SEB Reports Fourth Quarter and Full Year 2015

April 5, 2016 – Mississauga, ON: Smart Employee Benefits Inc. (“SEB” or the “Company”) (TSXV: SEB) today reported its financial results for the fourth quarter and year ended November 30, 2015.

HIGHLIGHTS FOR THE FOURTH QUARTER AND 2015 FULL YEAR

(All comparative figures are for the fourth quarter and full year 2014)

  • Revenue from continuing operations for the fourth quarter increased 224.9% to $13.8 million from $4.3 million, and for the year increased 151.5% to $50.3 million from $20.2 million due to the acquisition of Paradigm Consulting Group in December, 2014 and the consolidation of Banyan Work Health Solutions Inc. during fiscal 2015
  • Gross margin grew 273.6% from $4.3 million to $12.6 million and gross margin percentage improved from 21.4% to 25.1% for fiscal 2015
  • Cost of revenues and operating expenses changed year over year as follows:
    • Cost of revenues fell to 74.9% of sales from 78.6%
    • Salaries and other compensation costs fell to 11.4% of sales from 24.3%
    • Office and general costs fell to 9.4% of sales from 12.6%
    • Professional fees were $1.9 million up from $0.7 million. Professional fees fluctuate with financings and acquisitions
    • All other operating expenses are non-cash and increased from $2.2 million to $3.8 million, the largest increase being amortization and depreciation
  • Operating income before non-cash costs and professional fees for the full year was $2.1 million compared to $(3.8) million
  • SEB’s two operating divisions (Technology and Benefits) collectively generated positive Adjusted EBITDA of $2.8 million in fiscal 2015 compared to $(1.2) million in fiscal 2014
  • The sale of the Electronic Data Interchange business was completed for gross proceeds of $2.1 million during the year.

FINANCIAL HIGHLIGHTS SUBSEQUENT TO QUARTER END

  • Closed the acquisition of Maplesoft Group of Companies (“Maplesoft”) including the assumption of debt of $14.4 million, which included a revolving credit facility of $5.9 million.
  • Received proceeds of $1.6 million of a private placement equity financing, closing a $4 million commitment from a strategic investor.
  • Management has been engaged over the past several months in consolidating operating credit facilities and extending the term of the short term debt. The Company has signed back lender term sheets which on closing would increase operating credit facilities (tied to current receivables) to over $15.0 million and consolidate the term debt into 24 to 60 months terms. This would significantly improve the current ratio. Due diligence is in process and closings are targeted by May, 2016.
  • Extended the maturation date of debt from February, 2016 to August, 2016 and from March, 2016 to May, 2016.

The audited consolidated financial statements and related MD&A for the year ended November 30, 2015, can be found on SEDAR at www.sedar.com under the profile of Smart Employee Benefits.

MANAGEMENT COMMENTS 

John McKimm, President/CEO of SEB states:

“SEB’s acquisition program continues to deliver positive results. The Company now has a geographic footprint across Canada, and in the UAE, India and Australia. The business base has been established for strong organic growth. Contracted backlog and expected renewals exceed $360.0 million, up from approximately $25.0 million at November 2014. The SEB group employs approximately 850 people globally, one third employees and the rest are contractors. Over $30 million has been spent over the past four years on the acquisition and development of software solutions, and hosting infrastructures, and acquiring core companies.

The acquisition of Maplesoft is expected to increase the consolidated annual revenue of SEB by over $50 million, contributes substantially to the overall profitability, and increases sales backlog and renewals by over

$280 million. The acquisition of Maplesoft will build on our previous technology acquisitions (Somos Consulting Group Ltd., Logitek Technology Ltd., Inforica Inc., Stroma Service Consulting Inc., APS –Antian Professional Services Inc. and Paradigm Consulting Group Inc.), and will establish SEB as a leading Canadian company in the Cyber/IT Security, Information Management, IT Infrastructure Management, Data Centre Management, Project Management and Professional Services sectors, capable of delivering a broad portfolio of services and solutions to government and corporate clients, with specialty practices in healthcare and benefits processing solutions.

Transactions in the acquisition and joint venture pipeline for 2016 are well advanced. The cost structure of the acquisitions continues to be optimized through cost reduction initiatives. The cost structure has been permanently reduced in the past 90 days by over $1.4 million, annualized, largely due to restructuring of the senior management team in both the Technology and Benefits Divisions. This has positioned the Company to emphasize growth initiatives in the Benefits Division for 2016. SEB has now reached the point where Management expects significant, ongoing, positive EBITDA from continuing operations.”

ABOUT SEB

Smart Employee Benefits Inc.’s global infrastructure is comprised of two operating Divisions: Technology and Benefits. The Technology Division currently serves corporate and government clients across Canada and internationally. The Benefits Division focuses on SAAS and BPO solutions in the Health Sector and delivers its offerings to corporate and government clientele. The Benefits Division operates as a client of the Technology Division. The Technology Division is a critical competitive advantage in supporting the implementation of SEB’s benefits processing solutions into client environments. Acquisitions, joint ventures, and RFP wins will continue to be dominant influences in driving growth in both divisions.

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.

MEDIA AND INVESTOR CONTACT:

John McKimm, President/CEO - (888) 939-8885 x 354, (416) 460-2817, john [dot] mckimm [at] seb-inc [dot] com

Glenn Akselrod, Bristol Capital – (905) 326-1888 x 10, glen [at] bristolir [dot] 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 release.