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Morneau Shepell reports 2017 first quarter financial results

May 4, 2017

/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE U.S./

Highlights

  • Revenue of $157.8 million increased 5.8 per cent
  • Adjusted EBITDA increased by $2.2 million, or 7.6 per cent to $31.0 million
  • Adjusted EBITDA margins increased to 19.7 per cent from 19.3 per cent
  • Stephen Liptrap begins new role as President and CEO

TORONTO, May 4, 2017 /CNW/ - Morneau Shepell Inc. (the "Company" or "Morneau Shepell") (TSX:MSI) today reported its financial results for the three-month period ended March 31, 2017 (all amounts are in Canadian dollars, unless noted otherwise).

"As expected, we delivered a solid first quarter where, compared to the same period last year, revenues increased 5.8 per cent while Adjusted EBITDA grew 7.6 per cent and margins expanded from 19.3 per cent to 19.7 per cent," said Stephen Liptrap, newly-appointed President and Chief Executive Officer. "We're pleased that we were able to convert our strong fourth quarter sales pipeline into revenue and that we continue to see strength in our sales funnel."

"A key factor in our improving performance was the solid contributions delivered by all our lines of business that shows our strategy is working, particularly our ability to grow in the U.S. market, where we had significant wins in the quarter in the defined benefits space in the public sector and an EAP win in the automotive industry," added Liptrap.  "As I see it, our ability to grow revenues, profits and margins, particularly during a period of changing economic conditions, is the result of our strong strategy paired with excellence in execution, including our focus on cost management. Things are moving in the right direction for Morneau Shepell and, as we move through 2017, we continue to expect another solid year."

Q1 2017 Financial Review

In thousands of dollars

Three months ended

March 31, 2017

Three months ended

March 31, 2016

Revenue

157,837

149,123

Adjusted EBITDA

31,025

28,828

Adjusted EBITDA margin

19.7%

19.3%

Normalized Free Cash Flow

18,090

15,308

Profit

8,164

7,049

 

For the three months ended March 31, 2017, the Company reported $157.8 million in revenue, an increase of 5.8 per cent or $8.7 million from the same period in 2016. Organic revenue growth was 4.9 per cent.

Total operating expenses (excluding depreciation and amortization expenses) were $132.5 million in Q1, 2017, compared to $126.5 million in Q1, 2016.

Adjusted EBITDA increased by 7.6 per cent to $31.0 million from $28.8 million in Q1, 2016. The increase is primarily due to growth in revenue of $8.7 million, partially offset by an increase in salaries and other operating expenses of $6.5 million after EBITDA adjustments.

Adjusted EBITDA margin was 19.7 per cent – up from 19.3 per cent the previous year.

Profit was $8.2 million for the quarter, compared to $7.0 million in Q1, 2016.

During Q1, 2017, the Company generated Normalized Free Cash Flow of $18.1 million compared to $15.3 million in Q1, 2016.

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 Friday, May 5, 2017, at 8:30 a.m. ET. The conference call is open to all those wishing to attend, with a question & answer period to follow the presentation. In order to participate in the live conference call, please call 416-340-2217 (participant code 3683590) in the Toronto area, or 800-806-5484 (participant code 3683590) 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
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 approximately 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, Normalized Free Cash Flow and Organic Revenue. The Company believes that Adjusted EBITDA, Adjusted EBITDA margin, Normalized Free Cash Flow and Organic Revenue are useful supplemental measures to assist our investors in assessing our 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 non-cash operating working capital, capital expenditures, current income taxes (net of income taxes paid), and certain unusual expenditures.

(3)

"Organic Revenue" is defined as revenue excluding acquisitions not in the comparative period and divestitures, and the U.S. Health Exchange outsourcing business.

 

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 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 - Corporate

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


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