People Corporation
TSX VENTURE : PEO

People Corporation

March 31, 2014 08:30 ET

People Corporation Announces Second Quarter Results

TORONTO, ONTARIO--(Marketwired - March 31, 2014) - People Corporation (the "Company") (TSX VENTURE:PEO) today announced its financial results for the second quarter of fiscal 2014, which continued its trend of posting period-over-period increases in revenue and EBITDA as it successfully executes its growth plans in the group benefits, pension and HR consulting sectors.

"We continue to post record results as a result of a clear focus on growing our business, both organically and through acquisitions. At the same time, our judicious allocation of capital to strategic and operational initiatives, and a disciplined focus on operating expenses, have had a positive impact on margins and returns," said Laurie Goldberg, Chairman and Chief Executive Officer of the Company. "The Company's financial performance is a validation of our unique value proposition to the Company's clients, acquisition partners and our consultants."

Highlights of Financial Results for the three and six month periods ended February 28, 2014

Financial Results from Operations
3 months
ended
Feb 28, 2014
3 months
ended
Feb 28, 2013
6 months
ended
Feb 28, 2014
6 months
ended
Feb 28, 2013
Revenue $ 11,208,807 $ 8,138,325 $ 20,977,560 $ 15,151,907
EBITDA before corporate costs $ 3,235,394 $ 1,994,923 $ 5,857,542 $ 3,713,460
EBITDA before corporate costs margin 28.9 % 24.5 % 27.9 % 24.5 %
Adjusted EBITDA $ 2,332,343 $ 1,208,165 $ 4,182,576 $ 2,100,494
Adjusted EBITDA margin 20.8 % 14.8 % 19.9 % 13.9 %
Net income $ 1,424,949 $ 178,014 $ 1,823,171 $ 422,630

Revenue for the three and six months ended February 28, 2014 was $11.2 million and $21.0 million, respectively. This represents $3.1 million (37.7%) of growth for the quarter and $5.8 million (38.4%) of growth year-to-date over the comparative periods in fiscal 2013. The growth in revenue in the first two quarters of fiscal 2014 was attributable to both organic sources and acquisitions. For the first six months of fiscal 2014, approximately $2.1 million or 35.7% of the increase represents organic growth resulting from the addition of new clients and additional revenue from existing clients. In addition, client organic revenue growth figures were positively impacted by certain one-time revenue items amounting to approximately $398 thousand. The balance of the revenue growth, $3.7 million or 64.3% of the increase, was attributable to the acquisitions completed during the 2013 fiscal year, the results for which are now included in the Company's results. The majority of this increase is attributable to the acquisition of Hamilton + Partners, which was completed in July 2013; as such, its revenue is included in fiscal 2014's first six months, but was not in the comparable period in fiscal 2013.

The Company monitors EBITDA before corporate costs in order to assess the results of operations before consideration of the corporate investments required to execute the Company's client-focused strategic plan and position the Company for future growth. For the three and six months ended February 28, 2014, EBITDA before corporate costs was $3.2 million and $5.9 million, respectively. This represents an increase of $1.2 million (62.2%) of growth for the quarter and $2.1 million (57.7%) of growth year-to-date over the comparative periods in fiscal 2013.

Adjusted EBITDA for the three and six months ended February 28, 2014 was $2.3 million and $4.2 million, respectively. This represents $1.1 million (93.0%) of growth for the quarter and $2.1 million (99.1%) of growth year-to-date over the comparative periods in fiscal 2013. Adjusted EBITDA margin for the three and six months ended February 28, 2014 increased to 20.8% and 19.9%, respectively. The growth in Adjusted EBITDA and margin improvements are a result of the revenue growth discussed above, coupled with the operating leverage that exists in the business, as a significant amount of the incremental revenue effectively increases operating earnings with moderate additional incremental investment, operating expense, or corporate costs.

As discussed above, revenue for the three months ended February 28, 2014 was positively impacted by certain one-time revenue items, which also had a significant positive impact on EBITDA before corporate costs and Adjusted EBITDA, as it was generated with minimal incremental operating costs. As such, these items resulted in margins for the three-month period that are above what the Company believes to be a more normalized level at its current scale. Excluding the impact of the one-time revenue items, the Adjusted EBITDA margin for the three- and six-month periods ended February 28, 2014 is 17.9% and 18.4%, respectively.

For the three and six months ended February 28, 2014, the Company reported net income of $1.4 million and $1.8 million, respectively. This represents $1.2 million of growth for the quarter and $1.4 million of growth year-to-date over the comparative periods in fiscal 2013. The increase in net income is due to growth in Adjusted EBITDA discussed above, offset by incremental interest and other finance costs attributable to debt incurred in connection with acquisitions completed during fiscal 2013, and to various non-cash expenses related to the accounting entries for items such as amortization of intangible assets.

Summary Financial Position

The Company's financial position remains strong, with sufficient capacity for operational and strategic investments, including those related to growth through acquisition-related activities.

The Company had cash balances of $1.9 million as at February 28, 2014, a decrease of $540 thousand as compared to the amount as at August 31, 2013, the Company's most recent fiscal year-end. The decrease in the Company's cash position, as compared to the prior year-end is due to the seasonal fluctuations in working capital items and increased debt servicing obligations, offset by positive net cash from operations. In addition to its cash resources, the Company has a credit facility of $24.5 million with its senior lender, of which $13.5 million was drawn as of February 28, 2014. In addition to the credit facility with its senior lender, as of February 28, 2014, the Company has $4.2 million owing to vendors from previous acquisitions, of which $1.6 million is due in the next twelve months. The Company continues to believe that it will generate sufficient cash flows in order to meet its debt repayment obligations.

The complete Financial Statements and Management's Discussion and Analysis for the three- and six-month periods ending February 28, 2014, along with additional information about the Company and all of its public filings are available at www.sedar.com.

Acquisition Update

As part of the Company's acquisition-based growth plan, on March 19, 2014, the Company increased its economic interest in a portfolio of group benefit clients in a transaction with a third party insurance brokerage firm based in Toronto, Ontario. For the past four years, this broker has operated as part of People Corporation's third party broker network.

Mr. Goldberg commented, "Our third party broker network is a unique model for increasing our distribution capacity for our group benefits, third party administration and group retirement product and service offerings. The brokerage firm with whom we completed this transaction continues to be a great People Corporation partner and we will continue to work closely together to provide clients with a full range of solutions." Mr. Goldberg continued, "The relationship with this brokerage firm, resulting from many years working together, made us the natural counterpart to this transaction."

The purchase price of $900 thousand for the transaction was funded through existing credit facilities with the Company's senior lender.

About People Corporation

People Corporation is a national provider of group benefits, group retirement and human resource services. We have 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. Our industry experts provide uniquely valuable insight while customizing our innovative suite of services to the specific needs of our clients. Whatever your sector, whatever your scale, putting our 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 information" within the meaning of applicable securities laws, such as information concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Use of words such as "may", "will", "expect", "believe", or other words of similar effect may indicate forward-looking information including the completion of the transaction, the impact of that transaction on our earnings and cash flow, and the anticipated benefits of the transaction. This information is not a guarantee of future performance and is subject to numerous risks and uncertainties, including those described in our publicly filed documents (which are available on SEDAR at www.sedar.com). Those risks and uncertainties include: our ability to maintain profitability and manage growth; strong competition from other consultants and changes in the current legislation could result in significant competition from the banking industry; failure of information systems and technology; dependence on key clients; seasonality of revenues and the resulting possible impairment on working capital; reliance on key professionals; additional financing may be required and may not be available under terms favourable to us; there can be no assurance that any suitable future acquisition will be available to us or that, if available, the terms of the acquisition will be favourable to us; and a change in general economic conditions. Many of these risks and uncertainties can affect our actual results and could cause our actual results to differ materially from those expressed or implied in any forward-looking information made by us or on our behalf. Given these risks and uncertainties, investors should not place undue reliance on forward looking information as a prediction of actual results. All forward-looking information in this news release is qualified by these cautionary statements. This information is made as of the date of this news release and, except as required by applicable law, we undertake no obligation to publicly update or revise any forward looking information, whether as a result of new information, future events or otherwise. Additionally, we undertake 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

EBITDA and Adjusted EBITDA are not recognized measures under International Financial Reporting Standards ("IFRS"). Management believes that in addition to revenue, net income and cash flows, the supplemental measures of EBITDA and Adjusted EBITDA are useful as they provide investors with an indication of earnings from operations before debt management and non-recurring and other adjustments. Investors should be cautioned, however, that EBITDA and Adjusted EBITDA should not be construed as an alternative to net income determined in accordance with IFRS as an indicator of the Company's performance. The Company's method of calculating these measures may differ from other public issuers and, accordingly, may not be comparable to similar measures used by other issuers. 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 six months ended February 28, 2014, 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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