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
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3 months 3 months 6 months 6 months
ended ended ended ended
Feb 28, 2014 Feb 28, 2013 Feb 28, 2014 Feb 28, 2013
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Revenue $ 11,208,807 $ 8,138,325 $ 20,977,560 $ 15,151,907
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EBITDA before
corporate
costs $ 3,235,394 $ 1,994,923 $ 5,857,542 $ 3,713,460
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EBITDA before
corporate
costs margin 28.9% 24.5% 27.9% 24.5%
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Adjusted
EBITDA $ 2,332,343 $ 1,208,165 $ 4,182,576 $ 2,100,494
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Adjusted
EBITDA margin 20.8% 14.8% 19.9% 13.9%
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Net income $ 1,424,949 $ 178,014 $ 1,823,171 $ 422,630
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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.
FOR FURTHER INFORMATION PLEASE CONTACT:
People Corporation
Brevan Canning
(204) 295-8860
brevan.canning@peoplecorporation.com
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