Morneau Shepell Reports 2016 Third Quarter Financial Results

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Solid profitability growth in Q3 contributes to improved year-to-date performance

TORONTO, Nov. 8, 2016 /CNW/ - Morneau Shepell Inc. (the "Company" or "Morneau Shepell") (TSX: MSI) today reported its financial results for the three-month period ended September 30, 2016 (all amounts are in Canadian dollars, unless noted otherwise).

Highlights

  • Adjusted EBITDA increased by 5.0 per cent versus the same period last year on 2.7 per cent revenue growth
  • Adjusted EBITDA margins increased from 19.1 per cent to 19.3 per cent year to date and from 18.4 per cent to 18.8 per cent in the quarter
  • Year-to-date Adjusted EBITDA grew by 6.1 per cent versus the same period last year on 5.1 per cent revenue growth

"In the third quarter, the Company continued to deliver solid results and year-over-year growth," said Alan Torrie, President and Chief Executive Officer. "We are particularly pleased with our profitability and margins in the quarter that are the result of ongoing initiatives to efficiently deliver our services and exceed customer expectations."

"As we have previously indicated, revenue growth is currently slightly lower than it has been historically, primarily as a result of the co-ops in the U.S. public health exchanges not being able to sustain themselves under the Affordable Care Act," Torrie added. "Looking ahead, we expect our continued investments in the business and our client base will continue to yield positive results for the Company in the longer term."

Q3 2016 Financial Review

In thousands of dollars

Three months
ended
Sept. 30, 2016

Three months
ended
Sept. 30, 2015

Nine months
ended
Sept. 30, 2016

Nine months
ended
Sept. 30, 2015

Revenue

144,594

$140,778

$442,967

$421,590

Adjusted EBITDA

$27,187

$25,886

$85,548

$80,590

Adjusted EBITDA margin

18.8%

18.4%

19.3%

19.1%

Normalized Free Cash Flow

$17,323

$13,177

$51,214

$43,406

Profit (loss)

$5,210

($3,487)

$20,340

$13,996

 

For the three months ended September 30, 2016, the Company reported $144.6 million in revenue, an increase of 2.7 per cent or $3.8 million from the same period in 2015.

Total operating expenses (excluding depreciation and amortization expenses, and the write-down of deferred implementation costs and impairment) were $124.6 million in Q3 2016, compared to $118.3 million in Q3 2015.

Adjusted EBITDA of $27.2 million increased by $1.3 million or 5.0 per cent from $25.9 million in Q3 2015. The increase is primarily due to growth in revenue of $3.8 million, partially offset by an increase in salaries and other operating expenses of $2.5 million after EBITDA adjustments.

Adjusted EBITDA margin increased to 18.8 per cent from 18.4 per cent in the same period last year.

Profit was $5.2 million for the quarter, compared to a $3.5 million loss in Q3 2015. During the quarter, the Company incurred restructuring charges and a sublease loss, and wrote off deferred implementation costs totaling $6.1 million relating primarily to cost reductions and HRI New Jersey being placed under an Order of Rehabilitation.  This compares to impairment charges of $15.1 million in the comparable period in 2015 related to the wind down of HRI New York.

During Q3 2016, the Company generated Normalized Free Cash Flow of $17.3 million compared to $13.2 million in Q3 2015.

The 12-month rolling Normalized Payout Ratio at Q3 2016 was 56.2 per cent compared to 65.9 per cent at Q3 2015.

The Company is maintaining its policy of paying a monthly dividend of 6.5 cents per share.

Notice of Conference Call

Management of Morneau Shepell will host a conference call on November 9, 2016 at 1 p.m. Eastern Time. The conference call is open to all those wishing to attend, with a question and answer period to follow the presentation. In order to participate in the live conference call, please call 416-340-2217 (participant code 9749236) in the Toronto area, or 866-696-5910 (participant code 9749236) throughout the rest of Canada. A replay of the call will be available via the Morneau Shepell Web site at morneaushepell.com.

About Morneau Shepell Inc.

Morneau Shepell is the only human resources consulting and technology company that takes an integrative approach to employee assistance, health, benefits, and retirement needs. The Company is the leading provider of Employee and Family Assistance Programs, the largest administrator of pension and benefits plans and the largest provider of integrated absence management solutions in Canada. Through health and productivity, administrative, and retirement solutions, Morneau Shepell helps clients reduce costs, increase employee productivity, and improve their competitive position. Established in 1966, Morneau Shepell serves approximately 20,000 organizations, ranging from small businesses to some of the largest corporations and associations in North America. With almost 4,000 employees globally, Morneau Shepell provides services to organizations across Canada, the United States, and around the globe. Morneau Shepell is a publicly-traded company on the Toronto Stock Exchange (TSX: MSI). For more information, visit morneaushepell.com.

Financial Measures
To assist investors in assessing the Company's financial performance, this news release also makes reference to certain financial measures such as Adjusted EBITDA, Adjusted EBITDA margin and Normalized Free Cash Flow. The Company believes that Adjusted EBITDA, Adjusted EBITDA margin and Normalized Free Cash Flow are useful supplemental measures of performance as they are generally used by Canadian businesses as indicators of financial performance. See the Company's MD&A for more details. These financial measures do not have any standard meaning prescribed by International Financial Reporting Standards and therefore may not be comparable to similar measures presented by other issuers.

(1)

"Adjusted EBITDA" is defined as profit before finance costs, income tax expenses, depreciation, amortization, impairment losses, and certain unusual expenditures.

(2)

"Normalized Free Cash Flow" is defined as cash provided by operating activities, adjusted for changes in noncash operating working capital, capital expenditures, current income taxes (net of income taxes paid), and certain unusual expenditures.

 

Forward-Looking Statements
This news release contains "forward-looking statements" within the meaning of applicable securities laws, such as statements 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 a "forward-looking" statement. These statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including those described in the Company's publicly filed documents (available on SEDAR at www.sedar.com) and in the firm's MD&A under the heading "Risks and Uncertainties". Those risks and uncertainties include ability to maintain profitability and manage growth, reliance on information systems and technology, reputational risk, dependence on key clients, reliance on key professionals and economic conditions. Many of these risks and uncertainties can affect the firm's actual results and could cause the Company's actual results to differ materially from those expressed or implied in any forward-looking statement made by the Company or on the firm's behalf. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. All forward-looking statements in this news release are qualified by these cautionary statements. These statements are made as of the date of this news release and, except as required by applicable law, the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Additionally, the Company undertakes 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.

SOURCE Morneau Shepell - Investor Relations

For further information: Helen Reeves, 416.345.5633, hreeves@moreneaushepell.com

RELATED LINKS
http://www.morneaushepell.com

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