MISSISSAUGA, ONTARIO--(Marketwired - Oct. 31, 2016) - Smart Employee Benefits Inc. ("SEB" or the "Company") (TSX VENTURE:SEB) today reported its financial results for the third quarter ended August 31, 2016.
(All comparative figures are the third quarter prior year, unless stated otherwise.)
The results for the third quarter ending August 31, 2016 show significant improvement over the comparable period in the prior year. In addition to strong operating performance during the quarter, SEB refinanced part of its operating credit facilities and extended or repaid its short-term debt facilities.
Revenue: Revenue for the three-month period ended August 31, 2016 increased by 105%, or $12.5 million, to $24.4 million from $11.9 million for the same period in the prior year. Revenue for the nine-month period ended August 31, 2016 increased by 99.7%, or $36.4 million, to $72.9 million from $36.5 million for the same period in the prior year. The acquisition of Maplesoft Group Inc. ("Maplesoft") contributed significantly to this growth, accounting for $12.8 million in revenue for the quarter and $39.8 million for the nine months. This was partially offset by the unwinding of the Banyan Work Health Solutions Inc. ("Banyan") acquisition. The comparative prior year figures included Banyan which represented $2.2 million of revenue for the quarter and $6.4 million for the nine months.
Gross Margin: Gross margin for the three months ended August 31, 2016 increased by $1.1 million over the prior year reaching $4.3 million. For the nine-month period, gross margin increased by $4.2 million to $13.2 million, year over year. The prior year comparative figure includes Banyan which represented $0.4 million for the quarter and $1.4 million for the nine months. Gross Margin as a percentage of sales declined to 17.5% and 18.1% for the quarter and nine months, respectively, versus 26.9% and 24.7% the previous year. The growing professional services business from the Maplesoft acquisition coupled with the exclusion of Banyan was largely responsible for the gross margin percentage decline. Professional services typically have a lower percentage gross margin as a percentage of revenue.
Operating Expenses (salaries and other compensation, professional fees and office and general):
Operating Income before non-cash costs, interest, one time professional fees and equity share of Banyan's earnings before unwinding- was $812 thousand for the quarter versus $29 thousand in the previous year. The nine months was $2.0 million versus $1.2 million in the previous year. The comparative figures includes Banyan's results. The quarter ended August 31, 2016 has been the strongest third quarter since the inception of the Company.
Adjusted EBITDA from Continuing Operations- was $636 thousand for the quarter, up from $23 thousand in the previous year. The nine months comparison is $1.7 million, up from $0.6 million.
Loss from Continuing Operations- was $1.8 million for the quarter and $5.3 million for the nine months. This compares to $1.4 million and $4.0 million for the same periods previous year. The loss is primarily attributable to non-cash items (e.g. share based compensation, amortization, depreciation and interest accretion).
Technology Division- the Technology Division recorded strong performance for the first three quarters of fiscal, 2016. Revenue was $71.8 million with an EBITDA of $4.6 million. Backlog and renewals remain strong.
Benefits Division- the unwinding of Banyan significantly reduced the revenue from this Division. This Division remains a major growth focus for the Company in 2016 and beyond. The Company has significant growth opportunities in the fiscal 2017.
Corporate Division- the Corporate Division's Adjusted EBITDA for the third quarter was negative $0.6 million versus the previous year's loss of $0.9 million. Legal, accounting, and valuation fees are significant costs of this Division.
YEAR TO DATE FINANCIAL HIGHLIGHTS
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John McKimm, President/CEO/CIO of SEB, states:
"SEB's acquisition program continues to deliver positive results. The Company now has a geographic footprint across Canada, the UAE and India. The business base has been established for strong organic growth. The SEB Group employs approximately 726 people globally, one third employees and the rest, contractors. Over $30.0 million has been spent over the past four years on the acquisition and development of software solutions and hosting infrastructures, and acquiring companies that are core to the Technology and Benefits Divisions. The Technology Division continues to deliver strong growth from organic initiatives which is expected to continue. The Benefits Division has been well positioned for growth in fiscal 2017. The Company's New Product Platform is launching in November, 2016 and strategic partnership and acquisition transactions are in process with benefit consulting entities and Managing General Agents (MGAs). The Company's strategy has evolved from acquisition to also include "white-labelling" of its technology solutions with strategic partners who have extensive benefit client relationships. This will require additional investment in sales and marketing initiatives, acquisitions and joint ventures. Management believes both the Technology Division and the Benefits Division are well-positioned for significant growth in fiscal 2017."
Smart Employee Benefits Inc.'s global infrastructure is comprised of two operating divisions: Technology and Benefits. The Technology Division currently serves corporate and government clients across Canada and internationally. The Benefits Division focuses on offering SAAS and BPO solutions in the Health Benefits Sector to corporate and government clientele. The Benefits Division operates as a client of the Technology Division. The Technology Division is a critical competitive advantage in supporting the implementation of SEB's benefits processing solutions into client environments. Benefits processing is a high-growth specialty practice area. The core expertise of both divisions is data processing. Emphasis is on automating business processes utilizing SEB proprietary software solutions combined with solutions of third parties through joint ventures and partnerships. Acquisitions, joint ventures, and RFP wins will continue to be dominant influences in driving growth in both divisions.
For further information about SEB, please visit www.seb-inc.com.
THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS RELEASE REPRESENTS THE COMPANY'S CURRENT EXPECTATIONS AND, ACCORDINGLY, IS SUBJECT TO CHANGE. HOWEVER, THE COMPANY EXPRESSLY DISCLAIMS ANY INTENTION OR OBLIGATION TO UPDATE OR REVISE ANY FORWARD-LOOKING INFORMATION, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE, EXCEPT AS REQUIRED BY APPLICABLE LAW.
All figures are in Canadian dollars unless otherwise stated.