Smart Employee Benefits Inc (SEBFF) research, news, and more from GeoInvesting

Company description

Tue, 20 Oct 2020 20:33:29 GMT

SEB is a technology company providing Business Process Automation and Outsourcing software, solutions and services to a national and global client base. SEB has a specialty growth focus in cloud enabled SaaS processing solutions for managing employer and government sponsored health benefit plans on a BPO (Business Processing Outsourcing) business model, globally. SEB currently serves corporate and government clients across Canada and internationally. Over 80% of SEB's revenues derive from government, insurance and health care organizations. SEB's technology infrastructure of over 650 multi-certified technical professionals, across Canada and globally, is a critical competitive advantage in supporting the implementation and management of SEB's benefits processing solutions into client environments. SEB's Benefits Processing Solutions can be game changing for SEB clients. The core expertise of SEB is automating and managing business processes utilizing SEB proprietary software solutions combined with solutions of third parties through joint ventures and partnerships. SEB's client acquisition model in benefits processing is "Channel Partnerships" where SEB processing solutions both improve cost structures and enable new revenue models for Channel Partners and clients. All SEB solutions are cloud enabled and can be delivered on a SaaS platform. SEB solutions turn cost centers to profit centers for our Channel Partners.

Research

Wed, 04 Jan 2023 15:04:20 GMT

Smart Employee Benefits Inc (OTC:SEBFF) ($0.12) (SEB.V) ($0.18), a SaaS company focused on delivering administrative solutions (mainly HR) to corporations, announced it has entered an agreement to be acquired by Co-operators Financial Services Limited for CAD 0.30 cash per share ($0.22 in USD).

“Co-operators will acquire all of the issued and outstanding SEB Shares, other than those already owned by Co-operators, at a purchase price of $0.30 in cash per SEB Share, representing a total equity value of approximately $89.1 million. The Purchase Price represents a 76.5% premium to the closing price of SEB common shares on December 30, 2022, and an 80.9% premium to the 20-day volume weighted average closing price as of the end of trading on December 30, 2022.”

Recall that after its Q2 conference call we alerted an InfoArb we thought was worthy of pointing out in regards to the transformational transaction the company had referred to on prior calls.

We stated:

“While it is unclear exactly what the CEO’s comments may infer, it seems very likely to us that the company is possibly contemplating selling the company , going private and/or entering a joint venture/partnership.”

On April 29, 2021 we hosted a virtual presentation with Smart Employee Benefits with management and highlighted our key takeaways, highlighting our key takeaways in the replay provided.

On April 30, 2021 we added SEBFF to our Select Long model portfolios at $0.12. At the acquisition price of $0.22 U.S, it equates to a 83% return.

Overall, we think the decision by management to sell the company was the appropriate move, given the it's capital structure vs. lack of profitability that made it hard to remain public without further dilution to shareholders.

The idea was brought to us by GeoInvesting Research Contributor, Thomas Birnie.

Review of Coverage History

Date	Geo’s Coverage on SEBFF (SEB.V)
Oct. 21, 2020	Geoinvesting Research Contributor Thomas Birnie pitched the company to our community.
Apr 30, 2021	Hosted a virtual presentation with the company’s CEO and added the company to its Run to One Model Portfolio. Key takeaways included recurring revenue, a deep customer base, and an upcoming reverse split.
Aug 2, 2021	Released a bullish research report on the company after it announced its Q2 2021 reports. Overall opinion was that we believe the stock will be worth multiples over its current price once investors understand that most of the company’s revenue is recurring and tied to long-term contracts
Aug 23, 2021	Hosted a virtual panel with the CEO and COO.
Nov 2, 2021	Released research on the company after it released its Q3 2021 results.
Mar 11, 2022	Released research that the company announced it has received extensions and new contracts valued at $22.2 million.
Apr 1, 2022	Released research based on the company’s Q1 2024 results. Key takeaway: Contract momentum has been strong and it is nice to see that high capex expenditures are behind them.
Aug 2, 2022	Released research based on Q2 2022 results. Key takeaway: Gross margins were negatively affected as a result of onboarding a new client. Released research based on Q2 2022 results. Key takeaway: Gross margins were negatively affected as a result of onboarding a new client. We reiterated some of our skepticism that we had been communicating that, despite management’s continued positive outlook, their inability to meet lofty growth goals had us form an opinion that they should look for strategic alternatives, such as selling the company.
Aug 5, 2022	Released conference call InfoArb stating that it seems very likely that the company is possibly contemplating selling the company, going private and/or entering a joint venture/partnership.
Oct 3, 2022	Company announces 3 new multi-year contract wins exceeding $70 million in value.
Jan 3, 2023	The company announced its agreement to be acquired by Co-operators Financial Services Limited for CAD 0.30 per share ($0.224 USD).

Research

Mon, 03 Oct 2022 14:04:20 GMT

Smart Employee Benefits Inc (OTC:SEBFF), a SaaS company focused on delivering administrative solutions (mainly HR) to corporations, announced 3 new contract wins for fiscal year 2022 in Canada and USA.

The software/solution wins have a minimum value in excess of $5.7 million.
The Professional Services wins are over $70.8 million, including $33.1 million of option years.
All contract wins are multi year recurring revenue contracts with terms between 2 and 11 years.
The Company has also added 3 new “Vendor Management Agreements” authorizing the Company to supply ITS software, solutions and services for the 3 entities.

“Following a strong 2021 for contract wins, SEB’s new contract wins in 2022 remain strong,” said SEB CEO John McKimm. “Typically, our contracts take several months to deploy, and although we will realize some revenue in 2022, the full revenue and profitability of these new contract wins won’t flow-through our results until 2023. Furthermore, these new wins add to our large base of recurring revenue, which is currently over 90% of our contracted revenue. Additionally, the MarvalNA solutions contribute to our growing base of business in the USA. Our pipeline of sales opportunities in both Canada and USA remains very robust for 2022. We expect substantial continued growth as the year evolves. Our RFP win rate continues to be over 65%, which is inline with what we experienced in 2021 and substantially higher than years prior.”

Regardless of these positive developments and given the company’s weak balance sheet, we continue to believe that the best course of action that the company should take is to sell the company, something that they hinted to in their Q2 conference call.

Research

Fri, 05 Aug 2022 15:47:00 GMT

Smart Employee Benefits Inc (OTC:SEBFF) (SEB.V) ($0.07; $12.6M market cap), a SaaS company focused on delivering administrative solutions (mainly HR) to corporations, announced Q2 2022 results on Monday August 4th, which we highlighted in our Tuesday email.

The company held its Q2 conference call last night. We wanted to highlight some InfoArb we felt needed to be pointed out.

In regards to outlook/guidance:

“We're looking for the second half to be substantially stronger.”

“We're looking now for growth over $70 million in 2022”

With 6 month revenue at $32.6 million, second half revenues could imply near 20% growth for Q3 and Q4.

Regarding a transformational transaction:

During the Q&A, management’s answers to several questions implied that the company could possibly be entering a joint venture, a major partnership or possibility of going private

When asked if management would buy back stock as the stock is at depressed levels

“We're in a blackout at the moment, so insiders cannot buy shares at the moment or we would. So we -- given transactions that we have on the table, the insiders will be in our blackout for the next few months.”

When asked about adding color to statements in prior releases about transformation deals:

“That's why we're in blackout.”

CEO’s closing remarks discusses the depressed valuations in many technology companies:

“I think if you look at a lot of the technology IPOs that have -- in the last 3 years, they're all down 80% to 90%. It doesn't make a lot of sense to me if you look at some of the underlying fundamentals of the companies. The values of these companies at the moment is, I say, relative to their businesses, just don't make any sense. I think many technology companies should -- or Canadian technology companies at least in this marketplace that are in this wasteland and where nobody cares much about the stocks, either should be looking to go private or looking for a merger or things like that. Because with strategic partners, it just doesn't make any sense at these valuations.

You could not create or buy. For us, for example, we got close to $0.5 billion of contracts and we've got another $300 million of contracts in our sales pipeline, which we expect to close a substantial portion of those in the next year. So it just doesn't make any sense that we have a market cap of $20 million, but we're not alone. There's another 20 or 30 tech companies and a lot of them in health care, that have the same experience and are suffering the same malaise. So we are all unhappy about the stock price, but we continue to focus on our business”.

In our latest note, we stated that it was getting close to a point where an activist may need to get involved to unlock the company’s true value.

While it is unclear exactly what the CEO’s comments may infer, it seems very likely to us that the company is possibly contemplating selling the company, going private and/or entering a joint venture/partnership.

Given the totality of the CEO’s comments, the weak balance sheet and delays in converting the large backlog, we feel that selling the company to a larger firm could be a high probability scenario, especially given the company’s stock is already in the hands of a “strategic” industry participant, .However, even a strategic partnership would be a welcome surprise.

Research

Tue, 02 Aug 2022 15:24:06 GMT

Smart Employee Benefits Inc (OTC:SEBFF) (SEB.V) ($0.10; $17.9M market cap), a SaaS company focused on delivering administrative solutions (mainly HR) to corporations, announced Q2 2022 results:

Sales of $16.6 million vs $16.0 million in the prior year
Adj EBITDA of $0.01 million vs $1.0 million
Net loss of $0.01 vs net loss of 0.00

Our takeaways:

More of the same “ bullish commentary” rhetoric, but results of the quarter continue to not match management’s optimism
Despite management's commentary in the past that the heavy lifting, in terms of cost, is behind them, it appears gross margins were negatively affected by onboarding a new client.
Thus, we are concerned about the level of gross margins in the backlog, which we assume has some new customer business
On a related note, operating costs were up significantly on a meager increase in revenue. We are also confused as to the timing of when the company's large backlog will be booked.. Where is the operating leverage that management has been talking about?
Obviously, with the company continuing to lose money, we have to start wondering if it will be able to reach profitability before needing to raise money again, as is evident with the company's history of diluting shareholder value.
SEBFF Has still not executed a reverse split that it communicated it would complete over a year ago, Even though a 1 for 10 split has been approved.
Overall, we believe that it’s getting close to a point where an activist may have to get involved to accelerate the company's multiple year restructuring process.

Research

Fri, 01 Apr 2022 15:22:03 GMT

Smart Employee Benefits Inc (OTC:SEBFF) (SEB.V) ($0.18; $31.8M market cap), a SaaS company focused on delivering administrative solutions (mainly HR) to corporations, announced Q4 2021 results:

Sales of $15.9 million vs $14.0 million in the prior year
Adj EBITDA of $0.04 million vs $0.26 million
Net loss of $0.01 vs net loss of 0.00

“Since its inception, SEB has been investing in both the Technology Services operations and more significantly in the Benefits Solutions operations. The Technology Services operations, historically, has strong profitability. Benefits Solutions has required significant investment, the majority of which has been expensed. This has penalized historical cash flow, net earnings and EBITDA. But going forward, we plan for minimal capital expenditures, the cost structure from acquisitions and integrations has been largely realigned and anticipate both the Technology Services and Benefits Solutions to show strong growth and positive cash flow in 2022 and beyond…

…Signed contracts (backlog, evergreen, option years), based on a 5-year time frame are valued at over $470 million, of which over $130 million is Benefits Solutions revenue. Approximately, 80% of 2021 consolidated revenue targets are expected to be recurring over the next 4 years, with additional recurring revenue going out as long as 11 years. Since November 30, 2020, the Company has won over $205 million of net new contracts, including option years…

…The consolidated sales pipeline is the strongest it has ever been. The cost savings initiatives taken over the past several years largely benefitted the Company in 2020 with minimal improvements continuing in 2021. We anticipate continued improvement in consolidated financial performance in fiscal year 2022 versus fiscal year 2021, particularly in the Benefits Solutions.”

Contract momentum has been strong and it is nice to see that high capex expenditures are behind them. We would like to see the strong backlog continue to lead to top line growth and, with its fixed cost structure, trickle down to EPS as the company moves forward.

While it is good to see the company has been able to remain consistently EBITDA positive the last several quarters, in order for the stock to trade at premium valuation multiples, the market will want to see one of two things - either significantly accelerating revenue growth or positive GAAP/Adjusted EPS profitability.

Furthermore, we feel the company still has work to do to improve the optics of its balance sheet, including its outstanding convertible note.

Finally, the company has still not executed a reverse split that it communicated it would complete almost a year ago.

In summation, it is time for the company to convert its high backlog it continues to talk about into consistent and meaningful profitable revenue growth. If the company can meet these objectives, we believe the stock can rise multiples over where it stands today.

Research

Fri, 11 Mar 2022 15:04:06 GMT

Smart Employee Benefits Inc (OTC:SEBFF) (SEB.V) ($0.22; $37.4M market cap), a SaaS company focused on delivering administrative solutions (mainly HR/insurance solutions) to corporations, announced it has received extensions and new contracts valued at $22.2 million.

“This brings contract wins and extensions to over $205.0M over the past 15 months. SEB’s RFP sales pipeline includes tens of millions of dollars of contract value where decisions are pending over the next several months.”

On March 9, 2022 the company closed on a $5 million private placement with a large existing investor, with a $0.25 conversion price.

“The proceeds of the Financing will be used for general working capital purposes including the repayment of select payables.”

While the company has certainly had contract win momentum recently, the capital structure has been a concern from the beginning and the recent private placement does not help as the diluted share count continues to climb. We would also like management to provide color on how the company’s large backlog will be realized over time and if its conversion to sales and cash flow will finally allow the company to fund its growth internally.

Research

Tue, 28 Dec 2021 05:00:00 GMT

Smart Employee Benefits Inc (NASDAQ:SEBFF) (SEB.V) ($0.17; $29.8M market cap), a SaaS company focused on delivering administrative solutions (mainly HR) to corporations, experienced some odd trading action in the U.S listed OTC symbol SEBFF in yesterday’s trading session.

This illiquid stock traded as low as $0.0013 on what looked to be a 50k share block, likely someone taking a tax loss and maybe using the wrong limit price or placing a market order (however, most brokerages don’t allow market orders on OTC stocks).

After that sale, there were prints at $0.07, $0.08 and $0.11, but the orders did not reflect those last prices. It is our opinion that it is likely just a market maker error by the OTC. The end of day bid ask spread was $0.07 by $0.18 and will likely resort to its normal regular hours bid/ask trading range. The pre-market bid/ask this morning was $0.13 by $0.19.

The Canada markets were actually closed yesterday and are also closed today, so the Canadian symbol SEB.V has not traded.

We will keep watch on it today and see if the orders that come through reflect on the tape.

Research

Tue, 02 Nov 2021 18:33:40 GMT

Smart Employee Benefits Inc (NASDAQ:SMEYF) (SEB.V) ($0.18; $31.8M market cap), a SaaS company focused on delivering administrative solutions (mainly HR) to corporations, announced Q3 2021 results:

Sales of $15.4 million vs $14.6 million in the prior year
Adj EBITDA of $0.59 million vs $1.09 million (includes covid relief aid)
EBITDA of $0.46 million vs $0.49 million
Net loss of $1.0 million vs net loss of $1.0 million

Sticky revenue stream:

“Approximately 80% of 2021 forecast consolidated revenue streams are under contract for the next 4 years representing >90% for Benefits Solutions revenues and >70% for Technology Services revenue. The Company’s growth focus is on the higher margin Benefit Solutions revenue, although Technology Services revenue is also experiencing solid growth. The operations including sales and marketing initiatives, finance and accounting and technology support and delivery were largely integrated in fiscal, 2020.”

Channel partner expansion to drive revenue growth:

“Relationships have been consolidated and grown with multiple new business partners. The Company’s Channel Partner strategy has gained strong traction with more than a dozen active negotiations with Channel Partner opportunities including brokerage organizations, MGAs, TPAs, insurers, unions, and corporate entities. Several LOIs and LOAs have been executed with revenue growth expected in late 2021 and beyond from the Channel Partner business initiatives.”

Focus on improving profitability:

“Going forward, the capital expenditures are minimal, the cost structure from acquisitions and integrations has been largely realigned and both the Technology Services and Benefits Solutions are anticipated to show strong growth and positive cash flow in 2021 and beyond. Today approximately 80% of every new GM dollar will go to cash flow and EBITDA in both revenue streams. The contract values including backlog, option years and evergreen remain strong, with the Company continually renewing or winning sufficient new business to replace annual revenues. Over 98% of 2021 targeted revenues are under contract with over 80% of 2021 revenues under contract for the next 4 years.”

On April 29, 2021 we hosted a virtual presentation with Smart Employee Benefits management and highlighted our key takeaways, here. On April 30, 2021 we added SMEYF/SEB.V to our Run to One and Select Long model portfolios.

We are still waiting for the company to catalyze the positive developments management has been discussing. Although we were hoping to see some of the growth initiatives already materialize, we are excited to see the company start monetizing its growing predictable backlog

Interviews

Tue, 24 Aug 2021 04:00:00 GMT

VIRTUAL PANEL with Smart Employee Benefits (OTC:SMEYF) (SEB.V) SNN Summer Virtual Event

Maj Soueidan once again got a chance to speak with John McKimm, Smart Employee Benefits (OTC:SMEYF) (SEB.V) CEO, President & CIO, as well as the company’s Chief Operating Officer, Mohamad El Chayah during Bobby Kraft’s SNN Network Summer Virtual Event held August 17 to 19, 2021. Smart Employee Benefits Inc is a Canadian technology company providing software-enabled services in the areas of healthcare transaction processing, software solutions, and professional services for corporate and government clients.

Please see the session below to catch up on current initiatives SEB.V is embarking upon and to get a more in-depth refresher on what they do and their plans moving forward.

Research

Mon, 02 Aug 2021 14:38:15 GMT

Smart Employee Benefits Inc (NASDAQ:SMEYF) (SEB.V) ($0.27; $45.9M market cap), a SaaS company focused on delivering administrative solutions (mainly HR) to corporations, announced Q2 2021 results:

Sales of $16.0 million vs $15.4 million in the prior year
Adjusted EBITDA of $1.0 million vs $670,121 in the prior year
Nel loss of $789,871 vs net loss of $1.47 million
Backlog is very large with high visibility

Key positive to the report:

Year over year and sequential revenue and EBITDA growth

Some negatives:

Delay in contract renewals. However, the company expects to resolve by year’s end
Even though the company has done a good job at restructuring the balance sheet, we would lto see a further reduction in its debt burden.

Our overall opinion is that we believe the stock will be worth multiples over its current price once investors understand that most of the company’s revenue is recurring and tied to long-term contracts.

Some highlights from the press release:

"The Benefits revenue stream experienced a positive $971,562 Adjusted EBITDA and $762,881 EBITDA versus a positive $29,179 during the same time frame of the previous year. This trend is expected to continue in the second half of fiscal 2021, as growth is experienced in both revenue streams...

...Technology Operations have been historically cash flow positive and net new business wins remain strong. The Benefits Operations are just now becoming cash flow positive after considerable investments in technology and business infrastructure. Both operations are expected to have continued strong sustainable growth going forward. Signed contracts (backlog, evergreen, option years), based on a 5-year time frame are valued at over $400M, of which over $100M is Benefits Operations. Over 80% of 2021 consolidated revenue targets are expected to be recurring over the next 4 years, with additional recurring revenue going out as long as 9 years. Since November 30, 2020, the Company has won approximately $68.0M of net new contracts, including option years, over 25% of which are Benefits Operations...

...The consolidated sales pipeline is the strongest it has ever been. The cost savings initiatives taken over the past several years were largely experienced in 2020 with minimal improvements continuing in 2021. We are anticipating improved consolidated financial performance in the 2021 fiscal year vs. 2020, particularly in the Benefits Operations...

...The Company has established strong traction in multiple new business initiatives and is well positioned to win new business going forward.”

The company will be hosting its second quarter 2021 conference call on Thursday August 5th at 11:00 AM EST. We look forward to the call to see if management offers more color on its business initiatives and growth plans.

On April 29, 2021 we hosted a virtual presentation with SEB management and highlighted our key takeaways, you can see that here. On April 30, 2021 we added SEB to our Run to One and Select Long model portfolios.

Research

Mon, 14 Jun 2021 17:09:24 GMT

PodClip --

Stock has doubled, should we keep it?

*Stock is still ridiculously cheap, given

100% recurring revenue
3 to 7 year visibility in backlog that stands at $400M vs. 2020 revenue of $60.6

*Approaching break even

*EV/S

1.19

*Price Potential at 4 to 8 EV/S = $1.38 to $2.78

Research

Fri, 30 Apr 2021 04:00:00 GMT

Smart Employee Benefits Inc (NASDAQ:SMEYF) (SEB.V) - SEB is a SaaS company focused on delivering administrative solutions (mainly HR) to corporations. Their bread-and-butter business is in helping companies administer their insurance plans.

Yesterday, we hosted a virtual presentation with SEB’s CEO and COO. A replay of the video will be posted later today.

We are adding SEB.V/SMEYF to our Run to One Model Portfolio. We do think patience will be required as the company is not profitable yet and quarterly revenue can be lumpy. However, the stock trades at an EV/S of 0.76, compared to where we think it could eventually trade, well over an EV/S of 4.

Our key takeaways from yesterday's live call includes:

Substantially all rev is recurring
Contracts are very long-term which creates great visibility
Deep recognizable customer base
True one stop shop platform solution
Reverse split coming soon will improve the shares outstanding optics which currently stand at 170 million (near 200 million, fully diluted).

Last night, after the call, the company also released its Q1 2021 results:

Sales of $14.3 million vs $16.5 million in the prior year
Adjusted EBITDA of $670,121 vs a loss of $56,324 in the prior year
Loss of $0.01 vs loss of $0.01

It's important to note that the company has been focusing on higher margin revenue, which is partly why revenues were down for the quarter. The quarter was also negatively affected by contract delays that will drop in the second quarter.

Some highlights from the press release:

The first quarter, 2021 is the fourth straight quarter of positive EBITDA and Adjusted EBITDA... Continued positive growth is targeted for the remainder of fiscal 2021 and beyond.

SEB has made significant investments in both the Technology and Benefits Solutions revenue streams since the Company’s inception. Building the business and technology infrastructure, while a time consuming and costly process, has created significant values with blue chip and government clientele and strong strategic partnerships in both revenue streams.

The Benefits revenue stream experienced a positive $108,402 EBITDA versus a positive $30,019 during the same time frame. This trend is expected to continue in 2021, as growth is experienced in both revenue streams.

Technology Operations have been historically cash flow positive and net new business wins remain strong. The Benefits Operations are just now becoming cash flow positive after considerable investments in technology and business infrastructure. Both operations are expected to have continued strong sustainable growth going forward.

The consolidated sales pipeline is the strongest it has ever been. The cost savings initiatives taken over the past several years were largely experienced in 2020 with minimal improvements continuing in 2021. We are anticipating improved consolidated financial performance in the 2021 fiscal year vs. 2020, particularly in the Benefits Operations.”

Selected Disclosures on Above-mentioned Stock(s):

We are adding SEB.V, SMEYF to our long disclosures today

GeoTeam's Longs

Other Select Longs

Active Mock Portfolios

Micro-cap Run to One Model Portfolio: SEB.V, SMEYF

Interviews

Fri, 30 Apr 2021 04:00:00 GMT

Fireside Chat with Business Process Automation Company Smart Employee Benefits

Smart Employee Benefits is focused on delivering administrative solutions (mainly HR) to corporations. Their bread-and-butter business is in helping companies administer their insurance plans.

What caught our eye is the potential turnaround now underway. The company has been historically unprofitable, but in the words of the CEO, this was first driven by the need to develop the business and then transform it to achieve most of the perceived opportunity without having issues with competitors.

Now the performance started to improve as the company is signing new clients. Due to the scalability of the business, the CEO believes they could achieve strong profitability already this year. Moreover, this profitability should be stable as over 80% of the current revenue is contracted for at least the next four years.

If the business starts to execute and generate free cash flow, the current valuation would be wholly inappropriate. Even at just 1x P/S which would be woefully low for a growing and profitable SaaS play, the stock would already double.