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

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Presentation on theme: "Investor Presentation August 2013. This presentation contains forward looking statements that reflect management’s expectations regarding the future growth,"— Presentation transcript:

1 Investor Presentation August 2013

2 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 2

3 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

4 At a Glance … Where We’ve Come FromWhere We AreWhere 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 4

5 Model is Proven: Successful Growth Start-up 2010 / 2011 IPO $25MM Bank Facility Acquisition focus Started in Alberta; moved into British Columbia & Ontario Acquired first Montessori centres Early Stage 2012 Executive leadership in place $5MM convertible debenture Four centres developed, including 2 new purpose- built facilities 3 rd party validation of quality 50 centres by year-end 5 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

6 Business Model is Proven 6 CentresSpaces Revenue ($)Centre Margin ($) Occupancy Rates following BrightPath acquisition or centre opening Portfolio Growth Profitable Business Model

7 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 7 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

8 The Market CHALLENGE Fragmentation Smaller operators challenged to deliver quality programming at competitive prices Smaller operators capital constrained Market Opportunity: Fragmented Ownership 8 Source: Early Childhood Education and Care, Resource and Research Unit The Solution: ECONOMIES OF SCALE Improved programming Better service delivery Increased professionalism Access to financing For-profit child care spaces provided as follows:

9 The Company is Ready: Management Team to Build an Industry Leader Mary Ann Curran Chief Executive Officer Dale Kearns President & Chief Financial Officer Dean Michaels Senior 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

10 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 10 Exponential Growth in EBITDA

11 Operating Imperative Increase earnings and cash flow from currently owned centres External Growth Imperative Grow the base to leverage the model with accretive investments #1 #2 11 Maximize Return on Capital Strategic Imperatives

12 12 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

13 Product Model Exceeding Standards CurriculumNutritionTechnology 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 13 Passionate and Competent Caregivers and Educators

14 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 14

15 Business Model Proven: Industry-Leading Quality of Operations 15 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 Care66 Total Alberta Commercial and NFP73 Delivering on the Quality Promise: ECERS-R Assessment

16 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 16

17 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

18 18 Platform for Profitable Growth: External Growth Models

19 Platform for Profitable Growth: Post-Acquisition Improvements (Deer Ridge) 19 Acquisition costs: Real estate$1,044K Business239 CAPEX200 $1,483 ROI = 25.2%

20 CentreCityCapacity Occupancy (Q1 2013) Highland ParkCalgary, AB7295% ChestermereChestermere, AB24775% Lawrence AvenueKelowna, BC14481% McKenzie TowneCalgary, AB24799% New Developments 20

21 21 Real Estate Ownership

22 Trading SymbolBPE-V Recent Share Price$ Week Range$ $0.77 Shares Outstanding121.7 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 22 As the Company is under-leveraged with debt capital, there is potential for highly-accretive non-dilutive growth and creation of shareholder value

23 23 Subsequent files appendix only

24 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 Information and financial systems Organic growth Improved 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 24

25 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 – 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 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

26 Earnings Table All dollar figures are presented in thousands of Canadian dollars and non-cumulative Q1 2011Q2 2011Q3 2011Q4 2011Q1 2012Q2 2012Q3 2012Q 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 % Adjusted EBITDA (294) (74) 590 FFO 71 (22) (314) (285) 228 AFFO (329) (400)

27 Occupancy Improves Post-Acquisition 27

28 Investing In Our Future Facilities ERP Systems New Developments FacilitiesProduct 28

29 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

30 Driving to Higher Acquired Growth Partnerships Optimize real estate Advantaged by up-front planning in new developments Ancillary revenue potential Value add – one stop show for parents 30

31 Driving to Higher Acquired Growth Acquisitions 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 31

32 32 ($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 Q 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


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