BPE

CALGARY, May 22, 2014 /CNW/ - BrightPath Early Learning Inc. ("BrightPath" or the "Company") (TSX-V: BPE), the leading Canadian provider of quality early childhood education and care, announced today its operational and financial results for the three month period ended March 31, 2014 that demonstrate the Company is successfully implementing the strategy enunciated last year, and well on its way to achieving the goals set for 2014. In addition, the Company has recently announced four projects in its core Alberta marketplace that will add 680 licensed child care spaces representing 13% more capacity to the Company's current portfolio.

Portfolio performance highlights for the three months ended March 31, 2014 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):

• The highest quarterly revenue in the Company's history, at $12.7 million an increase of 10.6%;
• Adjusted EBITDA set  a new quarterly record, with $1.56 million an increase of 60.3%;
• Funds From Operations ("FFO") of $1.25 million ($0.01 per share), an increase of 64.5%;
• Adjusted Funds From Operations ("AFFO") increased 75.8% to a record $1.33 million ($0.011 per share);
• Improved centre margin which rose to 28.5% compared with 27.5%;
• Following a restructuring that included both a reduction in corporate overhead and a cost- effective relocation of certain accounting and operational functions, general and administrative costs decreased 12.2% to $1,276 and  were 15.9% lower on a sequential quarter basis; and
• Net loss of $653 ($0.005 per share), which included a provision of $770 for the aforementioned restructuring, without which the Company would have generated net earnings of $117. The financial benefit from the restructuring contributed to the above-noted reduction to general and administrative expense.

Significant events in 2014 include the following:

• In April, 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 Calgary;
• In May, the Company 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 modeled on the highly successful and well-received McKenzie Towne development in south east Calgary;
• In May, the Company's first Edmonton greenfield development, on lands within the Melcor Developments West Henday Promenade Shopping Centre, representing 250 spaces was announced;
• The Company initiated the process of expanding its Airdrie, Alberta centre from 50 licensed spaces to 111, with completion scheduled for fall 2014; and
• In May, construction of the Surrey centre reached 70% completion with the scheduled opening of 200 child care spaces in the fall of 2014.

"We embarked on a three-part plan to deliver on our promise to stakeholders," said Mary Ann Curran, Chief Executive Officer of BrightPath. "Introduce a new brand and an enhanced market-leading offering for our children; optimize the return on invested capital through operating and financial results substantially in excess of those in earlier periods; and refocus and repeat the success of the greenfield development channel to deliver significant accretive growth. With these financial results and recent announcements representing four new locations and one expanded facility comprising approximately 900 spaces, we are fulfilling our promise on all three fronts."

Financial Review

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

Selected Quarterly Information

For the three months ended March 31, 2014, the Company reported revenue of $12,703 (March 31, 2013 - $11,484) and centre margin of $3,626 (March 31, 2013 - $3,159). The year over year increase in revenue was primarily due to a higher number of spaces available for enrollment and a higher level of child enrollments combined with fee increases implemented, for the most part, effective January 1, 2014.  Centre margin as a percentage of revenue increased to 28.5% compared with 27.5% a year earlier, with the increase mainly attributable to the increased revenue and utilization of the information now available through the Company's Enterprise Resource Planning System ("ERP") system to optimize labour efficiency and costs.

Adjusted EBITDA for the first quarter of 2014 was $1,560 compared to $926 in the fourth quarter of 2013 and $973 in the first quarter of 2013. Adjusted EBITDA improved on a sequential quarter basis and compared to the first quarter of 2013 due primarily to higher centre margin and lower general and administrative expenses. Margin decreases in Ontario, due to full day kindergarten ("FDK"), were more than offset by gains in the other regions.

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

FFO for the first quarter of 2014 was $1,250 compared to $688 for the fourth quarter of 2013 and $760 for the first quarter of 2013. The increase over prior quarters is primarily due to increased centre margin and lower general and administrative expenses.  FFO per share for the first quarter of 2014 was $0.010 compared to $0.006 for the first quarter of 2013.

AFFO for the first quarter of 2014 was $1,329 compared to $728 for the fourth quarter of 2013 and $756 for the first quarter of 2013. The factors contributing to this increase are substantially the same as described for the increase in FFO. AFFO per share for the first quarter of 2014 was $0.011 compared to $0.006 for the first quarter of 2013.

Comparable centre revenue in Alberta increased 10.3% and 7.1% in British Columbia, and declined 4.1% in Ontario. Comparable centre margin rose 15.3% in Alberta and 59.4% in British Columbia, and declined 20.1% in Ontario. The decrease in revenue and centre margin in Ontario reflects lower occupancy and a shift towards younger children who generate lower margins than older children, as the Company adapts to the implementation of FDK in Ontario. As a result of the completion of implementation of the Company's ERP, the management of costs, particularly labour, has been considerably enhanced vis a vis previous periods.

Included in comparable centres are two newly-developed centres. Enrollments at these centres continue to show strength demonstrating pent up demand for quality child care which underpins the Company's growth strategy.

¹The number of licensed spaces at McKenzie Towne was expanded from 247 to 286 in October 2013.

New Locations

Situated in the West Henday Promenade, the Company's first new development in the Edmonton market will be located at the access point to Lewis Estates and central to several other high-growth master-planned communities. Across from a major public transit hub and adjacent to Anthony Henday Drive (Edmonton's major ring road), the primary trade area consists of more than 25,000 residents, with projected housing starts indicating a doubling of the population by 2018. Current information on the supply of child care spaces indicates fewer than 700 licensed spaces available to address existing market demand. Modelled on the highly successful McKenzie Towne and Chestermere newly-built day care centres in Calgary, the West Henday centre will comprise approximately 250 licensed child care spaces in a 20,000 square foot facility constructed on a 0.8 acre parcel of land.

The Company is securing the Edmonton land site through a long-term ground lease arrangement with Melcor Developments Ltd (MRD-TSX). BrightPath will commence construction upon satisfaction of conditions and receipt of a development permit.

"We are excited to once again work with BrightPath by introducing a quality child care facility in our West Henday Promenade project," said Mr. Brian Baker, President and CEO of Melcor Developments Ltd. "BrightPath provides a service that aligns with our objective of creating fully integrated communities for surrounding residents and clients of our business campuses. BrightPath's child care facility will be a valuable component to this vision in West Henday. This is our second project with BrightPath and we look forward to the prospect of additional partnerships."

The Company's most recently announced Calgary greenfield location is located in the Symons Valley area central to five master planned residential communities and adjacent to Evanston, the fastest growing residential community in the city.  The primary trade area consists of more than 50,000 residents, with projected housing starts indicating almost twice the population by 2017. Current information on the supply of child care spaces indicates fewer than 300 licensed spaces to address existing market demand.  When completed, the Symons Valley centre will house approximately 250 licensed child care spaces in a 20,000 square foot facility on a 0.9 acre parcel of land acquired through a long-term ground lease agreement. The Symons Valley centre is the Company's first project involving Hopewell Developments and CREIT.

In Cochrane, Alberta, the Company has entered into a premises lease for space to accommodate approximately 120 licensed child care spaces to meet the demand for child care in this market. The Company's centre in Cochrane will be conveniently located adjacent to Highway 1A, the arterial road that intersects with Crowchild and Stoney Trail in Calgary, reinforcing Cochrane as an increasingly desirable place to live based on its proximity to the latest generation of transportation links. The primary trade area, which consists of more than 20,000 residents, has experienced over 700 residential construction starts since 2013 and is projected to benefit from continued rapid population growth. Current information on the supply of child care indicates fewer than 470 licensed spaces.

Child Care Centre Portfolio Overview

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

Deferred Share Units ("DSUs")

For the three months ended March 31, 2014, 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 representing $70 fair value in respect of 200,890 DSUs.  The DSUs were issued on April 11, 2014.

Pursuant to the Employee DSU Plan, election was made to receive incentive compensation in the form of DSUs representing $23 fair value in respect of 64,285 DSUs.  The DSUs were issued on April 28, 2014.

Outlook

The Company continues to leverage its investment in its new ERP systems combined with strengthened operational oversight to deliver on its two identified priorities:

• To generate EBITDA substantially in excess of earlier periods through optimizing a return on capital invested - through improved management of enrollment and mix, market based pricing of fees, and management of all costs - labour, other operating and general and administrative; and
  
  
• To refocus and repeat earlier success with new locations developed by the Company that layer on substantial, accretive growth.

Progress with respect to these initiatives was clearly demonstrated in the first quarter and with announcements since then, representing a 60% increase in year over year operating results and plans for more than 900 new spaces to come on line, commencing in the third quarter of 2014.  As we move forward in 2014, the Company will continue to demonstrate its commitment to these objectives.

The Company is confident it will continue to drive profitability from its ongoing operating improvements, and will further leverage the profitable base with growth initiatives announced and others in the pipeline.

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 critical 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 represent 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 income / 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 income / loss, but not Adjusted EBITDA, FFO and AFFO.

QUARTERLY CONFERENCE CALL

BrightPath's quarterly results conference call is scheduled for Friday, May 23, 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. The conference call will be archived for replay until Friday, June 6, 2014 at midnight. To access the archived conference call, dial +1 (416) 849-0833 or +1 (855) 859-2056 and enter the reservation password 48510622 followed by the number sign.

A live audio webcast of the conference call will be available at: http://www.newswire.ca/en/webcast/detail/1356999/1501755. Please connect at least 10 minutes prior to the 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.

For more information on BrightPath visit www.BrightPathKids.com/corporate (TSX‐V: BPE).

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.

BrightPath Early Learning Inc.
Consolidated Statements of Financial Position
(Unaudited)

¹Certain amounts reclassified to conform to current year presentation.

BrightPath Early Learning Inc.
Consolidated Statements of Operations and Comprehensive Loss
Three months ended March 31, 2014 and 2013
(Unaudited)

BrightPath Early Learning Inc.
Consolidated Statements of Changes in Shareholders' Equity
Three months ended March 31, 2014 and 2013
(Unaudited)

BrightPath Early Learning Inc.
Consolidated Statements of Cash Flow
Three months ended March 31, 2014 and 2013
(Unaudited)

SOURCE BrightPath Early Learning Inc.