than a few of our competitors have done with a very aggressive M&A path with a PE backer where the culture is hard to keep together and there invariably turns out to be partner churn. And lastly, being in that Elite quadrant, it is not our Board goal currently, but we do believe this positions us very differently than virtually all other search firms in the market where being in that Elite quadrant with the reputation of our partners for a unique position if there were ever a strategic partner to join with. And how this helps attract partners, I've touched on a lot of these, too. It just keeps helping driving our culture of that eliteness. And at that size, even the larger star that I showed you in the bubble chart, that's nowhere near approaching a SHREK size. So we're talking low internal sharp elbows, lots of room to move in the market, low off limits. We currently do about 600 searches versus 10,000 to 15,000 at the SHREKs. And I should have pointed out that bubble chart was North America specific. So our goals do remain to continue to focus on growing London, but primarily building out our North American partner base, where we still have so much opportunity as well as at our firm. Being public does provide us a transparency that only Heidrick and Korn have for our employees. So there are no financial secrets here. We have one compensation plan with no special deals, and that is what drives people to our firm. Then in terms of the growth and profitability, as I mentioned, we do focus on the 3 drivers of number of searches per partner, average fee per search, number of partners and principals. I've talked a lot about the number of partners and principals and our approach there. Regarding the average fee, I would say that bringing on elite people helps maintain our average fee, which is still premium in the marketplace, not larger than the SHREKs, but larger than most of our competitors. And as I mentioned, as we move upstream in terms of size of clients, as we build out our partners, the average fee just naturally can increase due to the compensation of the placed executive increasing. And on number of searches per partner, it's really focused on enhancing strategic selling and collaboration, strategic sales training we've done a bit of as well as the collaboration piece and getting people together and then filling in these gaps I mentioned so that, if a functional partner -- I'll give one example of a functional partner in the marketing space is able to procure an operating P&L real estate role. We currently don't have a strong real estate presence. So if we had a real estate partner, it would help generate additional search work for us just through the network of current partners we have. So that's what we're focused on in terms of building out the average fee and the number of searches per partner. We do continue to look for process and efficiency. Mike Falagario, our Secretary, who you heard earlier, oversees reviewing tools. I'll show in just a moment where we're at in terms of technology and AI, but really leveraging that to shorten our cycle time, our days to close, as we call it, which is about 93 right now. And in doing that, we just increased capacity within the search firm so the partners can do more business development and more searches, and our support teams become more efficient so they can handle more searches per associate or consultant. So we are focused in areas such as that. And the profit side of things, as this number of searches per partner returns to historical norms, as Shreya had a chart on, we will pick up revenue that we don't have right now. The exact number of that, Shreya took an estimate at it, of that sort of $8 million or so. And that's a very profitable missing amount of revenue because that revenue does not need additional resources currently to execute on it. So it would have partner compensation, but it's got a strong variability under it. And we do target 10% EBITDA margins for the Caldwell business once our revenue levels have picked up to the historical norms. And we will continue to try to take advantage of cost savings. We have exited out of many of our real estate properties already. We're out of Los Angeles. We're out of Dallas. We're out of San Francisco. We're out of Vancouver. And we still have partners there. It's just people have national practices for the most part, and weren't in the office to justify the real estate space. So we stay interconnected through various internal initiatives, but that's enabled us to reduce our -- the cost we spend on physical space. And I would just remind people, we've hired a lot of partners over the last 12 months. There is a ramp-up time for these partners where profitability can be suppressed. So in terms of long-term profit, there will always be new hires, obviously, transitioning in, but this was an especially robust hiring group for us, and so we are looking forward to them producing more during the back half of this fiscal year than the front half. And then lastly, some actual numbers. So up here, historical, fiscal '19 through fiscal '24 and our revenue, you can see we're at $70 million in revenue, $70.4 million in 2019, up to almost $104 million -- well, down to $56 million in the pandemic, up to $104 million as the pandemic bounced back with that overheated hiring demand where our average searches per partner were topping up at about 16 per partner versus our historical norm of 11.7. And now, as Shreya pointed out, we're below that. And last year, last fiscal year ending August, we ended up just shy of $75 million. Our next big goal, so again, this isn't the long-term vision. This is not where the star was, but just the next goal we're looking to in the midterm that we set with our partners was a nice round goal of $125 million in revenue, which is a 67% growth from where we're at now and a 10% EBITDA. So that would be about $12.5 million in EBITDA. So again, not a long-term goal, not a fiscal '25 goal, and working with our partners to refine the exact time frame we put around that, but definitely our midterm goal. And the path to that from here, that 67% growth, that would represent approximately, if we had 70 partners each billing CAD 1.8 million, that would equal to $125 million. We're at approximately 52 partners right now, so that would be about 18 net new partners from where we're at and we -- currently. So the question is, how quickly can we hire 18 net new partners? I'm not talking gross, because we always will have some attrition through retirement as well as underperformers who don't transition into the firm. We have very, very few leaders who we want to retain, but occasionally, that will happen. But that's our target on the 18. And so when I say I'm working with my practices to refine how quickly can we do that, if I hired 18 new partners tomorrow, it would be tough to digest. So again, that's not a 1-year goal, but my practice leaders have put forth 34 new partner areas that they would like to fill current gaps in. So I mentioned real estate just as one example. But these aren't ultimate end goals. These are just -- we would be a stronger firm today if we had these 34 areas filled in. So there is engagement at the partner practice level. We are putting -- driving this through our practices, partner growth, and we're sort of revamping our onboarding process as well to hire a bit more robust growth. The 10 partners or so that we brought on in the last 12 months, that's a lot to digest for us when we only had in the low 40s to begin with. And when I say a lot to digest, it's teaching them our Caldwell way, how we do the searches. It's getting them to know each other so they know everyone's exact expertise. And so that's what we're building this platform for and what our next target is that we set with our partners. My closing slide is really on AI. We get a lot of questions on AI. How is it -- is it disrupting search? Is it real? We sort of break AI and just technology down into 3 components. One is our internal tech platform, and that represents the tools that we use -- or I'm sorry, the platform that we use to perform our search work and our business. So the platform itself, Thrive is a third-party executive search database and search process management system where we put all the information about every one of our searches and our candidates in and track our business development in. Predictive Index is third-party software, SaaS software. That's underpins our Caldwell Analytics. We are the only approved, certified partner for Predictive Index that is an executive search firm. They gave us an exclusive on that. And we leverage that with our clients. And that's the behavioral analysis and the cognitive analysis that we give to the executives we place against the job target that we work on with the client [ fit to role ]. And then we've built some internal tools such as what we call Caldwell People Finder, which pulls in from lots of different data sources, contact information for executives. It is truly a little unnerving to see how much information about all of us exists out there publicly, but this pulls that in so we can reach out to our executives, both candidates and clients. And then we use Zoom and Teams as the underpinning of our communication system for phone and video. So that's what lets us do our -- the underpinning of the search process. Then we have a set of tools, our search tools and big data, which is where, where are we finding the candidates and leveraging technology? And we have our internal databases inside of -- all the candidates inside of Thrive. That's over 500,000 from the search work we do. But tools such as LinkedIn, BoardEx, hireEZ, these have hundreds of millions of candidates within them. And so we leverage all of these both for candidate development, sourcing and development as well as for business development purposes. And these are expensive. We spend a lot of money on search tools. And that's what -- another reason clients hire a search firm, though, is because while a Fortune 500 Coca-Cola could afford all of these tools, a midsized business, small to midsized business, simply cannot. They'll have a LinkedIn license, and usually, that's it. So we're able to access a far deeper pool of candidates more quickly and with a better target, using all of these tools collectively, depending on what the industry is and the role is within a company. And those fall into the big data category as well. And so just differentiating that from AI, the big data, you can go into LinkedIn and say give me all the chief financial officers in the Northeast region with Big Four accounting experience who have been in their current role for more than 4 years, as an example. That's a search algorithm, a Boolean search. It's not AI. It's just accessing tons of data through a search engine. The AI tools are what's evolving, certainly, and what everyone's heard all about. ChatGPT, Copilot, Perplexity, those are truly the AI learning platforms where the technology learns itself, the ability for the technology to say, I've looked at the last 1,000 executives that you've placed and I've noticed these similarities. So when we go to look for candidates, we get -- if you're looking for this, you may also be interested in these executives. HelloSky, formerly known as Skyminyr, that is the company where we invested USD 500,000, gosh, 2, 2.5 years ago in their initial round. They continue on customer acquisition. It's starting to be used by some other search firms. So that's our direct investment. We own about 4% of that business, so not a material portion, but we also don't want to be a -- bet on one technology company. But that's an example of AI where it will give us, for example, a recruitability score for the candidate. So I can go in there and say, give me -- I'm doing a venture capital search for a CFO. Give me CFOs in a certain region who've scaled successfully from a Series A to a Series D, defined as going from revenue X to revenue Y, and it will come back with that along with a recruitability rank that says this person is likely someone you may be able to recruit. And that's powered by the AI figuring out, oh, if they've changed jobs X number of times in the past, and they're looking to do -- what's their likelihood of changing again? Or if they've only been somewhere 6 months, they're probably not going to move, or if they've been there 20 years, they may not move. So those are the types of AI developments that we've seen. And these are just the ones that Mike Falagario actively has going on internally right now with people. There's a whole waste basket full of AI tools we've looked at, so companies that didn't do what they say, which is the usual case, and companies that have gone out of business because they weren't able to scale. So it's for sure an area that's rapidly evolving. I still don't think it's going to disrupt executive search on a wholesale basis. I think it will continue to make us more and more efficient, which will change our business model to have people being more productive, so fewer associates and consultants and project coordinators over time. But it will be leveraging those, not replacing the executive search partner where, even with an AI tool, you're still getting a list of 100 executives and you don't know where to start even with recruitability scores and the executive search partner better able to sift through that as well as being the independent talent broker on behalf of our clients, where I keep using the example, it would be awkward for Coca-Cola to call Pepsi to see if their CEO wanted to join them, right? There's no independence there. So the one area that may impact us more and we do continue to look at closely is this does have a more direct impact at IQTalent, where these tools are making us more efficient now. We are finding candidates faster. And what that is doing is it's reducing the number -- the amount of time we have to spend to find candidates for our clients. And the challenge is we bill hourly. So by us becoming more efficient, we're actually reducing the amount that we charge our clients. So we are looking at disruption as it pertains to IQTalent a bit more directly than executive search. And we are looking at piloting different pricing models with our clients based on a place -- a fixed placement amount versus just an hourly billing. So we're active in doing that as well. So those are sort of the major scopes of the business areas. John, if you want to maybe hop on to summarize everything Shreya and I have done, and your own thoughts, and then we can open it up for Q&A.

Thank you very much, Chris. Thank you, Shreya. I realize there was a tremendous amount of information that we shared with you. But again, you have a chance to ask us some questions at the end to see if we can elaborate on anything that came out of it. But at the same time, I want to make sure that everybody on this call and any of our shareholders also know that we're always available if you have any specific questions or issues that are going on. One of the things that we didn't specifically talk about was leadership, although it's self-evident. I do want to thank the Board and congratulate the Board on an orderly and a planned leadership transition, which was already in place and in process last year. Again, for those of you who aren't aware, Chris has been our CFO, our COO, our President and now CEO. He's been with the company for 14 years. And one of the things that I hope that you took away from today is that our business is a little bit more complicated than maybe people think it is. It's not just get a search and fill a search. Like all companies, we're becoming a technology-bound company. But we're absolutely sure that this business continues to be high-touch. I do want to also emphasize that Shreya was hired 2 years ago as our VP of Finance with the express purpose of being a successor to Chris as CFO. We're very pleased that she took over that position on September 1, coincident when Chris became CEO. And again, Mike Falagario has been with the firm the whole time that I've been here for 17 years and has played many roles in finance, many roles in the IT side, but remains our VP and Corporate Secretary with a lot of transitional role, particularly on the technology and IQTP side of the business. At the same time, I hope you picked up on our vision and strategy. It has moved a little bit because of IQTalent Partners, but we have IQTP under control from a financial point of view. We still think there is a great, great growth opportunity there. We're aware of any of the technology challenges or disruption we may have there. But the growth that we see particularly coming and the profitability coming, we know we can get it out of Caldwell. Chris has already shown you the $125 million, which is very attainable and is not really a huge, huge goal. It's more market bound. One of the things that I expect that, if there aren't any questions, again, is on your mind, what's going on from everything from a tariff to uncertainty in the marketplace. We've really come to the conclusion, and I presume that most of you have too, is there's only so many things that we control, and what we control is working with our clients and doing the best we can. I'm sure we're going to have some instability that goes on with what comes out of the United States over the next while. But again, we're very confident in the growth strategy that we have. We're also confident in the fact that the great majority of our business is still in the United States. And again, we think from a -- even if there's uncertainty, that, that is going to continue to grow no matter what. You've already seen the technology. That might have been a little too much information for you or might have been a bit overwhelming. But what you should take away from that is that we are spending a tremendous amount of time and energy to make sure that we have the tools and the capacity to keep up. The high touch we continue to believe is going to be a part of our business. We need to continue to stay up-market. Our partners will play that high-touch role. And the execution side will be much more technology bound for us to deliver faster and better product. And IQTalent Partners, it's not a wait-and-see, but it is definitely a manage-and-see. And we're absolutely sure now that we have all of our costs under control so that we'll be able to at least keep it in a breakeven mode until we figure out what's going to happen to that business for the longer term. One of the things that you did see is that we have -- the Board has implemented a dividend for the last 2 quarters. Again, we've also issued a press release that we have established a buyback capability with the TSX, which we will be implementing. Both of those will be based upon our ability to have the cash to be able to do it. And again, as the Board always does, they look at where best to utilize our capital as we go. So we'll stop at that. I'd like to move over to thank our presenters and thank our guests and shareholders for being here today. We would like to go to a question-and-answer. I'm going to ask Chris to moderate the question-and-answer, i.e., to direct the questions to the best person to answer it. Mike Falagario will put the questions forward. So let's begin.

Thanks, John. And I've got the questions from Mike. So I think we can go through some of these. So in order of receipt, at what annual revenue base does Caldwell start generating operating profits in excess of 10%? And so I put up there our midterm goals of that $125 million and the 10% EBITDA margin. It will be challenging, I think, to get Caldwell much above 10% with our current business model, meaning the compensation structures we have. Again, those are both attraction to grow and retention to not have departures at the partner level. We have always been very open about that with investments. If you compare us with our 2 public competitors, Heidrick and Korn, they certainly get the benefit of some additional operating leverage. We do have public company costs. They do have public company costs, but they've got a bigger revenue and profit base to absorb that within. But the biggest piece is if you look at -- we have generally a lower G&A percentage to revenue in normal times, and we have a higher percentage of compensation to the partners compared to our peers. And that is what keeps our firm sort of growing and thriving. So 10% is what we've put for Caldwell. We have said in the past that we do see IQTalent as the ability to have higher margins. And right now, their margins are at breakeven, as we've said, so more focus on that. Getting above the 10% would be likely through a bit more operating leverage, if we're able to, over that size. You can see on -- if I put up even -- you can see that, when we were in that very overheated market, 16 searches per partner, we did $103.9 million and 11.3% EBITDA. So there is potential to get above 10%, but it really would be at higher metrics than what we're currently seeing with our partners. How does IQTalent Partners fit within Caldwell's long-term plans? I think we spoke to that, John, in terms of, look, we are sort of figuring things out the remainder of this fiscal year in terms of where that organic growth rate is going to reengage. And we will certainly make some decisions on that. Right now, we're 100% focused on just doing everything we can to drive their top line as well as enmesh the engagement of our partners for referral business. And I will say that, that business is extremely variable now in its cost base. We do not have a lease there anymore, and we have shifted to a slightly higher concentration of contractors versus employees so we can more efficiently change our cost base as revenue moves up and down. How many partners do you expect to have on board by fiscal year-end? I believe we're at 53 now. I'm not even 100% -- we just put out a press release yesterday. Jonathan Rossotto in our London office has joined us, and we -- that follows 2 other announcements of hires in January, Amanda Henkel and Scott Clark. We haven't put out a specific hard number on that. I would go back to say that we are always active in recruitment. We always have a pipeline of people we're talking to. Hiring 10 partners last year, we were aided by -- a bit aided by some economic conditions where people were dissatisfied at their firms on how compensation plans were, where it wasn't direct drive. It was based on how did the overall firm do. And while there's some benefits to that, culturally, it's challenging. And so it had people sort of loose in the market. I don't know that we'll hire another 10 in the next 12 months. I put out there that midterm goal of 18 net new partners. We will have some retirements and, like I said, some natural attrition. But we do look to keep expanding that partner count, both organically as well as possible boutique acquisitions. Moving forward, what is the new normalized average fees per assignment and assignments per partner? We still don't see any reason to back away from the -- really the historical averages that Shreya had shown in terms of that almost 12 searches per partner. That is sort of the model, 12 searches per partner, on average. Some do twice that amount, by the way, but that's just the average, but an average of 1 search per partner per month, 12 searches per year, and at that sort of roughly $120,000 to $130,000, U.S. or Canadian. And so when you pull the U.S. in, it goes above that $120,000 to $130,000 in Canadian dollars. I think Shreya showed that our historical average was about CAD 143,000. We do look for it to be higher than that. Honestly, that's a [indiscernible] average and our average fee increasing -- not increasing -- continuing competition always keeps a bit of a throttle on what search fees can be. But we have held the line at that sort of overall model of 1/3 of the placed executives' compensation. And we are commercial for large volumes or very large fees. We will come off a bit on that. But we've been very good at holding pricing. And as just inflation has occurred and executive compensation increases each year, that's our sort of offset to our employee cost inflation, is higher average fee just through natural compensation increasing over time. And the assignments per partner, yes, we would look to get back to sort of that 12 assignments per partner as our target. Always trying to increase that, obviously, as I said, but that's our sort of the midterm target. What are our capital allocation plans, excluding buybacks and dividends, which we talked to? We have no machinery. Our capital expenditures are quite small, so our machines are really our people. So when we think of capital allocation, it is those 4 primary areas, the buybacks and the dividends, which we talked to. And then partner hiring we've talked to. There are -- we don't write wholesale, big checks to acquire people as sign-ons, but we have to be competitive in commercial. And there is a certain amount of money people are usually leaving behind. So we will pay a sign-on to people, partners, when they join us with -- relative to the size of what their leave-behind is. And so there is a cost of acquisition in that area. So that's one area of capital allocation. So the more hiring we do, the more we will allocate our unencumbered cash for that. And then the other area, and I did just touch on it, would be boutique acquisitions. We're not focused on large acquisitions. They're very difficult to absorb culturally. I keep coming back to that cultural piece. But for instance, The Counsel Network that brought a couple of partners in their team, that was a great fit for us. It filled in an area we had open, which was legal, in Canada. So we will continue to look at opportunities where there are small firms, small -- when I say small, sort of 1 to 5 partners, where the purchase price would be something we would be willing to digest in that it fills in a specific gap. So we will continue to look at boutiques that become available. Hello, would you have any comments about the direct, indirect impact of potential U.S. tariffs on Canada? John, I'm talking a lot. Maybe I'll pause. For those of you who don't know, I'm based in the U.S., so I have my view. But John, perhaps you could give us the view representing Canada?

Well, I think, like everybody on this phone -- or on this virtual meeting today, there's a great deal of uncertainty that's going to go on in the next possibly 4 years at this point in time. The reality is that, if tariffs do come on at anywhere close to the President has threatened in the United States on to Canada, it definitely -- and everybody on this -- again, on this meeting knows that, that will have an effect on the Canadian economy. And it will probably have an effect on the American economy. But the biggest issue is just this uncertainty that continues to go on about what's going to happen, what's not going to happen. We actually thought that maybe the 2025 calendar year was going to be a year of a little bit more calmness, but that's not going to be the case. So we're pushing forward. But again, we're all working in the same markets. And again, I'm very confident in saying that businesses are going to move forward because that's what businesses do. So we're just working hard to make sure that we continue to be in front of clients, create business. And at the same time, we're just going to have to deal with what we get put upon us over time. Chris, you can add to that as well.

Yes. No, you covered it, John. It's a lot. The overall economic impact is notable, but the underlying reality is it impacts specific industries tremendously. We have current clients who are energy importers from Canada. It's a really big deal. So depending on what industry you're in, it would impact us very directly. And the good news is the tariffs are goods based, not services based, so there's no direct, but that indirect in terms of search is for sure. And it's felt in the U.S., perhaps not quite as front as it is in Canada, but it's for sure, again, creating uncertainty in the markets. Okay. Are we considering M&A? If so, what kind of M&A? I think we touched on that, really boutiques. We're not looking for acquisitions in the IQTalent lane right now. We view -- I mentioned we have our investment in HelloSky technology software. We have our investment in HootRecruit software, which was the spin-off of our IQRecruit from IQTalent. We're a passive investor there. We're not really looking to be technology investors so much as just users and enablers. So any M&A, again, we won't ever exclude anything, but right now, our focus really just executive search boutiques would be the area. Question, what is the 3-year revenue goal? We don't give specific hard time lines, but I did put out in the presentation what's our next big goal. And I said that's not a long-term goal. It's not a 1-year goal, as I said. But the sort of -- if I say 3 years midterm, without having put an exact 3-year target, I'm still working with the practice leaders on exactly which partners we're targeting first from a strategic perspective and how many people can we put through our funnel. But I have put forth what the next big target is at that $125 million and $12.5 million of EBITDA coming off of that. Future dividend increases are tied to what financial metrics? We look at a lot of different things. But obviously, cash flow and profitability is the biggest driver. When we put that in place, anything less than we thought $0.01 per share is sort of like why -- when I say $0.01 per share per year, what's the point of doing that? But as Shreya mentioned, that is a 1% yield. And if you look at Heidrick and Korn, our 2 competitors, they're in the 1% to 2% yield range, which seems to be fairly common in professional services, which doesn't mean we wouldn't revert to a higher dividend yield. Before IQTalent, we were in the 7% to 8% yield area. So it really is what's our profitability, our net earnings, and how have we balanced the buyback with the dividend itself? And we talked about the other capital allocation sources. So if we're not able to scale our partners, then, certainly, we would look to other capital allocation returns or investments for the benefit of the shareholders.

Yes. The only thing I'd add to that, Chris, is that the Board reviews -- will be -- reviews dividends every quarter, and will continue to do so to the benefit of the shareholders.

And John, it looks like that was the last of our questions, or one might have got cut off there at the end, Mike. I don't know if that -- the last one I could see, Mike, was future dividend increases.

That's it, Chris, confirmed.

Okay. John?

All right. With that, first of all, thank you for everyone for being on today. It's been -- I hope we've been able to give you the information you were looking for. Again, I would reiterate that the Board or Chris is available at any time if you have any individual questions or you would like to meet with us. I thank everyone for being on today. I will now hand control back to the operator and conclude this meeting. Thank you.

This concludes the meeting. You may now disconnect.