Smart Employee Benefits Inc.
TSX VENTURE : SEB

Smart Employee Benefits Inc.

October 30, 2015 19:09 ET

SEB Reports Third Quarter 2015

MISSISSAUGA, ONTARIO--(Marketwired - Oct. 30, 2015) - Smart Employee Benefits Inc. ("SEB" or "Company") (TSX VENTURE:SEB) is pleased to report its third quarter results.

FINANCIAL RESULTS FOR THE QUARTER:

For the quarter ended August 31, 2015, SEB recorded revenues of $11,878,990 an increase of $6,129,061 over the comparable three month period prior year. The decline of $1,463,540 from $13,342,530 in the second quarter, 2015 is primarily attributable to seasonal weakness resulting from summer holidays. The seasonality affected primarily the Technology Division. Year to date revenues for the nine months then ended increased by 136% totaling $36,503,100 versus $15,461,758 the prior year. The $21,042,342 increase over the prior year can be ascribed to the current year's acquisitions of Paradigm Consulting Group and Banyan Work Health Solutions, and organic growth initiatives.

For the quarter ended August 31, 2015, SEB recorded income from ongoing operations before interest and non-cash expenses of $28,963 versus a loss of $1,011,288 for the same quarter previous year. Non-cash expenses include stock based compensation of $5,637 ($106,071 in Q3/14), accretion of interest related to SEB's convertible financings of $189,504 ($134,214 in Q3/14), amortization of $716,647 ($249,287 in Q3/14) and depreciation of $103,732 ($24,188 in Q3/14). The current quarter's income from ongoing operations before interest and non-cash expenses of $28,963 is down from $611,223 in the second quarter, 2015. This is in part due to seasonal fluctuations in sales and part due to increases in cost structure. SEB's costs increased as a result of planned additions to the senior management team and infrastructure. Previous part time consultants were brought into the management team on a full time basis to manage the pending growth. SEB is expecting significant growth in positive results for the fourth quarter of fiscal 2015.

As a percentage of sales, expense ratios improved across the board, as follows:

  • Total expenses - improved from 37.0% in the quarter, and 35.0% for the nine months in the previous year, to 26.4% and 21.6%, respectively in 2015.
  • Salaries and compensation costs - improved from 21.0% in the quarter and 20.6% for nine months in the 2014 fiscal year, to 13.3% and 10.7%, respectively for the 2015 fiscal year.
  • Office and general expenses - improved from 14.2% in the quarter and 11.6% for the nine months in the 2014 fiscal year, to 9.8% and 8.6% respectively for the 2015 fiscal year.

Going forward the base expense cost structure will continue to decline as a percentage of sales and gross margin. Sales and gross margin growth can increase significantly with only minimal increases in cost structure.

The unaudited condensed interim consolidated financial statements and related MD&A for the period ended August 31, 2015, can be found on SEDAR at www.sedar.com under the profile of Smart Employee Benefits.

MANAGEMENT COMMENTS:

John McKimm, President/CEO/CIO states:

"SEB has closed 14 profitable acquisitions/joint ventures in the past 30 months. These transactions have strengthened SEB Technology infrastructure and expertise, provided access to new clients and given SEB offices in Mississauga, Ottawa, North Bay, Regina, Winnipeg, Vancouver, the UAE, Hyderabad, India, and Sydney and Melbourne, Australia. SEB now has over 200 active client relationships. The Maplesoft Group Inc. (Maplesoft) acquisition announced in June, 2015, expected to close imminently, adds Montreal and Calgary offices, triples the size of our Ottawa business and adds to our Toronto presence. The combination of Maplesoft and SEB, on a proforma basis for the fiscal year ending November, 2015 have revenues of approximately $100.0 M, and EBITDA in excess of $5.0 M. SEB is well positioned for very strong organic growth in fiscal 2016, in both revenue and EBITDA, the majority of which is already in backlog. The backlog and expected contract renewals for the combined entity is in excess of $360.0 million. In fiscal 2015, the Technology Division comprises the largest portion of SEB sales, but is expected to decline in 2016 as the Benefits Division growth accelerates. EBITDA growth is expected to increase significantly faster than sales due to the growth in the Benefits Division and the higher profit margins of this division."

About SEB:

Smart Employee Benefits Inc.'s global infrastructure is comprised of two Divisions: Technology and Health Care. The Technology Division currently serves corporate and government clients across Canada and internationally. The Health Care Division focuses on SAAS and BPO solutions in the Personal Health Sector and delivers its offerings to corporate and government clientele. The Technology Division is a critical competitive advantage in supporting the implementation of SEB's benefits processing solutions into client environments obtained through acquisitions and RFP wins.

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.

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 release.

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