2Forward Looking Statements & Non IFRS MeasuresThis 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.
3Overview We have proven the model works The market presents opportunity for development and consolidationBrightPath has the team, the plan and the resources to capitalize on the opportunitySuccess will be the result of:Maximize return on capital at our centresReducing overhead costsLayering on profitable growthWe will drive shareholder valueBrightPath has experienced incredibly high growth in a short period of time. We were able to become one of Canada’s largest child care providers (essentially) overnight – a success story in itself. Through that rapid growth and 51 centres, we inherited numerous different cultures, histories and customer bases. It was tough to establish a common identity between our portfolio. We knew we wanted to offer the highest quality possible but needed to develop stronger operating policies and methods in order to do so. We slowed down the pace of acquisitions and instead concentrated on refining our product, processes and people. We became an operating company that proved it could take an acquired child care centre and turn it into a more efficiently run business.In our growth, we expanded into 3 provinces very quickly – a process that took our competitors years to do. In that process, we learned the landscapes, regulations and demands are quite diverse. Every province comes with it’s own set of opportunities and challenges. We also began to acquire a division of Montessori centres – a type of child care different than what we had run in the past and with it’s own set of opportunities and challenges. We quickly saw the potential of Montessori and began to adjust our growth strategy to try and capture more of that market.Currently, we sit with a portfolio of 51 centres and 2012 revenue of $36.4 million. We have begun to leverage our size and scale, allowing us to provide programs and initiatives that our competitors simply cannot. This is helping us differentiate ourselves from those competitors and we have already begun to see the true potential exist for us to become a market leader.Moving forward, our goal remains the same – to offer the highest level of child development and programs available. The scale we believe we can reach with this goal is truly limitless. We are looking at various growth strategies such as new builds, co-locations, partnerships and selective acquisitions. We believe in order to achieve the highest level of quality possible, we need to reach a higher economy of scale through more growth. We expect as our development continues, we can stretch our centre margins, offer additional programs outside of child care and brand ourselves as a pioneer in an industry with proven global success.
4At a Glance … Where We’ve Come From Proven Where We Are Where We’re Going11-centre acquisition in 2010All located in AlbertaTrailing 12 month revenue of $6.2MM (2010)ProvenHigher quality of careProfitable operationsStrong operating modelStrong development modelBenefits of scale50 centres in three provincesDiversified portfolio of child care and Montessori centresRevenue of $39.9MM trailing twelve monthsAdjusted EBITDA of $1.0MM in most recent quarterBrightPath has experienced incredibly high growth in a short period of time. We were able to become one of Canada’s largest child care providers (essentially) overnight – a success story in itself. Through that rapid growth and 51 centres, we inherited numerous different cultures, histories and customer bases. It was tough to establish a common identity between our portfolio. We knew we wanted to offer the highest quality possible but needed to develop stronger operating policies and methods in order to do so. We slowed down the pace of acquisitions and instead concentrated on refining our product, processes and people. We became an operating company that proved it could take an acquired child care centre and turn it into a more efficiently run business.In our growth, we expanded into 3 provinces very quickly – a process that took our competitors years to do. In that process, we learned the landscapes, regulations and demands are quite diverse. Every province comes with it’s own set of opportunities and challenges. We also began to acquire a division of Montessori centres – a type of child care different than what we had run in the past and with it’s own set of opportunities and challenges. We quickly saw the potential of Montessori and began to adjust our growth strategy to try and capture more of that market.Currently, we sit with a portfolio of 51 centres and 2012 revenue of $36.4 million. We have begun to leverage our size and scale, allowing us to provide programs and initiatives that our competitors simply cannot. This is helping us differentiate ourselves from those competitors and we have already begun to see the true potential exist for us to become a market leader.Moving forward, our goal remains the same – to offer the highest level of child development and programs available. The scale we believe we can reach with this goal is truly limitless. We are looking at various growth strategies such as new builds, co-locations, partnerships and selective acquisitions. We believe in order to achieve the highest level of quality possible, we need to reach a higher economy of scale through more growth. We expect as our development continues, we can stretch our centre margins, offer additional programs outside of child care and brand ourselves as a pioneer in an industry with proven global success.Industry-leading child care provider; reputation for quality and excellence of programsContinued growth, leveraging size and brand for economies of scaleMaximize returns to shareholders
5Model is Proven: Successful Growth Performance-Driven2013Stabilized centre portfolio at 90% occupancyTwo development centres at 87% occupancySharpened focus on site selection and locationsSteps to maximize return on capitalNew revenue streamsLeverage new ERP systemEarly Stage2012Executive leadership in place$5MM convertible debentureFour centres developed, including 2 new purpose-built facilities3rd party validation of quality50 centres by year-endStart-up2010 / 2011IPO$25MM Bank FacilityAcquisition focusStarted in Alberta; moved into British Columbia & OntarioAcquired first Montessori centresOur history is comprised of high growth and high turnover in leadership thus far. The mission of being Canada’s leader in child care has remained the same (both in size and quality) but the business plans to achieve that have shifted recently. As a start up, we concentrated on growing as fast as possible. Over the past two years, we slowed down to refine our product, our strategy and our growth plan. Our aim is to build a solid operating foundation that can be applied to whatever development we pursue as opposed to buy, buy, buy and then try and make it work. With selective growth and stronger focus on operations, we become less of a risk and more predictable as an investment. We’re on our way in developing a system that maximizes centre margins while providing a level of care unseen in the Canadian marketplace.
6Occupancy Rates following BrightPath acquisition or centre opening Business Model is ProvenOccupancy Rates following BrightPath acquisition or centre openingCentresPortfolio GrowthSpacesProfitable Business ModelRevenue ($)Centre Margin ($)
7Supply Demand Imbalance in Many Markets Market Opportunity:Supply Demand Imbalance in Many MarketsThere are 2.1MM children in Canada under the age of 669% of these children’s mothers work outside the home75% of women whose youngest child is between 3 and 5 years old is workingThe rate of child care expansion decreased from 2008 to 2010There are regulated childcare spaces to accommodate only 22% of children below 5 years oldGovernment 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 notA U.S. study showed that participants of an early childhood education program were less likely to smoke, drink alcohol, and use drugsPoint we want to make:Canada is a working country with more and more women staying in the workforce to contribute to the family income. Housing markets continue to rise in many areas at an alarmingly high rate while the local businesses are slow to catch up. The child care industry (as illustrated next) is very segmented and mostly owner operator type models, and thus has been slow to meet the demands of the new developments. We have proven we can do just that with our recent opening in McKenzie Towne.More and more families are forced towards day home operators and nannies as space in centre based operations is limited. A huge opportunity exists to provide those growing neighborhoods and families with a better option, an option they are desperately seeking out.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
8The Solution: ECONOMIES OF SCALE Market Opportunity: Fragmented OwnershipThe Market CHALLENGEFragmentationSmaller operators challenged to deliver quality programming at competitive pricesSmaller operators capital constrainedThe Solution: ECONOMIES OF SCALEImproved programmingBetter service deliveryIncreased professionalismAccess to financingAn opportunity for BrightPath exists to capture the market at a point when no true leader has emerged. There are over 10,000 child care centres in Canada and less than a handful of brand names parents have heard about. By acquiring centres in pockets, we can control the market in those different regions. As we enter markets, the demand towards higher quality will emerge, creating a more challenging situation for competitors. As we grow our portfolio, we can re-invest into programs and initiatives that others simply cannot afford, further driving home our ability to stand out as THE market leader.For-profit child care spaces provided as follows:Source: Early Childhood Education and Care, Resource and Research Unit
9Management Team to Build an Industry Leader The Company is Ready:Management Team to Build an Industry LeaderMary Ann CurranChief Executive OfficerDale KearnsPresident & Chief Financial OfficerDean MichaelsSenior Vice President, Acquisitions & DevelopmentSenior level operator with >20 years in complex operations, managing functional elements (operations, IT, finance, audit, logistics) directly and integrating the wholeMost recently CEO of Jones Apparel Group Canada with operations across CanadaDeveloped and implemented channel expansion through opening of national retail chainAcademic credentials (MBA, ICD.D, CA) applied successfullyFinancial and Capital Markets expertise with >20 years in public and high growth companiesSuccessfully launched O+Y Properties in the public marketsCFO 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’sMost 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 marketsVP Real Estate, Winners Merchants Inc.; established nationally as a significant and profitable brand increasing store count from 14 to 200+We stop here to reflect on the importance we place on our senior leadership team. With diverse backgrounds professionally and academically, the team has proven success through their years in building strong businesses. As new leadership has emerged, it’s important to note the experience lies in “building” business, not starting business. A change was required to move BrightPath into the next step of our development. We needed people who could take a shell of something great and transition it into something substantial.
10Operating with Excellence: A Model for Profitable Growth Increased OccupancyAncillary programming to support premium pricing and new revenue streamEfficient Labour and Operating Expense ManagementOptimized overhead through improved business process / ERP implementationGrowth to Leverage InvestmentExponential Growth in EBITDAOne huge benefit for BrightPath is our size and scale. We are only realizing the beginning points of what this type of scale can provide us in terms of stretching our marginsOur product and facilities will contribute to our increased occupancy rates, which will allow us to raise our tuition costs (in excess of wage inflation)Our management team has proven operating success in controlling and managing labour costs and overheadOur acquisitions team headed by Dean Micheals is constantly looking at alternative ways of growing our portfolio (shared vs co-locations, vs storefront)These alternative centres will provide lower start up and investment costs which will ultimately lead to higher operating margins
11Maximize Return on Capital Strategic Imperatives#1#2Operating ImperativeIncrease earnings and cash flow from currently owned centresExternal Growth ImperativeGrow the base to leverage the model with accretive investmentsMaximize Return on Capital
12Strategic Imperatives: Enablers Product model supporting operating excellenceRecognized quality of programming and deliverySatisfied customers willing to share their experienceA model for profitable growth that includes both organic and external growthRebranding strategy to underpin and support organic and external growth
13Product Model Exceeding Standards CurriculumNutritionTechnologySpecial ProgramsDesirable, Differentiated, ScalablePassionate and Competent Caregivers and EducatorsOur product is constantly being refined to offer the most relevant, valuable and proven benefits possibleIf you’re looking for an investment that’s more than just ROI, here’s why BrightPath is a great choiceWe differentiate ourselves from typical child care options by offering educational and developmental programs at every age groupWe have pre-planned activities, games, songs and crafts – all meant to develop children socially, intellectually, emotionally and physicallyOur nutritional philosophy is truly leading the industry.We have partnered with Health Stand Nutrition Consulting Inc who has certified our menus, our ingredientsAll of our food is made in-house that day and from scratchWe have invested into adding technology into our classrooms. Hatch computer systems are revolutionary and identify where a child is on their development and offers up relevant and educational games for them to playLastly, we have been running a variety of different enhanced physical programs across the country and are now moving to a more national approach. Children’s gymnastics, yoga, dance and music are just some of the enhanced programs we continue to offer at each of our centres.These differentiators are why we consider ourselves to be a sustainable and reliable investment as the demand for our product continues to riseNationally standardizedLiteracy, arithmetic and languageRegistered Dietician & NutritionistPrepared fresh daily from scratchEducational learning through personal programsTrack development and tailorPartnering with national vendorsDance, Music, Gymnastics, etc.
14Exceeding all quality standards Delivering on the Quality PromiseAccreditationIndependent evaluation of quality being offered – widely considered the metric for evaluation of qualityScored 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 validationBC and Ontario have their own validation programs by regionMontessori centres accredited by CCMA (Canadian Council of Montessori Administrators) or AMI (American Montessori Institute)Exceeding all quality standardsAs evidence of the quality product we continue to put in our centres, we have continually paid for third party research on our existing centres. ECERS is widely considered to be the highest metric for evaluation of the centre environment .Through that process, we earned scores above national and provincial averages for all sectorsKeep in mind, we are only 3 years into this journey. Our expectation is that our scores from those tests continue to rise and remain steadily above national averagesAccreditation comes in a few forms but the one we’re most used to is in Alberta. The provincial government offers a program where they evaluate child care businesses on a number of different factors, from programs, evidence, communication with parents to outdoor time and parent reviews.This is not an easy process and truly separates high quality from mediocrity. All of our Alberta centres are either accredited or in the pre-accredited stages as we just opened. We actually receive benefits for accreditation such as wage enhancement to better compensate the great work our staff does.
15Delivering on the Quality Promise: ECERS-R Assessment Business Model Proven: Industry-Leading Quality of OperationsThe 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 programmingConducted by qualified, independent third partyScored particularly well with respect to physical spaceSCORESBrightPath %Total Alberta Commercial Child Care 66Total Alberta Commercial and NFP 73
16What Our Customers are Saying Satisfied CustomersWhat 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.”- SarahOur customers and their words are our greatest form of validation on the work we do on a daily basisIn a business primarily sustained through word of mouth and referrals, we need our parents to believe in what we’re doing and how we’re helping in order to move the business forwardEvery day, we receive great compliments from our families on the positive difference we’ve made in their lives
17Platform for Profitable Growth: Organic and Ancillary Revenue IncreasesIncreasing Occupancy90% overall occupancy rateTrack record of increasing occupancy ratesAncillary Programs“After the Bell” programs to begin in SeptemberIndependent revenue streamIncreased penetration of community for awareness and enrollmentPremium Price StrategyExpanding curriculum offerings – languages and active programs – to all age groupsDifferentiate and enhance our programming to support premium priceWe realize in order to become the leader, we need to grow by expansionWe also see an opportunity to grow organically with our portfolio centresEvery percentage point increase in occupancy results in substantial EBITDA difference as so we have become a performance based company, with all eyes managing how to raise our occupancy levelsWe have implemented processes to track inquiries, the sales process and develop feedback loops to ensure leads aren’t slipping through the cracksThis has contributed to the latest increase of enrolments and we expect to sustain and grow these numbersParents spend a lot of money in registering their children in a variety of community programsWe are about to offer these programs after hours to both our existing clientele and the families in the communities in which we serveThese programs will range from dance, karate and yoga to workshops, additional languages and tutoringAs we develop our brand, we will develop a premium extension where select centres will offer enhanced programs, additional languages and greater curriculum as our customers demand itWe will work with our families in these centres to ensure we are offering the most desirable programs and curriculum possibleThese initiatives will absolutely drive higher revenue streams and contribute to our bottom line for years to come
18Platform for Profitable Growth: External Growth Models
19Platform for Profitable Growth: Post-Acquisition Improvements (Deer Ridge)Part of our success in increasing occupancy once we take over a centre is the upgrade or facelift to the facilitiesFull upgrade tells parents we are committed to making a positive difference – builds trust and allows us to increase prices shortly thereafterThe upgrades pay off – we are able to take centres such as these at less than 60% occupied and reach 100% in a very short timeframeWhen we mention selective growth strategy, this is what we mean. We want to go after centres where high upside exists if we can implement our processesAcquisition costs:Real estate$1,044KBusiness239CAPEX200$1,483ROI =25.2%
20New Developments Centre City Capacity Occupancy (Q1 2013) Highland ParkCalgary, AB7295%ChestermereChestermere, AB24775%Lawrence AvenueKelowna, BC14481%McKenzie Towne99%Purpose built facilities allow us to configure rooms and space on our terms and in line with market trends and demand (rather than having to outfit existing space)New builds helps solve the supply demand imbalance spoken to earlierWe opened 4 new centres in 2012 adding 710 new spaces to the supply side of the equationWith new facilities, we can charge higher price pointsCentres and facilities are desirable for staff and families to joinWe can integrate multi purpose rooms/gyms into the plans to accommodate additional revenue streamsWe have invested about $6million into the 2 large centres each and expect a ROI of… (?)
22Recent Stock Information Trading SymbolBPE-VRecent Share Price$0.3152-Week Range$ $0.77Shares Outstanding121.7 millionMarket Capitalization$37.1 millionCredit facility$27.0 millionCash & 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
24The Company is Ready: Strategic Priorities Create and Leveragethe BrandModel of care and developmentBrand promiseTrust in the product Serve local interest Marketing to reinforce Parent reference / viral marketingScalable platform Consumer / Capital market synergyOperate with ExcellenceExecution of brand promiseOrganizational infrastructure Standard operating policies and proceduresProduct, people, process, place Information and financial systems Organic growth Improved pricing strategiesPlatform for Profitable GrowthLeverage the platformSelective acquisitionsStorefrontsGreenfieldsReal estate partnershipsChild development partnershipsAncillary programsThis slide is proof of what was just mentioned. With focus on key areas like creating scale to fund more initiatives which will contribute to the overall strength of our product along with developing additional revenue streams and partnerships all provide a sense of proof that the leadership team at BrightPath is all about creating a lasting business which will stand on it’s own two feet and emerge as a leader in this industry.
25Board of Directors to Provide Oversight and Support Growth Jeffrey Olin, ChairmanPresident 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 BerkowitzPrincipal 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, CAManaging 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.DManaging Partner, Cox & Palmer;Former Director of the Bank of Canada & Vice Chair of the Nova Scotia Securities Commission.Gary Goodman, CAExecutive 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, CAEVP & CFO of Stock-Trak;Over 25 years experience in operating, financial, & strategic roles in private & public enterprisesJohn SnobelenMinister of Education for the Province of Ontario (1995 – 1998);Minister of Natural Resources for the Province of Ontario (1998 – 1999).Our board of Directors are very hands on and provide a sense of leadership in deciding the direction our company goes. Their vast experience spans across many different industries such as real estate, capital investments, politics and finance. These connections allow us access to strategic alliances in financing, real estate and co-locations partnerships.
26Earnings TableQ1 2011Q2 2011Q3 2011Q4 2011Q1 2012Q2 2012Q3 2012Q4 2012Revenue$ 3,502$ 3,958$ 4,877$ 5,840$ 8,030$ 8,984$ 8,818$ 10,594Centre Margin1,1941,2861,4061,8412,4752,7092,1082,731Centre Margin %34322931302426Adjusted EBITDA144137(294)192673616(74)590FFO71(22)(314)119542379(285)228AFFO136100(329)211727566(400)320All dollar figures are presented in thousands of Canadian dollars and non-cumulative
27Occupancy Improves Post-Acquisition Previously mentioned, we consider ourselves to be a sustainable, reliable and proven operating company with a track record of improving the centres we acquire. This chart showcases the raise in occupancy YOY after we take them over. This can only be achieved if we are offering a product that is substantially better than what was there previous. We will later discuss in further detail the exact initiatives we’ve put in place which contributes to these numbers, but it’s important to note that we do not lower rates upon acquisition and in many cases, we actually implement a modest fee increase, further proving that in order to raise rates and increase occupancy simultaneously, we must be providing a product that parents are asking for.
28Investing In Our Future ERPSystemsNew DevelopmentsFacilitiesProductFacilitiesIn order to get to our goal of being the best provider of care and child development in Canada, investment is necessary to create that value that parents are demanding.
29Investing In Our Future ERPSystemsEnhance ROI on invested capitalOptimize labour ratiosReduce G&AStreamline payment and child administrationOptimize the role of the Centre DirectorERP systems allow us the flexibility to make more timely and accurate business decisions. Currently on outdated systems, we struggle with adapting to real time changes in enrolment and labour issues. Moving forward, we can react instantly with accurate data which will better position us to achieve optimum labour and enrolment efficiencies.These systems will also provide hours back to the days of our most important client – our Centre Directors. We can’t emphasize enough the impact they have on our end business. By saving them time, this will allow them to run great centres, coach their staff and interact more with our families – all necessary outcomes in our industry.We also expect to realize cost efficiencies in our G&A. Not only in salaries but in data collection, reporting and analysis.
30Driving to Higher Acquired Growth PartnershipsOptimize real estateAdvantaged by up-front planning in new developmentsAncillary revenue potentialThe benefits of partnering with different developers and real estate companies is immenseLower start up costs, access to high demand areas (previously un-attainable) and the potential for multi-centre deals all existOur operating margins would be considerably higher than othersPartnering in key locations also allows us to offer extreme value to parents in saving them transportation time and costsValue add – one stop show for parents
31Driving to Higher Acquired Growth AcquisitionsOntario – disconnect with vendors and full day kindergartenSelect Ontario marketsOther provinces; Quebec and NBAlberta reasonably solidTo expand our portfolio, we definitely need to consider acquisitions one of our greatest vehicles to get us thereIn Ontario specifically, certain pockets exist where the supply demand imbalance is extremely prevalentAs FDK continues to grow in size, many operators would rather sell than adapt, which creates a great opportunity for an innovative company like oursWe are also now looking at mid sized markets and trying to become the market leader in that region. By establishing ourselves as superior in a smaller market, we won’t need to open several markets to attract the client base necessary – a larger centre would generate great returns on our investmentsThe average acquisition adds (100?) spaces to our portfolio
32Model is Proven: Financial Results %($000)As we’re in this meeting, I’ll assume you’ve researched our company. As you’ll notice, we do experience seasonality unlike you might expect. The summer (Q3) in particular presents us a unique challenge which we continue to look at ways of overcoming. Our highest margin business, our OSC care essentially is non-existent in the summer months as they operate on a 10 month schedule. We have to bring them back for a 2 month period while competing with family vacation plans and unique and desirable summer camps. The Montessori centres we acquired possess an even greater level of seasonality as they historically take the summer off completely. We have diligently been looking at ways to not only keep those doors open, but sustain the level of enrolments through offering a fun and exciting summer program of discovery and exploratory learning. Last year was better than the year before and we are projecting for a stronger summer this year as well.The dip in our centre margin was due to delays in 3 of our new developments. With construction and permit issues causing delays in acquiring us our license, our ramp up on enrolment fell victim. We projected to open at a higher capacity, but with delays comes parents finding alternate care. In some cases, that alternative care required months of notice and therefore set us back on achieving the occupancy levels we had expected. Moving forward, these centres have reached expected occupancy projections and therefore will contribute a higher EBITDA than what we experienced over the past 12 months.Consistent margins that hover around 30%; reduce in summer months and more so with addition of MontessoriRecent investments in development centres will pay off as we move through 2013 and beyond.EBITDA of $1.0MM in Q will grow as investments in development centres and corporate infrastructure pay offAs the company continues to grow economies of scale will leverage the SG&A and investment in brand, curriculum, programming and facilities further