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Edited Transcript of PEO.V earnings conference call or presentation 27-Apr-20 12:30pm GMT

Q2 2020 People Corp Earnings Call

WINNIPEG May 5, 2020 (Thomson StreetEvents) -- Edited Transcript of People Corp earnings conference call or presentation Monday, April 27, 2020 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Dennis D. Stewner

People Corporation - CFO & COO

* Laurie Marc Goldberg

People Corporation - Executive Chairman & CEO

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Conference Call Participants

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* Gary Ho

Desjardins Securities Inc., Research Division - Analyst

* Jaeme Gloyn

National Bank Financial, Inc., Research Division - Analyst

* Meny Grauman

Cormark Securities Inc., Research Division - MD & Co-Head of Institutional Equity Research

* Scott Chan

Canaccord Genuity Corp., Research Division - Director of Research of Financials & Financial Services Analyst

* Jonathan Ross

Loderock Advisors - Principal

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen, and welcome to the People Corporation Second Quarter 2020 Earnings Conference Call. (Operator Instructions) This call is being recorded on Monday, April 27, 2020.

I would now like to turn the conference over to Jonathan Ross. Please go ahead.

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Jonathan Ross, Loderock Advisors - Principal [2]

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Thanks, Joanna. Good morning, everyone, and thanks for joining us today. People Corporation's second quarter 2020 financial results were released this morning. The press release, financial statements and MD&A are available on SEDAR as well as on the People Corporation website at peoplecorporation.com.

Before I pass the call over to management, we would like to remind listeners that portions of today's discussion include forward-looking statements. There can be no assurance that these statements will prove to be accurate or that management's expectations or estimates of future developments, circumstances and results will materialize. As a result of these risks and uncertainties, the results or events predicted in these forward-looking statements may differ materially from actual results or events. Risk factors that could affect the company's results are detailed in the company's annual information form and other public filings that are made available on SEDAR, and we encourage listeners to read those statements in conjunction with today's call.

Forward-looking statements made during this conference call are made as of the date of this call. People Corporation disclaims any intention or obligation to update or revise such information, except as required by applicable law. And People Corporation does not assume any liability for disclosure relating to any company mentioned during this call.

People Corporation's financial statements are presented in Canadian dollars, and the results discussed during this call are in Canadian dollars.

I'm joined on the call today by Laurie Goldberg, Executive Chairman and Chief Executive Officer of People Corporation; and Dennis Stewner, Chief Financial Officer and Chief Operating Officer.

I will now pass the call over to Laurie.

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Laurie Marc Goldberg, People Corporation - Executive Chairman & CEO [3]

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Thank you, Jon. Good morning, everybody, and thank you for joining our second quarter 2020 results conference call.

Before getting started, I would like to acknowledge and express our appreciation for all the frontline workers that are putting themselves in harm's way during the COVID-19 pandemic. While all of us are experiencing inconvenience and uncertainty, these individuals are working hard every single day to ensure that the virus is contained and we can all return to normal as soon as it is safe to do so. The only certainty these frontline workers have is that they will face COVID-19 or a higher risk of contracting COVID-19 every single day. On behalf of People Corporation, our management team and our Board of Directors, I'd like to say a heartfelt thank you to all of you. We greatly appreciate the service you are providing during these times.

I'd also like to acknowledge our own people who have shifted rapidly to reality of remote working environment and have provided seamless service to our clients during this challenging time.

Turning to the quarter. People Corporation continued to make significant strategic and financial progress during Q2, generating revenue growth of 45.5%. We grew adjusted EBITDA faster than revenue in the quarter. Excluding the impact of IFRS 16, EBITDA grew 52.3%. The growth in revenue and EBITDA continues to reflect the success of our efforts to scale the business, including our focus on winning new clients, enhancing our product suite, optimizing customer service, sales efforts to increase product and service penetration with existing clients and the success of our acquisition and integration activities. I'm particularly pleased with our organic revenue growth of 15.6% in Q2. This level of organic growth further highlights the strength of our business model.

We have positioned People Corporation to be uniquely capable of meeting the 2 primary client needs that we identified 10 years ago: cost containment and the efficient delivery of mass, customized solutions to a multigenerational workforce. In today's environment, the need for these services is stronger than ever.

People Corporation has built a unique, organic growth engine. We generally expect to generate between 5% and 10% organic growth over the long term. These growth rates are underpinned by several factors, including a deep bench of professionals with specialized industry and sector expertise, supported by a growing portfolio of digital, integrated solutions and product offerings; the largest TPA platform in the country; one of the largest benefit MGAs in the country; and broad national distribution capabilities across the small group, mid-market and enterprise channels. This foundation provides significant capacity for additional growth and further optimization over the coming years.

In Q2, we continued to make progress against our 4 key focus areas. Those 4 key focus areas are sales and service, products, strategic acquisitions and integration. I'll touch on each briefly, discussing our positioning in relation to the ongoing COVID-19 pandemic and hand the call to Dennis, who will review our financials and ongoing integration initiatives.

On sales and service, our Q2 organic growth of 15.6% was largely attributable to the addition of new clients across all of our distribution channels; additional products and services that we have delivered to our clients such as our disability management, group retirement, mental health and virtual health solutions; expanding our consultant count in terms of subject matter, market segment and sector expertise; as well as our business development discipline across the organization.

On our Q1 call, I told you that we will continue to invest in our third-party adviser network and our small group solutions platform in 2020. We have introduced MGA+, which is a unique partnership program combining the strengths of GroupQuest, Collage's Benefits HQ and HR platforms and People Corporation's broad suite of products and solutions.

The resulting combination is a compelling value proposition for third-party advisers and their clients. MGA+ provides back-office service and practice management capabilities that enable advisers to focus on business building and adviser-branded online enrollment platform for plan sponsors and their employees and access to People Corporation's broad selection of customized products and solutions. Some of the services included as part of the MGA+ bundle include quoting, consulting and renewal support and reporting for the advisers themselves, along with features that automate plan administration while integrating payroll and benefits in one solution for advisers' clients. This solution is unique in the Canadian market. Advisers are always looking for ways to distribute -- to differentiate themselves, and MGA+ is an eloquent solution that meets the needs of advisers and their clients while facilitating higher rates of client retention due to the strong value proposition delivered to the plan sponsor and their members. We are seeing very strong momentum in this area.

On the small group side, we are currently integrating HR @ Your Service, Collage HR and VirtualHealth with our Sirius solution. And once complete, we expect the resulting package to be one of the most attractive small group solutions in Canada. Sirius will offer a robust suite of products and services beyond the competitive offerings, which are primarily small group pools to stripped down TPA offerings. As a result, small groups will be able to access tools and features more common to larger companies at a fraction of the cost.

We're also doing all the work required in the back end to ensure that these platforms will work seamlessly together. This ensures that a client's needs can be met with or without the MGA capability depending on individual requirements. Once a client or group is enrolled on one system, it's a matter of a simple module addition, which is already developed to combine the 2 together.

On the mid-market and enterprise front, we continue to see good momentum ranging in lives from 1,000 to 5,000 across a number of sectors, including consumer foods, financial services, multi-employer union and transportations, to name a few. We continue to benefit from the investments we had made in attracting talent in combination with our unique TPA and product solutions to drive a compelling value proposition to defined market segments.

Turning to products. As you might imagine in today's environment, the demand for virtual health and mental health solutions is growing at a healthy pace. As discussed previously, we launched People Connect and a suite of other virtual health solutions in October of last year. Since then, we have added new partners to the program and embarked an initiative to bundle virtual health solutions for corporate and multi-employer clients. Some of the virtual offerings we recently launched include a 24/7 online health care on-the-go solution; an on-demand virtual care application providing members and their families with direct access to medical consultants; an online prescription delivery offering; a health care navigation solution providing a single point of contact throughout diagnosis, treatment and rehabilitation; and a second opinion medical program to assist members and their families with making informed decisions regarding their health.

We are in the process of expanding our suite of virtual offerings with the objective of providing a full continuum of virtual care to our clients starting in Q3 of this year. Our product development group, which we invested in expanding last year, has been vital in preparing us for this rollout, which is a critical advantage in an environment where virtual products and solutions are more important than ever. While in early stages, we are seeing strong sales momentum of this solution, particularly in this particular environment.

In Q2, we were active in the M&A front. We completed the acquisition of Integrated Benefit Consultants, which provides group benefit consulting services for companies throughout the province of Alberta. We also announced the acquisition of Robin Veilleux, a group benefit consulting service provider for companies based in the province of Québec. In addition to providing group benefit consulting, Robin Veilleux also deals with over 100 third-party advisers. These acquisitions further strengthened our presence in Western Canada and in Québec, which is one of Canada's largest provinces.

M&A is a good segue to discuss -- to a discussion of People Corporation's positioning in consideration of the ongoing COVID-19 pandemic. Our pipeline of potential deals remains full. But at the current time, we have decided to temporarily pause all acquisition activity, choosing to focus our time and effort on integration in the near term until the precise economic impact of COVID-19 and the duration of that impact is clearly clearer.

On April 6, we announced a $20 million bought deal, which we upsized to $22 million on the 7th and closed on the 16th. We fully expect to see opportunities arise as the COVID-19 pandemic subsides and there is further stability in the market.

As the severity of the COVID-19 came to light in early March, our priority was to ensure the safety of our employees and of our clients. We implemented our business continuity plan and were able to transfer over 90% of our staff to remote working arrangements quickly, which ensured safety as well as service continuity for our clients.

From a financial perspective, we did not see any impact on our business related to the COVID-19 pandemic either in Q2 or in the month of March. With an essential service offering designed to provide clients with benefit-cost containment, a concentration of clients in less cyclical sectors and a robust organic growth engine that further demonstrated in the second quarter, the company is well positioned to successfully navigate the current environment. However, given the measures taken by all levels of government in an effort to slow the spread of COVID-19 and potential impact on business in the overall economy, the company does expect to see some impact.

I'll now pass the call to Dennis.

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Dennis D. Stewner, People Corporation - CFO & COO [4]

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Well, thanks, Laurie, and good morning, everyone.

Revenue grew 45.5% this quarter to $59 million compared to $40.5 million in the second quarter of 2019. Adjusted EBITDA grew 92.2% to $17.7 million from $9.2 million in 2019. Excluding the favorable impact of approximately $1 million from IFRS 16 along with the impact of early timing of certain revenues in the quarter totaling $1.6 million and $1.115 million of seasonal revenues after REI from Robin Veilleux, adjusted EBITDA still grew faster than revenue at 52.3%. The growth in revenue and EBITDA is attributable to acquisitions made over the last year as well as our 15.6% organic growth rate.

As expected, personnel and compensation costs came down from last quarter as a percentage of revenue in Q2. These expenses comprised 60.5% of revenue compared to 65.8% in the prior quarter even after moving the impact of early timing and seasonal revenue. We continued to add talent in key areas, but as we scale up, we were able to leverage these costs over a larger revenue base.

We generated a net income of $481,000 in Q2 compared to a net loss of $3.4 million in the comparable period in 2019. The primary drivers of net income relative to the prior year were the contribution from acquired operations and organic revenue growth, which was partly driven by the launch and success of the new services that Laurie spoke about. The early timing of certain revenues also contributed to the increase in net income.

On an adjusted basis, earnings per share in the quarter was $0.08 compared to $0.02 in the same period of the prior year. Adjusted earnings per share excludes fair value changes to noninterest put options and contingent consideration, acquisition, integration and restructuring costs and equity-based REI. We continue to view adjusted EBITDA as the primary metric in evaluating our profitability.

Our balance sheet remains sound. As of February 29, 2020, we had $27 million in cash and $27 million in credit available through our $125 million credit facility. Subsequent to the end of the quarter, out of an abundance of caution in the early days of COVID-19, we drew an additional $21 million on the facility. We also completed a bought deal equity financing for net proceeds of $22 million to better position ourselves to execute on opportunities as they arise. Our leverage ratio remains within expected ranges, and we have ample liquidity to fund plans.

Before I open the lines for questions, I'd like to give an update on our fourth key focus area, integration. Integration remains a critical pillar of our growth strategy, especially with the level of acquisition activity over the past several quarters. We have dedicated teams responsible for integration activities, and we're focused on efficiently utilizing all the assets within our growing platform. While People Corporation has a national presence, we can be leveraging it better and more consistently to provide optimal service to clients and generate solid shareholder returns.

We have created a consulting center of excellence responsible for delivering a unique and consistent consulting methodology and best practices, including the tools, resources, RFP support and client communications for both the group benefits and group retirement solutions market. We also established a client experience center to deliver efficient delivery of our solutions and clients. As we continued to assess some of our winning strategies, we decided to double down on our client-first culture and establish the center of excellence.

Turning to acquisition, integration and restructuring or AIR costs. AIR costs are not included in EBITDA or adjusted earnings, but they remain critical to value creation. AIR costs will be a part of our business as long as we are acquiring and integrating companies into the platform. And we expect these costs to continue to be very accretive given our deeper product sets, growing distribution channel and large M&A pipeline. As we guided to on our Q1 call, AIR costs were lower sequentially in Q2 at $4.3 million compared to $5.1 million last quarter. Looking forward to Q3, we expect AIR to continue to come down due to the completion of various integration projects.

Overall, we are very pleased with our Q2 results while -- which continue to demonstrate our ability to grow and generate value for shareholders. As Laurie outlined, People Corporation has taken decisive actions to ensure the safety of its people and clients and to be prepared to execute on opportunities as they arise. We have also positioned the business to not only weather the current crisis but to use this time to further develop our product and service offerings to pave the way for continued long-term organic growth.

At this point, I'd like to ask the operator to open the lines for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from Meny Grauman from Cormark Securities.

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Meny Grauman, Cormark Securities Inc., Research Division - MD & Co-Head of Institutional Equity Research [2]

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Just a question. Lifecos reported it's cutting group benefit premiums for SMEs as dental and health claims decline, and I'm wondering if there are any implications for your business.

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Laurie Marc Goldberg, People Corporation - Executive Chairman & CEO [3]

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Yes. So that is kind of being done across the industry. We also have our own proprietary solutions, so we've done the same for our clients. It doesn't in the short to medium term in so far as these are really return of some premiums, particularly in the area of dental and some extended health. Obviously, people can't utilize their -- can't go to a dentist these days, as an example, or even to a physiotherapist, although they can use our upcoming virtual physio product line. So it doesn't really have an impact on us in terms of our revenue profile.

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Meny Grauman, Cormark Securities Inc., Research Division - MD & Co-Head of Institutional Equity Research [4]

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Okay. And then I'm just wondering about those 2 items -- yes.

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Laurie Marc Goldberg, People Corporation - Executive Chairman & CEO [5]

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Just for clarity, so how we get paid, while we use a commission as a proxy, as I've mentioned before, commissions are really customized depending on the level of effort and work by a client, so this won't have an impact on that. Even though it's calculated as a percentage of premium, the commission rates aren't adjusted, meaning that the actual commission dollars are similar.

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Meny Grauman, Cormark Securities Inc., Research Division - MD & Co-Head of Institutional Equity Research [6]

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Okay. And on the TPA side, is it -- are there any dynamics there that are worth considering given the drop in certain claims like dental especially?

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Laurie Marc Goldberg, People Corporation - Executive Chairman & CEO [7]

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Yes. So if your question is really all about COVID, so there's a couple of things. So as it relates to premiums, the reason why clients are being provided credits is because everyone is going on the assumption that this isn't going to last another full year and there will be a return in certainly the short to medium term in terms of being able to go and utilize services such as dental or such as in the case of extended health services. And so it's really not a sustained -- a client's premium at this lower level. It is not a normal -- it's not sustainable, so it's not like the renewals unless, of course, if COVID were to last for 2 years and the whole economy was shut down for that period of time. But I think we all believe that that's unlikely given current situation.

As it relates to on the TPA side, we will see some moderation in terms of some volume, but we are not really, at this point, seeing a big impact. And it all -- once again, it depends. If this lasts another 3 months in terms of people not being able to go and access dental or extended health, that's one thing.

Also, for self-insured plans, we will see some moderate decline. But again, the impact on a quarterly basis and then the net EBITDA impact, we don't see it being significant.

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Meny Grauman, Cormark Securities Inc., Research Division - MD & Co-Head of Institutional Equity Research [8]

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Got it. And then I was hoping you could just go into a little more detail in terms of the 2 items that you called out that helped boost revenue. And what was driving the -- in the first one in terms of the timing, taking revenue from Q3 into Q2, what were kind of the circumstances of that? And then with Robin Veilleux, what's the nature of the seasonality there?

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Laurie Marc Goldberg, People Corporation - Executive Chairman & CEO [9]

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Yes. So I'll address the first one, and Dennis can address the second item. So just for clarity, when we published our 15.6% organic growth, that excluded the impact of that really timing difference of $1.6 million. And so simply that our accounting policy as it relates to that $1.6 million, based on the nature of the revenue, our accounting policy is to take it into income when we receive that. Historically, we received that income in Q3. This year, we received it in Q2. So that was simply a timing difference. And so we excluded that from our organic growth rate because that really should come into play for Q3 to have an apples-to-apples comparison, and we just highlighted that due to the materiality of it.

As it relates to Robin Veilleux, I'll turn that to Dennis.

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Dennis D. Stewner, People Corporation - CFO & COO [10]

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Yes. Sorry, I missed that question, Meny.

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Laurie Marc Goldberg, People Corporation - Executive Chairman & CEO [11]

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Yes. The seasonality issue.

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Dennis D. Stewner, People Corporation - CFO & COO [12]

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The seasonality, yes, it's -- really, we just pointed it out because there's a small piece of their business that the revenue stream there is seasonal in nature. So if you looked at the revenue in the quarter versus the total revenue, it looks disproportionate. So again, we just highlighted it. We know you got models, and you're going to project it out. And there's -- but they're part of the revenue. It's seasonal, so we simply highlighted that for you.

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Meny Grauman, Cormark Securities Inc., Research Division - MD & Co-Head of Institutional Equity Research [13]

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Do you expect other seasonality in terms of the Robin Veilleux business? Like is it very -- is it something that can come up again in other quarters in terms of lumpiness of revenue?

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Dennis D. Stewner, People Corporation - CFO & COO [14]

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No. I think that's the -- we have seasonality throughout the business. It's usually not big enough. The swings from quarter-to-quarter sort of offset each other. So no, I think this quarter for that business would be where we see that sort of unusual spike. So I think the rest of the year is -- and it's going to be less material.

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Laurie Marc Goldberg, People Corporation - Executive Chairman & CEO [15]

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Yes. It's just -- Meny, just for clarity, it did not impact our organic growth because it was acquired revenue. So just for clarity on that item.

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Operator [16]

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Your next question comes from Jaeme Gloyn from National Bank.

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Jaeme Gloyn, National Bank Financial, Inc., Research Division - Analyst [17]

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First, just want to follow up on the early recognition of certain revenues, timing. So historically received in Q3. Is that the expectation going forward that this would be earned in Q3? Or is the revenue timing such that it could bounce around between Q2 and Q3 going forward?

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Dennis D. Stewner, People Corporation - CFO & COO [18]

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More likely than not, Jaeme, it's going to come in, in Q2 next year. But again, we highlighted it because our organic growth would have been over 20% in the quarter had we not highlighted, so we highlighted it. And we will continue to do that if it's material like that.

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Jaeme Gloyn, National Bank Financial, Inc., Research Division - Analyst [19]

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Okay. Great. Wanted to get your early thoughts on the Apri and Collage acquisitions. Apri, it looks like it generated about $5.1 million in revenues this quarter. Is that about where you had pegged it? And maybe some additional color around how the -- how those 2 businesses are combining and growing in the small group space and third-party broker space.

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Laurie Marc Goldberg, People Corporation - Executive Chairman & CEO [20]

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Yes. Yes. So I mean these acquisitions are meeting or perhaps exceeding our plans actually. And they weren't -- we didn't just buy them for the sake of more revenue and more EBITDA, but they really completed a strategic part of our puzzle for us. So overall, they're performing extremely well.

Apri has a very strong, what I'll call, traditional consulting business, and that is performing very well. But Apri also -- one of the strategic imperatives was the acquisition of the MGA business. The MGA business is really focused on supporting third-party advisers, and today we support just over 1,000 of them.

What's happening in this current market is that the value proposition is even stronger. Our quote levels are the highest they've ever been, meaning quoting new business. And there's a lot of pent-up volume. One of our biggest challenges is getting onto our platform quick enough. So there's a lot of, if you will, backlog there.

In terms of -- just so you know, that's not us. So there's a lot of background -- there's a lot of backlog, rather, so that is performing extremely well.

The Collage platform, similarly, our closing rate in terms of when we showcase the platform to third-party advisers is close to 100%. It's a very unique proposition. And we go to market with them separately, but we've also combined them. And so the combination of both of them is -- it's a very strong and unique offering in the Canadian marketplace. We're very, very pleased with that.

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Jaeme Gloyn, National Bank Financial, Inc., Research Division - Analyst [21]

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Okay. And I'll -- one more, and then I'll re-queue. There's a lot of -- a lot more color this quarter or this time around on OpEx flexibility especially given the potential impacts of COVID. Can you maybe just walk us through some of those items that could be flexed and the timing around how long it would take to flex those savings? Maybe a breakdown of what's variable comp versus fixed comp, stuff like that.

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Laurie Marc Goldberg, People Corporation - Executive Chairman & CEO [22]

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Okay. So first of all, what I would say is that in certain parts -- in certain, if you will, parts of our business, now more than ever, our clients, our plan sponsors and their members need us more than ever. So in certain areas, our actual activity and work is up quite a bit, and that is part of what we bring to the table, and we're here for our clients during these periods of time. That's why, just referencing back to a previous question, our effort actually on benefit plans, plan design, group retirement programs in a lot of ways is up in terms of effort, and that's why it doesn't nor should have an impact on our -- on the revenues from that perspective.

As it relates to kind of, if you will, our OpEx flexibility, by far our largest operating cost is our people, people costs. It represents close to 2/3 of our operating. I would say that close to -- there's close to a 50-50 split in terms of kind of base to variable pay, in terms of whether it's bonuses or whether it's commission-based. And so we're a company, obviously, that doesn't carry really any kind of fixed infrastructure costs other than leases where our offices are. And so we have a fair bit of flexibility in terms of, number one, some of those obviously vary with -- get naturally adjusted with volumes in terms of commissions; and then obviously, if we need to, we also have some flexibility in terms of our people. However, at this point, we haven't really had to do anything tied to COVID, and we're very closely monitoring. From our perspective, we look at it and we say, if this were to -- if we were to close down the economy for another 12 months, well, obviously, we depend, being on a B2B business, at the strength of companies. So that's a different story. But certainly, for the short and medium term, we're just monitoring it very closely. But if we need to, we have -- we can make adjustments literally very quickly and have a lot of variability with that.

Obviously, some of our other nonoperating costs, like other organizations, are down naturally just by virtue of the fact that all of our other costs like travel and entertainment and things like that, which are not insignificant in our organization given the nature of what we do, so some of that gets moderated during these times.

Having said that, from an overall macro economy point of view, we want those all to come back because it's good for everybody, and we like to keep the economy and people in business.

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Operator [23]

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The next question comes from Scott Chan from Canaccord.

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Scott Chan, Canaccord Genuity Corp., Research Division - Director of Research of Financials & Financial Services Analyst [24]

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Just kind of going back to the previous question on the 2 benefits on revenue. I caught the impact on the first one of $1.6 million. Do you have the impact of the Robin transaction in the quarter as well?

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Dennis D. Stewner, People Corporation - CFO & COO [25]

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Yes. It was about $1.6 million as well on the revenue line and $1.1 million on the EBITDA.

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Scott Chan, Canaccord Genuity Corp., Research Division - Director of Research of Financials & Financial Services Analyst [26]

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On the EBITDA. Okay. And then I just want to focus on the organic growth, and obviously, it came in really high in a tough March, in a tough period. When we kind of think about the organic growth and the items that you utilize in terms of new services, clients, inflation, penetration, what was the biggest driver of that organic growth? Or is it just a combination of all those factors?

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Laurie Marc Goldberg, People Corporation - Executive Chairman & CEO [27]

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Yes. So first of all, just for clarity on Robin Veilleux that, that had no impact on our organic growth numbers. It was acquired revenue, just for clarity.

As it relates to what had impact, really it's continued to be a combination. We still have a very large focus on new client mandates, so winning new accounts across small, mid-market and enterprise channels both through our direct sales channel and third-party adviser channel and then increased selling of some of our solutions like mental health solutions to increase conversion on our TPA. So it's really a combination. There's no one area where I would say dominated it other than new client mandates would still be the larger portion of it.

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Scott Chan, Canaccord Genuity Corp., Research Division - Director of Research of Financials & Financial Services Analyst [28]

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And you talked about kind of softness in coming months, and that's expected with COVID-19. Is it conceivable that you could still get in the range of the 5% to 10% organic growth target over the next 1 or 2 quarters?

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Laurie Marc Goldberg, People Corporation - Executive Chairman & CEO [29]

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Yes.

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Operator [30]

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The next question comes from Gary Ho from Desjardins.

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Gary Ho, Desjardins Securities Inc., Research Division - Analyst [31]

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Laurie, just wondering if you can provide a bit more details on your outlook for the next couple of quarters, especially on the sectors or clients that's a little bit more exposed, oil and gas, hotel, hospitality, kind of how they're dealing with the situation and kind of how some of your brokers are helping them out.

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Laurie Marc Goldberg, People Corporation - Executive Chairman & CEO [32]

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Yes. So I mean I'm going to give you a, call it, a 10,000-, 20,000-foot-level outlook. Obviously, we nor I can predict how long COVID will continue in terms of the impact on the economy. We expect that once people begin to return to work, if you will, kind of outside of their homes and economy starts to get better and better, there will be the beginning of the recovery, but we expect it will be a slow climb. We hope not, but that's what our expectation is. That said, the first thing we'll need to really consider is the nature of what we do. And so even if you take a look at some of the provinces, such as Saskatchewan as an example in terms of them announcing their plans in May to begin to open, and the first set of essential services that they're opening are things like dental and extended health services. So people need their health care regardless, especially in situations like this. So that's kind of an overall thing.

If you take a look at the nature of our business, we would have -- while we don't segment and we're not going to, if you take a look at the nature of our business in terms of what we call municipalities, universities, schools, hospitals, our First Nations business, our multi-employer business, those are extremely defensive especially in times like this, not that we've had a chance to ever test it in a pandemic. But that would comprise over half of our complement of our business. So that's kind of number one. Number two is, when you look at our -- when you take a look at our oil and gas business, while we have a fairly significant presence in Western Canada, we [do not deal with] oil and gas exposure. It's under 10% of our business. So that's number two. And we do have quite a few what I -- we would say as relatively strong entities there. And so from that perspective, we think we're in -- we've got good balance in terms of our portfolio of clients, if you will.

The other thing is, is that even on the corporate side, call it, kind of the nongovernmental for businesses, we have quite a few utilities, hydros, et cetera. So those are what we call defensive.

When you take a look at kind of corporate Canada, the overwhelming majority of our clients that have done even layoffs still are providing benefits to their employees because everyone is expecting, obviously, they're going to need people to run their business and expecting them to bring them back. So for that -- from that perspective, that is continuing.

We are seeing an increase in volume on our MGA side of our business. So on the small, where there will be some exposure, when you take a look at the small group, so small businesses, obviously, don't necessarily have the same financial wherewithal. So we do expect you're going to have in the economy and on our business, business failures, obviously, in the small group. So we get impacted by headcount.

It is just a recent growing business for us in the last couple of years. So as a percentage of our total portfolio, it wouldn't rank in kind of the top couple of tiers. But that said, on the flip side of it, the third-party adviser and MGA channel, which really focuses more on the small group, a little bit of medium but more small group, as I mentioned earlier, the quote levels and the volumes are very, very significant. And we expect to see the net pluses outweigh any negatives there in a reasonably significant way.

So from our perspective, it really comes down to how long COVID lasts because, at some point, if COVID were to last another half year in terms of the same economic impact, it would have a material impact on the health of all businesses, frankly, worldwide. And obviously, we're a B2B business. So having said that, I think that would apply to virtually any B2B business.

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Gary Ho, Desjardins Securities Inc., Research Division - Analyst [33]

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Yes. No, that's very helpful. And then you talked about layoffs. Is it safe to assume if someone is laid out, their group benefits are covered, what is it, 6 to 12 months post that?

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Laurie Marc Goldberg, People Corporation - Executive Chairman & CEO [34]

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No. Not necessarily. There's not a specific rule around that, but they are covered for -- they're usually coverage for certainly at least a good couple of months, and then it will vary. So that's more kind of like standard, but it depends on the employer, right? So -- and then a lot of these government programs that will subsidize some of the payroll require the benefits to be continued by the employer.

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Gary Ho, Desjardins Securities Inc., Research Division - Analyst [35]

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Got it. Okay. And then just my last question, Dennis. Just on the increase in cash post quarter, quite material, can you elaborate on this? Kind of what prompted you to draw the additional $21 million on top of the equity financing?

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Dennis D. Stewner, People Corporation - CFO & COO [36]

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Yes. It would be really -- Scott (sic) [Gary], it was really just early days of COVID and that initial sort of level of uncertainty. And subsequent, we will end up paying that back. Yes, we'll pay the facility back down.

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Operator [37]

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And the next question is a follow-up from Jaeme Gloyn at National Bank.

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Jaeme Gloyn, National Bank Financial, Inc., Research Division - Analyst [38]

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Yes. A couple of quick follow-ups. First, just around the REIs of H+ P and then that call was just done this quarter. Benefit Partners, they can start to elect to put their options in November of this year. Just want to get your thoughts around where your partners are, the principals are. Any conversations with those individuals on potentially putting their shares to you in this environment?

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Laurie Marc Goldberg, People Corporation - Executive Chairman & CEO [39]

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Yes. So we don't really expect anything with Benefit Partners. And as it relates to Hamilton, yes, and we will work with the vendors. We will start to monetize some of, not all, some of those respective puts and calls. They've been exercisable for quite a while.

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Jaeme Gloyn, National Bank Financial, Inc., Research Division - Analyst [40]

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Okay. And I just want to make sure I heard you correctly. You're not expecting anything from Benefit Partners?

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Laurie Marc Goldberg, People Corporation - Executive Chairman & CEO [41]

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No.

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Jaeme Gloyn, National Bank Financial, Inc., Research Division - Analyst [42]

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Yes. And then last one is just around the revenue mix, benefits versus consulting. Obviously, consulting got a pretty big lift in this quarter, and the mix is now about 50-50. Is that a temporary mix shift right now and the -- obviously the goal would be to get that back up to more of a 2/3 to 1/3 mix?

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Laurie Marc Goldberg, People Corporation - Executive Chairman & CEO [43]

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Do you mean by -- when you referred to benefits versus consulting, are you referring to really TPA versus consulting?

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Jaeme Gloyn, National Bank Financial, Inc., Research Division - Analyst [44]

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Correct.

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Laurie Marc Goldberg, People Corporation - Executive Chairman & CEO [45]

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Yes. That mix, we don't really see a -- the reality is, if anything, it's even more of a compelling reason for clients to be on the TPA platform from a cost perspective and a customization perspective. We'll see, once COVID subsides, whether there is an increased kind of more of a macro appetite for it. We do expect it'll have some level of bump for it because there's no doubt that it provides, especially in uncertain times, a lot more flexibility for the clients.

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Operator [46]

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Thank you. There are no further questions. Ladies and gentlemen, this does conclude your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.