BrightPath's Successful Operations and Newly Opened Centres Drive 57.3% Growth in Quarterly Revenue and 133% Increase in Funds from Operations

TORONTO, May 23, 2017 /CNW/ - BrightPath Early Learning Inc. ("BrightPath" or the "Company") (TSX-V: BPE), the leading Canadian provider of high-quality, comprehensive early childhood education and care, with 8,715 spaces of licensed capacity within 77 centres located in Ontario, Alberta and British Columbia, announced today its operational and financial results for the quarter ended March 31, 2017.  

Financial performance highlights for the quarter ended March 31, 2017 are as follows (all compared to the same period in the prior year):

  • The Company's revenue was $23.3 million compared to $14.8 million in 2016, an increase of 57.3%, with higher revenue reported across all provincial markets;
  • The Company generated a 65.5% increase in centre margin to $6.8 million compared to $4.1 million in 2016, with all provincial markets achieving higher centre margin;
  • BrightPath's Adjusted EBITDA was $3.5 million compared to $1.6 million in 2016, an increase of 1.9 million, or 119%;
  • FFO increased to $2.8 million ($0.023 per share) compared to $1.2 million ($0.010 per share) in 2016, or 133%; and
  • AFFO increased to $3.0 million ($0.025 per share) compared to $1.3 million ($0.010 per share) in 2016, or 131%.

Significant business and financial events for the quarter ended March 31, 2017 include:

  • In January 2017, the Creekside centre located in Calgary, Alberta, which opened in November 2015, became stabilized for financial reporting purposes. Enrollment at this 247-space centre is currently 96%;
  • In February 2017, the Sage Hill centre located in Calgary opened after completion of tenant improvement construction. The Sage Hill centre comprises 130 licensed spaces in a 10,000 square foot leasehold facility. Committed enrollment at this centre is currently 87%; and
  • Construction of the Company's "purpose-built" Richmond Early Learning and Care centre, in southwest Calgary, is underway and is anticipated to open in the second quarter of 2017. This centre will be comprised of 247 licensed spaces in a 20,000 square foot facility developed and owned by BrightPath on a one-acre parcel of land held pursuant to a long-term ground lease with First Capital Realty.

"BrightPath's unprecedented level of first quarter financial performance is reflective of the Company's transformative acquisitions in Ontario during 2016 as well as the highly successful new centre openings in Alberta, despite the continued challenging economic times in that province. The scalability of the business is proving itself through a 57% increase in revenue generating a 119% increase in Adjusted EBITDA. Further, the expansion of BrightPath's capacity through these new locations and strategic acquisitions has allowed us to extend our reach as the early childhood education and care provider of choice and deliver an industry leading service offering," stated Mary Ann Curran, Chief Executive Officer of the Company. "At the same time, the Company continues to strive to further improve enrollment levels while delivering additional growth and profitability through the remainder of 2017."

The Peekaboo portfolio, acquired in the third quarter of 2016, was integrated into BrightPath's Enterprise Resource Planning ("ERP") systems during the first quarter of 2017. The Company has identified opportunities to improve Peekaboo operations and financial performance in several areas. Beginning with the utilization of BrightPath's CRM and ERP systems, the Company believes there is potential for higher enrollments, optimization of room configurations and age mixes and greater labour productivity. The Company has shifted away from uniform pricing across all centres to market specific pricing strategies and eliminated duplicate executive level personnel. The office consolidation, food bulk purchasing improvements and efficiencies through combination of facilities maintenance personnel are well underway. In support of a greater value proposition to families in the markets served, the introduction of BrightPath's curriculum and programming will underscore the basis for these improvements.  

Financial Review

($000's except where otherwise noted and per share amounts)



Q1 2017

Q4 2016

Q3 2016

Q2 2016

Q1 2016

Q4 2015

Q3 2015

Q2 2015

Revenue

$

23,331

$

21,758

$

16,762

$

15,859

$

14,830

$

13,796

$

12,815

$

13,912

Centre margin


6,790

5,616


3,672


4,249


4,102


3,629


3,265


3,976

Centre margin %


29.4

25.8


21.9


26.8


27.7


26.3


25.5


28.6

Adjusted EBITDA


3,499

2,664


1,039


1,757


1,575


1,306


915


1,781

FFO


2,752

1,821


575


1,345


1,230


877


696


1,436

AFFO


2,979

1,799


478


1,276


1,255


851


596


1,373

Net profit (loss)


333

1,247


(1,139)


(264)


(182)


(560)


1,344


144

Per share amounts:











FFO


0.023

0.015


0.005


0.011


0.010


0.007


0.006


0.012


AFFO


0.025

0.015


0.004


0.011


0.010


0.007


0.005


0.011


Net profit (loss)


0.003

0.010


(0.010)


(0.002)


(0.002)


(0.005)


0.011


0.001

 

For the three months ended March 31, 2017, the Company reported revenue of $23,331 (March 31, 2016 - $14,830) and centre margin of $6,790 (March 31, 2016 - $4,102). Revenue increased 57.3% due to tuition from the acquired Peekaboo and Lawrence Park centres, revenue from new locations in Cochrane, Calgary and Edmonton, and moderate year over year increases in tuition fees. These revenue increases were partially offset by a decline in occupancy in Alberta Stabilized centres, mitigated by increased occupancy in Ontario and British Columbia centres. Centre margin as a percentage of revenue increased to 29.1% of revenue compared to 27.7% in 2016. The centre margin increase was primarily caused by two factors: improvement in new centre metrics relative to the first quarter of 2016; and, generally, labour and operating cost improvements driving improved margins, with all regions favourable in comparison to the same period in 2016.

Adjusted EBITDA, AFFO and FFO











Q1 2017

Q4 2016

Q3 2016

Q2 2016

Q1 2016

Q4 2015

Q3 2015

Q2 2015

Centre margin for the period


6,790


5,616


3,672


4,249


4,102


3,629


3,265


3,976

General and administrative expense


(1,408)


(1,109)


(1,204)


(1,273)


(1,345)


(1,129)


(1,271)


(1,258)

Taxes, other than income taxes


(42)


(73)


(37)


(28)


(38)


(41)


(40)


(44)

Operating lease expense


(1,841)


(1,770)


(1,392)


(1,191)


(1,144)


(1,153)


(1,039)


(893)

Adjusted EBITDA

$

3,499

$

2,664

$

1,039

$

1,757

$

1,575

$

1,306

$

915

$

1,781



Q1 2017

Q4 2016

Q3 2016

Q2 2016

Q1 2016

Q4 2015

Q3 2015

Q2 2015

Net profit (loss) before taxes for the period


333


(454)


(1,139)


(264)


(182)


(560)


1,344


144

Depreciation and certain other non-cash items


1,666


1,910


1,208


1,083


1,025


969


815


948

Acquisition and development costs


753


365


506


526


387


468


328


344

Restructuring costs


-


-


-


-


-


-


-


-

Loss on disposition of development land


-


-


-


-


-


-


-


-

Gain on sale and leaseback


-


-


-


-


-


-


(1,791)


-

FFO

$

2,752

$

1,821

$

575

$

1,345

$

1,230

$

877

$

696

$

1,436

Share-based compensation


357


106


110


114


117


272


63


153

Maintenance capital expenditures


(130)


(128)


(207)


(183)


(92)


(298)


(163)


(216)

AFFO

$

2,979

$

1,799

$

478

$

1,276

$

1,255

$

851

$

596

$

1,373

 

Adjusted EBITDA for the first quarter of 2017 was $3,499 compared to $1,575 in the first quarter of 2016. The increase in Adjusted EBITDA of $1,924 was primarily due to contribution from the Peekaboo portfolio, the impact of opening new centres with strong enrollment and revenue levels and improvements in Ontario and British Columbia portfolio operations, offset by the effects of a decline in the Alberta Stabilized centre occupancy owing to the economic challenges in the province.

The Adjusted EBITDA for the first quarter of 2017 met the Company's forecast and positions the Company on track to achieve its full year 2017 forecasted Adjusted EBITDA range of $13.6 million to $14.0 million.

FFO for the first quarter of 2017 was $2,752 compared to $1,230 in the first quarter of 2016, due primarily to the contribution of new centres acquired in 2016. FFO per share for the first quarter of 2017 was $0.023 compared to $0.010 for the same period in 2016. 

AFFO for the first quarter of 2017 was $2,979 compared to $1,255 a year earlier. AFFO per share for the first quarter of 2017 was $0.025 compared to $0.010 for the first quarter of 2016.

Net profit for the first quarter of 2017 was $333 compared to a net loss of $182 in the first quarter of 2016. Net profit for the first quarter of 2017 was primarily the result of a higher scale of operations through the contribution from the 20 centres acquired in the Peekaboo portfolio transaction. An increase in Adjusted EBITDA was offset by higher acquisition and development costs, which are required under IFRS accounting to be expensed in the quarter incurred, although the economic returns from these expenditures will accrue to the benefit of the Company in future quarters and years, and share-based compensation expenses compared to the same period in 2016. Basic and diluted net profit (loss) per share for the quarter ended March 31, 2017 was $0.003 (March 31, 2016 - $(0.002)).   

Centre Portfolio Overview

The Company's centre locations, number of licensed spaces and average occupancies are provided in the table that follows. Centres typically experience lower levels of attendance June through September due to seasonal factors. As well, new centres typically exhibit lower occupancy levels during ramp up of enrollments, thereby adversely impacting total portfolio occupancies prior to achieving stabilization. 



Three months ended
March 31, 2017

Three months ended
March 31, 2016

Stabilized Centres






Alberta



Ending Centres #

32

30

Ending Spaces #

3,625

3,219

Avg. Occupancy %

82.4

85.3




British Columbia



Ending Centres #

8

7

Ending Spaces #

764

558

Avg. Occupancy %

85.9

85.4




Ontario 



Ending Centres #

35

14

Ending Spaces #

3.949

1,401

Avg. Occupancy %

78.9

76.5




Total Stabilized Centres



Ending Centres #

75

51

Ending Spaces #

8,338

5,178

Avg. Occupancy %

81.1

82.9

Non-stabilized Centres






Alberta



Ending Centres #

2

2

Ending Spaces #

377

367

Avg. Occupancy %

82.7

69.7




British Columbia



Ending Centres #

-

1

Ending Spaces #

-

206

Avg. Occupancy %

-

76.5




Ontario 



Ending Centres #

-

-

Ending Spaces #

-

-

Avg. Occupancy %

-

-




Total Non-stabilized Centres



Ending Centres #

2

3

Ending Spaces #

377

573

Avg. Occupancy %

82.7

72.2

Total Portfolio (All Centres)






Ending Centres #

77

54

Ending Spaces #

8,715

5,751

Avg. Occupancy %

81.2

81.8


 

Deferred Share Units ("DSUs")

For the three months ended March 31, 2017, pursuant to the Board of Directors DSU plan, five members of the board of directors of BrightPath elected to receive board fees in the form of DSUs in lieu of cash remuneration, representing $0.07 million fair value in respect of 154,889 DSUs. The DSUs were issued on April 11, 2017.

Arrangement Agreement with Busy Bees

Earlier today, BrightPath announced that it had entered into a definitive agreement (the "Arrangement Agreement") with an affiliate of Busy Bees Holdings Limited (the "Busy Bees Affiliate") pursuant to which the Busy Bees Affiliate will acquire all of the issued and outstanding common shares of BrightPath at a price of $0.80 per share in cash, representing a premium of 46% over the volume-weighted average price of BrightPath shares on the TSXV of $ 0.547 for the 30 trading days prior to this announcement.  The transaction is valued at approximately $145 million and will be carried out pursuant to the Arrangement Agreement under a court-approved statutory plan of arrangement governed by the Canada Business Corporations Act.

NON-IFRS PERFORMANCE MEASURES

The Company uses "centre margin" as an indicator of centre performance. Centre margin does not have a standardized meaning prescribed by IFRS and therefore, may not be comparable with the calculation of similar measures by other entities. Centre margin is determined by deducting centre expenses from revenue. Centre expenses include labour and direct costs and exclude operating lease expense for leasehold properties and mortgage interest, if any, on those properties owned by the Company.

The Company also uses Adjusted EBITDA, FFO and AFFO as indicators of financial performance. 

Adjusted EBITDA is calculated by deducting the following from centre margin: operating lease expense, general and administrative expenses, and taxes other than income taxes. FFO is calculated by adjusting net profit (loss) to add back acquisition costs expensed as incurred, depreciation and certain other non-cash items. AFFO is calculated by adjusting FFO to add back share-based compensation and deduct maintenance capital expenditures. Maintenance capital expenditures consist of capital expenditures that are capitalized for accounting purposes but are considered to be recurring costs such as facilities and leasehold maintenance and the replacement of learning materials, toys, furniture, appliances and other equipment. Maintenance capital expenditures do not occur evenly over the course of the year with these activities typically occurring with greater intensity during the seasonally slower summer months.

Adjusted EBITDA, FFO and AFFO do not have standardized meanings prescribed by IFRS. The Company's method of calculating Adjusted EBITDA, FFO and AFFO may be different from other entities and, accordingly, may not be comparable to such other entities. Adjusted EBITDA, FFO and AFFO: (i) do not represent cash flow from operating activities as defined by IFRS; (ii) are not indicative of cash available to fund all liquidity requirements, including capital for growth; and (iii) are not to be considered as alternatives to IFRS-based net profit (loss) for the purpose of evaluating operating performance.

Centre operating results are also analyzed based on Stabilized and Non-stabilized centres which may not be comparable with that used by other entities. Acquired and newly-developed centres are deemed to be stabilized after 24 months, or sooner if pro forma occupancy levels are achieved.

Net profit (loss) is impacted by, among other items, accounting standards that require centre acquisition and transaction costs to be expensed as incurred. As the Company executes its consolidation and development strategy in the Canadian market, it will routinely incur such expenses which will negatively impact the Company's reported net profit (loss), but not Adjusted EBITDA, FFO and AFFO.

ABOUT BRIGHTPATH EARLY LEARNING INC.

BrightPath Early Learning Inc. is a Canadian leader in child care and early education with 77 locations in major markets across the country. Meeting the highest standards in curriculum, nutrition, technology and recreational programming, BrightPath is committed to providing families with the very best child development and care Canada has to offer. 

For more information, visit www.BrightPathKids.com/corporate (TSX‐V: BPE). For further information regarding this release, please contact Dale Kearns, President & Chief Financial Officer of BrightPath Early Learning Inc. at (403) 705-0362 ext. 406. 

FORWARD-LOOKING STATEMENTS

Certain statements contained herein constitute forward-looking statements regarding the future growth, results of operations, performance and opportunities of the Company. Forward-looking statements can generally be identified by the use of, but not limited to, the following words: "plans", "expects" or "does not expect", "budget", "scheduled", "estimate", "forecast", "pro forma", "anticipate" or "does not anticipate", "believe", "intend", "inferred", "potential" and similar expressions or statements that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements are not historical facts, but reflect the Company's current expectations regarding future results or events based on information currently available and what the Company believes to be reasonable assumptions. All forward-looking statements are qualified by these cautionary statements. 

Forward-looking statements are subject to a number of risks, assumptions and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results or events to differ materially from those expressed, implied or projected include, but are not limited to, general economic conditions, the Company's ability to meet and maintain forecasted occupancy levels, general government policies, continued availability of government child care subsidies to parents, unexpected costs or liabilities related to acquisitions, construction, environmental matters, legal matters, changes in interest rates, credit spreads and the availability of financing. In addition, please refer to the Risks and Uncertainties section of the Company's annual Management's Discussion and Analysis. As such, the Company gives no assurance that actual results will be consistent with these forward-looking statements.

Readers should not place undue reliance on any such forward-looking statements. These forward-looking statements are made as of the date hereof. The Company undertakes no obligation to publicly update or revise any such statement, reflect new information or reflect the occurrence of future events or circumstances, except as required by securities laws.


BrightPath Early Learning Inc.

Consolidated Statements of Financial Position

(Unaudited)


(CDN $000's)

March 31,

2017

December 31,

2016

Assets






Non-current assets




Restricted cash

$

400

$

700


Property and equipment


57,349


56,480


Goodwill and definite life intangible assets

51,008

51,393


108,757

108,573

Current assets




Cash

7,808

6,405


Restricted cash

2,450

2,150


Accounts receivable

2,430

2,282


Prepaid expenses and deposits

1,781

1,821


Short term investments

39

39


14,508

12,697




Total Assets

$

123,265

$

121,270






Liabilities






Non-current liabilities




Long term debt and financing leases

$

42,734

$

42,936


Other liabilities


400


700


43,134

43,636

Current liabilities




Accounts payable and accrued liabilities

14,227

12,466


Deferred revenue

1,998

1,900


Current portion of debt and financing leases

3,672

3,717


Convertible debentures – liability

component

4,988

 

4,968


24,885

23,051




Total Liabilities

68,019

66,687




Shareholders' Equity




Share capital

64,950

64,983


Convertible debentures – equity component

342

342


Equity settled share-based compensation

3,789

3,432


Accumulated deficit

(13,835)

(14,174)

Total Shareholders' Equity

55,246

54,583




Total Liabilities and Shareholders' Equity

$

123,265

$

121,270

 

 




BrightPath Early Learning Inc.



Consolidated Statements of Operations and Comprehensive Income (Loss)

Three months ended March 31, 2017 and 2016



(Unaudited)













 

(CDN $000's except for per share amounts)

 March 31,
2017

           March 31,
2016




Revenue

$

22,867

$

14,374

Government grants

464

456

Total revenue

23,331

14,830




Centre expenses




Salaries, wages and benefits

12,621

8,046


Other operating expenses

3,920

2,682

Centre margin

6,790

4,102




Operating leases

1,841

1,144

Finance costs

569

351

General and administrative

1,408

1,345

Taxes, other than income taxes

42

38

Acquisition and development

753

387

Share-based compensation

357

117

Depreciation and amortization

1,487

884


6,457

4,266




Profit (loss) before other income (expense)

333

(164)




Other income (expense)

-

(18)




Net Profit (Loss) and Total Comprehensive
Income (Loss)

$

333

$

(182)




Net profit (loss) per share




Basic

$

0.003

$

(0.002)


Diluted

$

0.003

$

(0.002)

 

 







BrightPath Early Learning Inc.




Consolidated Statements of Changes in Shareholders' Equity

Three months ended March 31, 2017 and 2016




(Unaudited)







(CDN $000's)

Share Capital

Convertible
Debentures –
Equity
Component

Equity Settled

Share-based
Compensation

Accumulated
Deficit

Shareholders'
Equity







Balance at January 1, 2016

$

65,374

$

342

$

2,985

$

(14,013)

$

54,668








Share-based compensation


-

-

117

-

117








Shares purchased for cancellation


(225)

-

-

119

(136)








Net loss and comprehensive loss


-

-

-

(182)

(182)








Balance at March 31, 2016

$

65,119

$

342

$

3,102

$

(14,076)

$

54,487








Balance at January 1, 2017

$

64,983

$

342

$

3,432

$

(14,174)

$

54,583












Share-based compensation


-


-


357


-


357












Shares purchased for cancellation


(33)


-


-


6


(27)












Net profit and comprehensive income


-


-


-


333


333












Balance at March 31, 2017

$

64,950

$

342

$

3,789

$

(13,835)

$

55,246

 

 

BrightPath Early Learning Inc.
Consolidated Statements of Cash Flow
Three months ended March 31, 2017 and 2016
(Unaudited)







March 31,

March 31,

(CDN $000's)

2017

2016




Cash provided by (used in):






Operating Activities



Net profit (loss)

$

333

$

(182)

Items not affecting cash:




Depreciation and amortization

1,487

884


Finance costs

569

351


Share-based compensation

357

117


Change in fair value of convertible debenture redemption feature

-

27

Change in non-cash operating   working capital

335

1,304

Cash provided by operations

3,081

2,501




Finance costs paid

(374)

(213)


2,707

2,288




Investing Activities



Property and equipment

(989)

(3,277)


(989)

(3,277)




Financing Activities



Loan proceeds

784

5,069

Loan repayments

(1,002)

(295)

Financing transaction costs

-

(23)

Finance lease repayments

(70)

(75)

Shares purchased for cancellation

(27)

(119)


(315)

4,557




Change in Cash

1,403

3,568

Cash at beginning of period

6,405

1,537

Cash at end of period

$

7,808

$

5,105

 

SOURCE BrightPath Early Learning Inc.

For further information: Dale Kearns, President & CFO, BrightPath Early Learning Inc., Office: (403) 705-0362 ext. 406, Toll Free: (888) 808-2252, http://www.brightpathkids.com; Joe Racanelli, Investor Relations, NATIONAL Equicom, (416) 586-1943, jracanelli@national.ca

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