BPE

CALGARY, Nov. 20, 2014 /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, announced today its operational and financial results for the three and nine month periods ended September 30, 2014.  The financial results clearly demonstrate that the successful implementation of the profitable growth strategy communicated last year is continuing, and that significant progress towards the operating and financial goals set for 2014 is being achieved.

Portfolio performance highlights for the three months ended September 30, 2014, which reflect the typically adverse impact of the summer season on the Company's operations, are as follows (all comparisons are against the same period last year and all amounts are in thousands except per share amounts, unless otherwise noted):

• A 7.2% increase in revenue to $12.0 million;
• Adjusted EBITDA of $0.8 million, an increase of 254.4%;
• Improved centre margin which rose to 23.2% of revenue compared with 23.1%;
• Average occupancy of 77.2% compared with 79.0% a year earlier;
• A significant decrease of 29.3% in general and administrative costs to $1.1 million;
• Funds from Operations ("FFO") of $517 ($0.004 per share) compared with $(161) ($0.001 loss per share) in the prior year;
• Adjusted Funds from Operations ("AFFO") increased $0.4 million to $0.3 million ($0.002 per share from $0.001 loss per share in 2013); and
• Available capital of $25 million at period end to fund its pipeline of growth initiatives, including an additional 870 child care spaces or 16% to the Company's current portfolio of 5,390 spaces.

Highlights for the nine months ended September 30, 2014:

• Revenues of $37.9 million compared to $34.6 million in 2013, an increase of 9.4%;
• Adjusted EBITDA of $4.1 million compared to $2.1 million in 2013, an increase of 91.6%; 
• Higher centre margin of $10.1 million (26.6% of revenue) compared to $9.0 million (25.9% of revenue) in 2013, an increase of 12.4%;
• A significant decrease of 22.3% in general and administrative costs to $3.6 million from $4.6 million in 2013;
• A 155.6% increase in FFO to $3.2 million ($0.03 per share) compared to $1.2 million ($0.01 per share) in 2013, a substantial increase of $2.0 million; and 
• A 130.2% increase in AFFO to $3.0 million ($0.02 per share) compared to $1.3 million ($0.01 per share) in 2013, an increase of $1.7 million.

Significant events during 2014 to date include:

• The Company announced plans to open a new child care centre in Cochrane, Alberta creating 120 spaces in leased premises in this rapidly growing, under-serviced community in close proximity to the city of Calgary;
• BrightPath announced its intention to develop a greenfield centre in the Symons Valley area of northwest Calgary in the Creekside commercial development, developed by Hopewell Developments in conjunction with Canadian Real Estate Investment Trust ("CREIT"), representing an additional 250 licensed child care spaces;
• The Company's first Edmonton greenfield development, on lands within Melcor Developments' West Henday Promenade Shopping Centre representing 250 spaces, was announced. Both the West Henday and Symons Valley developments are being modeled on the highly successful and well-received McKenzie Towne development in southeast Calgary;
• BrightPath expanded its Stony Plain centre in the Edmonton, Alberta area, increasing its licensed capacity from 121 to 151 child care spaces;
• The Company initiated the process of expanding its Airdrie, Alberta centre from 50 licensed child care spaces to 111;
• The Surrey centre, in a rapidly growing area within  metropolitan Vancouver, British Columbia with 206 child care spaces, was opened on schedule in September 2014, with enrollment progressing well;
• The TSX Venture Exchange accepted the Company's notice of intention to make a normal course issuer bid ("NCIB") in the open market to purchase up to a maximum five percent of the issued and outstanding common shares to contribute to enhanced shareholder value and liquidity; and
• BrightPath announced its second new development in Edmonton, representing 190 child care spaces in leased premises in the community of Windermere South.

"In its third quarter of operations for 2014, the Company more than tripled its Adjusted EBITDA compared to last year," noted Mary Ann Curran, Chief Executive Officer of BrightPath.  "Our success is based on our ongoing commitment to and parent recognition of our product innovation, more effective and efficient operating practices and a strengthened pipeline of new child care spaces that represents a further 870 child care spaces, an increase of 16%. We anticipate further refinement as we gain operating leverage through our recently implemented ERP and cost reduction initiatives, and substantial profitable growth as we bring the announced developments on stream."

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

Selected Quarterly Information

Operating results were strong despite the typical summer seasonal reduction in occupancy during the third quarter of 2014, and a short term lag in September 2014 enrollments that reflected the repositioning and reconfiguration of certain programs and child care spaces. Enrollments have subsequently rebounded as anticipated in the weeks following and as at the date hereof, occupancy levels are higher than a year ago. As the Company continues to innovate its programing and achieve a higher price point and higher overall revenue in many of its centres, planned transition results in some occupancy fluctuation in a select number of centres.

For the three months ended September 30, 2014, the Company reported revenue of $12,013 (September 30, 2013 - $11,211) and centre margin of $2,782 (September 30, 2013 - $2,592). The 7.2% increase in revenue year over year was primarily due to fee increases implemented at select centres, offset by a decrease in average child enrollments of 1.8 percentage points. Centre margin as a percentage of revenue remained relatively consistent at 23.2% compared with 23.1% a year earlier. Fee increases and utilization of the information now available through the Company's ERP system to optimize labour efficiency were offset, in part, by wage rate increases, reconfiguration of certain programs and spaces, a shift in age mix of children in Ontario due to the effects of public school full day kindergarten ("FDK"), and increased centre operating costs in western Canada.

Adjusted EBITDA for the third quarter of 2014 was $801 compared to $226 in the third quarter of 2013. Adjusted EBITDA improved compared to the third quarter of 2013 due to higher centre margin and lower general and administrative expenses.

Adjusted EBITDA, AFFO and FFO – Certain Amounts Amended For Correction

FFO for the third quarter of 2014 was $517 compared to $(161) in the third quarter of 2013. The increase over the prior year amount is primarily due to higher centre margin and lower general and administrative expenses. FFO per share for the third quarter of 2014 was $0.004 compared to $(0.001) for the same period in 2013.  The Company's progress is marked by the fact that it has now recorded positive FFO per share for four consecutive quarters.

AFFO for the third quarter of 2014 was $294 compared to $(113) a year earlier. The year over year increase in AFFO of $407 was primarily due to increased centre margin and lower general and administrative expenses, offset by an increase in maintenance capital expenditures which are typically planned to occur with greater concentration during the seasonally slower summer months. AFFO per share for the third quarter of 2014 was $0.002 compared to $(0.001) for the third quarter of 2013.

The Company's land development site in British Columbia was reclassified as an asset held for sale during the third quarter of 2014 following the decision by the Company to accept an offer for gross proceeds of $750 which will augment capital allocated to nearer term growth opportunities. The land development site was acquired as part of a $5 million portfolio transaction in 2011. Purchaser conditions have been waived and the transaction is expected to close in December 2014. 

Child Care Centre Portfolio Overview

The Company's child care centre locations, number of licensed spaces and average occupancies are as shown in the table that follows.  Average occupancies exhibit lower levels of attendance June through August due to seasonal factors.

Deferred Share Units ("DSUs")

For the three months ended September 30, 2014, pursuant to the Board of Directors DSU plan, five members of the board of directors of BrightPath received board fees in the form of DSUs representing $79 fair value in respect of 188,241 DSUs.  The DSUs were issued on October 31, 2014.

Outlook

In its third quarter of operations for 2014, the Company achieved a year over year increase in Adjusted EBITDA by a factor of well over three times.  The Company has continued to improve and innovate its product and this is increasingly being recognized by its customers. The Company has also strengthened its pipeline of growth opportunities which now represents a further 870 child care spaces, an increase of 16%. In summary, the Company remains focussed on the following objectives:

• To generate substantially higher EBITDA through optimizing the return on capital invested – through product improvement, better management of enrollment and mix, market-based pricing of tuition fees, and management of all costs - labour, other operating and general and administrative; and
• To improve upon its earlier success with new locations developed by the Company that layer on substantial, accretive growth. At quarter end, the Company has available capital of $25 million to fully fund both its announced and near term pipeline growth plans.

The Company has believed for several quarters that its common shares remain substantially undervalued. This is particularly the case in consideration of its established track record, significant improvement in the Company's financial performance, profitability, free cash flow and its growth program. In this light, the Company's board of directors has begun to consider various options to enhance shareholder value and liquidity including its NCIB and the sale of a land development site to augment capital allocated to nearer term growth opportunities.   

NON- IFRS PERFORMANCE MEASURES

The Company uses "centre margin" as a performance indicator of child care centre operating results. 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 exclude net rents due under leases for leasehold properties and mortgage interest, if any, on those properties owned by the Company.

BrightPath utilizes a number of key measures, such as Adjusted EBITDA, FFO, AFFO, occupancy and centre margin, that, in its opinion, are appropriate to measuring the progress of the Company towards its objectives. The Company uses "comparable centre results" and "stabilized centre results" to measure performance. Centres are deemed to be comparable once there is a full calendar year of results for comparative purposes. Acquired centres in Alberta are deemed to be stabilized 12 months following their acquisition.  Acquired centres in Ontario and British Columbia and new development centres in all provinces are deemed to be stabilized after 24 months.

Adjusted EBITDA is calculated by deducting from centre margin: general and administrative expenses, operating lease expense and taxes other than income taxes.  FFO is calculated by adjusting the net 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 stock 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 toys, appliances and other equipment.

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 income for the purpose of evaluating operating performance. 

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

QUARTERLY CONFERENCE CALL

BrightPath's quarterly results conference call is scheduled for Friday, November 21, 2014 at 10:00 am EST.  The call details are as follows:

To access the conference call by telephone, dial +1 (647) 427-7450 or +1 (888) 231-8191. Please connect approximately 10 minutes prior to the beginning of the call.

A live audio webcast of the conference call will be available at: http://www.newswire.ca/en/webcast/detail/1438437/1598841. Please connect at least 10 minutes prior to the web conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived at the above website for 90 days.

The conference call will be archived for replay until Friday, December 5, 2014 at midnight. To access the archived conference call, dial +1 (416) 849-0833 or +1 (855) 859-2056 and enter the reservation password 30756615 followed by the number sign.

ABOUT BRIGHTPATH EARLY LEARNING INC.

BrightPath Early Learning Inc. is a Canadian leader in child care and early education with 52 locations in major markets across the country.  Meeting the highest standard in curriculum, nutrition, technology and recreational programing, BrightPath is committed to providing families with the very best care and child development programs Canada has to offer. 

FORWARD-LOOKING STATEMENTS

Certain statements in this Release, which are not historical facts, may constitute forward-looking statements or forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). Any statements related to BrightPath's projected revenues, earnings, growth rates, revenue mix, staffing and resources, and product plans are forward-looking statements as are any statements relating to future events, conditions or circumstances.

The use of terms such as "believes", "anticipates", "expects", "projects", "targeting", "estimate", "intend" and similar terms are intended to assist in identification of these forward-looking statements. Readers are cautioned not to place undue reliance upon any such forward-looking statements. Such forward-looking statements are not promises or guarantees of future performance and involve both known and unknown risks and uncertainties that may cause the actual results, performance, achievements and/or developments of BrightPath to differ materially from the results, performance, achievements and/or developments expressed or implied by such forward-looking statements. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions. Except as required by law, BrightPath does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change.

The Company undertakes no obligation, except as required by law, to update publicly or otherwise any forward-looking information, whether as a result of new information, future events or otherwise, or the above list of factors affecting this information. Many factors could cause the actual results of BrightPath to differ materially from the results, performance, achievements and/or developments expressed or implied by such forward-looking statements.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

SOURCE BrightPath Early Learning Inc.