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Investor Presentation August 2013. Forward Looking Statements & Non IFRS Measures.
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Investor Presentation August 2013
Forward Looking Statements & Non IFRS Measures This presentation contains forward looking statements that reflect management’s expectations regarding the future growth, results of operations, performance (both operational and financial) and business prospects and opportunities of BrightPath Group, Inc. (the “Corporation”). All statements contained in this presentation other than statements of historical facts are forward looking statements. Whenever possible, words such as “plans”, “expects” or “does not expect”, “budget”, “scheduled”, “estimate”, “forecast”, “anticipate” or “does not anticipate”, “believe”, “intend” and similar expressions or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved, have been used to identify forward-looking statements. Although the forward-looking statements contained in this presentation reflect management’s current beliefs based upon information currently available to management and based upon what management believes to be reasonable assumptions, the Corporation cannot be certain that actual results will be consistent with these forward-looking statements. A number of factors could cause actual results, performance, or achievements to differ materially from the results expressed or implied in the forward-looking statements including those listed in the “Risk Factors” section of the Company’s regulatory filings. These factors should be considered carefully and prospective investors should not place undue reliance on the forward-looking statements. Forward-looking statements necessarily involve significant known and unknown risks, assumptions and uncertainties that may cause the Corporation’s actual results, performance, prospects and opportunities in future periods to differ materially from those expressed or implied by such forward-looking statements. Although the Corporation has attempted to identify important risks and factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors and risks that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, prospective investors should not place undue reliance on forward-looking statements. These forward-looking statements are made as of the date of this presentation and, except as required by applicable law, the Corporation assumes no obligation to update or revise them to reflect new events or circumstances. FFO, AFFO and Adjusted EBITDA are not measures defined by International Financial Reporting Standards (“IFRS”). They are presented because management believes these non-IFRS measures are relevant and meaningful measures of performance. FFO, AFFO, Adjusted EBITDA as computed may differ from similar computations as reported by other issuers and may not be comparable to those reported by such issuers. BrightPath’s MD&A contains a reconciliation of Net Income/Loss to Adjusted EBITDA, Net Income/Loss to FFO and the calculation of AFFO.
Overview • We have proven the model works • The market presents opportunity for development and consolidation • BrightPath has the team, the plan and the resources to capitalize on the opportunity • Success will be the result of: • Maximize return on capital at our centres • Reducing overhead costs • Layering on profitable growth • We will drive shareholder value
At a Glance … • 11-centre acquisition in 2010 • All located in Alberta • Trailing 12 month revenue of $6.2MM (2010) • Proven • Higher quality of care • Profitable operations • Strong operating model • Strong development model • Benefits of scale • 50 centres in three provinces • Diversified portfolio of child care and Montessori centres • Revenue of $39.9MM trailing twelve months • Adjusted EBITDA of $1.0MM in most recent quarter • Industry-leading child care provider; reputation for quality and excellence of programs • Continued growth, leveraging size and brand for economies of scale • Maximize returns to shareholders
Model is Proven: Successful Growth • Performance-Driven • 2013 • Stabilized centre portfolio at 90% occupancy • Two development centres at 87% occupancy • Sharpened focus on site selection and locations • Steps to maximize return on capital • New revenue streams • Leverage new ERP system • Early Stage • 2012 • Executive leadership in place • $5MM convertible debenture • Four centres developed, including 2 new purpose-built facilities • 3rd party validation of quality • 50 centres by year-end • Start-up • 2010 / 2011 • IPO • $25MM Bank Facility • Acquisition focus • Started in Alberta; moved into British Columbia & Ontario • Acquired first Montessori centres
Business Model is Proven Occupancy Rates following BrightPath acquisition or centre opening Portfolio Growth Centres Spaces Profitable Business Model Revenue ($) Centre Margin ($)
Market Opportunity: Supply Demand Imbalance in Many Markets Sources: The State of Early Childhood Education and Care in Canada 2010: Trends and Analysis, Childcare Resource and Research Unit Early Childhood Education has Widespread and Long Lasting Benefits, TD Economics, November 2012
Market Opportunity: Fragmented Ownership • The Market CHALLENGE • Fragmentation • Smaller operators challenged to deliver quality programming at competitive prices • Smaller operators capital constrained • The Solution: ECONOMIES OF SCALE • Improved programming • Better service delivery • Increased professionalism • Access to financing For-profit child care spaces provided as follows: Source: Early Childhood Education and Care, Resource and Research Unit
The Company is Ready: Management Team to Build an Industry Leader
Operating with Excellence: A Model for Profitable Growth Exponential Growth in EBITDA
Strategic Imperatives #2 #1 External Growth Imperative Grow the base to leverage the model with accretive investments Operating Imperative Increase earnings and cash flow from currently owned centres Maximize Return on Capital
Strategic Imperatives: Enablers • Product model supporting operating excellence • Recognized quality of programming and delivery • Satisfied customers willing to share their experience • A model for profitable growth that includes both organic and external growth • Rebranding strategy to underpin and support organic and external growth
Product Model Exceeding Standards Desirable, Differentiated, Scalable Passionate and Competent Caregivers and Educators • Nationally standardized • Literacy, arithmetic and language • Registered Dietician & Nutritionist • Prepared fresh daily from scratch • Educational learning through personal programs • Track development and tailor • Partnering with national vendors • Dance, Music, Gymnastics, etc.
Delivering on the Quality Promise Exceeding all quality standards
Delivering on the Quality Promise: ECERS-R Assessment Business Model Proven: Industry-Leading Quality of Operations The ECERs report is significant as it validates and highlights BrightPath’s early success in embracing the market opportunity to improve the [operational] quality of child care in Canada. • “Early Childhood Environment Rating Scale – Revised” • Assessed 17 individual BrightPath centres in Alberta that had benefited from implementation of Company’s programming • Conducted by qualified, independent third party • Scored particularly well with respect to physical space SCORES BrightPath 81% Total Alberta Commercial Child Care 66 Total Alberta Commercial and NFP 73
Platform for Profitable Growth: Organic and Ancillary Revenue Increases
Platform for Profitable Growth: External Growth Models
Platform for Profitable Growth: Post-Acquisition Improvements (Deer Ridge) ROI = 25.2%
Recent Stock Information As the Company is under-leveraged with debt capital, there is potential for highly-accretive non-dilutive growth and creation of shareholder value
Earnings Table All dollar figures are presented in thousands of Canadian dollars and non-cumulative
Investing In Our Future Facilities
Investing In Our Future • ERP • Systems Enhance ROI on invested capital Optimize labour ratios Reduce G&A Streamline payment and child administration Optimize the role of the Centre Director
Partnerships Driving to Higher Acquired Growth Optimize real estate Advantaged by up-front planning in new developments Ancillary revenue potential Value add – one stop show for parents
Acquisitions Driving to Higher Acquired Growth Ontario – disconnect with vendors and full day kindergarten Select Ontario markets Other provinces; Quebec and NB Alberta reasonably solid The average acquisition adds (100?) spaces to our portfolio
Model is Proven: Financial Results % ($000) • Consistent margins that hover around 30%; reduce in summer months and more so with addition of Montessori • Recent investments in development centres will pay off as we move through 2013 and beyond. • EBITDA of $1.0MM in Q1 2013 will grow as investments in development centres and corporate infrastructure pay off • As the company continues to grow economies of scale will leverage the SG&A and investment in brand, curriculum, programming and facilities further