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.
2
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
3
At a Glance …
Where We’ve Come From
•
•
•
11-centre acquisition in 2010
All located in Alberta
Trailing 12 month revenue of $6.2MM (2010)
Where We Are
•
•
•
•
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
Proven
•
•
•
•
Higher quality of care
Profitable operations
Strong operating model
Strong development
model
• Benefits of scale
Where We’re Going
•
•
•
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
4
Model is Proven: Successful Growth
Early Stage
2012
Start-up
2010 / 2011
• IPO
• $25MM Bank Facility
• Acquisition focus
• Started in Alberta; moved into
British Columbia & Ontario
• Acquired first Montessori
centres
• Executive leadership in
place
• $5MM convertible
debenture
• Four centres developed,
including 2 new purposebuilt facilities
• 3rd party validation of
quality
• 50 centres by year-end
Performance-Driven
2013
• Stabilized centre portfolio at
90% occupancy
• Two development centres at
87% occupancy
• Sharpened focus on site
selection and locations
• Steps to maximize return on
capital
• New revenue streams
• Leverage new ERP system
5
Business Model is Proven
Occupancy Rates following BrightPath
acquisition or centre opening
100
90
80
Portfolio Growth
Centres
Spaces
60
6,000
50
5,000
40
4,000
30
3,000
20
2,000
10
1,000
0
0
2010
2011
Centres
70
Revenue ($)
2012
Licensed Spaces
Profitable Business Model
Centre Margin ($)
40,000
12,000
35,000
60
10,000
30,000
8,000
25,000
20,000
50
6,000
15,000
4,000
10,000
2,000
5,000
0
40
2010 Q1
Q2
Q3
Q4
Q1
Q2
Q3
2010 Acquisitions
2011 Acquisitions
2012 Acquisitions
Developments
Q4
Q1
0
2010
2011
Revenue
2012
Centre Margin
6
Market Opportunity:
Supply Demand Imbalance in Many Markets
• There are 2.1MM children in Canada under the age of 6
• 69% of these children’s mothers work outside the home
• 75% of women whose youngest child is between 3 and 5 years old is working
• The rate of child care expansion decreased from 2008 to 2010
• There are regulated childcare spaces to accommodate only 22% of children
below 5 years old
• Government estimates 165,000 need new child care spaces ($1.6B investment)
• Evidence proves that children who participate in an early childhood education
system perform better than those that do not
• A U.S. study showed that participants of an early childhood education
program were less likely to smoke, drink alcohol, and use drugs
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
7
Market Opportunity: Fragmented Ownership
The Solution:
ECONOMIES
OF SCALE
The Market
CHALLENGE
•
•
•
Fragmentation
Smaller operators
challenged to deliver
quality programming
at competitive prices
Smaller operators
capital constrained
•
•
•
•
Improved
programming
Better service delivery
Increased
professionalism
Access to financing
8%
1%
5%
For-profit child care spaces
provided as follows:
Large Multi Centre (>15)
Medium Multi Centre (11-15)
Small Multi Centre (5-10)
Very Small (1-4)
Source: Early Childhood Education and Care, Resource and Research Unit
86%
8
The Company is Ready:
Management Team to Build an Industry Leader
Mary Ann Curran
Dale Kearns
Dean Michaels
Chief Executive Officer
President & Chief Financial
Officer
Senior Vice President,
Acquisitions & Development
• Senior level operator with >20
• Financial and Capital Markets
• Most recently SVP Real Estate
years in complex operations,
managing functional elements
(operations, IT, finance, audit,
logistics) directly and integrating
the whole
• Most recently CEO of Jones
Apparel Group Canada with
operations across Canada
• Developed and implemented
channel expansion through
opening of national retail chain
• Academic credentials (MBA,
ICD.D, CA) applied successfully
expertise with >20 years in public
and high growth companies
• Successfully launched O+Y
Properties in the public markets
• CFO and COO roles in Western
Canada and US based mid stage
high growth companies, which
enterprises were principally
focused on markets in Europe and
Asia.
• Acquired, developed and
licensed client side technology to
global OEM’s
Service and member of senior
executive committee with Katz
Group Canada, Inc. (Rexall
national pharmacy business)
• Led Rexall Pharma Plus retail
roll-out and roll-up into a
national chain, acquiring
existing stores and constructing
others in underserved markets
• VP Real Estate, Winners
Merchants Inc.; established
nationally as a significant and
profitable brand increasing
store count from 14 to 200+
9
Operating with Excellence:
A Model for Profitable Growth
Increased Occupancy
Efficient Labour and Operating Expense
Management
Optimized overhead through improved
business process / ERP implementation
Exponential
Growth in
EBITDA
Ancillary programming to support
premium pricing and new revenue
stream
Growth to Leverage Investment
10
Strategic Imperatives
#2
#1
Operating
Imperative
External Growth
Imperative
Increase earnings and
cash flow from
currently owned
centres
Grow the base to
leverage the model
with accretive
investments
Maximize Return on Capital
11
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
12
Product Model Exceeding Standards
Curriculum
Nutrition
Technology
Special
Programs
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.
13
Delivering on the Quality Promise
Accreditation
• All Alberta centres maintain highest level of validation
• BC and Ontario have their own validation programs by
region
• Montessori centres accredited by CCMA (Canadian Council
of Montessori Administrators) or AMI (American
Montessori Institute)
ECERS-R
Exceeding
all quality
standards
(Early Childhood Environment Rating Scale – Revised)
• Independent evaluation of quality being offered – widely
considered the metric for evaluation of quality
• Scored above all averages (national, provincial, for-profit
and non-profit)
14
Delivering on the Quality Promise:
Business
Model Proven: Industry-Leading Quality of Operations
ECERS-R
Assessment
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
Total Alberta Commercial Child Care
Total Alberta Commercial and NFP
81%
66
73
15
Satisfied Customers
What Our Customers are Saying
“In the past year, our son has
grown and thrived during his
time at BrightPath. He
continues to develop and
grow daily and we are
grateful for the care and
attention that the BrightPath
family has provided to
date. We would not hesitate
to recommend BrightPath as a
child care facility.”
- Ben
“Our son has been attending “We would really like to thank
BrightPath for the past 10
you and your staff for being so
months and we have
great with Jaxon. He has
consistently had compliments learned so much in regards to
from family and friends as to
playing well with the other
how advanced he is socially children, becoming in touch
and linguistically. We have
with his feelings and
always found the caregivers expressing them, using good
to be so warm and attentive mannerism and the best part
always making sure to form a
is all the preparation for
special bond with each child.
kindergarten. There is so
I would definitely recommend
much more to even list, it's
BrightPath to any parent.”
astonishing.”
- Chelsea
- Sarah
16
Platform for Profitable Growth:
Organic and Ancillary Revenue Increases
Increasing Occupancy
• 90% overall occupancy rate
• Track record of increasing occupancy rates
Ancillary Programs
• “After the Bell” programs to begin in September
• Independent revenue stream
• Increased penetration of community for awareness and
enrollment
Premium Price Strategy
• Expanding curriculum offerings – languages and active
programs – to all age groups
• Differentiate and enhance our programming to support
premium price
17
Platform for Profitable Growth:
External Growth Models
18
Platform for Profitable Growth:
Post-Acquisition Improvements (Deer Ridge)
120
Acquisition costs:
Real estate
Business
CAPEX
$1,044K
239
200
$1,483
100
80
Pre
60
Post
40
ROI =
25.2%
20
0
19
Capacity Enrollment Revenue
COP
New Developments
Centre
City
Capacity
Occupancy
(Q1 2013)
Highland Park
Calgary, AB
72
95%
Chestermere
Chestermere, AB
247
75%
Lawrence Avenue
Kelowna, BC
144
81%
McKenzie Towne
Calgary, AB
247
99%
20
Real Estate Ownership
21
Recent Stock Information
Trading Symbol
BPE-V
Recent Share Price
$0.31
52-Week Range
$0.25 - $0.77
Shares Outstanding
121.7 million
Market Capitalization
$37.1 million
Credit facility
$27.0 million
Cash & Undrawn Credit Facilities $14.5 million (reported March 31, 2013)
As the Company is under-leveraged with debt capital,
there is potential for highly-accretive non-dilutive
growth and creation of shareholder value
22
Subsequent files appendix only
23
The Company is Ready: Strategic Priorities
Create and Leverage
the Brand
Model of care and
development
Brand promise
Trust in the product
Serve local interest
Marketing to reinforce
Parent reference / viral
marketing
Scalable platform
Consumer / Capital market
synergy
Operate with Excellence
Execution of brand promise
Organizational infrastructure
Standard operating policies
and procedures
Product, people, process,
place
Platform for Profitable
Growth
Leverage the platform
Selective acquisitions
Storefronts
Greenfields
Information and financial
systems
Real estate partnerships
Organic growth
Child development
partnerships
Improved pricing strategies
Ancillary programs
24
Board of Directors to Provide Oversight and Support Growth
Jeffrey Olin,
Chairman
President and CEO of Vision Capital Corporation, manager of the Vision Opportunity Funds;
Managing Partner and Head of Investment Banking, Desjardins Securities;
Managing Director, HSBC Securities Canada;
Management positions with Bramalea Limited and with Olympia & York Developments;
Significant shareholder, involved in well known and impressive growth stories.
Adam Berkowitz
Principal at Croft Properties LLC, a privately held company with ownership of multi-family and commercial properties in the
United States; and analyst at High Rise Capital Management, a New York based real estate hedge fund from 2006 – 2008.
Colley Clarke, CA
Managing Director of Jadeco Inc. Previously CFO of Redknee Solutions Inc., Descartes Systems Group Inc. and Canadian
Satellite Communications Inc. Significant public market experience in executive & directorship roles.
Daniel F. Gallivan,
QC, ICD.D
Managing Partner, Cox & Palmer;
Former Director of the Bank of Canada & Vice Chair of the Nova Scotia Securities Commission.
Gary Goodman, CA
Executive Vice President of Reichmann International Development Corporation between December 2007 and June 2010.
Previously Chief Financial Officer (December 2001 – November 2006) and President and Chief Executive Officer (from
December 2006 – December 2007) of IPC US REIT, a Toronto Stock Exchange listed Real Estate Investment Trust. Trustee of
Boardwalk Real Estate Investment Trust, chairman and trustee of Huntington Real Estate Investment Trust, director of Gazit
America Inc.
Mitchell Rosen, CA
EVP & CFO of Stock-Trak;
Over 25 years experience in operating, financial, & strategic roles in private & public enterprises
John Snobelen
Minister of Education for the Province of Ontario (1995 – 1998);
Minister of Natural Resources for the Province of Ontario (1998 – 1999).
25
Earnings Table
Revenue
Centre Margin
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
$ 3,502
$ 3,958
$ 4,877
$ 5,840
$ 8,030
$ 8,984
$ 8,818
$ 10,594
1,194
1,286
1,406
1,841
2,475
2,709
2,108
2,731
Centre Margin %
34
32
29
31
31
30
24
26
Adjusted EBITDA
144
137
(294)
192
673
616
(74)
590
FFO
71
(22)
(314)
119
542
379
(285)
228
AFFO
136
100
(329)
211
727
566
(400)
320
All dollar figures are presented in thousands of Canadian dollars and non-cumulative
26
Occupancy Improves Post-Acquisition
100
90
80
70
60
50
40
2010
Q1 2011
Q2 2011
2010 Acquisitions
Q3 2011
Q4 2011
2011 Acquisitions
Q1 2012
Q2 2012
2012 Acquisitions
Q3 2012
Q4 2012
Q1 2013
Developments
27
Investing In Our Future
ERP
Systems
New
Developments
Product
Facilities
Facilities
28
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
29
Driving to Higher Acquired Growth
Optimize real estate
Advantaged by up-front planning in new
developments
Partnerships
Ancillary revenue potential
Value add – one stop show for
parents
30
Driving to Higher Acquired Growth
Ontario – disconnect with vendors and full day
kindergarten
Acquisitions
Select Ontario markets
Other provinces; Quebec and NB
Alberta reasonably solid
The average acquisition adds
(100?) spaces to our portfolio
31
Model is Proven: Financial Results
Centre Margin
%
40
1200
1000
35
800
30
600
25
400
200
20
0
15
-200
-400
10
-600
5
-800
0
-1000
2010
•
•
Adjusted EBITDA
($000)
2011
2012
2010
2013
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.
•
•
2011
2012
2013
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
32