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Smart Employee Benefits

Smart Employee Benefits expects significant profitability and positive cashflow 2019 following a year of transition

Snapshot

The firm supplies business process and outsourcing software, solutions and services to a Canadian and global client base, operating both a benefits division and a technology division

Employee benefits sign

Quick facts: Smart Employee Benefits

Price: 0.155 CAD

Market: TSX-V
Market Cap: $25.69 m
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  • Provides software managing “group benefit solutions and healthcare claims processing”

  • Supplies business process, outsourcing software, solutions and services to Canadian and global client base

  • Benefits processing group now manages over 300,000 plan members

 

What Smart Employee Benefits does:

Smart Employee Benefits Inc (CVE:SEB) is a technology company specializing in managing “group benefit solutions and healthcare claims processing” environments for corporate and government clients. 

This is a $60.0 billion industry, of which over $37.0 billion is employee group benefit plans and over $25.0 billion of other healthcare benefit claims such as workers compensation claims, travel benefits, various federal and provincial government programs.

The firm supplies business process and outsourcing software, solutions and services to a Canadian and global client base, and operates both a benefits division and a technology division.

The firm’s benefits processing group now manages over 300,000 plan members with hundreds of millions of premium dollars and the capability to service a global client base in multiple languages

How is it doing:

In April, SEB told investors that fiscal 2018 had been a year of transition as the business continues to strengthen, particularly in benefits processing which saw a significant reduction in cost structure of approximately $3 million on an annualized basis.

In September 2018, the firm announced the sale of Paradigm Consulting Group Inc to  Golden Opportunities Fund Inc, a venture capital fund managed by Westcap Management Ltd. in order to focus on its Canadian Federal government business and the insurance sector.

SEB posted a net loss for fiscal 2018 of $11.4 million, $1.6 million more than its restated 2017 loss, with a large proportion of the losses in both years due to fixed assets depreciation and intangible assets amortization.

It said the current year’s write-down of intangible assets will reduce these expenses in future years.

The group’s revenues in 2018 were $77 million, down from  $83 million in restated 2017, while its gross margin was $23.4 million (2017: $21.8 million.

The previous month, SEB revealed it had engaged Scotia Capital to assist it in identifying and negotiating a transaction with a strategic investment partner.

The company said it believed this process will provide optimal immediate value for shareholders, adding that it would "be operationally strategic to SEB, and provide the working capital to expedite the many growth opportunities.”

In January, SEB closed out a funding round, raising gross proceeds of C$892,250, which it said would be used for repayment of debt and general working capital purposes.

Under the offering, 4.15 million units were issued at a price of C$0.21.5 cents each, with each unit consisting of one SEB share and one common share purchase warrant of the company.

Each warrant is exercisable into one common share of the company at a price of C$0.30 cents per share for two years from the date of issuance. SEB share price closed at $0.19 on July 31.

What the boss says:

When reporting the 2018 results, John McKimm, SEB’s president, chief intelligence officer, and CEO said: "Significant profitability and positive cashflow is expected in 2019 and beyond. The cost structure has stabilized and the focus has moved to new sales initiatives."

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