People Corporation
TSX VENTURE : PEO

People Corporation

November 28, 2016 09:30 ET

People Corporation Announces Record Year-End and Quarter-End Financial Results and Highlights Strategic and Operational Achievements for the Year

Annual Revenues Grows 61.9% and Adjusted EBITDA Grows 53.9%

Quarterly Revenue Grows 57.9% and Adjusted EBITDA Grows 61.0%

WINNIPEG, MANITOBA--(Marketwired - Nov. 28, 2016) - People Corporation (the "Company") (TSX VENTURE:PEO) today announced financial results for the fiscal year ended August 31, 2016, and provided an update on the organizational achievements during the year that contributed to the ongoing successful execution of its strategic plan.

"People Corporation continues to report strong financial results and execute on its strategic objectives. In addition to strong organic growth, investments made in the past eighteen months have added to the record results being reported" said Laurie Goldberg, Chairman and Chief Executive Officer. "Our investment in BPA Financial Group in April 2016 has solidified People Corporation as one of Canada's largest independent Third-Party Administration businesses serving clients across the country and as one of Canada's fastest-growing group benefits, group retirement and human resources consulting services organization."

Highlights of Financial Results for the year-ended and quarter-ended August 31, 2016

Financial Results from Operations

People Corporation's financial results for the fiscal year-ended August 31, 2016 reflect the focused execution of its strategic and operational plans, which include organic growth initiatives, growth from acquisitions, and operational excellence. The effect of the acquisition of BPA Financial Group Limited ("BPA") is partially reflected in the results as the transaction closed April 13, 2016. As a result, 'run-rate' revenue and adjusted EBITDA on an annualized basis would be higher than the published fiscal 2016 results.



(In 000's, except
percent amounts
)
3 months ended
August 31, 2016
3 months ended
August 31, 2015
Year ended
August 31, 2016
Year ended
August 31, 2015
Revenue $ 24,902.6 $15,767.2 $79,802.3 $49,293.3
Adjusted EBITDA before REI $5,338.8 $3,220.6 $19,013.1 $11,476.8
Adjusted EBITDA $3,796.2 $2,358.3 $14,095.3 $9,161.4
Net Income (loss) ($277.0 ) $1,050.5 ($174.8 ) $1,394.4

For the three months ended August 31, 2016, the Company experienced revenue growth of $9.1 million (57.9 %). The Company recognized acquired growth of $7.2 million (79.2%) and organic growth of $1.9 million (20.8%). Organic growth is primarily comprised of the increase in revenue resulting from the addition of new clients from the Company's existing and expanded products and services platform and a growing benefits consulting team across Canada.

For the year ended August 31, 2016, the Company experienced revenue growth of $30.5 million (61.9%). The Company recognized acquired growth of $25.3 million (83.1%) and organic growth of $5.2 million (16.9%). Organic growth is primarily comprised of the increase in revenue resulting from the addition of new clients from the Company's existing and expanded benefits product and services platform, a growing consulting team and natural inflationary factors. The Company commenced a program in the past year to complement its organic growth initiatives through the recruitment and development of new consultants. Based on early results, the Company expects to expand this program in fiscal 2017.

Adjusted EBITDA before REI is Adjusted EBITDA before considering the retained economic interest held by the vendors and/or principals of acquired companies. For the three months ended August 31, 2016, the Company reported Adjusted EBITDA before REI of $5,338.7 which represents a margin equal to 21.4% of revenue, as compared to 20.4% in the prior year. For the year ended August 31, 2016, the Company reported Adjusted EBITDA before REI of $19,013.1 which represents a margin equal to 23.8% of revenue, as compared to 23.3% in the prior year. Margin improvements were primarily a result of recent acquisitions.

Adjusted EBITDA for the fourth quarter of fiscal 2016 was $3.8 million representing an increase of $1.4 million (61.0%), as compared to the same period in fiscal 2015. Growth in Adjusted EBITDA for the three month period was primarily driven by contribution from acquisitions and the increase in fourth quarter revenue, partially offset by increases in compensation expenses tied directly to the higher revenue, expansion of the consulting team through hiring additional benefit consultants and expansion of our leadership team. Adjusted EBITDA for the year ended August 31, 2016 was $14.1 million, representing an increase of $4.9 million (53.9%), as compared to the same period in fiscal 2015 resulting from the same factors.

For the three months ended August 31, 2016, the Company reported a decrease in the Net Income of $1.3 million resulting from the increase in revenue and Adjusted EBITDA, offset by higher costs primarily related to the BPA acquisition, including an increase in acquisition, integration and reorganization costs, finance expenses and acquisition-related amortization of intangible assets and accretion of REI liabilities resulting from 2015 and 2016 acquisitions. For the year ended August 31, 2016, the Company reported a decrease in the Net Income of $1.6 million resulting from the same factors.

Summary Financial Position

The Company continues to be well-positioned to execute on its growth strategy, with a strong financial position and ready access to financial capital. In addition, the financial position of the Company will accommodate the ongoing operational investments required to ensure the Company is delivering upon its value proposition to its clients, and achieving operational excellence and enhanced profitability.

The Company had cash balances of $14.4 million as at August 31, 2016, an increase of $7.9 million (120.6%) as compared to August 31, 2015, primarily resulting from net cash from operating activities, offset by cash used to fund a portion of the BPA acquisition, to acquire capital and intangible assets and repay loans and borrowings.

On October 6, 2016, the Company completed a bought deal private placement financing subsequent to the end of the year, issuing 5,439,500 common shares at $3.70 per share resulting in net proceeds of $19.1 million to be used to fund growth initiatives and for general corporate purposes.

In conjunction with the acquisition of BPA, the Company's senior lender increased its senior credit facility by $26.2 million to a total of $61.2 million. The amended credit facility consists of a $5.0 million revolving facility (the "Revolving Credit Facility"), a $22.2 million term loan (the "Term Loan"), and a $34.0 million revolving acquisition facility (the "Acquisition Revolver"). In addition, the expanded facility continues to provide for an option (the "Accordion Feature"), subject to the satisfaction of certain terms and conditions, to increase the Acquisition Revolver by an additional $15.0 million of capacity, which would result in the size of the Acquisition Revolver being increased to $49.0 million, and overall credit capacity being increased to $76.2 million. In conjunction with the facility expansion, the term of the facility has also been extended to October 31, 2019. At August 31, 2016, the Company has $39.1 million drawn on the credit facility, comprised of $21.1 million under the Term Loan and $18.0 million on the Acquisition Revolver. No funds have been drawn on the Revolving Credit Facility.

On October 31, 2016, the Company used a portion of net proceeds from the Offering to fully repay the term acquisition credit facility.

In addition to the credit facility with its senior lender, as of August 31, 2016, the Company had $1.3 million owing to vendors from previous acquisitions, of which $0.4 million is due in the next twelve months.

Strategic and Operational Highlights for Fiscal 2016

During the year, the Company acquired BPA Financial Group Limited ("BPA"), an independent full service national firm providing group benefit and pension administration consulting and claims management services to corporations and multi-employer trust organizations in Canada.

Highlights of the transaction include:

  • Together, BPA and People form one of Canada's premier independent Third Party Administration (TPA) businesses, serving clients across the country
  • Combined firm now serves approximately 1,000,000 Canadians coast to coast with enhanced ability to invest in best-in-class products, services and technology in the group benefits and pension administration and human resources consulting sectors
  • Combined firm now provides group benefit, group retirement and HR consulting solutions to more than 5,000 organizations across Canada through its professional staff of over 600 personnel
  • BPA's principals to retain ongoing ownership position in the business and together with BPA key management and staff will bring their significant experience and expertise providing for continuity in business operations
  • The transaction will be immediately accretive to EBITDA per share

Established in 1958, with offices located throughout Ontario and Eastern Canada, BPA Financial Group Limited provides group benefit and pension administration, consulting and claims management services to a number of major organizations in Canada. Consistent with People Corporation's other partner companies, BPA will continue to operate on a stand-alone business basis, but will leverage the advantages of being part of the People Corporation family to enhance its client offerings. The BPA principals, together with the management and staff that support them, will continue to be the primary operators of the business. Through this transaction, People Corporation significantly enhanced its national footprint and capability, particularly in the Eastern Canadian market.

In addition, the Company continues to make significant progress in executing its strategic plan, pursuing growth opportunities both organically and through acquisitions in which new operating entities become part of the People Corporation group of companies. As part of this, the Company continues to invest in people, technology and other organizational resources to build its organizational capabilities. Some notable milestones include:

  • Acquired 100% of the voting interest and 67% of the economic interest of BPA Financial Group Limited, one of Canada's preeminent independent full service national benefit and pension consulting and third party administration firms, with offices throughout Ontario and Eastern Canada;
  • Expanded the size of the credit facility to $61.2 million with an option, subject to the satisfaction of certain terms and conditions, to increase the Acquisition Revolver by $15 million for an overall credit capacity of $76.2 million.
  • Completed a bought deal private placement financing subsequent to the end of the year resulting in net proceeds of $19.1 million to be used to fund growth initiatives and for general corporate purposes.
  • Strengthened the organizational structure to position the Company for continued growth, with the appointments of Mr. Dennis Stewner, CPA, CA as the Company's Chief Financial Officer & Chief Operating Officer, Mr. Robert Andrews, Chief Operating Officer - Benefit Solutions, Mr. Keyur Desai, SVP -Information Systems - Benefit Solutions, and Ms. Sue Tardi, SVP - Human Resource Solutions;
  • Expanded organic growth capabilities through the continued expansion of its consulting team throughout Canada;
  • Re-launched an enhanced sales management and CRM software technology platform;
  • Launched new product and service offerings on our TPA platform to support revenue growth objectives;
  • Initiated an internal Employee Wellness program to promote internal staff health and well-being; and
  • Maintained the TSX Venture 50 ranking.

The complete Financial Statements and Management's Discussion and Analysis for the three months and the year ended August 31, 2016, along with additional information about the Company and all of its public filings are available at www.sedar.com.

About People Corporation

People Corporation is a national provider of group benefits, group retirement and human resource services. The Company has offices across Canada, each led by a team of experts and backed by the resources of a national company that is traded on the TSX-V. The Company's industry experts provide uniquely valuable insight while customizing an innovative suite of services to the specific needs of its clients. Whatever your sector, whatever your scale, putting People Corporation's expertise and proven track record to work will make a difference to your people and your bottom line.

Further information is available at www.peoplecorporation.com.

Forward-Looking Information

This news release contains "forward-looking statements" within the meaning of applicable securities laws, such as statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Use of words such as "may", "will", "expect", "believe", "intends", "likely", or other words of similar effect may indicate a "forward-looking" statement. These statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including those described in the Company's publicly filed documents (available on SEDAR at www.sedar.com). Those risks and uncertainties include the ability to maintain profitability and manage organic or acquisition growth, reliance on information systems and technology, reputation risk, dependence on key clients, reliance on key professionals and general economic conditions. Many of these risks and uncertainties can affect the Company's actual results and could cause actual results to differ materially from those expressed or implied in any forward-looking statement made by the Company or on its behalf. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. All forward-looking statements in this news release are qualified by these cautionary statements. These statements are made as of the date of this news release and, except as required by applicable law, the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Additionally, the Company undertakes no obligation to comment on analyses, expectations or statements made by third parties in respect of the Company, its financial or operating results or its securities.

Non-IFRS Financial Measures

The Company reports non-IFRS financial measures, including Standardized EBITDA, REI, Adjusted EBITDA before REI, and Adjusted EBITDA as key measures used by management to evaluate performance of the business, to compensate employees and to facilitate a comparison of quarterly and annual results of ongoing operations. Adjusted EBITDA is also a concept utilized in measuring compliance with debt covenants. The Adjusted EBITDA measure is commonly reported and widely used by investors and lending institutions as an indicator of a company's operating performance and ability to incur and service debt, and as a valuation metric. While used to assist in evaluating the operating performance and debt servicing ability of the Company, readers are cautioned that Adjusted EBITDA as reported by the Company may not be comparable in all instances to Adjusted EBITDA as reported by other companies. For a detailed explanation of how the Company's non-IFRS measures are calculated, please refer to the Company's MD&A filing for the three and nine-months ended August 31, 2016, which can be accessed via the SEDAR Web site (www.sedar.com).

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this press release.

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