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Morneau Shepell reports strong third-quarter 2018 financial results

Highlights

  • Revenue increased 19.9 per cent to $182.8 million
  • Adjusted EBITDA increased 20.0 per cent to $34.0 million
  • LifeWorks integration progressing well

TORONTO, Nov. 6, 2018 /CNW/ - Morneau Shepell Inc. (the "Company" or "Morneau Shepell") (TSX:MSI) today reported its financial results for the three and nine-month period ended September 30, 2018 (all amounts are in Canadian dollars, unless noted otherwise).

"We had a very strong quarter, delivering 19.9 per cent revenue growth and a 20.0 per cent increase in Adjusted EBITDA," said Stephen Liptrap, President and Chief Executive Officer. "Our performance is all the more satisfying given our focus in the quarter on integrating the LifeWorks acquisition that continues to proceed in line with our expectations. If anything, we're a bit further ahead than planned on achieving financial synergies and combining our market strategies and product roadmaps."

The acquisition of LifeWorks, a significant global well-being provider, was completed on July 27, 2018 for a total purchase price of approximately $437.6 million, subject to final closing working capital adjustments.

Year-to-date, the Company reported $521.5 million in revenue, an increase of 11.4 per cent over last year.  Adjusted EBITDA, at $101.3 million is also up 11.4 per cent over the same period last year.

"Moving forward, we're confident in delivering a very solid year of results, given our year-to-date performance and our strong pipeline growth in the quarter," continued Liptrap. "We expect to keep building on our momentum and executing our strategic plan towards the goal of being a leading HR power brand."

Q3 2018 Financial Review

In thousands of dollars

Three months ended

Sept. 30, 2018

Three months ended

Sept. 30, 2017

Nine months ended

Sept. 30, 2018

Nine months ended

Sept. 30, 2017

Revenue

$182,805

$152,528

$521,522

$468,303

Adjusted EBITDA

$33,989

$28,333

$101,308

$90,940

Adjusted EBITDA margin

18.6%

18.6%

19.4%

19.4%

Normalized Free Cash Flow

$23,075

$17,227

$56,829

$50,989

Profit (loss)

($9,556)

$9,178

$18,346

$29,575

 

For the three months ended September 30, 2018, the Company reported $182.8 million in revenue, an increase of 19.9 per cent or $30.3 million from the same period in 2017.

Total operating expenses (excluding depreciation and amortization expenses) were $162.2 million in Q3, 2018, compared to $126.2 million in Q3, 2017.

Adjusted EBITDA increased by 20.0 per cent to $34.0 million compared to the same period in 2017.

Adjusted EBITDA margin was 18.6 per cent, the same as in Q3, 2017.

Profit in the quarter amounted to a loss for the period of $9.6 million, was affected by $22.3 million in expenses related to transaction and integration costs associated with the LifeWorks acquisition. It also includes costs related to a transformation project to drive long-term value in the forms of earnings and cash flow improvement through changes in the way the Company operates.

During Q3, 2018, the Company generated Normalized Free Cash Flow of $23.1 million compared to $17.2 million in Q3, 2017.

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 Wednesday, November 7, 2018, at 10:00 a.m. ET. 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 416.641.6104  (participant code 2917172) in the Toronto area, or 1.800.952.5114 (participant code 2917172) 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 integrated approach to employee well-being, health, benefits and retirement needs. The Company is the largest administrator of retirement and benefits plans and the largest provider of integrated absence management solutions in Canada. LifeWorks by Morneau Shepell is a total well-being solution that combines employee assistance, wellness, recognition and incentive programs. As a leader in strategic HR consulting and innovative pension design, the Company also helps clients solve complex workforce problems and provides integrated productivity, health and retirement solutions.  Established in 1966, Morneau Shepell serves approximately 24,000 clients, ranging from small businesses to some of the largest corporations and associations.  With more than 4,500 employees in offices across North America, Morneau Shepell provides services to organizations 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 to assist our investors in assessing our financial performance. See the Company's Management, Discussion & Analysis ("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)

"Adjusted EBITDA margin" represents Adjusted EBITDA as a percentage of revenue.

(3)

"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.

 

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 the 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: please contact: Morneau Shepell Inc., Helen Reeves, 416.355.5633, hreeves@morneaushepell.com