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 [phone] 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.

Dale Kearns, President & CFO, BrightPath Early Learning Inc., Office: [phone] ext. 406, Toll Free: [phone], http://www.brightpathkids.com; Joe Racanelli, Investor Relations, NATIONAL Equicom, [phone], [email protected]

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