BPE

CALGARY, March 31, 2015 /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 twelve month periods ended December 31, 2014. The financial results clearly demonstrate the achievement of operating and financial goals set for 2014 and lay the groundwork for continuing profitable growth in 2015.

Portfolio performance highlights for the year ended December 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):

• Record revenues of $50.8 million compared to $46.8 million in 2013, an increase of 8.5%;
• Highest reported Adjusted EBITDA of $6.0 million, which is double the $3.0 million in 2013;
• A 13.5% increase in centre margin to $13.8 million (27.2% of revenue) compared to $12.2 million (26.0% of revenue) in 2013;
• A significant decrease of 26.8% in general and administrative costs to $4.5 million from $6.1 million in 2013;
• A 149.1% increase in Funds from Operations ("FFO") and 150.0% increase in FFO per share to a record $4.8 million ($0.040 per share) compared to $1.9 million ($0.016 per share) in 2013, a substantial increase of $2.9 million;
• A 120.2% increase in Adjusted Funds from Operations ("AFFO") and 117.6% increase in AFFO per share to $4.5 million ($0.037 per share) compared to $2.0 million ($0.017 per share) in 2013; and
• Available capital of $24.8 million at year end to augment its growing positive cash flow from operations and fund its pipeline of growth initiatives, including announced additional 870 licensed spaces or 16.2% growth to the Company's current portfolio of 5,372 spaces, as well as other initiatives under review and not yet announced.

Highlights for the three months ended December 31, 2014 include:

• A 6.0% increase in revenue to $12.9 million;
• Record Adjusted EBITDA of $1.9 million, more than double the amount in the same period in the prior year;
• A 16.6% increase in centre margin to $3.7 million (29.0% of revenue) compared to $3.2 million (26.3% of revenue) in 2013;
• A significant decrease of $0.6 million or 40.5% in general and administrative costs to $0.9 million;
• A 137.4% increase in FFO and 116.7% increase in FFO per share to $1.6 million ($0.013 per share) compared to $0.7 million ($0.006 per share) in the prior year; and
• A 102.2% increase in AFFO and 100.0% increase in AFFO per share to a quarterly record of $1.5 million ($0.012 per share from $0.006 per share in 2013).

Significant events for the fiscal year ended December 31, 2014 are as follows:

• 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 spaces. Construction of the centre began in February 2015 and is scheduled to open in the Fall of 2015;
• 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 and Chestermere developments in Calgary;
• The Surrey centre, in a rapidly growing area within metropolitan Vancouver, British Columbia with 206 spaces, was opened on schedule in September 2014 and began its ramp up in enrollment;
• The Company announced plans to open a new 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 expanded its Stony Plain centre in the Edmonton, Alberta area, increasing its licensed capacity from 121 to 166 spaces;
• The Company initiated the process of expanding its Airdrie, Alberta centre from 50 licensed spaces to 111;
• BrightPath announced its second new development in Edmonton, representing 190 spaces in leased premises in the community of Windermere South;
• The Company surfaced value by divesting its land development site in British Columbia generating $0.7 million of net cash to augment its funds to nearer term growth opportunities; and
• 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. During the year ended December 31, 2014, the Company purchased 325,500 shares for cancellation, of which 165,000 had been cancelled at December 31, 2014. The Company has purchased an additional 66,500 shares for cancellation to date in 2015.  

"BrightPath achieved unprecedented growth in financial performance in 2014," noted Mary Ann Curran, Chief Executive Officer of the Company. "Our success is a result of our commitment and focus on continuous product innovation, expansion of services, and efficient management of costs. The initiatives and investments we have outlined over the past several quarters are clearly beginning to bear fruit for shareholders. We anticipate further benefits as we gain operating leverage and bring announced developments and other pipeline and product initiatives under review on stream."

Financial Review

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

For the three months ended December 31, 2014, the Company reported revenue of $12.9 million (December 31, 2013 - $12.2 million) and centre margin of $3.7 million (December 31, 2013 - $3.2 million). The 6.0% 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 2.3 percentage points due to new centre openings and the final stages of transition to full day kindergarten in Ontario. Centre margin percentage increased to 29.0% compared to 26.3% a year earlier primarily due to fee increases and operating cost savings initiatives offset, in part, by wage rate increases and reconfiguration of certain programs and spaces. Comparable centre revenue increased 5.3% quarter over quarter.

For the year ended December 31, 2014, revenue was a record $50.8 million (December 31, 2013 - $46.8 million) and centre margin was the highest reported at $13.8 million (December 31, 2013 - $12.2 million). Revenue increased 8.5% primarily due to fee increases, offset by a slight decrease in average child enrollments of 1.1 percentage points. Centre margin as a percentage of revenue increased to 27.2% compared to 26.0% a year earlier, with the increase mainly attributable to fee increases and utilization of the information now available through the Company's ERP system to optimize labour and other costs. Comparable centre revenue increased 6.4% year over year.

Adjusted EBITDA for the fourth quarter of 2014 was $1.9 million compared to $0.9 million in the fourth quarter of 2013. Adjusted EBITDA improved over the prior year quarter mainly due to higher centre margin and lower general and administrative expenses. General and administrative costs decreased $0.6 million quarter over quarter due to reduced salary costs, professional and consulting fees and employee compensation awards, as well as approximately $0.3 million of non-recurring costs incurred in 2013 relating to the Company's business process reengineering project, rebranding initiative and completion of the ERP implementation.

Adjusted EBITDA for the year ended December 31, 2014 was the highest reported at $6.0 million, twice the amount of Adjusted EBITDA of $3.0 million generated in 2013, also mainly due to higher centre margin and lower general and administrative costs. For the year ended December 31, 2014, general and administrative costs decreased $1.6 million primarily due to the benefit of restructuring and relocation of functions representing $0.8 million and $0.8 million of non-recurring costs incurred in 2013 consistent with those noted above.

The decline in oil prices has not resulted in any material impact on the Company's enrollment or revenues in the fourth quarter of 2014 or first quarter of 2015. The Company is closely monitoring this matter and is contemplating various strategies to mitigate negative pressures on enrollment should this materialize later in 2015. Notwithstanding potential short term pressures that may surface from the transitory impact of recent oil price volatility, the Alberta market continues to represent an opportunity for selective new locations in several critically underserved markets.

Adjusted EBITDA, AFFO and FFO

FFO for the fourth quarter of 2014 was a quarterly record of $1.6 million compared to $0.7 million in the fourth quarter of 2013. The increase of 137.4% over the prior year amount is primarily due to higher centre margin and lower general and administrative expenses. FFO per share for the fourth quarter of 2014 was $0.013 compared to $0.006 for the same period in 2013.

FFO for the year ended December 31, 2014 was $4.8 million compared to $1.9 million for the year ended December 31, 2013. FFO per share for 2014 was the highest reported at $0.040 compared to $0.016 in 2013. 

AFFO for the fourth quarter of 2014 was $1.5 million compared to $0.7 million a year earlier. The year over year increase in AFFO of $0.8 million or 102.2% was primarily due to increased centre margin and lower general and administrative expenses, offset by an increase in maintenance capital expenditures which were planned to occur at select centres and operating lease expense primarily due to the opening of the Surrey centre in September 2014. AFFO per share for the fourth quarter of 2014 was $0.012 compared to $0.006 for the fourth quarter of 2013.

AFFO for the year ended December 31, 2014 was a record $4.5 million compared to $2.0 million for the year ended December 31, 2013, primarily for the same reasons noted above. AFFO per share for 2014 was $0.037 compared to $0.017 in 2013. 

The Company's progress is marked by the fact that it has now recorded positive FFO and FFO per share, and AFFO and AFFO per share, for five consecutive quarters. 

Net loss for the year of $1.6 million was impacted by three material amounts:

• Non-recurring restructuring costs of $1.0 million pursuant to the announced 2013 restructuring;
• The loss of $0.3 million from the sale of the Company's land development site in British Columbia which generated $0.7 million of net cash proceeds to invest in the Company's near term growth pipeline; and
• Acquisition and development costs of $1.6 million which are incurred for future growth and profitability of the Company.

The Company's land development site in British Columbia was divested following the decision by the Company to accept an offer for net proceeds of $0.7 million and augment capital allocated to nearer term growth opportunities. The land development site was acquired as part of a $5 million portfolio transaction in 2011. While the generation of $0.7 million of cash to pursue growth initiatives is positive, a loss on disposition of $0.3 million emanating from the land component in the portfolio acquisition was recognized.

New Locations

The Company's new Calgary greenfield location, located in the Symons Valley area, is 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, this Symons Valley centre will house approximately 250 licensed 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.

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 spaces in a 20,000 square foot facility constructed on a 0.8 acre parcel of land.

The Company's second new development in Edmonton is situated in the south west community of Windermere South, a rapidly growing and vibrant community. The Windermere centre will consist of 13,500 square feet of leasehold area pursuant to a long-term lease and will be comprised of approximately 190 licensed spaces in a new 160,000 square foot shopping centre anchored by a large grocery retailer and a major pharmacy. The primary trade area consists of more than 25,000 residents, with projected housing starts indicating that the population is expected to nearly triple by 2019. Current information on the supply of child care spaces indicates fewer than 300 licensed spaces are available, well short of existing market demand.

In Cochrane, Alberta, the Company has entered into a premises lease for space to accommodate approximately 120 licensed spaces to meet the demand 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. 

Centre Portfolio Overview

The Company's 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. As well, new centre locations may exhibit lower occupancy levels during ramp up and adversely impact total portfolio occupancies, as seen in the recent trend in British Columbia.

Deferred Share Units ("DSUs")

For the three months ended December 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 in lieu of cash remuneration, representing $0.07 million fair value in respect of 157,914 DSUs. The DSUs were issued on January 23, 2015.

Outlook

For the year ended December 31, 2014, the Company doubled Adjusted EBITDA on a year over year basis. As detailed herein, this performance was even more pronounced on a per share basis with increases in FFO and AFFO per share of 150.0% and 117.6%, respectively. The Company has continued to improve and innovate its product and strengthen its financial results. Announced new centre redevelopments and expansion represent a further 870 licensed spaces to be added to the Company's portfolio. The Company remains focussed on the following objectives for 2015:

• To generate substantially higher Adjusted EBITDA and optimizing the return on capital invested through:
  • product improvement;
  • better management of enrollment and mix;
  • market-based pricing of tuition fees;
  • management of all costs – labour, other operating and general and administrative; and
  • beginning to realize the cash flow from its external growth initiatives commenced last year and launched in 2015.
• To improve upon its earlier success with new locations developed by the Company that layer on substantial, accretive growth.

The Company's announced growth initiatives and additional pipeline opportunities are anticipated to be increasingly accretive to the Company's profitability as these initiatives are being implemented by utilizing the Company's $24.8 million of available capital and growing positive cash flow from operations without the requirement for any shareholder dilution by issuing equity capital.

The Company has entered 2015 with high expectations and looks forward to realizing the further benefits of its operating and growth initiatives. 

NON- IFRS PERFORMANCE MEASURES

The Company uses "centre margin" as a performance indicator of 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 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 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 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 income for the purpose of evaluating operating performance.

Centre operating results are also analyzed based on comparable and non-comparable and stabilized and non-stabilized centres which may not be comparable with that used by other entities. Centres are deemed to be comparable when 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 newly-developed centres in all provinces are deemed to be stabilized after 24 months.

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.

QUARTERLY CONFERENCE CALL

BrightPath's quarterly results conference call is scheduled for Wednesday, April 1, 2015 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/1501525/1672871. 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 Wednesday, April 15, 2015 at midnight. To access the archived conference call, dial +1 (416) 849-0833 or +1 (855) 859-2056 and enter the reservation number 8203887 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 child development and care programs Canada has to offer. 

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

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.