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President and CEO’s Message to Shareholders

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Solid growth as the power brand in employee wellbeing

In 2018, Morneau Shepell delivered yet another year of profitable growth that met our expectations and further strengthened our competitive position as the power brand in the wellbeing space.

The pivotal development in the year was the LifeWorks acquisition. It accelerated our plans to develop a cloud-based HR platform for providing employees of our clients with an integrated experience for everything they need to support their mental, physical, financial and social wellbeing.

Looking ahead, we’re confident that our combination of technology-enabled HR solutions, cloud-based HR platform, and deep pools of talent and expertise provides sustainable differentiation to take our business forward.

2018 Performance

We are very pleased with how our business performed. From a consolidated results perspective, our revenues reached $722.3 million in 2018, increasing $97.2 million or 15.5 per cent compared to the previous year. Adjusted EBITDA increased by $18.5 million to $137.0 million, primarily due to revenue growth, margin improvements and contributions from the LifeWorks acquisition.

The LifeWorks acquisition significantly advanced our cloud-based HR technology platform, and added significant scale in the United States, United Kingdom and Australian marketplaces.We added some new 500 employees, more than 4,200 customers and $100 million in profitable, largely recurring revenues. Post-acquisition, we also diversified geographically where now our revenues outside Canada – in the United States and beyond – increased from approximately 15% to some 25% by year-end.

We also secured our largest new client relationship with Prudential Retirement, which further enhanced our U.S. scale and added significant talent and clients. As a result of this win, we are now the “defined benefit engine inside” providing administration services to more than 250 of Prudential Retirement’s clients.

During a year of major changes for us, we maintained strong client satisfaction levels across all of our lines of business.

Today we assess our market position as follows:

  • We are the only provider that integrates the four critical key pillars of employee wellbeing.
  • We are trusted by our clients to provide insights and solutions to their most difficult challenges that range from wellbeing to engagement to retirement solutions to full health and productivity solutions.
  • Building on our significant market share in employee and family assistance programs and wellbeing solutions, the LifeWorks acquisition makes us the world’s largest solution provider in these converging market spaces.
  • We are the largest administrator of retirement and benefits plans in Canada with a fast-growing U.S. business, with some seven million people covered under our plans.
  • We are the largest provider of integrated absence management solutions in Canada and starting to win some critical mandates in the United States.

The power of purpose: evolving our strategy

As a result of the LifeWorks acquisition we were able to accelerate our strategic plan and our organization is focused on our purpose as a business, which is: improving lives, improving business. By helping our clients improve the wellbeing of their people, we help them improve workforce engagement and productivity. Our strategies today are:

  • Differentiate as a technology-enabled HR services organization delivered through our integrated cloudbased platform, supported by deep pools of expert talent and clinical expertise.
  • Own the wellbeing space and provide the full continuum of care, including:
    • A broad range of clinically-proven preventative health care modalities.
    • Solutions that address complex mental health issues, including digital therapies such as iCBT.
    • Reward and recognition solutions to mitigate workplace stress, anxiety, and absence while increasing engagement.
    • Concierge services to help people manage challenging family responsibilities, including elder care and child care.
  • Be a leader in design and delivery of complex HR solutions – differentiating with solutions from full outsourcing to pure technology implementations.
  • Accelerate our growth through U.S. and global expansion.
  • Transform our operations to be more scalable, focusing on year-over-year improvement for creating great client and employee experiences.

In closing, I would like to thank our employees, partners, clients and stakeholders for another successful year in 2018. On behalf of the whole management team, we’re excited by the opportunities in front of us to make a real difference in the world, to focus on improving lives and the businesses of our clients and delivering exceptional results.

Stephen Liptrap
President and CEO

Stephen Liptrap