People Corporation
TSX VENTURE : PEO

People Corporation

December 05, 2017 09:30 ET

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

Annual Revenue Grows 32.6% and Adjusted EBITDA Grows 42.7%; Significant Acquisition Activity and Important Operational Initiatives Position Company for Future Growth

WINNIPEG, MANITOBA--(Marketwired - Dec. 5, 2017) - People Corporation (the "Company") (TSX VENTURE:PEO) today announced financial results for the quarter-ended and year-ended August 31, 2017, and provided an overview of recent acquisition activity and strategic initiatives and operational investments.

"Fiscal 2017 marks the year we surpassed the $100 million revenue threshold and is reflective of our multi-pronged approach to continue driving growth in the business. Organic growth continues to be strong, and we continue to execute on strategically significant acquisitions, whether through broadening and strengthening our product/service portfolio, or enhancing our presence in important geographic markets," commented Laurie Goldberg, Chairman and Chief Executive Officer. "Fiscal 2017 will also be noted as a year of foundational investments and initiatives to position us for significant growth in the years ahead, including investments in leadership, technology, recruitment of benefit consultants and the expansion of our third party consultant network."

Mr. Goldberg continued, "Our disciplined and focused execution of the Company's strategic plan is ultimately centered on our clients, with the objective of continuing to enhance the strong foundation of products, services, delivery channels and implementation tools that provide our consultants with the ability to create and deliver unique and customized value-added solutions to our Canada-wide client base."

Highlights of Financial Results for the quarter and year ended August 31, 2017

Financial Results from Operations

The Company's financial results for the three and twelve months ended August 31, 2017, fully reflect the effect of last year's acquisition of BPA Financial Group Limited ("BPA") and organic growth initiatives. The effect of the acquisitions of Sirius Benefit Plans Inc. ("Sirius") and Skipwith & Associates Insurance Agency Inc. ("Skipwith") are partially reflected in the twelve-month results, but fully reflected in the fourth quarter results, as these transactions closed on April 12, 2017 and May 1, 2017, respectively.



(In 000's, except percent amounts)
3 months ended
August 31, 2017
3 months ended
August 31, 2016
12 months ended
August 31, 2017
12 months ended
August 31, 2016
Revenue $28,927.0 $24,902.6 $105,840.0 $79,802.3
Adjusted EBITDA before REI $7,048.3 $5,338.7 $25,351.7 $19,013.1
Adjusted EBITDA $5,718.4 $3,796.2 $20,109.0 $14,095.3
Net Income (loss) $242.1 $(277.0 ) $3,478.8 $(174.8 )

For the year ended August 31, 2017, the Company experienced revenue growth of $26.0 million (32.6%) to $105.8 million. The Company recognized acquired growth of $17.1 million (21.5%) resulting from acquired operations, including BPA, Sirius and Skipwith. Organic growth of $8.9 million (11.1%) was recognized primarily from increasing existing business by gaining new clients, increasing product and service penetration with existing clients and natural inflationary factors.

For the three months ended August 31, 2017, the Company experienced revenue growth of $4.0 million (16.2%). The Company recognized acquired growth of $2.1 million (8.6%) resulting from acquired operations, including Sirius and Skipwith, and organic growth of $1.9 million (7.6%).

Adjusted EBITDA for the year ended August 31, 2017, was $20.1 million, representing an increase of $6.0 million (42.7%), as compared to the same period in fiscal 2016. Growth in Adjusted EBITDA for the twelve month period was primarily driven by contribution from acquired operations resulting in increases in revenue, partially offset by increases in variable compensation expenses tied directly to the higher revenue, expanded leadership to accommodate integration and future growth, and the continued investment in recently hired benefit consultants and related support costs incurred to drive organic growth.

Adjusted EBITDA for the three months ended August 31, 2017, was $5.7 million representing an increase of $1.9 million (50.6%), as compared to the same period in fiscal 2016.

For the year ended August 31, 2017, the Company reported an increase in Net Income of $3.7 million primarily resulting from the impact of acquired operations and organic growth from existing operations, offset by an increase in acquisition related amortization of intangible assets and an increase of acquisition, integration and reorganization costs.

For the three months ended August 31, 2017, the Company reported an increase in Net Income resulting from the acquisitions of Sirius and Skipwith during the quarter; organic growth; and a decrease in finance expenses; offset by acquisition related amortization of intangible assets.

Acquisition of Dalbec

The Company also announced today that the previously announced acquisition of the assets, liabilities and business operations of Assurances Dalbec Ltée. ("Dalbec") has closed, with an effective date of December 1, 2017. Dalbec is a leading Third Party Administrator (TPA) and Third Party Payor (TPP) service provider of employee benefit plans to small and medium-sized companies in the Québec market. The Company will continue to operate the business in Québec as Assurances Dalbec. The Dalbec acquisition represents a significant enhancement to the Company's position in the Québec market, and an outstanding complement to the Company's existing business in Québec, SourceSanté Plus/HealthSource Plus, as well as providing another small group product option in the Company's expanding portfolio of solutions for the small group segment of the market, with Dalbec's PME+ product offering.

Corporate Office to Accommodate Growth

Along with the Company's rapid organic and acquisition-related growth in the past few years, the Company's national employee base has increased to almost 700, including approximately 190 in Winnipeg, where its corporate office is located. To accommodate this rapid growth, the Company is excited to announce that it is investing in a new corporate office. The state-of-the-art 43,000 square foot facility has been designed for flexibility, collaboration, and comfort in an environment which promotes excellence, ideas, and a strong culture. The new facilities are expected to provide opportunities for operational and financial synergies, and will facilitate certain integration initiatives that the Company intends to pursue in the next twelve months. The new space will provide sufficient space for existing staff in Winnipeg and accommodate future growth.

The Company has entered into a 10-year lease of the premises that came into effect on December 1, 2017. In conjunction with this lease agreement, the Company entered into a construction agreement to develop the new space. The Company expects the total project costs, including leasehold improvements, furniture and equipment, for the new premises to be approximately $9.5 million. These costs will be funded through an expansion of the Company's credit facility with its senior lender, as detailed below.

Strategic and Operational Highlights

The Company continues to make significant progress on executing its strategic plan, pursuing growth opportunities, both organically and through acquisitions, and making investments to position the Company for ongoing future growth. In support of this, the Company continues to invest in people, technology and other organizational resources to build its organizational capabilities. Some notable milestones include:

  • Announced acquisitions of: (i) the assets and business operations of Dalbec, a leading Québec-based TPA and TPP service provider which will complement the Company's existing operations in Québec and expand its small group product offering; (ii) Sirius, a nationally-focused TPA and TPP service provider focused on employers with 1-50 employees, which significantly enhances the Company's product and service offering in the small group segment of the group benefits market; and (iii) Skipwith, an established TPA and TPP service provider for group benefit plans mid-market sized employers and unions in Ontario;

  • Continued investment in leadership and technical capabilities, with a specific focus on sales leadership,
    product and underwriting, and information technology skills to further broaden and enhance the Company's product and servicing options, delivery channels and implementation tools;

  • Continued investment in the direct distribution channel through targeted recruitment of benefit consultants and training initiatives in order to expand organic revenue generating capabilities;

  • Expanded the Company's senior executive team with the appointment of Mr. Paul Asmundson in the newly-created role of Executive Vice President and Chief Corporate Development Officer, broadening the Company's Corporate Development capabilities;

  • Enhanced the Company's capital position through: (i) completing two bought deal private placements of common shares offering for gross proceeds of $20.1 million and $25.3 million, respectively; and (ii) expanding the Company's credit facility with its senior lender to $82.5 million, with an opportunity to further increase its facility by $15.0 million for an overall credit capacity of $97.5 million; and

  • Undertook a significant real estate project related to a new corporate office facility in Winnipeg to accommodate the rapid growth of the Company and to create a state of the art facility for staff.

Bought Deal and Expanded Credit Facility

The Company continues to be well-positioned to execute on its growth strategy, with a strong financial position and ready access to financial capital.

The Company had cash balances of $17.9 million as at August 31, 2017 compared to $14.4 million at August 31, 2016.

On November 22, 2017, the Company announced that it had closed its previously announced bought deal private placement common share offering for gross proceeds to the Company of $25.3 million, the net proceeds of which will be used to partially fund the acquisition of Dalbec, with the balance to be used to repay indebtedness and fund growth initiatives.

On December 4, 2017, given recent acquisition activity and the real estate investments detailed above, the Company strengthened its access to capital through the expansion of its credit facility with its senior lender to a maximum of $82.8 million of credit capacity. The credit facility consists of a $5.0 million revolving facility (the "Revolving Credit Facility"), a $19.5 million term loan (the "Term Loan"), a $48.8 million revolving acquisition facility (the "Acquisition Revolver"), and a $9.5 million delayed draw term facility to finance the Company's corporate office project (the "Real Estate Loan"). The credit facility agreement also 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 $63.8 million, and overall credit capacity being increased to $97.8 million. As of December 4, 2017, the Company had $19.5 million drawn against the Term Loan, $14.5 million drawn against the Acquisition Revolver and $5.0 million drawn against the Real Estate Loan. As a result, the Company has $43.8 million of unused credit capacity before considering the Accordion Feature.

Security Based Compensation Grants

On November 30, 2017, the Company's Board of Directors approved the grant of long-term equity incentive awards to its independent directors and to the Company's executive management and members of its senior management team. These incentive awards were granted under the Company's Security Based Compensation Plan (the "Plan"), established to reward directors and senior officers and employees, based on individual and corporate performance, to align their interests with that of the Company and to provide long-term incentives.

In particular, the Company granted:

  • 4,847 stock options to its independent directors with exercise prices of $7.22 per option, having terms of eight years, vesting over a period of three years and otherwise subject to the terms of the Plan;
  • 9,104 deferred stock units to its independent directors, vesting immediately and otherwise subject to the terms of the Plan; and
  • 149,488 restricted stock units, issued subject to performance conditions to its executive and certain of its senior management, vesting after three years and otherwise subject to the terms of the Plan.

The complete Financial Statements and Management's Discussion and Analysis for the three and twelve months ended August 31, 2017, 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 twelve months ended August 31, 2017, 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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