MISSISSAUGA, ONTARIO--(Marketwired - Apr 29, 2016) - Smart Employee Benefits Inc. ("SEB" or the "Company") (TSX VENTURE:SEB) today reported its financial results for the first quarter ended February 29, 2016.
FINANCIAL OVERVIEW FOR THE FIRST QUARTER
(All comparative figures are the first quarter prior year, unless stated otherwise.)
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Revenue increased by 107.1 % to $23.4m as a result of both the acquisition of the Maplesoft Group of Companies ("Maplesoft") which contributed $13.4m, and organic growth initiatives. The increase was offset by the de-consolidation of Banyan Work Health Solutions Inc. ("Banyan") which had contributed $2.0m in Q1, 2015.
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Gross Margin increased by 55.2% to $4.2m from $2.7m, even though the prior year's comparative figure included $465K from Banyan. Gross margin percentage ("GM %") declined from 24.1% to 18.1% due to the change in accounting for Banyan from consolidation to equity method. (Banyan's GM % for Q1, 2015 was 23.2%).
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Operating expenses changed as follows:
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Salaries and other compensation costs fell to 10.4% of sales from 11.3%. Further improvements in cost structure are planned during the year.
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Office and general costs fell to 5.0% of sales from 7.2%, and from 9.4% in fiscal 2015.
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Adjusted EBITDA was at break-even (negative $124), falling below expectations as a result of one entity in the Technology Division and one entity in the Benefits Division performing below budget; the change in accounting for Banyan; and higher than projected corporate costs. Management believes this shortfall will be recovered as the year evolves.
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Overall performance in the Technology Division was strong. Sales growth was higher than expected while backlog and renewals remain over $300.0m. Revenues increased by 159.2% to $23.0m from $8.9m. Adjusted EBITDA increased to $1.5m from $733k. Adjusted EBITDA was impacted by a weakness in one entity where the bench utilization was lower than expected. These employees have now been deployed in revenue generating capacities and utilization is anticipated to return to normal in Q2, 2016. Growth in the Technology Division remains strong and results are expected to show continued improvement throughout the year.
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Benefits Division revenues decreased by $2.0m from prior year as a result of the deconsolidation of Banyan. EBITDA was a negative $562K compared to $66K. Negative earnings were a result of $432K spent on the customization of technology solutions for specific market opportunity to be launched in Q3, 2016; equity accounting for Banyan, which added $181K of expenses that would have previously been excluded from EBITDA (depreciation, amortization and interest); and lower than anticipated earnings from Disability Management due to sales from a long-term client being delayed. Management anticipates that Q1, 2016 results will be offset by the growth from other clients during the year.