Edited Transcript of PEO.V earnings conference call or presentation 20-Jan-20 1:30pm GMT

People Corporation continued to make significant strategic and financial progress during Q1. During the quarter, we generated revenue growth of 21.9%, of which 8.3% was organic growth. We continue to produce such results due to our team’s focused execution of our strategy. We grew adjusted EBITDA faster than revenue, continuing the trend from fiscal 2019.

In Q1 2020, excluding the impact of IFRS 16, EBITDA grew 35%. The growth in revenue and EBITDA continues to reflect the success of our efforts to scale the business, which includes winning new clients, attracting great talent to join our team, gaining increasing scale in multiple market segments, enhancements to our product suite, optimizing customer service sales efforts to increase product and service penetration with existing clients and the success of integration and acquisition activities.

As a reminder, we typically see a progression towards higher rates of organic growth beginning in the second year after an acquisition. The organic growth rates depend on the level of acquisitions we make in preceding years as well as on the timing of large contract wins and renewals. We generally expect to generate between 5% and 10% organic growth in the longer term.

In Q1, we continued to make meaningful 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 our objectives for 2020 regarding the first 3 and Dennis will discuss our ongoing integration initiatives.

For sales and service, we remain very pleased with the level of organic growth we are generating. The 8.3% organic growth we generated in the first quarter is directly attributable to the additional access to products and services that we offered to our acquired companies, increasing penetration with existing clients, our business development discipline across the organization and the new consultants we have hired across the country.

As we move through 2020, we will continue to invest in our third-party consultant network and our small group solutions, expanding our wholesaling teams and the supporting tools we introduced during 2019 to drive enhanced service for our existing clients and attract new clients to People Corporation. We expect to continue to see increased and better opportunities on the enterprise side through our Business Development Solutions Group. We had some solid wins during 2019 and we expect this trend to continue in 2020.

Turning to product. We will continue to focus on rolling out the products we introduced last year, including our mental health, virtual therapy, HR and disability solutions such as People Connect and HR @ Your Service. Early indications is that these solutions are being well received by our clients. We also expanded our product development group over the past year, and we’ll continue to evolve existing products and services while innovating to ensure our clients and their members have access to the best suite of products and services available.

On the M&A front, our deal pipeline remains full, and we closed key — 2 key acquisitions just before the end of Q1: Collage Technologies and Apri Group. I discussed these companies at length on our Q4 call. Combined with People Corporation’s national distribution capabilities, Collage will serve as both a powerful business development tool as well as a retention tool, particularly as we seek to enhance our small group solution business from a traditional benefits product to a more integrated solution.

We also view Collage as an important service enhancement for our third-party consultants, which is a nice addition, given our ongoing investments in that part of the business as well as the addition of Apri Group. Collage’s Benefits HQ platform enables us to offer those third-party consultants Tier 1 practice management software as well as access to an enhanced suite of products and solutions digitally.

We closed the acquisition of Apri Group on November 29. Apri adds financial and geographic scale, strengthens our capabilities in key geographic areas and significantly increases and enhances our distribution capabilities. Specifically, the transaction immediately establishes us as one of the largest MGAs in Canada and adds meaningfully to our national group benefits consulting operations.

As we enter 2020 and continue executing against our 5-year strategy, People Forward, we are still just scratching the service of what is possible, both for our clients and our shareholders. We see continued opportunity to add and innovate in sales and distribution, our service platform and products developed, both organically and through strategic acquisition. Further, we see a growing opportunity to unlock the value of our national footprint through closer integration.

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 21.9% this quarter to $44.3 million compared to $36.3 million in the first quarter of 2019. Adjusted EBITDA grew 45.5% to $10.8 million from $7.4 million in 2019. Adjusted EBITDA includes a $0.8 million favorable impact relating to the implementation of IFRS 16. Even without considering the implementation of IFRS 16, adjusted EBITDA grew faster than revenue at 34.9%.

The growth in revenue and EBITDA is attributable to acquisitions made over the last year as well as our 8.3% organic growth rate. Our organic growth rate is driven by launching new services, gaining new clients, increasing product and service penetration and natural inflationary factors. We also continue to focus on integrating acquired companies so they can benefit from our national distribution platform. We expect that the corporate infrastructure we have put in place will continue to attract partners to join our platform and will ultimately continue to drive solid margins over the long term.

Investment into human resources continues to be a vital part of our growth plan. As a percentage of revenue, personnel and compensation costs were 65.8% compared to 64.2% in the prior year. Excluding the impact of the increase in acquisition, integration and restructuring costs, personnel and compensation costs were 55.5%, down from 58.2% last year.

We incurred a net loss of $2.8 million in Q1 compared to a net loss of $1.5 million in the comparable period in 2019. The primary drivers of net income relative to the prior year were increases to acquisition, integration and reorganization costs and amortization and depreciation expense as a result of goodwill and intangible amortization.

On an adjusted basis, earnings per share in the quarter was $0.02, consistent with the prior year. Adjusted earnings per share excludes fair value changes to non-interest 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 November 30, 2019, we had $22.7 million in cash and $65.7 million in credit available through our $125 million credit facility. Our leverage ratio remains within expected ranges, and we have ample liquidity to fund our near-term growth plans.

Before I open the line 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 in the last 6 months. We have dedicated teams responsible for integration activities and are focused on leveraging all the assets within our growing platform.

Anything related to acquisitions, integration or reorganization that we don’t anticipate being ongoing fits under the acquisition, integration and restructuring, or AIR category. AIR costs are not included in EBITDA or adjusted earnings, but they remain critical to our 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 set, growing distribution channel and large M&A pipeline.

As we guided to on our Q4 call, AIR costs were higher in Q1 at $5.1 million compared to $2.2 million in the same quarter last year. The bulk of the increase in Q1 was related to the costs related to 2 acquisitions completed as well as the departure of the company’s President in October. In addition, we executed 3 acquisitions in fiscal 2019 which we continued to integrate during the first quarter.

We have been and will continue to be very active. Looking forward to Q2, we expect AIR to come in lower than Q1. The AIR increase is directly related to the heightened M&A activity, our focus on integrating these operations as well as steps we are taking to continue integrating our national platform to more fully realize the benefits of the foundation we have built. Overall, we are very pleased with the Q1 results, which continue to demonstrate our ability to grow and generate value for shareholders.

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) And your first question is from Meny Grauman at 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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Dennis, you ended up talking about integration, so I was hoping to get a little bit more detail. Specifically, I noticed there was reference to integration of ACL and Gallivan, and I’m just wondering if you could give us more color in terms of what does that entail? How deep does that particular integration go?

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

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Yes, it’s Laurie. Why don’t — I can first address it and then Dennis can add anything to it. I mean, it’s really Phase 1 in terms of it’s really integrating our go-to-market strategy, now with the combination of both the Gallivan & Associates and ACL in the core business, meaning certain Canadian students, and then with the addition of ACL, also bringing the foreign student capability to the table. We’ve really developed a strategy around our kind of going to market to really leverage both our scale in the Canadian student side as well as our specialty expertise in the foreign student side. So it’s really been more at this point in the front end of the business as opposed to kind of integrating operationally.

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

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Is there an intention here to run this business more fully integrated? Is it — does it make sense to run it as one business? Or if not, then why not?

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

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So over time, we will be integrating our businesses, and we’ve walked up that ladder integrating across all of our units, the businesses, both in terms of today, we used some of our expertise along certain market segments to go to market. So in certain industries where we have large scale, we’ll go to market, leveraging that scale across our entire platform. But over time, we will be — we do see integrating the rest of the businesses, where it’s going to drive both either a — more efficiency, cost efficiency, as well as increase the — kind of the service to our clients in terms of making it a little bit more seamless.

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

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And then Laurie, did you…

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

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So there’s nothing about those 2 companies that wouldn’t apply to other organizations within our company.

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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 Laurie, you talked a lot, you’ve been very consistent about talking about the acceleration in growth that you see and expect sort of year 2 of an acquisition. I’m wondering if there’s anything in the most recent deals, the Apri and the ACL in particular, that suggests that you couldn’t deliver the same kind of doubling in growth rate in year 2 for either of those bigger acquisitions?

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

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Yes. No, there’s nothing specific. I think in the case of — so the answer is no, there’s nothing different in terms of our confidence in our ability to significantly increase the growth rate. We’ve already got early signs of that even though it’s really only — really year 1 of both of those on our organization. As it relates to Apri, we’re already seeing some good run rates from that combined with our existing distribution, and they also have some unique capabilities that we can then apply to the rest of our sales and distribution capabilities.

Collage is a little bit more of a platform, as we’ve discussed, which is more than enabler for us to provide great practice management support to third-party consultants or brokers. And again, we see — we’re already seeing early stages of good growth from those platforms even though it’s a little bit earlier than we would normally anticipate.

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Meny Grauman, Cormark Securities Inc., Research Division – MD & Co-Head of Institutional Equity Research [10]

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And then there’s a big increase in cash from changes in working capital. Just hoping to get a little bit more color on what’s driving that and how temporary it is.

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Dennis D. Stewner, People Corporation – CFO & COO [11]

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Yes, it really relates to a couple of our more recent acquisitions in — on the student benefits side and with life benefit. We collect — the nature of their revenues as well as their revenue collection or cash collection is a little bit different, so they do tend to collect some revenues upfront. So those, we treat as deferred revenue. So you’re seeing the cash, but it’s really an upfront payment they received from those carriers.

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Meny Grauman, Cormark Securities Inc., Research Division – MD & Co-Head of Institutional Equity Research [12]

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And so that’s just the nature of that business creates this sort of advanced payment, and…

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Dennis D. Stewner, People Corporation – CFO & COO [13]

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That’s right.

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Meny Grauman, Cormark Securities Inc., Research Division – MD & Co-Head of Institutional Equity Research [14]

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And so you can expect that to continue that same pattern for that business in particular?

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Dennis D. Stewner, People Corporation – CFO & COO [15]

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Yes.

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Operator [16]

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The next question is from Jaeme Gloyn of National Bank.

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

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First question is just related to the revenue drivers, organic revenue drivers that is, you list the 4 items in the MD&A and talked about them. I’m just wondering if you can give us a little bit of more color around the contribution from each of those items. Did it weight towards one of those factors specifically over others?

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Laurie Marc Goldberg, People Corporation – Executive Chairman & CEO [18]

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Yes. I would really say, I mean, if you look at it from what was the result is really new — principally 2 areas: One is brand-new clients to the firm; and number two, the launching of some of these products that we’re referring to. So our disability management platform as well as some of the People Connect, although that’s still — that’s a game of scale, but we’re getting very good momentum on there.

What’s enabling that? I mean, aside from our working on enhancing those products and working on additional ones is it’s really kind of taking that combined with really increasing our distribution scale and our expanding the scale within our channels. And what I mean by that is really growing our third-party channel is one area that we did — we are seeing — it’s part of our strategy that, say, compared to a couple of years ago in terms of the growth that we’re seeing there. And we’ll — we expect to continue to see that.

Number two, really growing our enterprise channel, where we’re getting some, I would say, quite good traction. Certainly got some good traction in 2019, and we see more in terms of the pipeline in 2020. And so when we kind of take — basically deliver more products and enhance our distribution capabilities, that’s where it’s all coming from.

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

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Okay, great. On the expense side, just as it relates to administration fees. I know this is early, but I just wanted to get a little bit more clarification on the new claims product that was launched during the second half of 2019 by one of the company’s TPA practices, little bit more color around that. And then as a follow-up on that, the — what are the services that are provided to the student union clients that would drive an increase in administration fees?

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Dennis D. Stewner, People Corporation – CFO & COO [20]

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Yes. Primarily, that — it really is a change in the way we are and a new service we are offering to our multi-employer clients, where we are — essentially, it’s a new revenue stream. There’s a few different components to it, but we’re seeing some new sources of revenue and a change in the way that the claims are being adjudicated. So we’ve taken some of that on in terms of claims adjudication, so you’re seeing a higher expense there. But there’s also some new sources of revenue related to that. So it’s essentially a new offering for us at the multi-employer level related to claims adjudication and some related revenue streams there.

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

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Okay. And can you just size that maybe in terms of — I mean, you mentioned one of the company’s TPA practices. Like, is there an opportunity to drive margin, EBITDA on this type of activity for other aspects of the business? Like how much of the business would this apply to? Are you able to size it?

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Dennis D. Stewner, People Corporation – CFO & COO [22]

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Yes. Yes. We — I mean, I can’t size it per se, but if you — I think where we’ve seen some good organic growth over the last number of quarters is where we look for opportunities, and Laurie would have alluded to this on other calls. Where we have the benefit of some of the scale we have, for example, in the multi-employer space is we can try different revenue-generating opportunities or different value-adds for our clients. And so in this case, we’ve really picked one of our large client segments, offered an enhanced sort of solution there. And the idea would be that to the extent there’s good value in there, and there is, we could look at broadening the scope of that initiative.

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Laurie Marc Goldberg, People Corporation – Executive Chairman & CEO [23]

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Let — yes. Jaeme, let me just add a little bit more to that. So part of our strategy over the last couple years, and we’ve been talking to it, was really adding new products onto our platform. So in this particular case, there were some specific needs that we have — that clients in this particular sector, the multi-employer sector, that plan members had. We built some products to meet their needs. And as a result of that, with that comes additional revenue, and then of course related administration costs to administer that.

It is a very strong margin, revenue business. It’s a business of — that we’re taking our existing platform and launching the product on there. So — and early indications — well, first of all, not only has that existing client very positive results, we’re getting some increased demand in that market segment or other clients actually asking for it.

So the short answer to your question, is it a margin enhancer? Absolutely, a strong one. And number two — I would say very strong one, actually. And number two is it’s very good value added for the plan member and the sponsor. And number three, we expect additional pickup not only in that sector, but then as we start to look to other market segments that we serve, expanding that across the platform over the course of the next couple of years.

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Jaeme Gloyn, National Bank Financial, Inc., Research Division – Analyst [24]

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Okay, great. Last one for me, just a little bit more clarification around the ARI costs for Q2. You mentioned it would be lower than Q1, but should we still expect elevated ARI relative to previous years even though it’s lower than — quarter-over-quarter?

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

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Yes. Actually if we look at AIR in Q1 was $5.1 million. If I exclude the unusual costs or the onetime costs of $1.7 million, we had about $3.4 million of sort of true AIR costs. And we’re expecting Q2 is going to be somewhere between that level and — in Q2. Highly unlikely it gets as high as Q1, but somewhere in that range. And again, the reason for the range is it all depends on — a good part of it will depend on external transaction-related costs depending on what happens in the quarter.

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Operator [26]

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The next question is from Stephanie Price at CIBC.

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Stephanie Doris Price, CIBC Capital Markets, Research Division – Director of Institutional Equity Research and Software & Business Services Research Analyst [27]

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You executed on the buyback of some retained economic interest this quarter. Just wonder if you could give us an update on the REI in 2020 and beyond, how we should be thinking about that.

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Laurie Marc Goldberg, People Corporation – Executive Chairman & CEO [28]

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I mean, I think as we’ve mentioned in the past, all the time. Those REIs, first of all, have put and call features, our ability to call, the bidder’s ability to collect, but they are timed and sequenced contractually. We will — as certain partners retire, we will look to really monetize those retained economic interests. And because it’s staged, we have an appropriate kind of transition process and retirement process and succession planning. And then more broadly over time, eventually, REIs by company will be taken out at the extreme as partners retire, but also depending on the rate of integration. So we — so if you — if we stop doing any REI deals today, you could probably expect over the course of the next 3, 4 years, you’re going to see those REIs systemically being retired. But we still look to do acquisitions on an REI basis as well as our kind of traditional earn-out model.

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Stephanie Doris Price, CIBC Capital Markets, Research Division – Director of Institutional Equity Research and Software & Business Services Research Analyst [29]

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Okay. And then you’ve mentioned integration into a national platform a few times on the call. I was hoping you could talk a little more broadly about your thoughts on the integration of the overall business.

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Laurie Marc Goldberg, People Corporation – Executive Chairman & CEO [30]

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Yes. So I mean, as we’ve probably said from virtually the inception of this organization about 10 years ago, when an organization joins us, we do what we call Phase 1 integration, which is really integrating the back end of the business. We usually do that within the first 6 months. And that’s everything around IT, finance, HR, treasury, financial accounting and related to internal controls. Then we bring in what we call kind of the next phase of integration that we do today and have historically done, is we bring shared services, some front-end shared services, to each of the entities so they can really leverage the benefits of a larger organization, being People Corporation. That helps them in terms of go-to-market expertise, increasing their bench and sales capability as well as product platform.

Over time, and we’ve done this in certain spots, is we will increasingly see, by region, bringing some of the kind of like businesses together so that it’s a little bit more of a, if you will, seamless go-to-market in that region; as well as being able to — the closer they’re together, the more that they can really leverage going to market when there’s expertise. So what I’ve always said is the greatest — probably the greatest opportunities around integration is really about kind of the top line of the business, and that is around putting more products on the existing platforms, bench increasing, basically the different firms leveraging capabilities of other firms within our organization.

So over time, we’re — you’re going to see on the brokerage consulting side probably a little bit less integration there in the sense of traditional integration of the back end of the business because you still need physical people on the ground in the regions to serve the customer. On the TPA side, definitely we’ll see increased integration there in the back end, particularly our technology platforms, to really move over time to one technology platform to both drive efficiency, cost efficiency, and we see that there is significant opportunity there; and secondly, to really enhance our capabilities, not only in terms of what we provide to the plan sponsor, but also particularly to the plan members.

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Operator [31]

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Your next question comes from Gary Ho with Desjardins.

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Gary Ho, Desjardins Securities Inc., Research Division – Analyst [32]

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Just going back to the organic revenue growth side. I think you’ve talked a bit about the new enterprise accounts wins previously. My understanding is that there was a bit of a time lag between winning a client versus getting them on board and recognizing the revenue associated with that contract. Just wondering, do we see any of that in Q1? And when should we see some more of that on board later this year?

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Laurie Marc Goldberg, People Corporation – Executive Chairman & CEO [33]

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Yes. So yes, there would have been some of that in Q1, and you will continue to see it throughout the year. I mean, this is now a new and growing part of our business. And so we’ve added a number of folks over the last 6 to 9 months into our enterprise group. And while the lead times are, on average, quite long to bring an enterprise group accounts over even if it’s consulting only, never mind TPA, the funnel is growing and we do expect to see some momentum quarter-over-quarter in that particular segment.

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Gary Ho, Desjardins Securities Inc., Research Division – Analyst [34]

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Okay. And then, Laurie, I think in previous calls, you alluded to bigger, more transformative deals on the M&A side. Can you give us an update on that? Is that still something that’s in the hopper that you’re looking at?

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Laurie Marc Goldberg, People Corporation – Executive Chairman & CEO [35]

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We are looking at it. We’re probably looking at it a little more focused and aggressively, I would say, in the last 6 to 12 months. As I’ve always said, you can’t always buy what you want when you want it. It’s got to actually be for sale. And — but that said, our core pipeline on acquisitions is very robust. And so there is a lot of strong activity on kind of our traditional acquisitions, I’m saying traditional as compared to something more transformative. But we are taking an increased, more laser-focused approach on something a little bit more transformative. And that’s going to be a function of the right opportunity, but also where the target company is really interested in joining our organization.

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Gary Ho, Desjardins Securities Inc., Research Division – Analyst [36]

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And does the current environment — I mean, valuation a little bit elevated. Does that — is more — is that inducive of the seller wanting to sell their companies a bit more? Or does that change the environment at all in your view?

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Laurie Marc Goldberg, People Corporation – Executive Chairman & CEO [37]

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Yes. I think that there’s no doubt that there is more kind of — a transformative deal. I wouldn’t necessarily say it changes. Usually, that’s a large — that would traditionally be a large-scale organization that may, in fact, be part of a much larger company. So it’s not necessarily going to change their view with multiples. Obviously, people will listen more. If you exclude that, kind of something transformational, I — there’s no doubt that some increased multiples have caused the rest of the market to really be more open minded, if you will, listening to the transaction. And I think you’re seeing that across the country today. [Right?] That is part of the reason that our pipeline is stronger.

But it really — the genesis of why that’s happening is that small to medium-sized players are recognizing that it’s increasingly a game of scale simply because it’s very difficult to have both the expertise and the capabilities around whether it’s subject matter expertise, geographic coverage, technology capabilities, product capabilities to really serve the increasing demands of plan sponsors and their members.

So there’s no doubt that it’s — there’s an opportunity on that side of the business. As I mentioned, on transformational, that’s really about whether that company is a large company on its own or part of a larger organization, it’s a matter of its strategic direction. So I’m not so sure that multiples will have that material of an impact.

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Gary Ho, Desjardins Securities Inc., Research Division – Analyst [38]

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Got it. Okay. And then just very last question, maybe a bigger picture type of question. So after a busy, I guess, 2019 in acquisitions, gaining scale and whatnot, launching new products, now does this change your view on your adjusted EBITDA margin potential over time? I think you’ve talked about it previously around 25 percentage-ish, post REI basis. Has that view changed at all?

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

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I — we — what we’ve said in the past would still be consistent. So we definitely see an opportunity to continue to grow, kind of creep up that margin over time. There’s a fairly significant cost as we grow our distribution capabilities, and — whether that is our third-party channel or whether it’s in our in-house, hiring people. So usually, you get a cost before you get the revenue. And so once we then bring in the core client as we add on new products onto the platform, there’s greater accretion on that simply because your distribution costs are much lower. You don’t have the incremental distribution cost associated with first setting up the distribution platform as well as getting the client in the first place with the core mandate, typically being their group benefit and/or their group retirement plan. So we see that it would definitely, on an incremental basis, be a margin enhancer.

And it’s a very strong — it’s a high demand. There’s a bunch of products and services that members are increasingly looking for. So the demand is out there. And so it ends up being very — it enhances our total relationship with the client.

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Operator [40]

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The next question is from Scott Chan from Canaccord Genuity.

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Scott Chan, Canaccord Genuity Corp., Research Division – Director of Research of Financials & Financial Services Analyst [41]

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Laurie, just going back to Gary’s question on EBITDA margin. If we kind of think about your kind of 5-year plan and you’re scratching the surface, when we look at the margin profile over time, what is the biggest driver in your view? Is that integration, organic with new products, or inorganic opportunities that have been obviously very — you guys obviously have done a lot of acquisitions lately.

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Laurie Marc Goldberg, People Corporation – Executive Chairman & CEO [42]

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Yes, I would really say the first 2 are the most. One is new product from the platform. You mentioned you don’t have the same kind of incremental distribution costs, that’s number one. And then number two, over time, integration, particularly on the TPA side of the TPA platforms.

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Scott Chan, Canaccord Genuity Corp., Research Division – Director of Research of Financials & Financial Services Analyst [43]

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And on the new product side, and you mentioned like the disability management platforms being kind of helping supporting that higher organic growth. Is this something that you might kind of quantify a bit more to us in the future?

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Laurie Marc Goldberg, People Corporation – Executive Chairman & CEO [44]

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Yes. At this point, no. It’s early stages. It was a nice contributor, there’s no doubt, but it’s really early stages. And at this point, we’re not really breaking out kind of product contributions. But while disability was one of the ones we’ve referred to in the last couple of quarters because we — as I’ve mentioned, over the last 1.5 years, we built it and then have now launched it, same with People Connect and People Care. There is a — that is just the beginning.

There is a — kind of look at our product lineup, and what we see just even kind of new product and insurance solutions for our core benefit clients, we’re working on a number of those. So there really isn’t a finite list at all. There is a lot of high-demand products and services that members are looking for, and we are working towards building those and launching them. So over time, we will look to do probably give a little bit more breakdown on that. But at this point, it’s just too early for us to do that.

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Scott Chan, Canaccord Genuity Corp., Research Division – Director of Research of Financials & Financial Services Analyst [45]

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Okay, got it. And just lastly, just on the M&A side, you talked about a full pipeline. Can you kind of maybe help quantify it or qualify it, what you’re seeing at the start of this year versus last year? Any change in dynamics? You talked about transformative stuff, but any kind of specific sector-focused stuff that you’re looking at?

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Laurie Marc Goldberg, People Corporation – Executive Chairman & CEO [46]

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Yes. So I’ll answer in reverse. So as it relates to transformative, it’s really, as I mentioned, just in the recent — last year that we started to talk about that and be more laser-focused on that. So we’ll continue to do that.

If I look at year-over-year in terms of the pipeline, it’s very strong. It’s, I would say, as strong or stronger than, say, a year ago, but just up a bit. If I look at — I think I’ve mentioned this in the past, if I look at, say, compared to 2, 2.5 years ago, there is a very significant increase in terms of the numbers of deals we’re looking at. And I’ve mentioned on a few calls, we’ve never seen more deals, we’ve never done more deals and we’ve never walked away from more deals. And that goes back to the fact that small- to medium-sized players are realizing that it’s difficult to remain competitive today and in the future if you don’t have the scale.

And so pipeline’s very strong. Our corporate development group is more than busy. And we obviously never comment on — pre-comment, if you will, on deals we’re about to do. But just suffice it to say that the pipeline is very strong and we remain optimistic in terms of our ability to grow inorganically as well as organically.

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Operator [47]

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Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating. And at this time, we ask that you please disconnect your lines.

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Laurie Marc Goldberg, People Corporation – Executive Chairman & CEO [48]

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Thanks, everyone.