symbility solutions inc. symbility solutions sy-tsxv: · pdf filepage 1andrej krneta of 41 ,...

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Andrej Krneta, B. Eng, MBA | 416.687.6656 | [email protected]

25 July 2016

Technology

Symbility Solutions Inc.

Ind

Projected Return: 35%

Valuation: DCF (11.2% WACC)

Market DataMarket Capitalization

Net Debt

Enterprise Value

Basic Shares O/S

Fully Diluted Shares O/S

Avg. Daily Volume (M)

52 Week Range

Dividend Yield

Revisions2016E Revenue

2016E EBITDA

2016E EPS

Financial MetricsFYE - Jun 30

Revenue

EBITDA

EPS

FCF

Net Debt:EBITDA

FCF Yield

Valuation Data

DCF - Current/Target

EV/EBITDA Current

Peers

Target

P/E Current

Peers

Target

Quarterly Data

EBITDA 2015

2016

EPS 2015

2016

Company Description

-0.9 -0.7 0.5 0.8

-0.6 0.1 0.2 -0.2

-$0.01 -$0.01 $0.00 $0.00

-$0.01 $0.00 $0.00 -$0.01

Symbility Solutions provides cloud-based and mobile

claims processing software solutions. The Company

targets the Property & Casualty insurance industry, as

well as the Health insurance industry. Within its property

division, SY offers a workflow management solution that

optimizes workflow by securely connecting everyone in

the claims cycle. Furthermore, SY provides mobile-based

claims technology for field adjusters and contractors. SY

was incorporated in 1999 and headquartered in Toronto,

ON.

Q1 Q2 Q3

-4.5 -1.2 2.1

26.5 34.2 40.0

-0.4 -0.5 1.5

-$0.02 NA

F2015A

17.8x 11.7x -4.9x

-7.1% -1.9% 3.2%

-$0.03 -$0.02 -$0.01

NA

NA 73.9x

NA NA

55.8x 59.4x 38.6x

NA NA NA

F2016E F2017E

0.07

83.1

-6.4

76.8

237.5

237.5

-0.5 NA

$0.40 - $0.24

0.0%

New Old

34.2 NA

C2015A C2016E C2017E

$0.50 $0.90

NA NA 50.2x

Q4

9.5x 35.5x 20.2x

NA

0.00

0.20

0.40

0.60

0.80

$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

Jul-

15

Au

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5

Sep

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Oct

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Dec

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Jan

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Feb

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Mar

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May

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Jun

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Volume (M) Price

Symbility Solutions

Capitalizing on Momentum; Initiating with Speculative Buy

Investment Thesis: We anticipate a hastened pace of revenue recovery at Symbility Solutions. The strengthening momentum in international markets is set to drive the upside. Ramping backlog and recent customer wins in the region may yet prove managements’ revenue outlook for 2016e as modest. SY’s exclusive access to a strategic asset bars competitive entry and locks in a sustainable market presence through the medium term. With its place in a duopoly market intact, Symbility faces a Greenfield opportunity with firm pricing power. Add in that the ban for the largest shareholder (28% stake) to fully consolidate SY expires in CQ217e, and we see a risk downside protection to boot. In turn, we are initiating coverage of Symbility Solutions with a $0.50 price target (35% upside) and Speculative Buy recommendation.

Focus on the strengthening momentum of revenue upside: Outside the US, SY continues to leverage a more benign competitive environment. Indeed, low end-market penetration, early presence through resellers, and product awareness have ramped the current backlog of active pilots 3x y/y, as of Q116. The transition to direct sales speaks of tighter end customer engagements. This is a timely measure given the recent uncertainty in the UK financial sector. Elsewhere, a channel partnership with the licensor of a key product at SY bolsters its go-to market strategy: (i) incentive for the partner/shareholder to invest in SY’s competitive edge, and (ii) diverse regional expansion. At a solid 40% y/y in 2016e, the Property division’s revenues outside North America (26% of total in Q116 vs. 18% in Q114) are set to drive the outperformance in 2016e (management outlook: revenues of $33M+ in 2016e).

Margin trough in 2016e: We expect resurgent Property revenues to ramp transactions in the sales mix. A trough in the contribution from these margin-rich sales points to GM% recovery in 2016e. Further, recent Tier-1 customer wins come with an expanding ecosystem of volume-generating participants. As the dilutive impact from acquisitions tapers, we see a margin recovery stretching from 2016e and into the medium term.

Regional risks have to be considered: The exposure to the European financial sector does not elicit exuberance. Recent turmoil in the region (UK referendum on EU membership) may question the conversion rate of active pilot to contracts. Yet, the foothold at Tier-1 clients offers an incremental degree of stability (deeper balance sheet, presence in multiple regions). Also, SY is a provider of a productivity driving technology. Its adoption promises declines in cost of ownership. Should the financial industry experience a cyclical downturn, cost-cutting measures will likely be prioritized.

Valuation: On a relative valuation basis, SY looks undervalued among its Canadian peers (2.2x vs. 2.7x EV/Sales NTM for the group). In the rush to gain scale, the Company is looking to reverse the structural risks. Thus, a comparison to modest growth, income-generating peers may be misleading. SY’s EBITDA% expansion into mid-single digits in 2017e and gradual ramp thereafter led us to a set of stress-tested cash flow forecasts. Also, current risk pricing is unchanged from the time of 30%+ single customer concentration. With no clients at 10%+ contribution, the discount applied to market expected cash flows looks unmeasured. Our DCF valuation points to a price target of $0.50 (35% upside to the current share price). In turn, we are initiating coverage of Symbility Solutions with a Speculative Buy rating.

SY-TSXV: $0.38

Speculative Buy $0.50 Target

SY-TSXV: $0.37

Speculative Buy $0.50 Target

Symbility Solutions Inc. (SY-TSXV) | July 25 2016

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Symbility Solutions Inc. (SY-T, CAD $0.37) - Data Sheet BUY | PT: CAD $0.50Company Description Consensus 3 Mths Ago Current Return

Rating: Outperform Outperform

Target: $0.60 $0.58 55%

Median: $0.60 $0.60 62%

High: $0.60 $0.60 62%

Low: $0.60 $0.55 49%

Consensus Distribution

Sector Outperform/Buy 2

Sector Perform/Hold 0

Sector Underperform/Sell 0

# Est 2

Historical Valuations

CAPITAL IQ - CONSENSUS BASED NTM EV/EBITDA CAPITAL IQ - CONSENSUS BASED NTM EV/SALES

Key Financial MetricsFinancial Summary/Key Metrics 2014 2015 Q116 Q216E Q316E Q416E 2016E 2017E Key Statistics Value

Consolidated ($M) 52-Week High $0.40 8%

Net Sales 27.8 26.5 7.9 8.4 8.8 9.0 34.2 40.0 52-Week Low $0.24 (35%)

Growth y/y 27.0% (4.6%) 56.7% 50.0% 12.9% 12.0% 28.9% 17.0% Avg Vol (3-Mo) 0.07

Cons. 28.0 25.7 8.1 8.1 8.6 8.7 33.3 38.4 Shares Outstanding 237.52

Cons. 3 Mts. Ago 28.0 25.7 8.1 7.9 8.8 9.0 33.8 NA Market Cap 83.1

Net Debt -6.6

EBITDA 3.1 (0.4) (0.6) 0.1 0.2 (0.3) (0.5) 1.4 Enterprise Value 76.6

Margin 11% -1% -7% 1% 2% -4% -2% 4% Div Yield 0%

Cons. NA NA NA 0.0 0.1 0.3 (0.4) 0.7 FYE Dec/15

Cons. 3 Mts. Ago NA NA NA NA NA NA NA NA Employees 141

EPS ($0.00) ($0.03) ($0.01) ($0.00) ($0.00) ($0.01) ($0.02) ($0.01) Top Inst. Ownership M Shares ∆ 6 Mnths % Held

Cons. $0.00 ($0.03) $0.00 $0.00 $0.00 $0.00 ($0.02) ($0.01) CIBC AM 24.23 0.00 10.2%

Cons. 3 Mts. Ago $0.00 ($0.03) $0.00 $0.00 $0.00 $0.00 ($0.01) NA Jec Ii Associates, Llc NA NA NA

Grt Capital Partners NA NA NA

Cash 12.6 6.6 6.4 5.1 5.4 5.2 5.2 7.2 Blackrock NA NA NA

Net Debt (12.6) (6.6) (6.4) (5.1) (5.4) (5.2) (5.2) (7.2) Blumont Capital NA NA NA

Aran AM NA NA NA

FCF 1.7 (4.4) (0.1) (1.2) 0.3 (0.2) (1.2) 2.2 City National Rochdale, Llc NA NA NA

Geneva Advisors NA NA NA

Operating/Segmented Summary ($M) Front Street NA NA NA

Symbility Property 23.2 18.2 5.3 5.5 5.9 6.0 22.7 27.6 Grandeur Peak Glbl. Adv. NA NA NA

% of total 83% 69% 67% 66% 67% 66% 66% 69%

Valuation F2016E F2017E F2018E

Symbility Health 4.6 5.4 1.6 1.4 1.4 1.5 5.8 6.3 EBITDA (0.5) 1.4 4.1

% of total 17% 20% 20% 16% 16% 17% 17% 16% Net Change in WC (0.3) 1.1 0.2

Capex (0.4) (0.4) (0.5)

Symbility Strategic Services 0.0 3.0 1.1 1.5 1.5 1.5 5.7 6.2 FCFF (1.3) 2.1 3.9

% of total 0% 11% 14% 18% 17% 17% 17% 15%

WACC 11.4%

Term. Growth Rate 3.0%

Current 1-Yr TGT

Terminal Value PV 60.0

Equity Value 121.4 135.3

DCF Value $0.51 $0.57

Comparables

1 Week 1 Month 3 Month YTD 1 Year F2016E F2017E F2016E F2017E F2016E F2017E

Symbility Solutions Inc. $0.37 $0.50 0.0% 35% 0.0% -2.6% 1.4% 32.1% 23.3% 34.2 40.0 -0.5 1.4 -$0.02 -$0.01

Absolute Software Corporation ($US) $7.65 $7.15 4.3% -2% -1.0% 12.2% 14.2% 2.7% -3.8% 92.9 100.8 12.4 17.3 $0.28 $0.09

Espial Group, Inc. ($US) $2.21 $3.63 0.0% 64% 1.4% 4.7% 2.8% (4.7%) (32.8%) 43.9 51.0 5.9 8.1 -$0.11 $0.11

Kinaxis Inc. ($US) $52.76 $40.78 0.0% -23% 3.5% 2.6% 21.9% 12.4% 79.1% 134.3 159.1 37.5 47.1 $0.81 $0.98

Halogen Software Inc. ($US) $8.70 $8.83 0.0% 2% (2.2%) 5.2% 2.4% 21.7% (11.9%) 82.5 92.2 3.4 4.2 -$0.10 -$0.07

Solium Capital Inc. ($US) $6.53 $8.06 0.0% 23% 1.2% 10.7% (6.0%) (6.7%) (17.4%) 114.0 136.0 24.6 30.0 $0.19 $0.29

TIO Networks Corp. $2.39 $2.73 0.0% 14% 3.9% 22.6% 25.8% 6.2% 102.5% 117.4 129.9 16.3 17.5 $0.10 $0.12

Peer Average 13.1% 1.1% 9.7% 10.2% 5.3% 19.3%

FCF Yield EV/Sales Sales Growth (%) EV/EBITDA EBITDA Margin (%)

F2015 F2016E C2015 C2016E C2017E C2015 C2016E C2017E C2015 C2016E C2017E C2015 C2016E C2017E

Symbility Solutions Inc. 77 -5.1% -1.2% 2.9x 2.2x 1.9x -5% 29% 17% NA NA 53.4x -1% -2% 4%

Absolute Software Corporation ($US) 291 7.2% 1.8% 2.6x 2.6x 2.7x -1% -3% 8% 14.2x 23.1x 16.1x 18% 11% 15%

Espial Group, Inc. ($US) 30 3.4% -3.3% 1.9x 1.5x 1.4x 24% 9% 63% 24.1x NA 6.3x 6% -8% 14%

Kinaxis Inc. ($US) 1,215 2.7% 1.7% 17.1x 13.1x 10.8x 30% 21% 21% 47.1x 39.9x 31.9x 28% 27% 28%

Halogen Software Inc. ($US) 150 -3.9% -0.9% 2.7x 2.4x 2.1x 16% 12% 13% NA 84.9x 46.1x -6% 2% 4%

Solium Capital Inc. ($US) 202 3.2% 2.9% 2.5x 2.2x 2.0x 17% 9% 13% 11.7x 11.3x 8.2x 19% 18% 22%

TIO Networks Corp. 202 2.6% 0.9% 2.4x 3.6x 1.5x -34% 131% 20% 26.8x 11.7x 9.5x 13% 13% 14%

Peer Average 2.5% 0.5% 4.9x 4.2x 3.4x 9% 30% 23% 24.8x 34.2x 19.7x 13% 11% 16%

*All financial values in CAD unless otherwise noted

Source: Echelon Wealth Partners, Company Reports and Filings, Capital IQ, Bloomberg

EBITDA EPSReturn

Enterprise

Value

Symbility Solutions is a cloud-based provider of claims

processing solutions with mobile capabilities. It serves both

the P&C and Health insurance industries through its

Property and Health divisions, respectively. SY's provides a

workflow management solution that optimizes workflow

by securely connecting everyone in the claims cycle. SY also

provides mobile-based claims technology for field

adjustors and contractors. SY was incorporated in 1999 and

headquartered in Toronto, ON.

RevenueComparables

and Peer AnalysisPrice Target Div Yield Return

Comparables

Multiples Analysis

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Symbility Solutions Inc. Absolute Software Corporation Espial Group, Inc.

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Symbility Solutions Inc. Absolute Software Corporation Espial Group, Inc.

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Absolute Software Corporation Espial Group, Inc. Symbility Solutions Inc.

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Absolute Software Corporation Espial Group, Inc. Symbility Solutions Inc.


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Executive Summary: Capitalizing on Momentum

Symbility Solutions is a leading vendor of insurance claims processing software. It secured a strong positioning in the US market and has tripled its annual revenues over the last five years. Low end-market penetration and strength of proprietary offerings continues to sustain its presence. Symbility relies on strategic partnerships (with a 28% shareholder) for product breadth, channel collaboration, and lower cost of distribution. However, SY’s growth potential is constrained by its size and balance sheet. Competitive pressures from a single rival are ever-present threats. In turn, SY has been firming its staying power at customers via: (i) broadening its product portfolio aimed at upsells, (ii) moving away from resellers to direct sales, and (iii) bolt-on acquisitions that provide early access to the end customer decision-making process. Add in that the ban on fully consolidating SY (by the aforementioned shareholder) expires in CQ217e, and we see a limit on the risk-downside.

SY is being judged on its haste recovery after a recent large contract loss. It plans to leverage its legacy in the Property insurance market. Also, more diversified revenue streams make for lower risk to revenue upside. We believe that these underlying catalysts may prove management’s 2016e revenue outlook of c. $33M as modest.

Our view is that the following factors are incumbent for the rate of recovery and, in turn, restoring confidence at SY:

Access to a strategic asset sustains SY’s presence in the US. Pricing databases are indispensable for US insurers.

The industry requires externally sourced data as a safeguard against litigations. With exclusive access to the

strategic asset, SY has secured the junior position in the duopoly US market. Further, new channel collaboration

with the owner of the proprietary databases and largest shareholder at SY makes the asset an investment

priority. In turn, more robust offerings are set to firm SY’s competitive edge in the US. An informed and mature

market is more likely to appreciate the reliability of pricing data. Thus, we see SY’s positioning in the US largely

intact in the near term.

Strengthening momentum in international markets is set to drive outperformance. Outside North America, SY

has the competitive high ground. It holds a dominant market share at Tier-1 property insurers in Europe. Also, a

new channel partnership has allowed expansion into Australia. Outside the US, SY continues to leverage a more

benign competitive environment. Indeed, low end-market penetration, early presence through resellers, and

product awareness have ramped the current backlog of active pilots 3x y/y. Add in the transition to direct sales,

and we see firming momentum in a Greenfield opportunity. With pilots converting to customer wins, Property

revenues outside North America (26% of total in Q116 vs. 18% in Q114) are set to grow at 40% y/y in 2016e.

Transaction volumes are drivers of margin expansion. Recent moves to diversify led to a decrease of transaction

revenues in the mix. In 2016e, we see a trough in the contribution from these margin-rich sales. New Property

customer contracts bring in margin-rich transaction volumes. Further, at existing Tier-1 customers the network

effect grows the number of participants. As Property sales expand in the mix, we see margin expansion in 2016e

extending into the medium term.

Valuation: Elusive Risk Pricing Dictates Valuation Discount

Symbility’s recent share price increase came on the back of new contract wins and rising backlog. In turn, we see a growth recovery in 2016e and momentum building through the near term. On a relative valuation basis, SY looks undervalued among peers that largely appear priced for cash generation (2.2x vs. 2.7x EV/Sales NTM for the group). In the rush to gain market share, the Company is looking to reverse the structural risks. It is unfavourably positioned relative to its much larger rival. Also, the resulting investment ramp is set to compress the margin profile, making SY an (relative) underperformer on the bottom line. But, the trends of firm organic revenue growth and EBITDA% expansion into mid-single digits over the next 24 months led us to a set of stress-tested cash flow forecasts. In the mid to long term, we see SY’s EBITDA% at c. 20%, which is in line with SY’s closest peer that shares a similar revenue-generating model. Our stress-tested assumptions helped us to derive a DCF-based price target of $0.50 that points to a 35% upside to the current share price. In turn, we assigned a Speculative Buy recommendation, as we initiate coverage of Symbility Solutions.


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Company Description

SY develops workflow management software for the insurance industry. The Company’s product portfolio includes a datacentre hosted engine, mobile client, third-party databases, and analytics tools. It facilitates the adjudication and administration of claims at property and health insurers. The platform replaces legacy claims processing, lowering the cost of ownership. SY serves insurer markets through its two key business segments: (i) residential and commercial property, and (ii) health benefits. SY is the second largest provider of property claims processing software in the US. Its Health division derives revenues from Canada where SY competes in a more fragmented market. It uses distribution partnerships (resellers) in some regions, but mostly sells through direct channels. In 2015, the Company added a new business division after acquiring a developer that specializes in mobile applications and technology services.

The Company has been active since 2000 under the name Automated Benefits Corporation. It was listed on the TSX Venture Exchange under the ticker AUT. In 2004, the Company acquired Symbility Solutions Inc., a developer of mobile claims systems. As a result of a growing claims processing focus, in September 2012 Automated Benefits Corp. changed its name to Symbility Solutions Inc. and its ticker to SY and remained listed on TSX Venture Exchange. It is headquartered in Toronto (Ontario) with offices in Montreal (Quebec), Fareham (United Kingdom), Nashville (US), and Stuttgart (Germany). As of Q116, SY has c. 150 employees.

Exhibit 1 – Corporate Timeline of Key Recent Events

Symbility Solutions Inc. Corporate Timeline Date

Symbility Solutions acquires claims division of MSB (all-stock offer; 52M shares) Apr-12

Automated Benefits Corporation changes name to Symbility Solutions Inc. Sep-12

Symbility closes $10M equity financing (at $0.44/share) Dec-12

CoreLogic acquires 30% ownership stake at SY from TPG Mar-14

Symbility acquires Haus360° (Germany) Oct-14

Symbility acquires UK Innovation contracts Mar-15

Symbility closes $7.2M equity financing at $0.33/share (includes $2.1M from CoreLogic) Apr-15

Symbility acquires certain assets from Bogaroo Inc. (Strategic Services) Jun-15

Source: Company Reports and Filings, Echelon Wealth Partners Inc.


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Investment Thesis: Getting back to Basics

SY’s relative size gives the impression that it punches well above its weight. The depth of its product portfolio and presence in the high-end of the total addressable market (TAM) rendered c. 52% CAGR (2011-2014) revenue growth in recent years. SY pursued expansion to a more defensive size as a way of keeping competitive pressures at bay. But, before the critical mass came to fruition Symbility suffered the loss of its largest customer, Farmers Insurance (January 2014). Farmers agreed to extend its contract to the end of 2014 before moving to a competing platform at Xactware Inc., a subsidiary owned by NASDAQ-listed Verisk Analytics (VRSK-US, NR). That, in turn, reversed much of the gains from recent years (-21.4% y/y in the Property division in 2015), but left the Company with a more diversified set of revenues, as:

I. Customer concentration markedly declined with no 10%-revenue clients left in the mix; and

II. New regional distribution allows reliance on wider end markets for sources of revenue.

Going forward, SY aims to capitalize on the strength of its offerings while managing the size imbalance that favours its larger peer. Management’s outlook for 2016e points to c. 25% y/y growth after 4.5% y/y contraction in 2015. Meanwhile, scale expansion and investments in growth remain priorities, although SY still faces a threat from its larger rival. Since the loss, SY regained some investor confidence (share price: +32% YTD), albeit incremental assurances remain in demand. On that, SY’s more attractive y/y comparison this year offers comfort after a perception-distorting 2015 (revenues -4.5% y/y). This is far from being window-dressing. Headline numbers from Q116 closely resemble the underlying fundamentals (Property division: +22% y/y organic revenue growth vs. reported -21.4% y/y for 2015). Add in a reasonably capitalized balance sheet, and we see sufficient capacity to fuel expansion at acceptable risk of further EPS dilution (for a small capitalization growth story).

Exhibit 2 – Major Contract Loss kept Share Price in a Narrow Band

0

2

4

6

8

10

12

0.00

0.10

0.20

0.30

0.40

0.50

0.60

1/2/2013 8/2/2013 3/2/2014 10/2/2014 5/2/2015 12/2/2015 7/2/2016

Vo

lum

es

(M)

Shar

e P

rice

($

)

SY share price ($) Volumes traded (M)

Source: Yahoo Finance

Down, but not out: Strategic Asset Locks In Foothold in the US

SY’s access to proprietary databases is a source of sustainability and competitive advantage. SY provides material and labour costs that impact property insurers’ business performance, which makes the pricing database an indispensable part of the product offering. We believe that access to the asset will keep the Company on a competitive high ground and help address sceptical views following the large contract loss. With its still large exposure to the hyper-


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competitive US market, SY counts on the strategic asset to sustain its current growth profile in the region and drive end-market adoption.

Exhibit 3 – Symbility Property Platform serves Stakeholders via Enterprise Software and Databases

Claims ManagementSystem

Customer Service

CoreLogicDatabase

Desk Adjuster

Mobile Claims

ClaimsConnect

Claim

Desk Adjuster

ExaminerManager

AdjusterClaims Representative

Re-inspector

Contractors and Restoration Professionals


The platform separates SY from the app economy: SY’s business model is not app-economy, as its offerings extend beyond a mobile client. There are similarities. Like some consumer-facing platforms (iOS and Android), the Company’s Claims Connect leverages the ubiquity of mobile devices to generate the network effect: the wider the network, the more benefit to new participants (insurance policy holders, internal and third-party claim adjusters, construction companies, subcontractors, etc.). But, that is where the similarities end, as:

I. Platform offers an end-to-end support: SY’s solution offers an end-to-end view to all counterparties (the aforementioned participants) into the stages of claim processing. The offering requires the combination of enterprise software and real-time data to serve the ecosystem of providers (claim adjusters) and consumers (policy holders). Thus, SY’s platform exceeds the potential of a mobile app that provides the support mostly to the client side, without the breadth of a holistic solution.

II. Client app without databases does not fully address the market: Pricing data is a complementary component of the enterprise software platform. The proprietary nature of the database prevents a mobile app on a third-party platform to become a close substitute. As a result, the asset separates SY’s business model from the (smartphone) app-economy of disposable suppliers and limits the competitive space to enterprise software vendors with access to proprietary data.


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The lack of a unique edge prevents most mobile apps from reaching commercially acceptable retention rates. A supplier looking to enter the claims processing market without access to the pricing data faces formidable barriers to entry.

Exhibit 4 – Low Retention Rates Prevent most Apps from Converting to Sustainable Businesses

Per

cen

tage

of

Use

rs S

till

Act

ive

Days since app install Days since app install

Per

cen

tage

of

Use

rs S

till

Act

ive

Source: Quettra Mobile Intelligence

Thus, databases are the driver of market adoption and a source of SY’s sustainability in the US. With the threat of app-economy benign, the access to pricing data makes SY a solid second source to the high-end of the US market.

Exhibit 5 – SY’s Property Solution is a Platform that Transcends Weakness of Mobile Clients

Source: IBM, Pariveda Solutions

We believe that the Company will be able to preserve its still-robust US organic growth. Excluding the $10.5M contribution from Farmers’ overall ecosystem in 2014, SY’s US (all US sales are in the Property division) sales grew c. 30% y/y in 2015 on a constant currency basis. Q116’s 43.1% y/y US revenue growth (c. 37% y/y on constant FX) indicates that SY remains well-positioned in the region, as:


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US insurance carriers require pricing data: The litigious US market requires property insurers to use prices

sourced through third parties. The use of external providers of labour and material costs prevents a conflict of

interest. In turn, reliable market-based rates directly impact carriers’ core business. Xactware’s market

dominance attests to the impact of the proprietary data. Its databases (470 geographic regions in North America,

the UK, and Ireland) and analytics helped Xactware account for c. 70-80%+ of US market share. However,

Symbility claims a competitive edge as its databases reportedly span 752 pricing regions and outperform

Xactware’s on accuracy of labour and material rates (component based vs. average of contractor quotes at

Xactware). SY’s presence in the high-end of the market and the resulting increase of US annual sales by a factor of

c. 5x from 2011’s $3.5M to $17.4M in 2014 endorses the credibility of its offerings. As a result, SY remains a solid

alternative to a much larger peer and, in turn, attractive to insurance carriers looking to avoid monopolistic

pricing pressures from a single source.

Exhibit 6 – The Battle of the Databases will likely Drive US Competitive Positioning

Xactware CoreLogic

Geographies

Covered

470 Regions

(across two continents)

752 Regions*

(US and Canada)

Frequency of

Update

Pricing data published monthly in North

America; quarterly in UK and Ireland

Local multiplier (see below) updated monthly;

residential cost handbook updated quarterly

Approach Contractor Cost Approach Component Cost Approach

Pricing

Methodology

1. Surveys industry professionals, ~100K

contractors, insurance carriers, and

independent adjusters.

2. Also uses retail pricing research, cat specific

pricing research, and in-field estimates used

to settle claims submitted to Xactware.

3. Performs proprietary cluster analysis to

identify mid-range market price points.

1. Surveys tens of thousands of material prices,

labour rates and equipment prices throughout

Canada and the US.

2. Local multipliers are applied so that costs are

localized to current market conditions.

3. CoreLogic also gets feedback from Symbility to

update cost data based on actual claims.

Source: Xactware, Company Reports and Filings, Echelon Wealth Partners Inc.

Investment potential in databases scales beyond SY’s balance sheet: A consistent investment in data collection,

visualization, and analysis is imperative to SY’s positioning in the US market. SY licenses the data from its largest

shareholder, CoreLogic (CLGX-US, NR), on an exclusive basis. Thus, the ownership structure compels CoreLogic to

maintain and continuously improve the quality of databases, strengthening SY’s competitive edge in the US. Add

in that CoreLogic will resell SY’s offerings in Australia, and we see further incentive to invest in the asset. All in,

SY’s financial capacity to preserve its competitive footprint in the US is compounded by the balance sheet (see

Ownership Structure in the Appendix for details) of its large strategic shareholder.

In April 2016, SY displaced Xactware at a Tier-1 US insurer. The Company won a contract at QBE Americas (QBE-ASX, NR), the seventh largest participant in terms of US market share. Proprietary databases within SY’s core offerings were the key driver. Also, the adoption of recently launched products (business analytics and video feed inspection tools) at QBE contributed to the upside. This win shows that the strengthening of the product portfolio around the strategic database asset allows SY to maintain its foothold in the US.


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Cautiously optimistic on US sales growth through the near term: The degree of the competitive edge that the asset brings will determine SY’s US market outlook, in our view. Following the displacement at Farmers, the Company is tasked with firming confidence at US property insurers. With end-market idiosyncrasies unchanged (rip-and-replace), adoption drivers intact (software platforms enable the network effect), and competitive offerings at SY unscathed (access to unique and indispensable asset), we remain cautiously optimistic about its US prospects. As a result, we see the Company extending its underlying organic growth of US Property revenues from c. 27% CAGR 2013-2015 into 17-18% y/y in 2016e and 14-15% in 2017e.

Pivot to Underserved: International Expansion as a Growth Driver

Symbility is taking the path of least resistance to share gains. International markets offer benign costs of customer acquisition amid a favourable competitive landscape. Indeed, the number of active pilots increased 3x from a year ago. Much of the upside comes on the back of a larger focus on international customers. Thus, we see SY well-positioned for a Greenfield opportunity. In our view, a handful of recent measures will allow SY to induce near-term revenue growth at international property insurers through:

Acquisition of reseller contracts and avoiding exorbitant sales commissions to third-party distributors;

Forming channel partnerships with larger insurance industry vendors in need of complementary offerings; and

Strengthening the direct channel to customers as SY matures to a self-sustaining distribution model.

Recent results point to strengthening momentum outside North America. In Q116, LTM (last twelve months) international Property revenues grew 44.7% y/y on an organic basis (vs. 28.8% in Q415 and 36.6% in Q115). We believe that the tailwind of the ongoing capacity expansion is set to make SY’s international business the key driver of near-term performance.

Exhibit 7 – SY is not in a Regional Transition…those Sales have been a Strong Contributor for a while


Symbility has an established international presence. All of its international revenues (26.1% of total in 2015) come from property insurers (Property division: 68.6% of 2015 sales). In the Property division, ex-North America, sales rose from 11.3% of the unit’s top line in 2012 to c. 38% in 2015. That was, in small part, driven by resellers and recent contract buy-outs. Nevertheless, we see a case for organic upside to accelerate. In Q116, SY’s international efforts


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helped the number of active pilots at prospective customers (successful pilots convert to contracts) to ramp 3x to 15 from just 5 in Q115.

Exhibit 8 – Transitioning to Direct Sales from Resellers is a Sign of Maturity in a Ripe Space

March 2015: SY acquired UK Innovation Symbility reseller contracts of $7M in annual value for $6.6M

October 2014: SY acquired Hause360° and c. $1M of annual reseller contracts

Source: Echelon Wealth Partners Inc.

At the outset of 2016, SY’s international Property revenue growth looked set to overtake that in the US, and remain ahead of those at other segments due in part to:

(i) Increasing product awareness: We believe that SY will extend its nascent product awareness and build upon the momentum of end-market adoption. The Company has recently acquired its reseller contracts, allowing for greater control of product awareness, sales cycles, and potential for upsells at existing customers; and

(ii) The high-end offers high wallet-share potential: The access to European Tier-1 insurers is less prohibitive amid a more favourable competitive landscape (vs. the US). It may take longer to educate non-US customers on the benefits of switching to workflow management software (i.e., longer product cycles). But, the opportunity to grow revenues at mostly underserved Tier-1 insurers will offset that downside over the medium term. As in the US, SY is targeting the high-end of the addressable market.

As competitive pressures remain high in the US…In the US, SY faces a formidable opponent. Xactware has access to a deep balance sheet and the complementary products of its corporate parent. In 2014, it displaced SY at Farmers, causing it to lose c. $10.5M of 2014 revenues (c. $9.5M from the direct contract at Farmers and another $1M from third-party users of SY’s platform). Further risks of losses in the US remain in place and loom over SY. The Company remains disadvantaged, as Xactware continues to convert its size and product breadth (analytics and data) into a competitive edge.


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Exhibit 9 – US sees SY on a Back Foot, but plenty of “White Space” remains Addressable

Symbility Clients

Xactware Clients

Indeterminate

Symbility Clients market share● Chubb Inc......................................10.3%● Ace Ltd..........................................5.2%● Erie Insurance Corp.......................5.1%● QBE Insurance Group....................4.6%

Xactware Clients market share● Sate Farm......................................10.3%● Liberty Mutual...............................5.2%● Allstate...........................................5.1%● Berkshire Hathaway Group............4.6%● Nationwide Corp............................3.3%● Farmers Insurance .........................3.3%● United Serv Automobile.................2.8%● Hartford Fire & CAS Corp...............1.9%● American Family Insurance............1.2%● Auto Owner Group........................ 1.0%● WR Berkley Crop........................... 0.9%● Allianz Insurance Corp...................0.8%


However, outside the US SY faces a more benign competitive environment. Property insurers are not required to use third-party-sourced databases. The less litigious European landscape allows carriers to obtain (material and labour) prices internally, and use software as a productivity tool. Thus, the breadth of proprietary databases is not as crucial as it is in the US; this may limit Xactware’s presence in Europe, in the near term. In turn, we see SY’s first movers’ advantage, product awareness, and potential to deliver cost savings (processing time, fraud detection, and visibility) as credible adoption catalysts outside North America.

…SY matures in international markets: SY’s recent shift away from resellers signals its growing maturity outside North America. In its early stages, SY used third-party resellers to reach European insurers. It was a cost-efficient, if not revenue-maximizing distribution model. The Company paid sales commissions of 50% of the contract value. However, that approach now looks exhausted (and expensive). SY has an established presence outside North America and the financial capacity to expand its internal salesforce. As a result, the Company acquired the existing reseller contacts in the UK and Germany with the aim of consolidating them into its direct sales channel.


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Exhibit 10 – SY believes that its UK Dominance can be Replicated Elsewhere


Adding capacity to the momentum: To support the transition outside North America, SY plans to add 30 quota-carrying salespeople in 2016 in order to address potentially long sales cycles (customer education, product trials, etc.). Indeed, the sparse adoption of claims processing software may signal discomfort with technology at European carriers. In the US, corporate customers tend to be early adopters. In turn, vendors are required to displace last-gen technology to gain share. However, this “rip-and-replace” approach is seldom needed at European insurers. Instead, the effort (and investment) is more impactful if focused on educating the customer on the benefits of adopting software in place of more manual processes. Thus, a decisive investment in direct distribution looks well-timed in 2016e given the potential for the sales cycle to lengthen as customer education, prototype testing, and evidence of financial benefits take their course.

In our view, SY’s transition to direct sales signals a more mature presence in the Greenfield market. We believe that replacing resellers will help the Company forge stronger customer ties (i.e., upsells), lower client acquisition costs (50% of contract value), and drive the Property segment’s international revenue growth at 39.4% CAGR 2014-2017e.

What is not in our forecasts? SY has recently partnered with CoreLogic to distribute offerings in Australia. CGLX provides property and financial data, and analytics with a meaningful footprint in the country. Its solutions include underwriting data and analytics that are complementary to SY’s workflow management software. That, in turn, gives SY exposure to another underserved market with sparse competitive threats. As a result, near-term revenue contribution is likely, as distribution is enhanced through the network of the larger partner. With this alliance opening the path to Asia Pacific (Australia and New Zealand), SY is positioned to take a share of a $45-50M immediately addressable annual revenue opportunity over the near to medium term (not in our forecasts).


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Exhibit 11 – International Organic Growth to Outpace overall Property (Organic) Upside by 20%

0%

40%

80%

120%

160%

Inte

rnat

ion

al L

TM o

rgan

ic g

row

th (

$)

-40%

-20%

0%

20%

40%

60%

2013 2014 2015 2016e

Pro

per

ty R

even

ue

gro

wth

(%

)

Property Organic GrowthProperty Reported Growth

International oragnic growth on LTM moving average at Property divsion


All in, we see international market penetration as a support to solid upside in the Property division and SY. With a backlog of pilots converting to near-term revenues, we expect organic sales growth in the division of c. 20% y/y in 2016e (vs. 23.8% y/y in 2015).

The Network Effect: Transactional Margin Expansion

We see revenue mix-shift driving margin expansion. Near-term catalysts make the Property division the engine of sales growth. New insurer wins bring ecosystems of users to SY’s software platform. As a result, transaction volumes are set to grow revenues with margins higher than the corporate average. Add in new product launches broadening the offerings, and we see upsells expanding Property revenues’ share in the mix. In turn, the resulting GM% accretion is set to narrow near-term losses this year with profit generation emerging in 2017e.

Property revenue to reverse some lost share in the mix: A large contract loss caused Property revenues in 2015 to decrease in the mix (from 83.3% in 2014 to 72.8% in Q115). Add in the Q215 acquisition of Strategic Services (non-recurring revenue business), and Property contribution dropped to 64% of the H215 top line. That, alongside Property GM% compression, resulted in SY’s margin downside in 2015.

Exhibit 12 – Lower Share of Property Sales in the Mix had a Negative Impact on Margins

2014

Property Health

2015

Property Health & Strategic Services

64%

66%

68%

70%

72%

74%

76%

78%

80%

82%

2014 2015

SY consolidatedgross margin (%)



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In the near term, however, we expect Property to drive performance at SY. With resurgent revenue growth in 2016e, the division is set to outperform others (Health and Strategic Services) and reverse the recent margin slump.

We note two key Property division catalysts set to drive near- to mid-term margin expansion at SY:

Transaction revenue margins stand out: We expect transaction volume-driven upside to cause margin accretion.

At SY’s customers, third-party and internal adjusters trigger revenues at SY through claims submissions

(transactions). The network effect draws additional ecosystem participants (policy holders, subcontractors,

adjusters) to the platform, with a larger base of users driving transaction volumes and revenue upside. Further,

transaction revenues GM% (80-85%+) tend to exceed those at fixed subscription vendors. Indeed, SY’s close peer

Solium Capital (SUM-T, PT $5.50, $6.00, Sell) has 20-25% of transactions in the sales mix, which helped it generate

c. 20%+ EBITDA% over the last four to five years. With existing pilots converted to customer wins at SY, we see a

growing user base at individual insurers driving transaction revenues and, in turn, 200bps GM% y/y expansion in

the Property division; and

Exhibit 13 – Network Effect Expands User Ecosystem that Generates Margin-rich Transactions

0

2

4

6

8

10

12

Farmers revenues Third-party ecosystem Total Impact from contract loss

Rev

enu

e co

ntr

ibu

tio

n (

$M

)

$1M

$10.5M$9.5M

SY sees the potential at every client to grow the ecosystem of subscribers to

the Claims Connect platform.The network effect perpetuates subscriber growth, transaction volumes, and, in turn, revenue

generation at SY.

The contribution of the ecosystem was apparent after a key contract

loss. Farmers’ contract cancellation went beyond direct revenues

sourced from the firm (c. $9.5M) and included the contribution from the participating network (c. $1M)

in 2014.


New product cycle and upsells: New product introductions position SY for upsells at existing customers. In 2015,

the Company added seven new enhancements and features. Last year, SY deployed the new Business Intelligence

(BI) module at six to seven customers (8-9% attach rate as of Q415). Insurers use BI for analytics, information on

claims processing, and data visualization. Also, the tool becomes more useful as transaction volumes grow. Large

data samples collected from all of SY’s customers strengthen the claims analysis, providing more reliable insight

(e.g., fraudulent claim prevention). That, in turn, will help drive end demand for BI and upsells at existing


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customers. We believe that BI may have added c. $0.5M to 2015 revenues (3% of property revenues). With the

attach rate rising to low double digits at the end of this year, we expect a contribution of $1.6M from BI in 2016e

(7% of the segment’s mix).

Where is the upside to our estimates? Our current estimates include a total of 12 BI clients by the end of 2016e, which implies the same number of customer wins this year as in 2015, despite the mid-of-last-year launch. Our medium-term forecasts (2017-2018e) include an average of $1M y/y revenue growth from BI for a total of $3.5-4.0M in 2018e or 10% of the revenue mix (vs. c. 3% in 2015).

Exhibit 14 – Expanding Property in SY Mix Equals Higher Transaction Revenue Contribution….

91.0%

9.0%

2015

Property Transactions (recurring) Property Services

80.2%

19.8%

2015

Symbility Transactions (recurring) Professional Services

GM%: 75-80%

GM%: 35-40%


We see a reasonable potential for SY to beat our BI revenue estimates. Our attach rate forecast of 10% in 2018e may be understated given the rate of end-market adoption in 2015. However, we kept our forecasts conservative as the bulk of the demand mostly comes from the competitive US markets where early adaptors tend to originate.

Exhibit 15 – ….higher Property Transactions in the Mix to Drive Margin Upside in 2017e



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All in, we see gross margin expansion at SY, as Property revenues outperform through 2016e and regain some of the lost share in the sales mix. We expect the upside to partially absorb the impact of higher opex on EBITDA over the near to medium term, with 100-200bps y/y GM% gain to 72-73% in 2017e.

Risks: Need to Stay Step(s) Ahead

Below, we outline key risks to our investment thesis.

The lack of direct control of key asset: SY does not have ownership control of pricing databases. We established

that the asset drives SY’s competitive edge in the US. Insurers’ business performance depends on the

disbursements based on material and labour costs. However, SY does not have a direct impact on capital

allocated to database expansion and maintenance. The owner (CoreLogic) may de-prioritize the allocation of

capital from the asset and re-direct funds to more critical (to CLGX) destinations. Thus, a shift in the strategic

direction at CoreLogic may have a vast negative impact on SY. Should CLGX’s investment allocation result in a

decline in data collections, accuracy, and quality of databases, SY may become uncompetitive. The risks are

alleviated by the use of databases at CoreLogic’s core businesses and ownership stake in Symbility Solutions.

Exposure to UK financials: The outcome of the UK referendum on EU membership has triggered negative

sentiment in recent days. Specifically, large UK commercial property asset managers (Standard Life UK [SLS-UK,

NR], Aviva Investor Property Trust [AV-UK, NR], M&G Investments [Private], and Henderson UK Property [HGG-

UK, NR]) communicated liquidity concerns. Should the woes spread, we may see the impact on Symbility’s

revenues in the region. Active pilots may be discontinued and shelved for a later date. With lower-than-

anticipated contract conversions, the contribution from the region may be curtailed. But, SY’s foothold at Tier-1

clients offers an incremental degree of stability (deeper balance sheet, presence in multiple regions). Also, SY is a

provider of a productivity-driving technology. Its adoption promises declines in cost of ownership. Should the

financial industry experience a cyclical downturn, cost-cutting measures will likely be prioritized.

Customer retention measures too recent: The large contract loss points to risks related to customer retention. SY

remains mainly dependent on databases for contract renewals. Thus, SY is compelled to broaden its portfolio of

products and services with the aim of increasing customer dependence. Indeed, SY launched a series of new

products (Desk Adjuster, Business Intelligence) and diversified its offerings via development services (Strategic

Services). The moves are encouraging as they lower the risks of competitive displacements. But, the impact on

long-term customer retention is still unclear because the measures have only recently come into place. As a

result, the near-term risks of further displacements may remain elevated as penetration of new offerings takes

time to ramp at customers.

Potential for conflict of interest: CoreLogic’s 28.3% ownership (and three Board members) allows a material

impact on the strategic direction at SY. Since CoreLogic became a significant stakeholder its interests have been

aligned with those of the remaining shareholders. However, future market dynamics may lead SY to take a

position that would make those interests diverge. For instance, CLGX may contest SY partnering in the channel

with one of CoreLogic’s competitors. Should such partnership entail new market expansion (similar to SY-CLGS in

Australia) as a result of co-operation of vendors with complementary offerings, CLGX would oppose SY gaining a

source of new revenue streams. A greater frequency of contested tactics at SY could result in a growing conflict of

interest and eventual change of ownership. A resulting divestment of 28%+ will likely disturb SY’s access to

pricing databases and cause material share price volatility.

Lower barriers in international: In international markets, insurance companies are not required to use third-party

pricing data. Regulations allow those insurers to source prices internally. Thus, the lack of access to databases

does not prevent other software vendors from entering the market. We believe that SY’s contract wins at global

insurance carriers is a compelling endorsement that still overshadows the threat of new entrants. But,

international markets have become a key source of new customers for SY. A material disruption to new client

acquisitions there would make for a negative impact to our investment case.


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Financials: In a Mode of Recovery

SY is set for revenue growth and margin pressures in 2016e. The firm sees c. 25% y/y revenue upside to $33M+ on the back of the Property division’s underlying catalysts. But, recent business combinations made for a revenue mix shift that compressed gross margins. Add in the ongoing capacity expansion extending through the end of this year, and we see further pressures on margins in 2016 before a recovery in 2017e. With no debt to service, SY has sufficient cash balance to support the ongoing organic expansion. Thus, we see that helping SY reach a point of sustainable cash generation in mid-2017e. We do not dismiss the possibility of a further equity raise as a support for an acquisition-accelerated capacity expansion and revenue growth.

Underlying revenue upside holds as investments exert pressure on margins: Last year, SY added $5-6M via acquisitions, but lost $10.5M y/y due to a cancelled contract (-4.6% y/y consolidated). On a stand-alone basis (excluding the lost Farmers’ contract and acquisitions), the Company averaged mid-to-high-teen organic growth in 2012-2015. In 2016e, the official c. 25% y/y revenue growth guidance implies a similar performance (15-16% y/y) from the operating units held in ownership since December 31, 2014. Much of this upside is driven by the Property division. We expect the segment’s revenues (68.6% of total 2015 revenues) to grow organically at 20-21% y/y in 2016 (EWP est.) and remain largely in line with last year’s trend of low 20%s. With the focus on international Property expansion, we see Health slowing to c. 9% y/y this year from 15.1% y/y in 2015.

Exhibit 16 – Property Revenue and Growth Drives SY

Source: Company Reports and Filings

Margin pressure is set to come from the negative impact of revenue mix and capacity expansion. In 2015, GM% declined 10.3 percentage points y/y to 70.7%. Property contributed to the decline as the margin dropped 630bps y/y to a still-stellar (vs. other segments) 80.3% GM%. Property’s sales decrease of 21.4% y/y (Farmers contract) and datacentre expansion made for the headwinds. Further, the acquisition of Strategic Services in Q215 extended SY’s GM% dilution. The new units came with a modest 40% GM% profile. As Strategic Services rose in the mix (Q116: 13.3% vs. 0% in Q115), the consolidated GM% dropped 310bps y/y in Q116 to 71.2%. We expect GM% to remain in the low-70s this year before expanding in 2017e. Elsewhere, opex is set to grow 18.8% y/y to $27.6M in 2016. SY plans to add headcount to support the transition from resellers to direct distribution in Europe. In turn, we anticipate SY to remain at an EBITDA loss in 2016e, but positioned for an upside in 2017e due to multiple margin drivers (mix shift and leverage).


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Exhibit 17 – On the Downside, SY’s Overall Performance follows that of Property

-20%

0%

20%

40%

60%

80%

100%

120%

2012 2013 2014 2015

Consolidated revenue growth (%) Property as % of mix

65%

70%

75%

80%

85%

90%

2012 2013 2014 2015

SY gross margin (%) Property gross margin (%)


Cash at ample levels to finance organic growth to self-sustained cash generation: Symbility raised $7.2M of equity capital in Q215. It used the proceeds to finance the acquisition of reseller contracts in Europe and the Strategic Services division. In Q116, the Company reported a cash balance of $6.4M after seeing negligible net outflows in the quarter. With a marginal loss on the EBITDA line in 2016e, we expect a moderate decline of remaining cash before net inflows from operations (CfOp) emerge in early H117e. SY has no debt on its balance sheet.

Share count ramps as equity raise finances acquisition roadmap: SY’s share count of 237.5M (as of Q116) is unusually large. In Q212, the Company issued 52M new shares as a payment for MSB’s claims division. That helped to increase the average number of common shares (ANCS) from an already sizeable 118M to 181M (end of Q312). In the same year, SY financed an acquisition by raising $10M of equity capital and increasing the ANCS to 204M by Q113. The common share count (as of Q116) came on the back of the aforementioned equity capital raise in 2015 ($7.2M). Should a viable opportunity arise, acquisition-driven share issue is acceptable, in our view, as a way to accelerate the path to critical mass.

Foreign Exchange: SY is exposed to foreign exchange risk through its Property Division. Most of the unit’s sales are US$-denominated (c. 55% in 2015) with the balance based on C$, pound-sterling (GBP) and the Euro. With Property making for the bulk of the top line (68.6% in 2015; 67% in Q116), SY’s results are meaningfully impacted by FX. Indeed, recent GBP weakness (-8% vs. C$ since beginning of June) may offset the ongoing momentum in the UK. On the top line, SY saw a benefit in 2015 as the C$ weakened compared to other currencies. But, the Company does not hedge its exposure and, in turn, translations led to a $0.2M gain in 2015 and $0.5M loss in Q116 (pre-EBIT as SY did not adopt hedge accounting). Unlike most of its peers, SY’s non-GAAP figures are not adjusted for FX. Thus, its adj. EBITDA stands exposed to FX volatility (Q116: adj. EBITDA loss of $0.6M included $0.5M FX loss).

Valuation: Elusive Risk Pricing Dictates Valuation Discount

For Symbility Solutions, 2016 is a year of recovery. It started with customer wins, lower revenue concentration and ramping backlog. The resulting share price increase of 25% YTD has some questioning an upside beyond recent gains, as:

I. Structural risks in the largest end market remain in place; and

II. This year’s investment ramp will makes for a taxing impact on cash flows.

At mid-teen organic revenue growth, however, SY stands to outperform on a relative basis over the next twelve months (NTM). We believe SY is well-positioned to extend that trend through the medium term and mend its margin profile.


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Near-term revenue growth acceleration: We believe that SY is at the onset of growth acceleration. Over the next twelve months we see revenue upside of 19% y/y (vs. 14-15% y/y LTM). Some of that comes from a favourable y/y comparison (phase-out of the effect of the lost contract and acquisitions). On an organic basis, we see the Property division as a revenue growth driver with a 20%+ y/y upside in 2016e. Also, our cautious view of the Health segment’s sales growth (c. 9% y/y in 2016e vs. management’s 10-15% y/y) leaves room for estimate upgrades.

Exhibit 18 – Canadian SaaS Space is not a Homogenous Group

Sales Growth (%)

LTM NTM LTM NTM LTM NTM LTM NTM

Absolute Software ABT Cons. 297 1.9x 1.8x -4% 1% 12.7x 15.7x 15% 12%

Espial ESP Cons. 79 1.8x 1.3x 21% 36% (84.6x) 149.0x -2% 1%

Kinaxis KXS Cons. 1,311 9.1x 7.8x 33% 17% 33.8x 28.5x 27% 27%

Halogen Software HGN Cons. 187 1.6x 1.5x 14% 12% (36.7x) 53.1x -4% 3%

Solium Capital SUM Cons. 317 2.7x 2.4x 14% 11% 16.5x 12.4x 16% 20%

TIO Networks TNC Cons. 208 2.8x 1.6x -7% 81% 24.9x 12.0x 11% 13%

Median 2.3x 1.7x 14.6x 22.1x

Mean 3.3x 2.7x (5.5x) 45.1x

Symbility Solutions SY EWP 83 2.6x 2.2x 15% 20% n/a n/a 0% 1%

At target market capitalization

Symbility Solutions 120 3.9x 3.2x 15% 20% n/a n/a 0% 1%

EV/EBITDA EBITDA%

Company Name TickerEstimate

Source

Market

Cap

(CAD$M)

EV/Sales

Source: Capital IQ, Company Reports and Filings, Echelon Wealth Partners Inc.

Is recovery priced in yet? On a relative valuation basis, SY’s 2.2x EV/sales NTM is below the peer group’s average of 2.7x. An outlier in the group is Kinaxis (KXS-T, NR), which trades at 7.8x EV/sales NTM. After adjusting for the outlier, SY looks fully valued (group: 1.7x). But, Kinaxis is priced above others on the back of its c. 20%+ multi-year revenue CAGR expectations. Such vast outperformance (vs. the group) warrants an equally rich multiple that justifiably influences the group’s average. But, KXS is also an outlier on a market capitalization basis. As a result, it may not reflect the traits associated with a group of small capitalization growth companies. Further, relative valuation may not capture the multi-year upside at SY. Relative valuation multiple falls short of reflecting our expectations of sharp margin accretion in the medium term. At SY, we see a sustainable mid-teen revenue growth profile with a lack of a comparable benchmark to fully reflect the underlying fundamentals.

We excluded US-listed companies from relative valuation. Evaluating SY’s performance against US peers would not be informative, in our view. US-based SCM suppliers have structurally higher valuation multiples than those outside the country. In the US, the industry benefits from an extensive specialist investor community, higher scale capital formation, with deeper tech markets with seasoned executives, and greater supply of engineering talent. That, however, offers CoreLogic (2.6-2.7x EV/Sales NTM) an opportunity to consolidate SY at an accretive valuation.


of 41


Exhibit 19 – Discounted Cash Flow (DCF) Analysis at Base Case of 13% EBIT

2015 2016e 2017e 2018e 2019e 2020e 2021e 2022e 2023e 2024e 2025e

Revenues ($M) 23.6 34.2 40.0 45.3 50.6 55.9 60.6 64.6 68.4 71.9 75.0

Growth (%) -15.3% 45.3% 17.0% 13.3% 11.7% 10.5% 8.3% 6.7% 5.8% 5.1% 4.3%

EBIT ($M) -6.1 -4.4 -2.4 0.0 3.5 7.3 7.9 8.4 8.9 9.3 9.7

EBIT margin (%) -25.7% -12.8% -6.1% -0.1% 7.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0%

EBITDA ($M) -0.4 -0.5 1.5 4.1 8.0 12.1 12.8 13.2 13.9 14.4 14.8

EBITDA margin (%) -1.6% -1.3% 3.8% 9.0% 15.8% 21.6% 21.1% 20.4% 20.3% 20.1% 19.8%

Cash Taxes ($M) 0 0 0 0 0 0 0 0 0 0 0

Changes in NWC ($M) -2.2 -0.4 1.1 0.2 -0.2 -0.2 -0.2 -0.1 -0.4 0.0 -0.1

Capex ($M) -0.3 -0.4 -0.4 -0.5 -0.5 -0.6 -0.6 -0.6 -0.7 -0.5 -0.4

Free Cash Flow ($M) -2.9 -1.2 2.2 3.8 7.3 11.4 12.0 12.4 12.9 13.9 14.3

Present Value as of July 25, 2016

Terminal Value ($M) 67.0 Net Debt ($M) -6.6

FCF, 2016-2025e ($M) 45.7 Equity Value ($M) 119.6

Number of common shares 237.5

Market Value per share ($) 0.50 Source: Company Reports and Filings, Echelon Wealth Partners Inc.

Our Discounted Cash Flow (DCF) analysis is based on forecasts that are underpinned by the following considerations with near- to medium-term impact.

Double-digit revenue growth into the medium term: In 2016e, SY guided to c. 25% y/y sales upside.

Thereafter, we see the aforementioned organic growth drivers positioning the Company for a double-digit

increase. With recurring revenues contributing 74% to the 2016e sales mix, we expect the mid-teen growth

profile to extend into the medium term for c. $55M top line in 2020e. Our estimates point to 6% revenue CAGR

from 2015 to 2020e.

Medium-term margin expansion and transition to cash generation: We see positive EBITDA% emerging in 2017e

with a high single-digit margin profile in 2018e. The revenue mix-shift to c. 70% Property contribution and

operating leverage are set to drive further expansion. Our long-term projections see mid-teen EBITDA% in 2019-

2020e and a stable profile of c. 20% thereafter (based on 13% EBIT%; see Exhibit 21 below for sensitivity analysis).

SY’s closest peer, Solium Capital, targets 20-25% EBITDA% in 2016e on 6-7% y/y organic revenue growth. Its

capital allocation looks more suited for a late-stage tech company, as it favours cash generation over growth.

Given similar revenue models (transactions-driven), SUM’s current margin profile (19-20% EBITDA%) may be in

line with that reached in later years at SY. Thus, 20% EBITDA% (the low end of current target) seems a reasonable

proxy for the back half of the DCF 10-year forecast period.

Historical returns understate cost of equity capital: We believe that relative historical returns are ill-suited as a

risk proxy at SY. Beta of 0.2-0.3 (see Exhibit 20) suggests that investing in SY carries lower risk than that of the

overall market. Bloomberg-derived beta (adjusted beta: 0.2) implies a similar conclusion. In our view, the lack of

liquidity and small market capitalization may have distorted the immediate signalling mechanism of share price

movements. Indeed, on the day after the UK referendum the S&P/TSX index declined 1.7% alongside others amid

a global market turmoil while SY’s share price remained unchanged (volume of 9K shares traded). Thus, the

corresponding beta readings (moves relative to that of markets indices) underprice the underlying risks at SY,

and, in turn, the cost of equity capital (equal to weighted average cost of capital or WACC, as no debt at SY).

Current share price overstates risks: We believe that the discount rate implied from the current share price

overstates risks. At current share price levels, the implicit WACC points to 13-14%. With an equity risk premium of

4%, the market appears to discount SY’s cash flows with a beta of c. 3.0. But, the risk of such price dislocations


of 41


(three times the magnitude of that of the overall market) lacks historical precedence. Also, SY’s risk profile has

improved since the loss of the Farmers contract (34% of revenue lost) in 2014. SY no longer has any customers

with 10%+ revenue contribution. Since the negative impact on revenues from a single event is now reduced, the

cost of capital associated with such risks should be as well.

What is the appropriate cost of capital? In the US market, share price returns of Verisk Analytics and CoreLogic

point to betas of 0.8 and 0.9, respectively. At similar assumptions (beta of 1), SY’s equity cost of capital comes to

a lowly 8.44% (7% equity risk premium). We believe that double-digit returns are required to counterbalance the

sparse liquidity, among other risks. An alternate rate of return of 11% would imply a beta of 2.0-2.5. That, in our

view, suggests market-relative share price movements that better reflect the underlying risks at SY.

Terminal value: We derived the terminal value (TV) of our DCF by using a 3% long-term growth rate and 11.2%

WACC. At the end of the 10-year forecast period (pre-TV), we expect SY to achieve the sufficient scale to mitigate

the current threats. With the risks of competitive displacements lower, the TV discount rate (cost of capital) may

be overstated. But, we kept the WACC unchanged, as the higher rate allows an additional safety margin in our

underlying assumptions.

Exhibit 20 – SY’s Relative Share Price Performance is a Poor Indicator of Underlying Risks

y = 0.2493x + 0.0068R² = 0.0084

-40%

-20%

0%

20%

40%

60%

-20% -15% -10% -5% 0% 5% 10%

SY w

ee

kly

retu

rns

(Jan

20

10

-Ju

ne

20

1)

S&P/TSX Venture Composite Index Weekly Returns (Jan 2010 - June 2016)

y = 0.2291x + 0.0062R² = 0.0031

-40%

-20%

0%

20%

40%

60%

-15% -10% -5% 0% 5% 10%

SY w

ee

kly

retu

rns

(Jan

20

10

-Ju

ne

20

16

)

S&P/TSX Composite Index Weekly Returns (Jan 2010 - June 2016)

Source: Capital IQ, Echelon Wealth Partners Inc.

Our DCF-derived valuation points to a price target of $0.50 and 35% upside to the current share price. In turn, we are initiating coverage of Symbility Solutions with a Speculative Buy recommendation.

Exhibit 21 – Sensitivity Analysis

5.2% 8.2% 11.2% 14.2% 17.2% 5.0% 8.0% 13.0% 18.0% 21.0%

2.0% 1.51 0.73 0.47 0.34 0.26 0.30 0.37 0.47 0.57 0.64

3.0% 2.07 0.83 0.50 0.35 0.27 0.32 0.39 0.50 0.61 0.68

4.0% 3.58 0.97 0.54 0.37 0.28 0.35 0.42 0.54 0.67 0.74

Weignted Average Cost of Capital (WACC) LT EBIT margin (%)Terminal

Growth (%)



of 41 Andrej Krneta, B. Eng, MBA | 416.687.6656 | [email protected]

Exhibit 22 – Income Statement, 2013-2017e ($CAD 000s, except EPS)

INCOME STATEMENT F2013 F2014 FQ115 FQ215 FQ315 FQ415 F2015 FQ116 FQ216e FQ316e FQ416e F2016e F2017E

Dec-13 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Dec-16 Dec-17

Revenue 21,894 27,805 5,047 5,628 7,787 8,075 26,537 7,911 8,441 8,795 9,061 34,208 40,024

yoy growth (%) 32% 27% -30% -20% 18% 16% -5% 57% 50% 13% 12% 29% 17%

Cost of sales 4,224 5,289 1,319 1,426 2,262 2,758 7,765 2,276 2,310 2,436 2,876 9,898 11,013

Gross Profit 17,670 22,516 3,728 4,202 5,525 5,317 18,772 5,635 6,131 6,359 6,185 24,310 29,011

Gross margin (%) 80.7% 81.0% 73.9% 74.7% 71.0% 65.8% 70.7% 71.2% 72.6% 72.3% 68.3% 71.1% 72.5%

Sales & Marketing 10,055 10,630 2,480 2,896 3,343 3,226 11,945 3,578 3,619 3,743 3,869 14,809 16,986

as % of total sales 46% 38% 49% 51% 43% 40% 45% 45% 43% 43% 43% 43% 42%

General & Administrative 7,600 7,068 1,716 1,708 1,843 1,890 7,157 2,006 1,993 2,059 2,005 8,062 8,798

as % of total sales 35% 25% 34% 30% 24% 23% 27% 25% 24% 23% 22% 24% 22%

Research & Development 4,552 5,094 1,106 1,159 943 859 4,067 905 1,242 1,192 1,313 4,651 4,976

as % of total sales 21% 18% 22% 21% 12% 11% 15% 11% 15% 14% 14% 14% 12%

EBITDA -137 3,091 -877 -796 511 783 -379 -553 99 199 -197 -452 1,528

EBITDA margin (%) -1% 11% -17% -14% 7% 10% -1% -7% 1% 2% -2% -1% 4%

Depreciation 232 314 90 90 105 109 394 110 111 112 113 447 451

Amortization 1,373 1,637 469 611 718 1,180 2,978 584 590 596 602 2,371 2,395

Stock Compensation 3,049 1,903 258 127 326 298 1,009 273 285 290 256 1,104 1,111

Other 254 487 120 63 34 146 363 666 165 165 165 1,161 680

Transaction related 0 143 257 768 202 87 1,314 0 0 0 0 0 0

EBIT -4,791 -906 -1,951 -2,392 -840 -891 -6,074 -1,520 -887 -799 -1,167 -4,374 -2,428

EBIT margin (%) -22% -3% -39% -43% -11% -11% -23% -19% -11% -9% -13% -13% -6%

Finance Income, net -117 -148 -41 -12 -6 -5 -64 -6 3 3 3 3 7

Profit before tax -4,674 -758 -1,910 -2,380 -834 -886 -6,010 -1,514 -890 -802 -1,170 -4,377 -2,435

Tax (credit)/charge 13 75 18 15 30 -11 52 7 13 13 19 52 49

Effective Tax Rate -0.3% -9.9% -0.9% -0.6% -3.6% 1.2% -0.9% -0.5% -1.5% -1.6% -1.6% -1.2% -2.0%

Net Profit -4,687 -833 -1,928 -2,395 -864 -875 -6,062 -1,521 -903 -815 -1,189 -4,429 -2,484

Profit margin (%) -21% -3% -38% -43% -11% -11% -23% -19% -11% -9% -13% -13% -6%

Basic Shares (M) 205 210 210 227 238 273 228 238 238 238 238 238 238

Diluted Shares (M) 205 210 210 227 238 273 228 238 227 238 238 238 238

Basic EPS ($) -0.02 0.00 -0.01 -0.01 0.00 0.00 -0.03 -0.01 0.00 0.00 -0.01 -0.02 -0.01

Diluted EPS ($) -0.02 0.00 -0.01 -0.01 0.00 0.00 -0.03 -0.01 0.00 0.00 -0.01 -0.02 -0.01

($CAD K)




Exhibit 23 – Balance Sheet, 2013-2017e ($CAD 000s)

BALANCE SHEET F2013 F2014 FQ115 FQ215 FQ315 FQ415 FQ116e FQ216e FQ316e FQ416e F2017e

($US K) Dec-13 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Dec-17

Cash & equivalents 12,173 12,612 5,162 7,893 4,529 6,553 6,380 5,092 5,331 5,283 7,419

Accounts receivable 4,153 4,879 5,311 5,789 9,636 7,127 7,980 8,694 8,778 8,602 9,310

Prepaid expenses and other 791 704 685 718 1,042 1,101 965 1,030 1,073 1,105 1,257

Other Receivables 0 895 995 1,095 1,195 849 917 926 935 945 973

Current Assets 17,117 19,090 12,153 15,495 16,402 15,630 16,242 15,742 16,118 15,935 18,959

Restricted Cash 33 56 55 80 144 123 123 144 144 144 144

Capital assets 675 747 767 817 744 691 666 619 555 701 535

Intangible assets 9,017 8,657 13,889 13,796 13,098 11,929 11,394 10,839 10,279 9,681 7,422

Goodwill 6,771 6,948 7,890 10,751 10,751 10,763 10,763 10,763 10,763 10,763 10,763

Prepayments 0 34 29 0 0 19 53 0 0 0 0

Total Assets 33,613 35,532 34,783 40,939 41,139 39,155 39,241 38,107 37,858 37,224 37,823

Accounts payables and accruals 3,755 5,136 5,983 6,330 5,482 4,949 5,463 5,712 5,833 5,889 7,505

Deferred Revenue 3,032 2,135 2,180 2,041 3,591 2,702 3,510 2,774 2,947 2,982 3,342

Current Liabilities 6,787 7,271 8,163 8,371 9,073 7,651 8,973 8,487 8,780 8,871 10,846

Capital lease obligations 5 0 0 0 0 0 0 0 0 0 0

Other long term liabilities 345 64 64 39 22 8 20 0 0 0 0

Customer deposits 0 345 345 345 345 346 346 345 345 345 345

Long Term Liabilities 350 409 409 384 367 354 366 345 345 345 345

Capital Stock 48,224 49,802 49,831 58,025 58,078 58,078 58,078 58,078 58,078 58,078 58,078

Warrants 235 0 0 65 65 94 94 94 94 94 94

Contributed surplus 12,063 12,929 13,187 13,296 13,622 13,920 14,193 14,382 15,029 18,732 19,840

Deficit -34,046 -34,879 -36,807 -39,202 -40,066 -40,942 -42,463 -43,278 -44,468 -48,896 -51,381

Shareholders Equity 26,476 27,852 26,211 32,184 31,699 31,150 29,902 29,276 28,733 28,008 26,632

Shareholders Equity & Liabilities 33,613 35,532 34,783 40,939 41,139 39,155 39,241 38,107 37,858 37,224 37,823




Exhibit 24 – Cash Flow Statement, 2013-2017e ($CAD 000s)

CASH FLOW STATEMENT F2013 F2014 FQ115 FQ215 FQ315 FQ415 F2015 FQ116 FQ216e FQ316e FQ416e F2016e F2017E

($CAD K) Dec-13 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Dec-16 Dec-17

Operating Activities:

Net Profit -4,687 -833 -1,928 -2,395 -864 -876 -6,063 -1,521 -903 -815 -1,189 -4,429 -2,484

Depreciation & Amortization 1,605 1,951 559 701 823 1,289 3,372 694 701 708 715 2,818 2,846

Stock based compensation 3,049 1,903 258 127 326 298 1,009 273 285 290 256 1,104 1,111

Other 50 96 30 0 34 0 64 0 0 0 0 0 0

Net Change in Working Capital -2,485 -1,006 343 -1,083 -3,342 1,496 -2,586 548 -1,274 157 225 -344 1,087

Net Cash Flow From Operations -2,468 2,111 -738 -2,650 -3,023 2,207 -4,204 -6 -1,192 340 6 -852 2,560

Financing Activities:

Issuance of common shares 0 0 0 7,153 0 0 7,153 0 0 0 0 0

Proceeds from exercise of options 112 212 0 18 0 0 18 0 0 0 0 0

Cost of issuance of shares -1 -2 -1 -728 19 0 -710 0 0 0 0 0

Repayment of capital lease obligation -51 -45 -1 -1 -1 -2 -5 0 -1 -1 -1 -3 -3

Net Cash from financing activities 60 165 -2 6,442 18 -2 6,456 0 -1 -1 -1 -3 -3

Investing Activities:

Capital asset purchases -511 -386 -110 -26 -40 -60 -236 -85 -60 -65 -50 -260 -286

Acquisition of intangible assets -241 -1,100 -51 -30 -20 -11 -112 -49 -35 -35 -4 -123 -136

Business Combinations 0 -354 -6,592 -1,000 -347 -276 -8,215 -300 0 0 0 -300 0

Other investing expenses 134 -24 1 0 0 -1 0 0 0 0 0 0

Free Cash Flow -3,220 625 -899 -2,706 -3,083 2,136 -4,552 -140 -1,287 240 -48 -1,234 2,139

Net Cash from Investing activities -618 -1,864 -6,752 -1,056 -407 -348 -8,563 -434 -95 -100 -54 -683 -421

+/- Exchange rate impact 191 27 42 -4 47 167 252 267 0 0 0 267 0

Net cash Increase -2,835 439 -7,450 2,732 -3,365 2,024 -6,059 -173 -1,288 239 -49 -1,270 2,136




Exhibit 25 – Revenue Profile, 2013-2017e ($CAD 000s)

INCOME STATEMENT F2013 F2014 FQ115 FQ215 FQ315 FQ415 F2015 FQ116 FQ216e FQ316e FQ416e F2016e F2017E


Divisional Segmentation

Symbility Property 17,828 23,157 3,672 4,320 5,072 5,135 18,199 5,297 5,549 5,895 5,965 22,705 27,561

as % of total sales 81% 83% 73% 77% 65% 64% 69% 67% 66% 67% 66% 66% 69%

Symbility Health 4,066 4,648 1,375 1,266 1,253 1,457 5,351 1,562 1,373 1,370 1,555 5,859 6,302

as % of total sales 19% 17% 27% 22% 16% 18% 20% 20% 16% 16% 17% 17% 16%

Strategic Services (net of eliminations) 42 1,462 1,483 2,987 1,052 1,519 1,531 1,542 5,644 6,161

as % of total sales 1% 19% 18% 11% 13% 18% 17% 17% 16% 15%

Regional Segmentation

Canada 5,032 5,717 1,623 1,572 2,939 3,083 9,217 2,867 3,023 3,048 3,246 12,184 13,053

as % of total sales 23% 21% 32% 28% 38% 38% 35% 36% 36% 35% 36% 36% 33%

United States 14,161 17,422 2,081 2,273 2,875 3,152 10,381 2,977 3,093 3,218 3,136 12,425 14,136

as % of total sales 65% 63% 41% 40% 37% 39% 39% 38% 37% 37% 35% 36% 35%

International 2,701 4,666 1,343 1,783 1,973 1,840 6,939 2,067 2,325 2,529 2,678 9,599 12,835

as % of total sales 12% 17% 27% 32% 25% 23% 26% 26% 28% 29% 30% 28% 32%

Revenue 21,894 27,805 5,047 5,628 7,787 8,075 26,537 7,911 8,441 8,795 9,061 34,208 40,024

yoy growth (%) 32% 27% -30% -20% 18% 16% -5% 57% 50% 13% 12% 29% 17%

($CAD K)




Exhibit 26 – Property Income Statement, 2013-2017e ($CAD 000s)

PROPERTY INCOME STATEMENT F2013 F2014 FQ115 FQ215 FQ315 FQ415 F2015 FQ116 FQ216e FQ316e FQ416e F2016e F2017E


Revenue 17,828 23,157 3,672 4,320 5,072 5,135 18,199 5,297 5,549 5,895 5,965 22,705 27,561

yoy growth (%) 38% 30% -39% -27% -8% -10% -21% 44% 28% 16% 16% 25% 21%

Cost of sales 2,395 3,105 720 812 785 1,271 3,588 819 841 935 1,298 3,894 4,513

Gross Profit 15,433 20,052 2,952 3,508 4,287 3,864 14,611 4,478 4,708 4,959 4,666 18,812 23,048

Gross margin (%) 86.6% 86.6% 80.4% 81.2% 84.5% 75.2% 80.3% 84.5% 84.8% 84.1% 78.2% 82.9% 83.6%

Sales & Marketing 8,995 9,378 2,226 2,580 2,506 2,605 9,917 2,936 2,825 2,909 3,015 11,685 12,955

as % of total sales 50% 40% 61% 60% 49% 51% 54% 55% 51% 49% 51% 51% 47%

General & Administrative 6,855 6,142 1,430 1,399 1,471 1,550 5,850 1,690 1,531 1,567 1,478 6,265 6,825

as % of total sales 38% 27% 39% 32% 29% 30% 32% 32% 28% 27% 25% 28% 25%

Research & Development 3,902 4,012 842 821 606 531 2,800 625 796 796 774 2,991 3,271

as % of total sales 22% 17% 23% 19% 12% 10% 15% 12% 14% 14% 13% 13% 12%

Other Expenses 247 615 372 833 223 135 1,563 628 0 0 0 628 0

Segment Operating Profit -4,566 -95 -1,918 -2,125 -519 -957 -5,519 -1,401 -444 -312 -600 -2,758 -3

Operating margin (%) -26% 0% -52% -49% -10% -19% -30% -26% -8% -5% -10% -12% 0%

Finance income, net -2 0 0 0 0 0 0 0 0 0 0 0

Income tax expense 13 75 18 15 30 -11 52 7 0 0 0 7 0

Segment income (loss) -4,577 -170 -1,936 -2,140 -549 -946 -5,571 -1,408 -444 -312 -600 -2,765 -3

Profit margin (%) -26% -1% -53% -50% -11% -18% -31% -27% -8% -5% -10% -12% 0%

($CAD K)




Exhibit 27 – Health and Strategic Services Income Statements, 2013-2017e ($CAD 000s)

HEALTH INCOME STATEMENT F2013 F2014 FQ115 FQ215 FQ315 FQ415 F2015 FQ116 FQ216e FQ316e FQ416e F2016e F2017E


Revenue 4,066 4,648 1,375 1,266 1,253 1,457 5,351 1,562 1,373 1,370 1,555 5,859 6,302

yoy growth (%) 13% 14% 20% 11% 12% 17% 15% 14% 8% 9% 7% 9% 8%

Cost of sales 1,829 2,184 599 590 612 625 2,426 696 602 613 668 2,580 2,803

Gross Profit 2,237 2,464 776 676 641 832 2,925 866 770 757 886 3,279 3,499

Gross margin (%) 55.0% 53.0% 56.4% 53.4% 51.2% 57.1% 54.7% 55.4% 56.1% 55.2% 57.0% 56.0% 55.5%

Sales & Marketing 1,060 1,252 254 304 392 286 1,236 344 430 440 461 1,675 2,223

as % of total sales 26% 27% 18% 24% 31% 20% 23% 22% 31% 32% 30% 29% 35%

General & Administrative 745 926 286 301 185 120 892 96 207 237 288 828 952

as % of total sales 18% 20% 21% 24% 15% 8% 17% 6% 15% 17% 19% 14% 15%

Research & Development 650 1,082 264 338 337 328 1,267 280 446 396 539 1,660 1,705

as % of total sales 16% 23% 19% 27% 27% 23% 24% 18% 32% 29% 35% 28% 27%

Other Expenses 7 15 5 -2 4 75 82 4 0 0 0 4 0

Segment Operating Profit -225 -811 -33 -265 -277 23 -552 142 -312 -316 -402 -888 -1,381

Operating margin (%) -6% -17% -2% -21% -22% 2% -10% 9% -23% -23% -26% -15% -22%

Finance income, net 2 0 0 0 0 0 0 0 0 0 0 0 0

Segment income (loss) -227 -811 -33 -265 -277 23 -552 142 -312 -316 -402 -888 -1,381

Profit margin (%) -6% -17% -2% -21% -22% 2% -10% 9% -23% -23% -26% -15% -22%

STRATEGIC SERVICES INCOME STATEMENT FQ115 FQ215 FQ315 FQ415 F2015 FQ116 FQ216e FQ316e FQ416e F2016e F2017E

Mar-15 Jun-15 Sep-15 Dec-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Dec-16 Dec-17not full quarter

Revenue 42 1,472 1,497 3,011 1,140 1,519 1,531 1,542 5,732 6,161

yoy growth (%) n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a

Cost of sales 24 865 862 1,751 792 866 888 910 3,455 3,697

Gross Profit 18 607 635 1,260 348 653 643 632 2,276 2,464

Gross margin (%) 1.4% 48.4% 43.6% 23.5% 22.3% 47.6% 46.9% 40.7% 38.9% 39.1%

Sales & Marketing 12 445 359 816 355 364 394 393 1,506 1,807

as % of total sales 1% 36% 25% 15% 23% 27% 29% 25% 26% 29%

General & Administrative 8 187 220 415 220 255 255 239 969 1,022

as % of total sales 1% 15% 15% 8% 14% 19% 19% 15% 17% 16%

Other Expenses 0 19 13 32 34 0 0 0 34 0

Segment income (loss) -2 -44 43 -3 -261 34 -6 0 -233 -365

Profit margin (%) 0% -4% 3% 0% -17% 2% 0% 0% -4% -6%

($CAD K)

($CAD K)




Appendix

Symbility PROPERTY

The Property segment is the largest business unit at SY. It makes for the bulk of the revenue mix (2015: 67%), offers regional diversification, and drives consolidated profitability. The market is dominated by a single large competitor. It displaced SY at a large customer and caused share loss in 2015. However, outside North America Property sales ramped at 68% CAGR 2012-2015 and made for 26.1% of total 2015 sales. We see the salesforce headcount rise in Europe and expansion to Asia Pacific as catalysts for further upside. We expect Property sales to return to growth in 2016e with 20%+ y/y upside in 2017e. In turn, the resulting margin expansion is set to partially absorb the costs associated with growth investments.

Exhibit 28 – Property Requires Scale and Revenues of $25M to generate Emerging Profitability

-10

-5

0

5

10

15

20

25

2011 2012 2013 2014 2015

$M

EBIT ($M) Revenues ($M)

70%

75%

80%

85%

90%

95%

100%

2011 2012 2013 2014 2015

Gro

ss m

argi

n (

%)

Gross margin (%)


Product Portfolio I: Workflow Management: Through the Property division, SY sells software to insurance carriers. Its products allow for the facilitation of property and casualty claims. SY offers a platform that provides end-to-end support for the entire claims submission process: collection of claims, generation of cost estimates, visibility to multiple counterparties within the process, speedy time to adjudication, and improvement of overall user experience. The offerings include:

Claims Connect: A cloud-based workflow management solution that allows insurance carriers to facilitate and

monitor the claims submission process;

Mobile Claims: SY offers a field estimation tool used by employees of insurance companies and third-party

adjusters to record claims information and submit on-site-generated cost estimates; and

Reporting Analytics: This tool allows the use of statistical analysis to generate feedback aimed at improving the

effectiveness of the process and generate business impactful recommendations to insurers.

Product Portfolio II: External Database: SY uses a third-party database that is owned by its single largest shareholder. In-field claims adjusters depend on material and labour pricing information to derive cost estimates. The reliability, accuracy, and validity of such data make it the key source of SY’s competitive advantage.



Exhibit 29 – Our Serviceable Addressable Market is c. 50% of TAM according to Third-party Estimates

Echelon Wealth Partners est. 2013 2014 2015 2016e SY est.

United Sates TAM

Number of US households (M) 132.8 134.0 135.0 136.1

Total Insured Homes in US (M) 126.2 127.3 128.3 129.3

as % of total (%) 95% 95% 95% 95%

Households that filed claims (%) 5.0% 5.2% 5.4% 5.6%

Total Claims filed in the US (M) 6.4 6.7 6.9 7.2

Average Revenue per claim ($) 30 30 30 30

Regional claims revenue potential

United States ($M) 190.8 200.1 208.0 216.0 350

Canada ($M) 19.1 20.0 22.9 23.8

Western & Northern Europe ($M) 77.6 81.4 84.6 87.8 280

Australia & Japan ($M) 76.3 80.0 83.2 86.4 170

Claim TAM revenues ($M) 363.7 381.4 398.8 414.0 800

Third-party estimates: includes US & Canada and upsells above claims.

Third-party estimates: includes all Europe and Russia.

EWP: just countries where SY is now present: Poland, France, Belgium, Netherlands, UK, Germany

Third-party estimates: includes China.


Total addressable opportunity and market share: We believe that property claims software market penetration in the US is currently at 45-50%. That implies that SY and its competitor(s) are capturing roughly half of the TAM potential of c. 7M claims filed annually in the US (EWP estimates). Our TAM estimates are based on:

Number of insured homes in the US: We used the trends in household formations and census data to derive the

number of homes in the US. The Insurance Information Institute cites that 95% of homes are insured;

We made adjustments for the year of construction. US census data puts 35-year+ homes at 60% of total US

households. Our adjustments were based on assumptions that older homes suffer a greater deal of damage

caused by natural disasters;

The number of claims filed in the US in 2015 came to 6.9M or at a blended rate of 5.4% of the total homes

insured in the US. In 2014, that number was 6.7M or 5.2% of total insured homes (vs. 5% cited by the Insurance

Information Institute); and

International: Our findings included a figure of 64% as the portion of insured UK homes. We used a similar

estimate as a proxy for the European markets that SY targets (Poland, France, Belgium, Netherlands, the UK, and

Germany). Other supporting data used in our analysis: individual country population size and GDP.

We believe SY processed c. 400K property claims in the US in 2015, implying a market share of c. 6-7%. In 2016e, we expect SY’s installed base to process a total of c. 900K claims versus 870K in 2013 when SY last reported those figures. Overall, the TAM that includes US, Canada and Europe (countries where SY is currently present) comes to 10-11M property insurance claims submitted on an annual basis (EWP estimates). That puts SY’s 2016 TAM penetration at c. 8% of the immediately addressable space. Add in the recent expansion into Australia and New Zealand (with possible offerings in Japan), and SY looks positioned for an additional 2-3M claims in TAM expansion.



Exhibit 30 – Backlog of Live Pilots has been on an Upswing as International Greenfield Matures

0

5

10

15

20

Q115 Q215 Q315 Q415 Q116

Pilot count at end of quarter Pilots added in quarter


Backlog and visibility: We believe that SY had 70-71 active clients (large insurance companies) at the end of 2015. The customer count rose from c. 50 in mid-2013 on the back of client wins in the US and Europe. At the end of 2014, we estimate that SY had 4 active pilots, added 27 new pilots through 2015, lost 6, and ended 2015 with 13 active pilots at various insurance carriers. SY ended Q116 with 15 active pilots (vs. 5 at the end of Q115). Most of the 3x+ upside in the number of pilots over that 12-month period came on the back of SY’s upside in international markets.

With a recent ramp in capacity investments, we see c. 30+ pilots added in 2016e, 25-26 converted to customers, and 9-10 lost (10% of total pilots after a full-quarter worth of new pilot additions). As a result, we expect SY to end 2016e with 95-100 insurance carriers as clients.

Exhibit 31 – Conversion from Pilots to Clients will be Volatile due to Shelved Projects in the Mix

0.0%

20.0%

40.0%

Q115 Q215 Q315 Q415 Q116

Conversion rate from pilots to contracts Pilot attrition (%)

Q115 Q116

Pilots at beginning of period 4 13

New pilots 1 9

Converted to contracts 0 5

Pilots lost 0 2

Pilots at end of period 5 15


Revenue growth potential: Each customer win brings in an active ecosystem of claims adjusters, building contractors, internal adjusters (insurance company staff), and policy holders. We believe that SY supported c. 60K revenue-generating participants in Q116 (vs. 50-55K in mid-2015). In seasonally strong quarters (Q2 and Q3), we believe that SY’s total install base processes c. 250-300K claims per quarter.

Property revenues are driven by transactions. SY charges clients based on the volume of claims processed. Some contracts are limited on the downside. SY charges a fixed amount based on the minimum number of claims in a given period. Since 2012, SY’s Property revenue grew 12.1% CAGR to 2015, mostly as a result of organic growth. However, a



large contract loss at the end of 2014 caused a 21.4% y/y revenue drop in 2015, drastically underrepresenting the Property division’s growth potential.

Organic revenue growth: The Property division’s organic revenue growth was 29.2% in 2014. In 2015, SY saw Property (organic) revenue grow at 14.7% y/y after excluding the impact from the Farmers contract in 2014 ($9.5M) and acquisitions. We made additional adjustments that include the contribution from Farmers’ external suppliers (c. $1M). The loss of a contract causes the entire ecosystem to change vendors. In turn, SY’s Property division grew 23.8% y/y on an organic basis in 2015. We believe that this rate of growth (blue line in Exhibit 32) shows a more accurate potential. Our current forecasts point to c. 20% revenue CAGR 2016-2017e in the Property division.

Exhibit 32 – We expect Organic Growth to remain at 20%+ Y/y in 2016e

-40.0%

-20.0%

0.0%

20.0%

40.0%

2013 2014 2015 2016e

Reported Property revenue growth (%)Organic Property revenue growth, adj. for Farmers contract only(%)Ogranic Property revenue growth, adj. for Farmers & third-party ecosystem (%)


Outperforming margin profile: We believe that Property will remain the profitability driver at SY. High-GM% recurring revenues (transactions) make for 90-91% of Property revenues. That gives the division the scale to generate cost efficiencies on the back of the low-capital requirements for the cloud software delivery model. Most of the cost of sales (COGS) came from amortization of database licenses and royalty payments on third-party technology. On a combined basis, those expenses made for $2.7M of the $3.6M total COGS in 2015. SY’s 80%+ GM% (Q116: 84.5%) remains the key driver of its consolidated performance. We expect the division’s Professional Services revenues (GM% at 40-50%) to rise in the mix due to the ongoing international expansion. But, we expect their contribution to remain relatively stable at c. 10% going forward (EWP estimates). We also expect the international expansion to contribute to the $1-2M EBIT loss in 2016e.

Symbility HEALTH

The Health division is the Company’s second largest business unit. Over the last three years, revenues grew at a fairly consistent mid-teen percentage rate. In 2015, Health contributed 20.2% of total revenues. All revenues originated in Canada with the potential for a vast near-term geographic expansion distant. As in Property, revenues in the Health segment are generated from transactions. Its single geography focus and the resulting scale have contributed to relatively inferior margins (vs. Property). Health has captured a solid customer base, despite facing a more diverse competitive landscape (vs. Property). We see steady trends of customer wins in the near term, as productivity gains drive end-market adoption. Our expectations for 2016e, however, come at the lower end of management’s target due to SY’s focus-shift onto international expansion in the Property segment.



Exhibit 33 – A Less Ambitious Division

0%

2%

4%

6%

8%

10%

12%

14%

16%

0

1

2

3

4

5

6

2012 2013 2014 2015

Sale

s gr

ow

th (

%)

Re

ven

ue

s ($

M)

Revenues ($M) Sales growth (%)

40%

42%

44%

46%

48%

50%

52%

54%

56%

58%

60%

-1.00

-0.60

-0.20

0.20

0.60

1.00

2012 2013 2014 2015

Sale

s gr

ow

th (

%)

Re

ven

ue

s ($

M)

EBIT ($M) Gross Margin (%)


Product Portfolio: SY targets Third Party Administrators (TPAs administer employee benefit plans), employee benefit brokers, and insurance carriers. The Company’s web-based solution manages health and dental claims. That includes electronic submissions, processing in real-time, and automation of the adjudication process. In addition, SY’s Health platform provides a seamless exchange of data between the carrier and TPAs, lowering transaction costs and overhead.

Exhibit 34 – Health Product Portfolio

PRODUCT DESCRIPTION USERS

Adjudicare

Cloud-based adjudication and

claims payment solution for

health and dental claims

- Employee benefits brokers

- TPAs

- Plan members

- Plan sponsors

Symbility Health

Claims Connect

Workflow management tool that

acts as a communications hub,

data warehouse, and anlytics

engine.

- TPAs

- Plan sponsors

- Plan members

- Insurance carriers

Symbility Health

Mobile Claims

Mobile application that allows

plan members to manage and

submit health and dental claims

using a mobile device.

- Plan members


Steady revenue growth: The Health division saw a steady mid-teen-percent revenue growth over the last five years. For the most part, sales come from medium-sized TPAs serving specific regions. SY’s larger peer, TELUS Health (part of



TELUS Corp. [T-T, PT $43, $44.02, Buy]), is more active in the high end, with the largest TPAs as clients. Over the years, however, SY grew its base to c. 75 healthcare clients that generate adjudication revenues. As in Property, SY takes a percentage revenue share from each transaction. Those transaction revenues, in our estimates, contribute 80% of the Health division’s total sales. The balance of the mix comes from proceeds in pharmacy markets where we believe SY has two large benefit management clients (Express Scripts Canada and BioScript).

Exhibit 35 – Property and Health, a Side-by-side Comparison

2015Health adjudication revenues ($M)

Pharmacy revenues ($M)

0.0% 20.0% 40.0% 60.0% 80.0% 100.0%

Health

Property

Gross Margin

0.0% 20.0% 40.0% 60.0% 80.0%

Health

Property

Contribution in the mix

0%

5%

10%

15%

Health Property

Professional Services contribution (%)


Management targets 10-15% y/y sales growth this year in Health. Our forecasts, however, point to a 9-10% y/y upside as investments favour international expansion at Property. SY claims portability of the health platform to regions outside of Canada, but we see no indication of an aggressive push in the near term. Also, generating upsells by expanding Adjudicare to include enrollment and administration does not appear to be a priority at the moment.

Health segment GM% is below the corporate average. Even a high share of transactions (c. 85%) in the revenue mix seems insufficient to raise the profile closer to that at Property. We believe that a more concentrated competitive landscape may constrain pricing power. Add in that Health revenues are limited to Canada, and we see the lack of scale as a bottleneck to a near-term upside. The Health division remains lossmaking with annual operating losses of sub-$1M.

Competition: In the high end, TELUS Health and ClaimSecure dominate the market. SY focuses more on mid-sized TPAs that serve insurer carriers and employee benefit brokers. Elsewhere, smaller privately held and publicly listed vendors compete for position.

TELUS Health: TELUS Health was launched after TELUS acquired Emergis in 2008 ($763M; 3.6x EV/LTM Revenue).

Emergis provides automation of transactions at health and financial services customers. TELUS Health serves five



of the ten largest insurers and providers of Employee Benefit Plans (EBP) in Canada. The five clients are reported

to have generated 73% of all proceeds from EBP in 2014 (source: Fraser Group). TELUS Health manages claims

and benefits, allowing real-time adjudication of drug, dental and extended healthcare claims. TELUS’ eClaim has

customers that include some of the largest Group Life and Health insurers (Sun Life Financial, Manulife, Great-

West Life, Desjardins Financial and Industrial Alliance), and large TPAs (Cowan, Johnston Group, and Johnson).

ClaimSecure provides Health and Dental Claims management and benefit management services. Those include

processing of health and dental benefit transactions and real-time transmission to claimants and service

providers. Its benefit management services include: (i) designing and administering health benefit plans, and (ii)

managing health claims on behalf of corporations, insurers, TPAs and others. ClaimSecure operates as part of

drugstore chain Rexall Health (owned by the privately held Katz Group). In March 2016, US-based McKesson

offered to acquire Rexall Health for C$3B.

Esorse Corporation (Private): Esorse provides electronic health and dental claims processing software. It serves

insurers, TPAs, insurance brokers and self-insured corporations. Its products support claims management services

and payment processing (hybrid pay-direct card used as a payment vehicle for health services). Its claims

management services include real-time electronic claims processing and adjudication services, on-line reporting,

and consolidated billing and administration of traditional insurance group benefit plans.

NexGenRX (NXG-TSXV, NR): NXG offers claims management software that supports end-to-end processing of

health and dental claims. Its software automates the adjudication of drug, dental and extended health care

claims. NXG also provides web-based administration services for all employee benefits, including enrollment,

consolidated billing and reporting.

Symbility STRATEGIC SERVICES

SY established the Strategic Services division (SSD) after the acquisition of BNOTIONS in June 2015. During that year, the division contributed 11.3% to total revenues on the back of little over two quarters to consolidated sales. SSD develops enterprise software, mobile applications, and data and analytics tools. SY sees it as a strategic asset that is set to drive cross-selling opportunities. In our view, it is too early to determine the impact on the overall business due to its recent launch. However, any move toward firmer positioning and ahead of still-menacing competition is encouraging. We believe that the addition of SSD will incrementally help penetrate the high-end of TAM as the division is widening SY’s offerings at existing and prospective clients.

Exhibit 36 – A Slow Start to 2016

-0.5

0.0

0.5

1.0

1.5

2.0

Q315 Q415 Q116

Revenues ($M) EBIT ($M)

25.0%

30.0%

35.0%

40.0%

45.0%

Q315 Q415 Q116

Gross margin (%)




The “Strategic” in Strategic Services: SSD brings a more diversified approach to customer wins. The division expands SY’s product portfolio, firming its presence at existing clients. It augments SY’s offerings beyond software sales by assisting clients deploying technology-driven (design, engineering, and data services) go-to-market strategies. This, in our view, drives up the cost of displacing SY’s solutions and reduces the structural threats from a hypercompetitive environment. Further, SY sees SSD as a driver of cross-selling opportunities. SSD is expected to convert its customer engagements (development projects, trials, pilot deployments, etc.) to insurance platform sales. In turn, we see the SSD acquisition as a source of strategic positioning at prospective clients whose perception of urgency for claims processing modernization is insufficient to drive contract wins at SY.

Below we provide examples of some recent cross-selling opportunities:

Property: SY was able to win a pilot with a Canadian insurance company as a result of a development project with

the SSD team; and

Health: SSD is now in late-stage negotiations with a major pharmacy to deploy apps as well as expand offerings at

an existing insurance account.

Exhibit 37 – Strategic Services Division Broadened Offerings, but changed Sales Composition

2014 2015 2016e

91%

Recurring Revenues (%)

Property & Health Services (%)

80%

Recurring Revenues (%)Property & Health Services (%)Strategic Services (%)

74%

Recurring Revenues (%)Property & Health Services (%)Strategic Services (%)


SSD has had a slow start in 2016. With $1.1M contribution in Q116, the division’s revenues declined q/q from a quarterly run-rate of c. $1.5M in H215. Some of the impact may be due to seasonal budgeting at clients. We expect quarterly sales volatility to remain in place with an average quarterly contribution of $1.5M. We expect the division to contribute 16-17% of the mix in 2016e. But once added to other professional services, SSD’s revenues will help drive non-recurring revenues to c. 26% of SY’s top line in 2016e (vs. 9-10% in 2014). SSD’s project-driven business model keeps the division’s GM% below those at other segments. The lack of transaction or fixed-recurring revenues will see GM% remain below the corporate average. Our forecasts include a $0.5-1.0M EBITDA loss at SSD in 2016e.

Ownership Structure

Symbility Solutions is a publicly listed company with 237.5M shares issued (as of Q116). The shareholders consist of institutional funds, management and insiders, strategic investors, and retail participants.

Strategic Holding: CoreLogic owns 28.3% of SY’s common shares and is the largest single shareholder. CLGX is a NYSE-listed provider of property data and analytics. It serves clients in the mortgage, insurance and auto industries. Its offerings are largely complementary to those at SY. Its Risk Management business provides credit history, property



transactions and flood data. The Work Flow segment is an enterprise software platform aimed at the financial services market. CLGX serves clients in North America, Europe, and Asia Pacific.

In March 2014, CLGX became a strategic shareholder (28.3% interest) at SY after the following series of events:

In January 2012, privately held Decision Insight Information Group (DIIG) obtained a stake in Symbility Solutions.

SY offered 30% ownership in exchange for the Claims division of Marshall Swift/Boeckh (MSB), a subsidiary of

DIIG. SY issued 52.2M new shares to MSB (balance of assets) that remained a fully owned subsidiary of DIIG. At

the time, DIIG was a 100%-owned subsidiary of Property Data Holdings Ltd. (a portfolio company of TPG Capital, a

private equity firm). In 2012, TPG indirectly owned 33.3% of SY after MSB bought an additional 7M shares at

$0.27 via a private placement (59.2M shares). As a part of the transaction, SY elected three board members from

TPG’s ownership structure (one from TPG and two from DIIG).

On July 1 2013, CLGX bid $661M (reportedly) for three DIIG-held businesses (MSB, DataQuick Information

Systems, DataQuick Lender Solutions). The transaction closed in March 2014 with MSB bringing in a database of

building cost information and analytics for property insurance and financial services customers to CLGX. In turn,

the company obtained all of MSB’s 61.4M shares at SY (at $0.40/shr). In April 2015, CLGX participated in the

equity raise at $0.33/shr and currently holds a 28.3% interest (67.7M total shares held) in SY.

CLGX has three seats on SY’s Board (total of 9). As long as CLGX’s interest remains above 20%, the company has the right to one-third of the total Board seats. A stand-still agreement prohibits CLGX from making an unsolicited bid for the remaining stake. That agreement is set to expire in April 2017.

Exhibit 38 – Strategic Investor allows SY to face US Competition on a more Comparable Basis

Source: Capital IQ, CoreLogic, Company Reports and Filings

Public Ownership: The single largest institutional shareholder (CIBC Asset Management) owns 10.2%. Insiders (current management, mostly board members) hold 13.3% of all shares. The CEO of Symbility (James Swayze) owns 4.2% and the Chairman (Scott Paterson) has 4% of common shares. The vast majority of the float (48%) remains with public and retail investors.



Management Biographies

James R. Swayze, Chief Executive Officer & Board Director

James Swayze is the Chief Executive Officer and one of the founders of Symbility Solutions. Prior to founding Symbility, Mr. Swayze held various senior executive positions with a number of global technology, financial services and insurance companies, including General Electric. He has worked extensively in the US throughout his career and speaks fluent German. Mr. Swayze is an expert on the application of technology in the insurance sector, a regular contributor to key industry publications, and a sought-after speaker.

Blair R. Baxter, Chief Financial Officer

Blair Baxter serves as the Chief Financial Officer at Symbility and oversees the Company’s financial reporting and control, human resources, legal compliance, and corporate governance. He has over 25 years of experience at private and public technology companies. Mr. Baxter has also served as the Chair of the Board of Governors of The Michener Institute for Applied Health Sciences and other not for profit organizations. Mr. Baxter holds a Bachelor of Commerce degree from Carlton University and a Chartered Accountant designation.

Marc-Olivier Huynh, Chief Technology Officer & Founder

Marc-Olivier Huynh is the Chief Technology officer and a founder of Symbility Solutions. His primary focus at Symbility is stimulating innovation in the development and enhancement of the Company’s P&C insurance software. Mr. Huynh has over 20 years of software programming experience, and cofounded a services software company at 17 with clients in Canada and the US. During the completion of his computing engineering degree, Mr. Huynh build and sold custom software for other companies, with many still being used today. Mr. Huynh holds a Bachelor of Science degree in Computer Engineering from the École Polytechnique de Montréal.

Paul Crowe, CEO of Symbility Intersect and CMO of Symbility Solutions

Paul Crowe currently serves as the Chief Executive Officer of Symbility Intersect (previously BNOTIONS) and assumed the role of Chief Marketing Officer of Symbility Solutions in September 2015 after Symbility acquired BNOTIONS. As CEO of Symbility Intersect, Mr. Crowe works closely with Product and Engineering teams to ensure clients achieve their goals through the launch and optimization of mobile products, and strategic-innovation initiatives. He also oversees all marketing in North America, Europe and Asia in his role as CMO. Previously, Mr. Crowe worked in the digital advertising world, helping brands evolve CRM programs into data-driven eCRM programs, launching websites, building eCommerce sites, and assisting brands to create social media presence. He also co-founded TEDxToronto in 2009 and sits on various advisory boards, including the City of Toronto Innovation and Technology Advisory Board, ITAC and Interactive Ontario.

John Burega, Executive Vice President of Worldwide Sales

John Burega currently serves as EVP of Worldwide Sales, leading Symbility’s global, customer and training operations. Prior to joining Symbility, Mr. Burega spent the first decade of his career building business units for various corporations and managing operations throughout the US and Europe. He also cofounded a global technology company focused on the lottery and charity marketplace. Mr. Burega holds a Bachelor of Arts degree from the University of Western Ontario.



Selected Board Member Biographies

G. Scott Paterson, Chairman and Member of Corporate Governance & Nominating Committee

Scott Paterson is a Director serving on the board of Lions Gate Entertainment (LGF-US, NR). AT LGF, he chairs the company’s Audit & Risk committee. Mr. Paterson was involved in the founding of Jump TV. As the Chairman and CEO he led its IPO in 2006 and merger with NeuLion (NLN-T, NR) in 2008. Mr. Paterson is also the Chairman of Engagement Labs (EL-V, NR) a social media analytics company. His experience includes serving 16 years in the financial services industry. He was the Chairman and CEO of Yorkton Securities. Mr. Paterson has served as Chair of the Canadian Venture Exchange, Vice Chair of the TSX, governor of the Investment Dealers Association, and a Director on the councils of Canadian Investor Protection Fund, Canadian Securities Institute, and the Canadian Securities Advisory.

R. Larry Binnion, (independent) Chair of Audit Committee

Mr. Binnion was appointed to the board in 2009. He is a computer systems industry executive. He was the CEO of Versa Systems Ltd. (2001-2010), a software company focused on the eGovernment market. Mr. Binnion grew Versa into a leader in the software market for licensing, enforcement, and case management. He oversaw the sales of the business in 2010. Prior to Versa, Mr. Binnion spent 25 years at KPMG as a partner. His professional experience includes a managing partner at an oil and gas company, VP of IT at a large global insurance provider, program manager for a government vehicle licensing computer transformation project, national Director for an international auditing and consulting organization, and a managing partner for a computer outsourcing company.

Richard Hurwitz, (independent) Chair of Corporate Governance & Nominating Committee

Mr. Hurwitz has a 30-year track record of building technology companies with expertise in general management and capital raising in the US and abroad. Currently, Mr. Hurwitz is the CEO of Tungsten Corporation Plc. From 2010-2013, he was the CEO of Pictometry International. He led the transition of the company from image content company to a provider of geospatial solutions. Mr. Hurwitz also occupied the role of the Chairman of the Board at Pictometry (8 years). Prior to that, he was a partner at Aegis Investment Partners, managing partner with Mancorp Services, and managing Director of Bridge Information Systems (real-time financial information). Mr. Hurwitz currently serves as a Director at Manning and Napier (NM-US, NR). He is a National Association of Corporate Directors (NACD) Fellow.

Robert Landry, (independent) Chair of Compensation Committee

Mr. Landry was appointed to the board in 2009. He retired in 2007 after serving six years as President and CEO of the Canadian branch of Zurich Insurance. He was the Chair of Zurich’s Advisory Board from 2008-2010. He is also a Director on the Board of Trisura Surety and Guarantee Co., a Canada-based insurer. Mr. Landry serves on the Board of DAS Canada (part of DAS Group) and Wawanesa Mutual Insurance Co. He was a Director of the Insurance Institute of Canada (IIC) from 2006-2008 and Board Chair in 2007.

James Balas, (non-independent)

Mr. Balas is the Senior VP Finance and Controller at CoreLogic. He is responsible for leading the accounting, tax, treasure, risk management, financial planning and analysis, and SEC reporting at CLGX. Prior to that, he was a VP and Controller at Ameron International, a materials manufacturing company. Before Ameron, Mr. Balas held senior finance positions at Keystone Automotive Industries and Solar Integrated Technologies.



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ANALYST CERTIFICATION

Company: Symbility Solutions | SY: TSXV I, Andrej Krneta, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that I have not, am not, and will not receive, directly or indirectly, compensation in exchange for expressing the specific recommendations or views in this report. IMPORTANT DISCLOSURES

Is this an issuer related or industry related publication? Issuer

Does the Analyst or any member of the Analyst’s household have a financial interest in the securities of the subject issuer? If Yes: 1) Is it a long or short position? Yes; and, 2) What type of security is it? Common shares

No

Does the Analyst or household member serve as a Director or Officer or Advisory Board Member of the issuer? No

Does Echelon Wealth Partners Inc. or the Analyst have any actual material conflicts of interest with the issuer? No

Does Echelon Wealth Partners Inc. and/or one or more entities affiliated with Echelon Wealth Partners Inc. beneficially own common shares (or any other class of common equity securities) of this issuer which constitutes more than 1% of the presently issued and outstanding shares of the issuer?

No

During the last 12 months, has Echelon Wealth Partners Inc. provided financial advice to and/or, either on its own or as a syndicate member, participated in a public offering, or private placement of securities of this issuer?

No

During the last 12 months, has Echelon Wealth Partners Inc. received compensation for having provided investment banking or related services to this Issuer? No

Has the Analyst had an onsite visit with the Issuer within the last 12 months? No

Has the Analyst been compensated for travel expenses incurred as a result of an onsite visit with the Issuer within the last 12 months? No

Has the Analyst received any compensation from the subject company in the past 12 months? No

Is Echelon Wealth Partners Inc. a market maker in the issuer’s securities at the date of this report? No



RATING DEFINITIONS

Buy The security represents attractive relative value and is expected to appreciate significantly from the current price over the next 12 month time horizon.

Speculative Buy The security is considered a BUY but in the analyst’s opinion possesses certain operational and/or financial risks that are higher than average.

Hold The security represents fair value and no material appreciation is expected over the next 12-18 month time horizon.

Sell The security represents poor value and is expected to depreciate over the next 12 month time horizon.

Under Review While not a rating, this designates the existing rating and/or forecasts are subject to specific review usually due to a material event or share price move.

Tender Echelon Wealth Partners recommends that investors tender to an existing public offer for the securities in the absence of a superior competing offer.

Dropped Coverage Applies to former coverage names where a current analyst has dropped coverage. Echelon Wealth Partners will provide notice to investors whenever coverage of an issuer is dropped.

RATINGS DISTRIBUTION

Recommendation Hierarchy Buy Speculative Buy Hold Sell Under Review Restricted Tender

Number of recommendations 31 24 8 1 4 1 2

% of Total (excluding Restricted) 45% 35% 12% 1% 6%

Number of investment banking relationships 8 7 2 0 3 2 0

% of Total (excluding Restricted) 40% 35% 10% 0% 15%

PRICE CHART, RATING & PRICE TARGET HISTORY

Date Target (C$) Rating

25 Jul 2016 $0.50 Spec. Buy

Coverage Initiated: Jul 25, 2016

Data sourced from: Capital IQ

$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

Oct 14 Feb 15 Jun 15 Oct 15 Feb 16 Jun 16

Symbility Solutions Inc. (TSXV:SY)

Last Sale Price Target (C$)



Toronto Wealth Management

1 Adelaide Street East, Suite 2000

Toronto, ON M5C 2V9

416-572-5523

Toronto Capital Markets

130 King Street West, Suite 2500

Toronto, Ontario M5X 2A2

416-649-4273

Montreal Wealth Management

1000 De La Gauchetière St. West, Suite 1100

Montréal, QC H3B 4W5

514-396-0333

Montreal Wealth Management and Capital Markets

1501 McGill College Ave., Suite 1450

Montréal, Québec H3A 3M8

514-940-5096

Ottawa Wealth Management

360 Albert Street, Suite 800

Ottawa, ON K1R 7X7

1-877-967-5866

Calgary Wealth Management

350 - 7th Avenue SW, 19th Floor

Calgary, AB T2P 3N9

403-218-3144

Vancouver Wealth Management and Capital Markets

1055 Dunsmuir St. Suite 3424; P.O Box 49207

Vancouver, BC V7X 1K8

604-647-2888

Victoria Wealth Management

730 View Street, Suite 210

Victoria, BC V8W 3Y7

1-877-978-9300

Oakville Wealth Management

1275 North Service Road, Suite 612

Oakville, ON L6M 3G4

289-348-5936

Tokyo Capital Markets

Holland Hills Mori Tower ; RoP #603

5-11-1 Toranomon, Minato-Ku,

Tokyo, 105-0001, Japan

+81.90.1470.1684

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