MISSISSAUGA, ONTARIO -- (Marketwired) -- 04/21/17 -- Smart Employee Benefits Inc. ("SEB" or the "Corporation") (TSX VENTURE: SEB) is pleased to announce the closing of its new credit facilities with a major Canadian Bank (the "Bank") in the amount of $22,500,000. The credit facilities were obtained by SEB's Technology Division. SEB's Benefits Division has no debt beyond normal accounts payable.
The new financing arrangements consist of an operating demand facility of up to $12,000,000 (the "Senior Operating Facility"), a demand $5,500,000 term loan facility with repayment amortized over 4 years (the "Senior Term Facility") and a $5,000,000 subordinated term loan facility (the "Junior Term Facility"). The Junior Term Facility is a $5,000,000, 5-year, subordinated term facility with the mezzanine arm of the Bank with monthly interest only and a balloon payment at the end of the term. The Senior Term Facilities have interest terms consistent with fully secured senior debt. The Junior Term Facility has interest terms consistent with secured subordinate debt facilities.
Each of the Senior Operating Facility, Senior Term Facility and Junior Term Facility are secured by a first charge over all the assets of the borrower and the material subsidiaries of the Corporation, contain positive, negative and financial covenants, and include other usual and customary terms and conditions. The Corporation and the material subsidiaries of the Corporation, in both the Technology Division and the Benefits Division, have provided guarantees in support of these new credit facilities.
The new credit facilities consolidate and replace the aggregate $4,751,000 of credit facilities that the Corporation's wholly owned Technology Division subsidiaries had with the same Canadian Bank, as well as the Corporation's asset based credit facilities of $12,500,000 with a major international Asset Based Lender (ABL). The new credit facilities also repay the term debt of Maplesoft Group Inc. (a wholly owned subsidiary of the Corporation) and repay select convertible notes at the public company level.
States John McKimm, President/CEO/CIO of SEB, "The acquisition of Maplesoft Group Inc. left SEB's Technology Division ("TD") with significant short term very high interest rate debt. These new credit facilities consolidate this short-term debt, extending the term to 4-5 years and generate interest cash savings of over $130,000 per month, or in excess of $1.5 million, annually. The new Facilities are tied to the TD business. The TD in fiscal 2016 generated sales of approximately $96.0 million with an adjusted EBITDA in the $7.5 million range. The TD has over $450 million of contracts made up of backlog, renewals and option years. The debt service of these facilities is expected to require approximately 35% of the TD operating cash flow. Significant growth in the TD is expected in revenue and EBITDA growth in fiscal 2017."
John McKimm further states:
"SEB as a consolidated entity has made significant progress since November 30, 2015, as follows:
1) Balance Sheet - SEB's consolidated debt facilities are primarily Schedule l bank facilities or funding provided by insiders. The company has repaid over $6.0 million of debt in fiscal 2016.
2) New Equity Capital - SEB has closed in the past several months $5.73 million of new equity funding, the majority being made available by insiders with the President /CEO/CIO representing over 1/3 of this funding. Further equity up to $1.0 million is expected to close prior to the end of April, 2017, primarily from existing shareholders.
3) Benefits Division Acquisition - The Company recently acquired the Canadian mid market benefits administration business of Aon Hewitt Inc. representing 48 clients and over 250,000 plan members across Canada. This acquisition also included several complementary technology platforms and approximately 150 employees in Canada and India. The transaction created a strategic business relationship with Aon Hewitt on future business initiatives. This transaction positions SEB as one of the larger benefit administration businesses in Canada and provides the platform for significant organic growth in the Benefits Division as clients are introduced to SEB's more extensive health benefits processing solutions.
4) Technology Division Backlog, Renewal Contracts and Option Years - Has grown to over $450 million where the majority of the contracts are multi-year agreements.
5) Consolidated Revenue - Grew in fiscal 2016 from $42.6 million in fiscal 2015 to $97.2 million with double digit organic growth forecast for fiscal 2017.
6) Benefits Division Backlog and Renewal Contracts - Is estimated to exceed $50.0M over the next 4 years and growing.
7) Cash Flow Positive - SEB's Technology Division has a reached position of positive sustainable and growing cash flow. The Benefits Division, after five (5) years of investing heavily in software, is expected to reach a position of sustainable positive cash flow in fiscal 2017.
8) Significant Enhancement in SEB's Health Benefits and HR Processing Solutions - SEB's "Benefits Exchange Platform" has been significantly enhanced in the past year. The Aon Hewitt transaction has added key functionality . A license transaction with FICO has also added important analytics and fraud identification capability. The Platform includes modules in Administration (including a leading Flex-Plan Platform deployed with over 150,000 plan members), an adjudication platform, claims payment processing, real time reporting, fraud identification and analytics, a new insurance products enrolment platform that reduces the application and approval process to minutes from months, disability document management solutions with analytics that automate disability case management processes, a fully digital, interactive Health & Wellness Platform with multiple apps including drug adherence, interfaces with wearables, etc., PBM (Pharmacy Benefit Management) custom solutions for the delivery of drugs, EDI solutions for automating claims processing for various benefit categories that are largely manual in the industry today and custom preferred provider networks capability. These solutions can operate stand alone or as one fully integrated environment on "One Benefit Card." The platform supports disaggregation of Benefit Types among Insurers. It supports the creation of pools that allow better pricing for many benefit categories. The solutions are web or cloud enabled. All solutions will be cloud enabled within the next several months. All solutions can be deployed globally in multi-lingual and multi-currency environments. The acquisition of the Aon Hewitt mid-market administration business in Canada provides the opportunity for significant organic revenue growth as clients are introduced to SEB's fully integrated benefits exchange environment. The majority of the clients already utilize Aon Hewitt's Flex-Plus Platform which is now being enhanced and integrated into SEB's administration and adjudication solutions. SEB also acquired a total HRO (Human Resources Outsourcing) platform for managing comprehensive HR and employee programs. This platform is also being enhanced. The combination of SEB and Aon Hewitt solutions creates a unique integrated technology environment for taking SEB's back office health benefits administration and adjudication solutions to a full PEO (Professional Employer Organization) business model in Canada and the U.S. The full implementation of SEB solutions within a Benefit Plan environment generates annual processing revenue between $300 to $600 per plan member. The implementation of the full PEO business model can more than double this revenue per plan member.
The TD is a strong growing business with significant organic sales and EBITDA growth. The Benefits Division is expected to enjoy positive cash flow in fiscal 2017. The recent equity financing combined with this $22.5 million new credit facilities significantly strengthens the balance sheet. SEB's integrated technology solutions are among the most comprehensive in the industry for managing Health Benefit, HR and Employee Programs.
SEB is well positioned for strong growth in both revenue and cash flow in fiscal 2017."
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 offering SaaS and BPO solutions in the Health Benefits Sector 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. Benefits Processing is a high-growth specialty practice area.
The core expertise of both divisions is data processing. Emphasis is on automating business processes utilizing SEB proprietary software solutions combined with solutions of third parties through joint ventures and partnerships.
Acquisitions, joint ventures, channel partnerships, 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 statements made in this release that are not historical facts contain forward-looking information that involves risks and uncertainties. All statements, including statements regarding the Corporation's areas of focus, other than statements of historical facts, which address the Corporation's expectations, should be considered as forward-looking statements and therefore subject to various risks and uncertainties. The words "may", "will", "could", "should", "would", "suspect", "outlook", "believe", "plan", "anticipate", "estimate", "expect", "intend", "forecast", "objective", "hope" and "continue" (or the negative thereof), and words and expressions of similar import, are intended to identify forward-looking statements.
Such forward-looking statements are based on knowledge of the environment in which the Corporation currently operates, but because of the factors listed herein, as well as other factors beyond the Corporation's control, actual results may differ materially from the expectations expressed in the forward-looking statements. Investors are cautioned not to put undue reliance on forward-looking statements. The Corporation undertakes no obligation, and does not intend, to update, revise or otherwise publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof, or to reflect the occurrence of any unanticipated events, other than as required by applicable law.
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.
MEDIA AND INVESTOR CONTACTS:
Office (888) 939-8885 x 354
Cell (416) 460-2817