Smart Employee Benefits Reports Q2/2022 Results

9 Consecutive Quarters of Positive Adjusted EBITDA;

Conference Call Thursday August 4th at 3:30 P.M.

• Q2/2022 revenue at $16.7 million increased by 3.8% versus Q2/2021 and 4.2% over Q1/2022
• Posted 9^th consecutive quarter of positive adjusted EBITDA
• Trailing Twelve Months ("TTM") revenue increased by $5.0 million (8.5%) and TTM gross profit increased by $0.148 million (0.7%)
• Over 90% of targeted 2022 revenues are currently under contract
• Future revenue and EBITDA are expected to experience significant growth, driven by the Company's strong business pipeline
  

MISSISSAUGA, Ontario, Aug. 01, 2022 (GLOBE NEWSWIRE) -- Smart Employee Benefits Inc. ("SEB" or the "Company") (TSXV: SEB) (OTCQB: SEBFF) reports its financial results for the second quarter ending May 31, 2022 ("Q2/2022"). SEB is an Insurtech company focused on technologies that provide leading-edge, cloud based end-to-end IT and benefit processing software, solutions and services for the life and group benefits marketplace and government.

Please refer to the interim unaudited consolidated financial statements and Management's Discussion and Analysis ("MD&A") for the six months ended May 31, 2022, filed on SEDAR at www.sedar.com for more information. Unless otherwise specified, all dollar amounts are denominated in Canadian dollars.

Q2/2022 Highlights:

• Consolidated:
  • Revenue: Grew 3.8% to $16.7 million versus $16.1 million in Q2/2021
  • Nine consecutive quarters of positive Adjusted EBITDA.
    
    
• Benefits Solutions:
  
  • Revenue: $4.5 million versus $4.6 million in Q2/2021
  • Eight consecutive quarters of positive EBITDA.
    
    
• Technology Services:
  
  • Revenue: $12.6 million versus $12.1 million in Q2/2021.
  • Adjusted EBITDA: $0.7 million versus $1.1 million in Q2/2021.
  • EBITDA: $0.7 million versus $1.1 million in Q2/2021.

• Over 65% of year-to-date revenues come from clients with more than 5-year histories with the Company.
  
  
• With over $240 million of contract wins in the last 18-months and over $470 million of total contract value, management expects year-over-year increases in fiscal 2022 Revenue, Adjusted EBITDA and EBITDA.
  

States John McKimm, President/CEO/CIO of Smart Employee Benefits Inc.:
"Since our inception, SEB has been investing in both Technology Services operations and more significantly in Benefits Solutions. Historically, Technology Services has strong profitability. Benefits Solutions has required significant investment, the majority of which has been expensed. This has penalized historical cash flow, net earnings and EBITDA, but going forward, Benefits Solutions should require minimal capital expenditures. The cost structure from acquisitions and integrations has been largely realigned and we anticipate both Technology Services and Benefits Solutions to show strong growth and positive cash flow in Fiscal 2022 and beyond. Today, approximately 80% of every new gross margin dollar goes to cash flow and EBITDA in both revenue streams. The contract values, including backlog, option years and evergreen, remain strong, with the Company continually renewing or winning sufficient new business to maintain and grow future annual revenues. Over 90% of 2022 targeted revenues are under contract, with over 80% under contract for the subsequent 4 years; and some under contract for as long as 11 years. The Company has established strong traction in multiple new business initiatives and is well positioned to win new business going forward. A one-time contract in the first half of 2022 increased the cost structure and reduced margins; however, this contract is considered an investment in the future as it contributes to both Intellectual Property assets opening opportunities with new clients and longer-term managed services revenue."

Business Development Activities Fiscal 2022:
Relationships have been consolidated and grown with multiple new business partners. The Company's Channel Partner strategy has gained strong traction with more than a dozen active negotiations with brokerage organizations, Master General Agents, Third Party Administrators ("TPA"), insurers, unions, and corporate entities. Several agreements have been executed with Channel Partners; with revenue growth expected in 2022 and beyond. Channel Partner "White Label TPA" agreements have been signed with organizations representing over 180,000 plan members. Additionally, RFP wins added over 60,000 plan members in Fiscal 2021. Approximately 160,000 of those plan members are in transition, expected to be live later in 2022.

The Company's RFP and Channel Partner sales pipeline is the largest it has ever been (in both corporate and government opportunities) for both Technology Services and Benefits software and solutions driven revenue streams.

Business Outlook:
Technology Services revenues have historically been cash flow positive, and net new business wins and renewals remain strong. Benefits Solutions revenue is becoming cash flow positive after considerable investments in technology, business infrastructure, and client acquisition. We expect both revenue streams to have continued strong sustainable growth going forward. Signed contracts (backlog, evergreen, option years), based on a 5-year time frame are valued at over $470 million, of which over $130 million is Benefits Solutions revenue. Approximately 80% of 2022 forecast revenue targets are expected to be recurring over the next 4 years, with additional recurring revenue going out as long as 11 years. Since November 30, 2020, the Company has won over $240 million of net new contracts, including option years.

COVID-19 has led to increasing demand for the Company's Benefits Solutions, including "online medical care partnerships". In Technology Services, we saw an increase in revenues in the first half of the year which was a direct result of the contract wins in the past 18 months. Total Contract Values for the Company continue to grow, and utilization of the contracts is gaining stronger traction as government and businesses streamline and adjust to COVID-19 operating business processes.

The majority of the Company's business is largely multi-year, managed services-driven recurring revenue contracts for managing and operating mission critical technology and people infrastructure for our clients. On a consolidated level, in Q2/2021 the Company applied for and received approximately $0.339 million of COVID-19 government relief to support the Technology Services operations as opposed to no support in Q2/2022. This resulted in lower profitability when comparing the two quarters. However, this has allowed the Company to keep valuable full-time staff employed throughout the pandemic, who are now deployed to support the current and anticipated growth.

The consolidated sales pipeline is the strongest it has ever been. The cost savings initiatives taken over the past several years largely benefited the Company in 2020 and 2021 with some continued benefits into fiscal 2022.

Comparative Consolidated Results for the Second Quarter and Six Months 2022 and 2021:

		3 months ended		YTD ended
		May-22	May-21		May-22	May-21
Revenue		$	16,663,735		$	16,059,834			$	32,663,870		$	30,388,064
Cost of revenues			11,054,364			10,130,214				21,787,216			18,970,194
Gross Margin			5,609,371			5,929,620				10,876,654			11,417,870
Gross Margin as a % of Revenue			33.7%			36.9%				33.3%			38.3%
Operating costs			5,256,087			4,569,274				10,261,241			9,106,583
Professional fees			209,624			344,994				413,969			625,815
Adjusted EBITDA			143,658			1,015,350				201,444			1,685,471
Change in Investment			-			104,164				-			104,164
Gain on sale of investment			(89,618	)		-				(89,618	)		-
Decommissioning costs			28,206			-				104,037			-
Share-based compensation			158,280			121,339				402,580			618,286
Transaction costs			484,854			81,999				574,289			81,999
EBITDA		$	(438,063	)	$	707,847			$	(789,844	)	$	881,022
Net loss from operations		$	(2,461,761	)	$	(789,871	)		$	(4,421,368	)	$	(2,265,729	)

Consolidated Segmented results for the Six Months ended May 31, 2022 and 2021:

Smart Employee Benefits Inc.
Segmented Income Statement Detail for the Six Months May 31, 2022 (in C$)	Technology	Benefits	Corporate	Intercompany Sales/COS	Total Company
Revenue	$	24,286,984	$	9,118,116	$	-		$	(741,230	)	$	32,663,870
Cost of revenues
Cost of revenues		20,162,273		2,366,173		-			(741,230	)		21,787,216
Gross margin		4,124,711		6,751,943		-			-			10,876,654
Expenses
Salaries and other compensation costs		2,520,786		4,738,622		495,340			-			7,754,748
Office and general		343,511		1,477,775		685,207			-			2,506,492
Professional fees		57,842		22,298		333,829			-			413,969
		2,922,140		6,238,694		1,514,375			-			10,675,209
Adjusted EBITDA		1,202,572		513,248		(1,514,375	)		-			201,444
Decommissioning cost		104,037		-		-			-			104,037
Gain on sale of investment		-		-		(89,618	)		-			(89,618	)
Transaction costs		-		-		574,289			-			574,289
Share-based compensation		4,886		12,617		385,077			-			402,580
EBITDA		1,093,649		500,631		(2,384,124	)		-			(789,844	)
Amortization of intangible assets		5,948		225,038		39,911			-			270,897
Depreciation of equipment		40,640		22,551		-			-			63,191
Depreciation of right-of-use assets		54,089		127,186		299,424			-			480,698
Interest and financing costs		91,520		106,451		2,618,767			-			2,816,738
Net income (loss)	$	901,452	$	19,405	$	(5,342,226	)	$	-		$	(4,421,368	)

Smart Employee Benefits Inc.
Segmented Income Statement Detail for the Six Months ended May 31, 2021 (in C$)	Technology	Benefits	Corporate	Intercompany Sales/COS	Total Company
Revenue	$	22,641,524	$	8,760,689	$	-		$	(1,014,149	)	$	30,388,064
Cost of revenues
Cost of revenues		17,998,915		1,985,428		-			(1,014,149	)		18,970,194
Gross margin		4,642,608		6,775,262		-			-			11,417,870
Expenses
Salaries and other compensation costs		2,134,021		4,605,511		635,751			-			7,375,282
Office and general		362,718		1,148,904		219,677			-			1,731,302
Professional fees		104,234		49,285		472,297			-			625,815
		2,600,973		5,803,700		1,327,725			-			9,732,399
Adjusted EBITDA		2,041,636		971,562		(1,327,725	)		-			1,685,471
Change in investment		-		-		104,164			-			104,164
Transaction costs		-		-		81,999			-			81,999
Share-based compensation		121,217		208,681		288,388			-			618,286
EBITDA		1,920,418		762,881		(1,802,277	)		-			881,021
Amortization of intangible assets		5,106		207,668		39,911			-			252,684
Depreciation of equipment		55,852		40,093		-			-			95,944
Depreciation of right-of-use assets		54,089		127,185		299,424			-			480,698
Interest and financing costs		87,474		64,576		2,164,432			-			2,316,482
Income tax recovery		943		-		-			-			943
Net income (loss)	$	1,716,954	$	323,364	$	(4,306,043	)	$	-		$	(2,265,729	)

Consolidated Segmented results for the Second Quarters ended May 31, 2022 and 2021:

Smart Employee Benefits Inc.
Segmented Income Statement Detail for the quarter ended May 31, 2022 (in C$)	Technology	Benefits	Corporate	Intercompany Sales/COS	Total Company
Revenue	$	12,553,738	$	4,488,781	$	-		$	(378,785	)	$	16,663,734
Cost of revenues
Cost of revenues		10,301,448		1,131,701		-			(378,785	)		11,054,364
Gross margin		2,252,290		3,357,080		-			-			5,609,370
Expenses
Salaries and other compensation costs		1,411,760		2,318,325		253,231			-			3,983,317
Office and general		91,838		717,360		463,575			-			1,272,773
Professional fees		31,580		8,915		169,129			-			209,624
		1,535,178		3,044,599		885,936			-			5,465,714
Adjusted EBITDA		717,112		312,482		(885,936	)		-			143,657
Decommissioning cost		28,206		-		-			-			28,206
Gain on sale of investment		-		-		(89,618	)		-			(89,618	)
Transaction costs		-		-		484,854			-			484,854
Share-based compensation		1,080		-		157,200			-			158,280
EBITDA		687,826		312,482		(1,438,372	)		-			(438,066	)
Amortization of intangible assets		2,974		124,089		19,955			-			147,018
Depreciation of equipment		20,342		10,607		-			-			30,950
Depreciation of right-of-use assets		26,596		62,539		147,231			-			236,366
Interest and financing costs		47,740		84,985		1,476,641			-			1,609,365
Net income (loss)	$	590,174	$	30,261	$	(3,082,197	)	$	-		$	(2,461,762	)

Smart Employee Benefits Inc.
Segmented Income Statement Detail for the quarter ended May 31, 2021 (in C$)	Technology	Benefits	Corporate	Intercompany Sales/COS	Total Company
Revenue	$	12,088,125	$	4,550,036	$	-		$	(578,327	)	$	16,059,834
Cost of revenues
Cost of revenues		9,696,669		1,011,873		-			(578,327	)		10,130,214
Gross margin		2,391,456		3,538,164		-			-			5,929,620
Expenses
Salaries and other compensation costs		1,112,489		2,277,828		330,439			-			3,720,755
Office and general		169,240		562,125		117,156			-			848,522
Professional fees		48,834		43,732		252,428			-			344,994
		1,330,562		2,883,685		700,023			-			4,914,272
Adjusted EBITDA		1,060,894		654,479		(700,023	)		-			1,015,349
Transaction costs		-		-		81,999			-			81,999
Share-based compensation		-		-		121,339			-			121,339
EBITDA		1,060,894		654,479		(1,007,526	)		-			707,846
Amortization of intangible assets		2,553		106,062		19,956			-			128,570
Depreciation of equipment		27,926		19,000		-			-			46,926
Depreciation of right-of-use assets		26,596		62,539		147,231			-			236,365
Interest and financing costs		47,662		36,014		1,001,237			-			1,084,914
Net income (loss)	$	955,213	$	430,863	$	(2,175,948	)	$	-		$	(789,871	)

Reconciliation of Consolidated Net loss to EBITDA for the Six Months ended May 31, 2022 and 2021:

		3 months ended	YTD ended
		May-22	May-21	May-22	May-21
Net loss from operations		$	(2,461,761	)	$	(789,871	)	$	(4,421,368	)	$	(2,265,729	)
Interest and financing costs			1,609,365			1,084,914			2,816,738			2,316,482
Income tax expense			-			943			-			943
Depreciation and amortization			177,967			175,496			334,088			348,628
Depreciation of right-of-use assets			236,366			236,365			480,698			480,698
EBITDA			(438,063	)		707,847			(789,844	)		881,022
Change in investment			-			104,164			-			104,164
Gain on sale of investment			(89,618	)		-			(89,618	)		-
Decommissioning costs			28,206			-			104,037			-
Share- based compensation			158,280			121,339			402,580			618,286
Transaction costs			484,854			81,999			574,289			81,999
Adjusted EBITDA		$	143,658		$	1,015,350		$	201,444		$	1,685,471

Revenue Increased 3.8% Quarter Over Quarter:

During Q2/2022, consolidated revenues from continuing operations was $16.7 million versus $16.1 million in Q2/2021. Technology Services revenue increased by $0.5 million while the Benefits Solutions revenues decreased by $0.1 million. Contract values remain high with over $240 million of new wins in the last 18 months. Approximately 80% of 2022 forecast consolidated revenue streams are under contract for the next 4 years, representing >90% for Benefits Solutions revenues and >70% for Technology Services revenue. The Company's growth focus is on the higher margin Benefit Solutions revenue, although Technology Services revenues continue to experience significant growth.

Gross Margin and Gross Profit:

The Company generated $5.6 million in Gross Profit in Q2/2022 versus $6.0 million in Q2/2021. Gross Margin was 33.7% in Q2/2022 compared to 36.9% in Q2/2021. The reduction in Gross Margin and Gross Profit in the Q2/2022 was largely due to two notable one-time projects in Q2/2022.

Technology Services Gross Profit (Gross Margin) in Q2/2022 was $2.3 million (17.9%) versus $2.4 million (19.8%) in Q2/2021.

The Benefits Solutions Gross Profit (Gross Margin) was $3.4 million (74.8%) versus $3.5 million (77.8%) largely due to lower Gross Margins in the online medical module sales.

Operational Costs:

• Salaries and Other Compensation - Salaries increased by $0.3 million during Q2/2022 compared to the same period the prior year. The increase is mainly due to a reduction in COVID relief funding when compared to the same period last year.
  
  
• Office and General Costs - Office and general costs increased by nearly $0.4 million during Q2/2022 versus Q2/2021. The increase is largely due to no COVID-19 subsidy and rent credits in Q2/2022 as opposed Q2/2021.
  
  
• Professional Fees - Professional fees remained relatively flat in Q2/2022 compared to Q2/2021. Professional fees vary with the amount of financing or acquisition/disposition activity during the period.
  

Non-Cash Expenses:
Non-Cash expenses include amortization, depreciation and share-based (options, RSUs) compensation remain flat during Q2/2022 versus Q2/2021.

Interest and Financing Costs, Interest Accretion and Transaction Costs:
Interest and financing costs, interest accretion from continuing operations increased from $1.1 million in Q2/2021 to $1.6 million in Q2/2022, which is due to increased credit facility and convertible debt. The transaction costs expense increased by $0.4 million in Q2/2022 compared to Q2/2021. There were no significant transactions costs in fiscal 2021 as compared to the actively involved equity financing that occurred in the current quarter.

Decommissioning Costs:
Approximately $0.03 million of costs in Q2/2022 were one-time, related to the decommissioning of select operations in Western Canada. Total decommissioning costs are estimated at approximately $0.45 million to be recognized on a quarterly basis over the subsequent 12 months. The Company has reorganized select operations such that these activities will be managed from our Ottawa offices.

Grant of Options and RSUs:
On March 9, 2022, pursuant to the Company's Omnibus Long-Term Incentive Plan (the "Plan"), the Company granted 1,700,000 options to a consultant. The options have a 36-month term, vest 25% on the third, the sixth, the ninth and the twelfth months, and are exercisable at $0.22 per share. On April 27, 2022, the Company granted 200,000 options to an employee. The options have a 36-month term, vest after 24 months, and are exercisable at $0.16 per share. On April 27, 2022, the Company granted 77,500 options to various employees. The options have a 42-months term, vest 10% every six months for 30 months with the remaining 50% vest after 36 months. They are exercisable at $0.16 per share.

On April 27, 2022, the Company has granted an aggregate of 140,625 RSUs to an employee. The RSUs were vested immediately. Each vested RSU entitles the holder to acquire one common share of the Company. The Shares issued upon such RSU settlement shall be issued as fully paid and non-assessable Shares, each RSU is valued at market price of $0.16 per share. On the same date, the Company has also granted an aggregate of 232,500 RSUs to various employees. The RSUs were issued in accordance with the Plan. The RSUs will be vested 10% every six months for 30 months with the remaining 50% vested after 36 months. Each vested RSU entitles the holder to acquire one common share of the Company. The Shares issued upon such RSU settlement shall be issued as fully paid and non-assessable Shares, each RSU is valued at market price of $0.16 per share.

A minimum of 25% of the directors' fees for Fiscal 2021 and 2022 must be compensated in RSUs and the directors can choose to be either compensated in cash or RSUs for the remaining 75%. As a result, the Company has also committed to issue 212,714 RSUs at $0.20 per share and 296,807 RSUs at $0.16 per share to the directors for the service provided in Q1 and Q2 2022. The RSUs will vest 100% after 12 months.

CONFERENCE CALL DETAILS:
Management will host a call:
Date/Time: Thursday August 4th, at 3:30 PM ET
Canada & USA Toll Free Dial In: 1-800-319-4610
Toronto Toll Dial In: 1-416-915-3239
Callers should dial in 5-10 minutes prior to the scheduled start time and simply ask to join the call.
Webcast Link access at http://services.choruscall.ca/links/seb2022q2.html

Conference Call Replay Numbers:

Canada & USA Toll Free:	1-855-669-9658
Code:	9328 followed by the # sign

Replay Duration: Available for one week until end of day Thursday August 11th, 2022.

About Smart Employee Benefits Inc. ("SEB"):
SEB is an Insurtech company focused on Benefits Administration Technology driving two interrelated revenue streams - Benefits Solutions and Technology Services. The Company is a proven provider of leading-edge IT and benefits processing software, solutions and services for the Life and Group benefits marketplace and government. We design, customize, build and manage mission critical, end-to-end technology, people and infrastructure solutions using SEB's proprietary technologies and expertise and partner technologies. We manage mission critical business processes for over 150 blue chip and government accounts, nationally and globally. Over 90% of our revenue and contracts are multi-year recurring revenue streams contracts related to government, insurance, healthcare, benefits and e-commerce. Our solutions are supported nationally and globally by over 600 multi-certified technical professionals in a multi-lingual infrastructure, from multiple offices across Canada and globally.

Our solutions include both software and services driven ecosystems including multiple SaaS solutions, cloud solutions & services, managed services offering smart sourcing (near shore/offshore), managed security services, custom software development and support, professional services, deep systems integration expertise and multiple specialty practice areas including AI, CRM, BI, Portals, EDI, e-commerce, digital transformation, analytics, project management to mention a few. The Company has more than 20 strategic partnerships/relationships with leading global and regional technology and consulting organizations.

Forward-looking statements:
Certain information in this release, may constitute forward-looking information. In some cases, but not necessarily in all cases, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "targets", "expects" or "does not expect", "is expected", "an opportunity exists", "is positioned", "estimates", "intends", "assumes", "anticipates" or "does not anticipate" or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might", "will" or "will be taken", "occur" or "be achieved". In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management's expectations, estimates and projections regarding future events.

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.

Neither TSX Venture Exchange Inc. nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange Inc.) accepts responsibility for the adequacy or accuracy of this release.

All figures are in Canadian dollars unless otherwise stated.

Media and Investor Contact
John McKimm
President/CEO/CIO
Office (888) 939-8885 x 2354
Cell (416) 460-2817
[email protected]

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