MISSISSAUGA, Ontario, Dec. 01, 2021 (GLOBE NEWSWIRE) — Smart Employee Benefits Inc., (“SEB”) (TSXV:SEB) (OTCQX: SEBFF), through its operating entities, for fiscal year ending November 30, 2021, has signed new contracts valued in excess of $140.0M. The majority of clients include the Government of Canada and various corporate enterprises. The contracts extend out as long as 9 years with the majority in the 3-to-5-year range. The contracts include approximately $47.3M initiated in fiscal 2021, with $61.4M extensions and $31.6M of option years. Approximately 81% of the contracts are recurring “Services” revenue streams with the remainder being recurring “Software and Solutions” revenue streams.
Gross Margin on the $140.0M of new contracts, using SEB’s most recent consolidated numbers for the first 9 months of fiscal 2021, is estimated to exceed $51.7M. The estimated Gross Margin for SEB’s total contract value (estimated at over $420.0M) is approximately $148.0M.
The majority of the new signed contracts are related to RFP (Request for Proposal) competitive bids. SEB’s RFP win rate in the past 12 months is >65%, an increase from >50% in fiscal 2020 and >30% in 2019. Our RFP win rate has been steadily increasing since 2019. RFP wins together with our Channel Partner client acquisition transactions are steadily growing our contract values. Today we have visibility on over 90% of 2022 forecast revenues. Over 80% of 2022 forecast revenue is contracted for the subsequent 4 years with contract terms as long as 9 years. In addition, we have over $120.0M of contract value in our sales pipeline where decisions are pending in the next 6 months.
These contract awards and our sales pipeline reinforce SEB’s strong positioning in the IT sector as one of the leading suppliers of expertise in Information Technology and Benefits Processing (software, solutions, services) to both Enterprise clients and the Public sector. These awards come at a time when Governments (Federal, Provincial, Municipal) and corporations are responding to the dynamic challenges of Covid-19 and the concurrent need to increasingly digitize and automate business processes. The wins also indicate the stability of SEB’s client base, even in times of economic turmoil. Over 70% of SEB’s total contract value comes from long-term client relationships of more than 5 years.
States John McKimm, President/CEO of SEB: “These new contract bookings reflect the effectiveness of our operating model in responding to customer needs in providing the efficiency and value to win in increasingly complex markets. Over 90% of SEB’s total contract values is recurring revenue managed services business. Our sales pipeline is the strongest it has ever been. Our technology and people solutions are leading edge and highly cost-effective in driving the digital transformation journey for our clients in the public, enterprise and emerging market segments.
Additionally, the mix of revenues between Services and Software/Solutions is evolving quickly. In fiscal 2021, Software/Solutions revenue comprised approximately 30% of revenues with Services the remaining 70%. This is up from a mix of 8% and 92%, respectively, in fiscal 2016. Although, Software/Solutions and Services revenues are intricately linked, each dependent on the other to a large degree, gross margins in Software/Solutions exceed 70% versus the 17% in Services.
The evolution of SEB’s sales mix to focus on Software/Solutions has increased consolidated gross margin from 17.6% in fiscal 2016 to 36.9% in the first 9 months of fiscal 2021. SEB’s objective is to increase the sales mix to over 40% Software/Solutions in the next 24 months. This will have an obvious impact on gross margins, positive cash flow and EBITDA. Today, over 80% of every new gross margin dollar goes to profitability and cashflow. As of Q3 2021, SEB has recorded six straight quarters of positive EBITDA this trend is expected to continue in 2022 and beyond.”
About Smart Employee Benefits Inc. (“SEB”):
SEB 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 8 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.
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.