Investor Presentation August 2013. This presentation contains forward looking statements that...

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Investor Presentation August 2013

Transcript of Investor Presentation August 2013. This presentation contains forward looking statements that...

Page 1: Investor Presentation August 2013. This presentation contains forward looking statements that reflect management’s expectations regarding the future growth,

Investor PresentationAugust 2013

Page 2: Investor Presentation August 2013. This presentation contains forward looking statements that reflect management’s expectations regarding the future growth,

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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.

Forward Looking Statements & Non IFRS Measures

Page 3: Investor Presentation August 2013. This presentation contains forward looking statements that reflect management’s expectations regarding the future growth,

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

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Page 4: Investor Presentation August 2013. This presentation contains forward looking statements that reflect management’s expectations regarding the future growth,

At a Glance …Where We’ve Come From

Where We Are

Where We’re Going

• 11-centre acquisition in 2010• All located in Alberta• Trailing 12 month revenue of $6.2MM (2010)

• 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

Proven• Higher quality of care• Profitable operations• Strong operating model• Strong development

model• Benefits of scale

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Model is Proven: Successful Growth

Start-up2010 / 2011

• IPO • $25MM Bank Facility• Acquisition focus• Started in Alberta; moved into

British Columbia & Ontario• Acquired first Montessori

centres

Early Stage2012

• 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

Performance-Driven2013

• 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

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Business Model is Proven

2010 2011 20120

10

20

30

40

50

60

0

1,000

2,000

3,000

4,000

5,000

6,000

Centres Licensed Spaces

2010 2011 20120

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

0

2,000

4,000

6,000

8,000

10,000

12,000

Revenue Centre Margin2010 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

40

50

60

70

80

90

100

2010 Acquisitions 2011 Acquisitions 2012 Acquisitions Developments

Centres Spaces

Revenue ($) Centre Margin ($)

Occupancy Rates following BrightPath acquisition or centre

opening

Portfolio Growth

Profitable Business Model

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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 UnitEarly Childhood Education has Widespread and Long Lasting Benefits, TD Economics, November 2012

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The Market CHALLENGE

• Fragmentation• Smaller operators

challenged to deliver quality programming at competitive prices

• Smaller operators capital constrained

Market Opportunity: Fragmented Ownership

Source: Early Childhood Education and Care, Resource and Research Unit

8% 1%

5%

86%

Large Multi Centre (>15)

Medium Multi Centre (11-15)

Small Multi Centre (5-10)

Very Small (1-4)

The Solution:

ECONOMIES OF SCALE

• Improved programming

• Better service delivery• Increased

professionalism• Access to financing

For-profit child care spaces provided as follows:

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The Company is Ready:Management Team to Build an Industry Leader Mary Ann CurranChief Executive Officer

Dale KearnsPresident & Chief Financial Officer

Dean MichaelsSenior Vice President, Acquisitions & Development

• Senior level operator with >20 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

• Financial and Capital Markets 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

• Most recently SVP Real Estate 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+

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Operating with Excellence:A Model for Profitable Growth

Increased Occupancy

Ancillary programming to support premium pricing and new revenue

stream

Efficient Labour and Operating Expense Management

Optimized overhead through improved business process / ERP

implementation

Growth to Leverage Investment

Exponential Growth in

EBITDA

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Operating Imperative

Increase earnings and cash flow from

currently owned centres

External Growth

ImperativeGrow the base to

leverage the model with accretive investments

#1

#2

Maximize Return on Capital

Strategic Imperatives

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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

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Product Model Exceeding Standards

Curriculum Nutrition Technology

Special Programs

• 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.

Desirable, Differentiated, Scalable

Passionate and Competent Caregivers and Educators

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Delivering on the Quality Promise

Accreditation

• 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)

ECERS-R (Early Childhood Environment Rating Scale – Revised)

• 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) Exceeding

all quality standards

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Business Model Proven: Industry-Leading Quality of Operations

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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

SCORESBrightPath 81%Total Alberta Commercial Child Care

66Total Alberta Commercial and NFP 73

Delivering on the Quality Promise:ECERS-R Assessment

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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 BrightPath for the past 10 months and

we have consistently had compliments from family

and friends as to how advanced he is socially and linguistically. We

have always found the caregivers to be so warm

and attentive always making sure to form a special bond with each child. I would definitely

recommend BrightPath to any parent.”

- Chelsea

“We would really like to thank you and your staff for being so great with

Jaxon.  He has learned so much in regards to

playing well with the other children, becoming in touch with his feelings

and expressing them, using good mannerism and the best part is all

the preparation for kindergarten.  There is so much more to even list,

it's astonishing.”- Sarah

Satisfied Customers

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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

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Platform for Profitable Growth:External Growth Models

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Platform for Profitable Growth:Post-Acquisition Improvements (Deer Ridge)

Acquisition costs:

Real estate $1,044K Business 239 CAPEX 200

$1,483

Capacity Enrollment Revenue COP0

20

40

60

80

100

120

PrePost

ROI =25.2%

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Centre City CapacityOccupancy(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%

New Developments

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Real Estate Ownership

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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)

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

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Subsequent files appendix only

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Create and Leverage

the Brand

Model of care and developmentBrand promiseTrust in the productServe local interestMarketing to reinforceParent reference / viral marketingScalable platform

Consumer / Capital market synergy

Operate with Excellence

Execution of brand promiseOrganizational infrastructureStandard operating policies and proceduresProduct, people, process, placeInformation and financial systemsOrganic growthImproved pricing strategies

Platform for Profitable Growth

Leverage the platform

Selective acquisitions

Storefronts

Greenfields

Real estate partnerships

Child development partnerships

Ancillary programs

The Company is Ready: Strategic Priorities

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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).

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Earnings Table

All dollar figures are presented in thousands of Canadian dollars and non-cumulative

Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012

Revenue $ 3,502 $ 3,958 $ 4,877 $ 5,840 $ 8,030 $ 8,984 $ 8,818 $ 10,594

Centre Margin 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

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Occupancy Improves Post-Acquisition

2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 201340

50

60

70

80

90

100

2010 Acquisitions 2011 Acquisitions 2012 Acquisitions Developments

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Investing In Our Future

Facilities

ERP Systems

New Developments

Facilities

Product

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Investing In Our FutureERP

Systems

Enhance ROI on invested capital

Optimize labour ratios

Reduce G&A

Streamline payment and child administration

Optimize the role of the Centre Director

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Driving to Higher Acquired Growth

PartnershipsOptimize real estate

Advantaged by up-front planning in new developments

Ancillary revenue potential

Value add – one stop show for parents

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Driving to Higher Acquired Growth

AcquisitionsOntario – 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

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2010 2011 2012 20130

5

10

15

20

25

30

35

40

Centre Margin

2010 2011 2012 2013-1000

-500

0

500

1000

1500

Adjusted EBITDA($000) %

Model is Proven: Financial Results

• 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