q3 fy16 results presentation vfinal2
TRANSCRIPT
Nord Anglia EducationThird Quarter Fiscal 2016
Results PresentationFor the period ended May 31, 2016
July 26, 2016
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Neither Nord Anglia Education, Inc. (NYSE: NORD) nor any of its subsidiaries or affiliates is making any representation or warranty, expressed or implied, as to the accuracy or completeness of the attached materials.
Please note that the attached materials and our oral explanations of the attached materials may constitute forward-looking statements within the meaning of applicable U.S. securities laws and such forward-looking statements are made based on our current expectations. Forward-looking statements relate to events involving certain risks and uncertainties, and actual results may differ materially from the views expressed.
A number of potential risks and uncertainties are outlined in our public filings with the Securities and Exchange Commission. Nord Anglia Education, Inc. does not undertake any obligation to update any forward-looking statement, except as required under applicable law. You are cautioned not to place undue reliance on any forward-looking statements.
Disclaimer
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The world’s leading premium schools organization
42 schools 15 countries ~35,300 students ~49,400 capacity
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Third quarter fiscal 2016 highlights vs prior year
Financial Revenue up 49.4% (CC1 53.0%) from $169.9 million to $253.8 million Adjusted EBITDA up 39.9% (CC1 44.3%) from $49.9 million to $69.9 million Adjusted Net Income up from $23.2 million to $28.8 million Adjusted Diluted EPS up from $0.23 to $0.28
Operational Average full time equivalent students (FTEs) up 47.5% from 23,932 to
35,309 Capacity up 43.0% from 34,539 seats to 49,402 seats Revenue/FTE up 2.2% (CC1 4.7%) from $7.0k to $7.2k
1 CC denotes Constant Currency throughout
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Sep-15 End of Year FTEs
5,727 5,905
6,456 6,884
5,264 5,295
7,295 7,683
9,4359,560
North America
South East Asia
Middle East
Europe
China
Strong end of year enrollment and regional trends
FY16 organic in-year FTE growth – 2.6%(1)
Organic FTE growth from end
FY15 – 9.4% Continued positive trends on
inquiries and visits
Summer 2016 expansion ~5,400 seats
Sep-15 FTEs
End of year 2016 FTEs
34,177 35,327
1 Excludes the students acquired from a small school in Switzerland in February 2016.
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Increased dual curriculum opportunities in China
Nord Anglia Chinese International School – high demand has exceeded expectations
Strong brand has generated multiple opportunities to open more dual curriculum schools in China
Actively developing a robust plan to pursue the dual curriculum
opportunity
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Collaborations with world leading educators
2015/16
2016/17
2016/17
2017/18
2016/17 50 teachers starting an Executive Masters in International Education
2017/18 50 additional places with 100 participants at any one time
Enhancing our educational offer through curricula, professional development and unique experiences
Learning from the best
10 Schools
38 Schools
13 Schools
26 Schools
84 May 2015 | Why choose a Nord Anglia Education?
FinancialPerformance
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Group performance summary – Q3 fiscal 2016 vs Q3 fiscal 2015
$ millions Q3FY16(1) Q3FY15 VariancePremium Schools 252.5 167.5 CC: 54.4%
Actual: 50.8%
Other 1.3 2.4Total Revenue 253.8 169.9 CC: 53.0%
Actual: 49.4%
Gross Profit 101.3 68.2 CC: 52.7%Actual: 48.7%
Gross Profit Margin 39.9% 40.1% (0.2%)
Adjusted EBITDA 69.9 49.9 CC: 44.3%Actual: 39.9%
Adjusted EBITDA Margin 27.5% 29.4% (1.9%)
Adjusted Net Income 28.8 23.2 Actual: 24.0%Adjusted EPS (in $) 0.28 0.23 Actual: 17.8%
1 Q3FY16 ends May 31, 2016
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Q3 fiscal 2016 premium schools revenue bridge
$ millions
0.0
50.0
100.0
150.0
200.0
250.0
300.0
167.5
146.4
252.5
(4.0) (17.1) 16.0
90.1
11%
62%
5,3005,902
Average FTEs
Q3FY15 Q3FY16
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China highlights
Commentary
Q3FY16 Avg Revenue/FTE $9.6k down from
$10.0k due to mix impact of acquisition, FX, stronger growth in lower price point schools
Capacity 9,242 places up 19.2% from 7,756
Q3FY16 Revenue $56.5m from $53.1m +6.4% (+11.0% CC)
Q3FY16 Adj. EBITDA$24.6m from $25.6m -4.0% (+0.4% CC)
Financial Performance
The British School of Beijing, Shunyi (Shunyi, Beijing)
Series1
4,654
6,871
Average FTEs
Q3FY15 Q3FY16
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Europe highlights
Commentary
Q3FY16 Avg Revenue/FTE $9.2k up from
$8.0k due primarily to mix impact of acquisition partly offset by FX headwind
Capacity 8,617 places up 41.6% from 6,084
Financial Performance
Q3FY16 Revenue$63.5m from $37.4m +69.9% (+71.9% CC)
Q3FY16 Adj. EBITDA$15.3m from $7.5m +103.5% (+106.1% CC)
Collège du Léman (Geneva, Switzerland)
4,453
5,314Average FTEs
Q3FY15 Q3FY16
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Middle East highlights
Commentary
Q3FY16 Avg Revenue/FTE $4.9k up from $4.8k
Capacity 5,851 places up 11.4% from 5,251
Financial Performance
The British International School Abu Dhabi (Abu Dhabi, UAE)
Q3FY16 Revenue$25.8m from $21.2m +21.9%
Q3FY16 Adj. EBITDA$6.0m from $4.3m +40.2%
6,6827,650
Average FTEs
Q3FY15 Q3FY16
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Southeast Asia highlights
Commentary
Q3FY16 Avg Revenue/FTE $5.0k down from
$5.1k due to FX headwind
Capacity 12,185 places up 4.3% from 11,688
Financial Performance
British International School Ho Chi Minh City (HCMC, Vietnam)
Q3FY16 Revenue$37.9m from $33.9m +11.7% (+16.2% CC)
Q3FY16 Adj. EBITDA$12.2m from $10.6m +15.3% (+20.2% CC)
2,843
9,572
Average FTEs
Q3FY15 Q3FY16
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North America highlights
Commentary
Q3FY16 Avg Revenue/FTE $7.2k down from
$7.7k due to mix impact of acquisitions
Capacity 13,507 places up 259.2% from 3,760
Q3FY16 Revenue $68.8m from $21.9m +214.0%
Q3FY16 Adj. EBITDA$22.0m from $8.2m +168.0%
Financial Performance
The British School of Chicago South Loop (Chicago, Illinois, U.S.A.)
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Impact of completed sale and leaseback of three US school properties
Expected Adjusted EBITDA negative impact in FY16 ~$5m and in FY17 ~$16m
~$171m net cash proceeds in FY16
North Broward Preparatory School, Florida Completed May 31, 2016
Windermere Preparatory School, Florida Completed April 1, 2016
The Village School, TexasCompleted May 31, 2016
Plus new 2,200 seat British International School Houston campus will add $8m property expenses in North America in FY17
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Balance sheet & cash flow
LTM Q2FY15 PF LTM Q3FY15 PF LTM Q4FY15 PF LTM Q2FY16 PF LTM Q3FY16 PF
5.2x 4.9x4.3x
5.0x 4.8x
Net Leverage
Nine months endedMay 31,
($ millions) 2016 2015
Cash generated from operations 14.3 9.2Payment of loan/bond expenses (5.0) -Interest paid (44.5) (20.1)Tax paid (18.9) (14.2)Net cash used in operating activities (54.1) (25.1)
Acquisition consideration (33.6) (108.9)
Sale and leaseback gross proceeds 167.0 -
Capital expenditures and other (59.2) (30.6)
Net cash generated from/(used in) investing activities 74.2 (139.5)
Net cash generated from financing activities 19.3 152.9
Net increase/(decrease) in cash and cash equivalents 39.4 (11.7)
Cash and cash equivalents at end of the period (net of overdrafts) 260.5 142.6
Q3FY16 Net Debt $907.3m1
LTM Q3FY16 Consolidated EBITDA PF $189.4m2
Negative EBITDA impact from FX, new Chicago school and sale and leaseback rent
Leverage profile
Highlights Summary cash flow
Target net leverage ≤ 4.0x in FY16
1 Net debt calculated as the principal debt outstanding including capital leases less cash 2 LTM Q3FY16 Consolidated EBITDA pro forma acquisitions and Sale & Leaseback $189.4m
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Outlook
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Nord Anglia Education is tightening its full year outlook for FY16:
Outlook for Fiscal 2016
1 Diluted weighted average shares of approximately 104.1 million
NewFY16 guidance
Previous FY16 guidance
Revenue $850 - $855 million $845 - $855 million
Adjusted EBITDA $206.5 - $208.5 million $205 - $210 million
Adjusted Net Income $67 - $68 million $67 - $70 million
Adjusted EPS1 $0.64 - $0.65 $0.64 - $0.67
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Appendix
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Appendix
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Existing Under construction
Nord Anglia International School Al KhorCompass International School Doha, GharaffaCompass International School Doha, Madinat KhalifaCompass International School Doha, RayyanThe British International School Abu DhabiNord Anglia International School Dubai
MIDDLE EAST
SOUTHEAST ASIARegents International School PattayaSt Andrews International School BangkokNorthbridge International School CambodiaDover Court International School SingaporeBritish International School, HanoiBritish Vietnamese International School, HanoiBritish International School, Ho Chi Minh CityBritish Vietnamese International School, Ho Chi Minh City
NORTH AMERICAThe British International School of CharlotteBritish International School of BostonBritish International School of Chicago, Lincoln ParkBritish International School of Chicago, South LoopBritish International School of HoustonThe Village SchoolBritish International School of WashingtonNord Anglia International School New YorkNorth Broward Preparatory SchoolWindermere Preparatory SchoolSan Roberto International School
49,400
The English International School PragueThe British International School BudapestThe British School WarsawThe British International School BratislavaInternational College SpainCollège Beau SoleilCollège Champittet NyonCollège Champittet PullyCollège du LémanLa Côte International School Aubonne
EUROPE
CHINANord Anglia International School Shanghai, PudongThe British International School Shanghai, PuxiThe British School of Beijing, SanlitunThe British School of Beijing, ShunyiThe British School of GuangzhouLéman International School - ChengduNord Anglia International School Hong Kong
Our Global Family
Our path to becoming the world’s leading premium schools
Listed on the main board
London Stock Exchange
Nord Anglia Education founded
Opened first school
Warsaw, Poland
Acquired new schools in SE Asia
Singapore and Cambodia
Taken private by Baring Private
Equity Asia
Andrew Fitzmauricejoins as CEO
Market cap: $40mm pre-appointment
Opened first school in China
Pudong, Shanghai
Acquired four schools in
Switzerland
Acquired first school in SE Asia
Pattaya, Thailand
Opened first school in the Middle East
Abu Dhabi, UAE
Acquired WCL Group (11 Schools)
Listed on the NYSE
Opened three new greenfields
Hong Kong, Dubai and Aubonne, Switzerland
Opened new greenfield
Chicago, USA
Acquired four schools in Vietnam
Ho Chi Minh City and Hanoi
Acquired six Meritas schools
New greenfield
Houston, USA
Induction 2016 22
Aug 31, 2008 FY09 FY10 FY11 FY12 FY13 FY14 FY15 Apr 24, 2016
4,010 4,282 6,166 7,054 8,180 10,27917,313
22,286
35,343
No. of schools: 6 6 9 12 13 25 31 35 42
Student EnrollmentCAGR: 33%
1972 1992 2002 2009 2012 20141989 2003 2008 2011 2013 2015 2016
22
organization
New dual curriculum greenfield
Shanghai, China
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Greenfield opportunities generate the highest returns
Key factors: Market growth - supply/
demand dynamics EBITDA margin at maturity
average breakeven utilization – c.30-35%
average margin of NORD schools at maturity – c.33%
Lower Higher
Hig
her
Low
er
3-4 years to breakeven1
6-8 years to maturity
e.g. Chicago (opened Sept 2015)
1-2 years to breakeven1
3-4 years to maturity
e.g. Shanghai (opened Sept 2003)
Not a strategic fit2-3 years to breakeven1
3-5 years to maturity
e.g. Dubai (opened Sept 2014)
Growth
Margin
Target ROI 70%+
1. Breakeven means Adjusted EBITDA positive2. Maturity means 80% utilization
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Consolidated income statement
*Please refer to the footnotes and other information in our report on Form 6-K furnished to the SEC on July 26, 2016.
Three Months Ended Nine Months Ended
$ millions, except share dataMay 31,
2016May 31,
2015May 31,
2016 May 31,
2015 (unaudited) (unaudited)
Revenue 253.8 169.9 741.3 485.2Cost of sales (152.5) (101.7) (445.2) (290.4)Gross profit 101.3 68.2 296.1 194.8
Selling, general & administrative expenses (48.5) (28.3) (140.8) (82.1)Depreciation (0.2) (0.2) (0.6) (0.6)Amortization (4.6) (3.5) (13.9) (9.6)Other gains/(losses) (8.5) 0.2 (1.6) (4.4)Exceptional expenses (6.1) (1.8) (11.0) (4.5)Total expenses (67.9) (33.6) (167.9) (101.2)
Operating profit 33.4f 34.6 128.2 93.6 Finance income 0.6 0.4 2.3 1.7Finance expense (19.8) (9.4) (46.0) (24.0)Net finance expense (19.2) (9.0) (43.7) (22.3)
Profit before income tax 14.2 25.6 84.5 71.3Income tax expense (10.1) (7.0) (25.3) (19.6)Profit for the period 4.1 18.6 59.2 51.7
Profit attributable to: Owners of the parent 3.6 18.2 57.8 51.0 Non-controlling interests 0.5 0.4 1.4 0.7Profit for the period 4.1 18.6 59.2 51.7
Earnings per ordinary share (in dollars) Basic 0.04 0.18 0.56 0.52 Diluted 0.04 0.18 0.56 0.52
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Key operating data
*Please refer to the footnotes and other information in our report on Form 6-K furnished to the SEC on July 26, 2016.
Three Months Ended Nine Months Ended May 31,
2016May 31,
2015May 31,
2016May 31,
2015
Full-time equivalent students (average for the period)China 5,902 5,300 5,813 5,222Europe 6,871 4,654 6,656 4,619Middle East 5,314 4,453 5,304 4,330South East Asia 7,650 6,682 7,486 5,118North America 9,572 2,843 9,508 2,811Total 35,309 23,932 34,767 22,100
Capacity (average for the period)China 9,242 7,756 9,031 7,756Europe 8,617 6,084 8,617 6,084Middle East 5,851 5,251 5,851 5,251South East Asia 12,185 11,688 12,146 8,154North America 13,507 3,760 13,507 3,760Total 49,402 34,539 49,152 31,005
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Key operating data continued
*Please refer to the footnotes and other information on our report in Form 6-K furnished to the SEC on July 26, 2016.
Three Months Ended Nine Months Ended May 31,
2016May 31,
2015May 31,
2016May 31,
2015
Utilization (average for the period)China 64% 68% 64% 67%Europe 80% 76% 77% 76%Middle East 91% 85% 91% 82%South East Asia 63% 57% 62% 63%North America 71% 76% 70% 75%Total 71% 69% 71% 71%
Revenue per FTE (in $ thousands)China 9.6 10.0 28.5 30.1Europe 9.2 8.0 27.9 24.8Middle East 4.9 4.8 14.5 14.1South East Asia 5.0 5.1 14.4 15.3North America 7.2 7.7 21.2 23.0Total 7.2 7.0 21.2 21.5
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Supplemental financial data
Three Months Ended % Variance
$ millionsMay 31,
2016 May 31,
2015 Reported Constant Currency
(unaudited) (unaudited)Revenue (segment)
Premium SchoolsChina 56.5 53.1 6.4% 11.0%Europe 63.5 37.4 69.9% 71.9%Middle East 25.8 21.2 21.9% 21.9%South East Asia 37.9 33.9 11.7% 16.2%North America 68.8 21.9 214.0% 214.0%Total Premium Schools 252.5 167.5 50.8% 54.4%Other 1.3 2.4 (46.4%) (44.7%)Total Revenue 253.8 169.9 49.4% 53.0%
Adjusted EBITDA (segment)
Premium SchoolsChina 24.6 25.6 (4.0%) 0.4%Europe 15.3 7.5 103.5% 106.1%Middle East 6.0 4.3 40.2% 40.2%South East Asia 12.2 10.6 15.3% 20.2%North America 22.0 8.2 168.0% 168.0%Total Premium Schools 80.1 56.2 42.4% 46.7%Other 0.2 0.3 (16.8%) (13.7%)Central and regional expenses (10.4) (6.6) 58.7% 61.8%Adjusted EBITDA 69.9 49.9 39.9% 44.3%Adjusted Net Income 28.8 23.2 24.0%
*Please refer to the footnotes and other information on our report in Form 6-K furnished to the SEC on July 26, 2016.
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Supplemental financial data continued
Nine Months Ended % Variance
$ millionsMay 31,
2016 May 31,
2015 Reported Constant Currency
(unaudited) (unaudited)
Revenue (segment)
Premium SchoolsChina 165.8 157.2 5.4% 9.6%Europe 185.6 114.8 61.7% 71.1%Middle East 76.9 61.3 25.5% 25.5%South East Asia 107.8 78.2 37.9% 46.0%North America 201.7 64.5 212.4% 212.4%Total Premium Schools 737.8 476.0 55.0% 60.6%Other 3.5 9.2 (62.1%) (60.5%)Total Revenue 741.3 485.2 52.8% 58.3%
Adjusted EBITDA (segment)
Premium SchoolsChina 71.4 74.2 (3.9%) 0.1%Europe 44.4 23.2 90.7% 104.1%Middle East 17.5 12.2 43.9% 43.9%South East Asia 33.4 26.2 28.1% 36.1%North America 64.9 23.3 178.5% 178.5%Total Premium Schools 231.6 159.1 45.5% 51.2%Other 0.1 1.1 (93.3%) (93.0%)Central and regional expenses (30.4) (21.4) 42.2% 44.9%Adjusted EBITDA 201.3 138.8 45.0% 51.1%Adjusted Net Income 83.1 66.4 25.0%
*Please refer to the footnotes and other information on our report in Form 6-K furnished to the SEC on July 26, 2016.
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Reconciliation of non-GAAP financial data
*Please refer to the footnotes and other information on our report in Form 6-K furnished to the SEC on July 26, 2016.
Three Months Ended Nine Months Ended
$ millions May 31,
May 31, May 31,
May 31,2016 2015 2016 2015
Revenue 253.8 169.9 741.3 485.2Cost of Sales (152.5) (101.7) (445.2) (290.4) Rent Premium Schools 19.5 14.4 54.2 39.3 Depreciation Premium Schools 12.4 7.7 35.2 22.1Adjusted Cost of Sales (120.6) (79.6) (355.8) (229.0)Adjusted Gross Profit 133.2 90.3 385.5 256.2
Profit for the period 4.1 18.6 59.2 51.7Income tax expense 10.1 7.0 25.3 19.6Net financing expense 19.2 9.0 43.7 22.3Exceptional items 6.1 1.8 11.0 4.5Other losses/(gains) 8.5 (0.2) 1.6 4.4Amortization 4.6 3.5 13.9 9.6Depreciation 0.2 0.2 0.6 0.6Depreciation in Cost of Sales 12.4 7.7 35.2 22.1EBITDA 65.2 47.6 190.5 134.8
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Reconciliation of non-GAAP financial data continued
*Please refer to the footnotes and other information on our report in Form 6-K furnished to the SEC on July 26, 2016.
Three Months Ended Nine Months Ended
$ millions May 31,
May 31, May 31,
May 31,2016 2015 2016 2015
(Gain)/loss on disposal of property, plant and equipment (0.6) 0.1 (0.6) 0.4Share based payments 1.5 0.9 4.8 2.2Greenfield pre-opening costs 1.7 - 3.5 -Rollout of Juilliard Program 0.5 0.2 1.7 0.2Rollout of MIT collaboration 0.4 - 0.4 -Global campus expedition facility 0.9 - 0.9 -China expat taxes 0.0 1.1 0.0 1.1Other 0.3 0.0 0.1 0.1
Adjusted EBITDA 69.9 49.9 201.3 138.8 Depreciation (12.6) (7.9) (35.8) (22.7)Net Financing Expense (19.2) (9.0) (43.7) (22.3)Financing Expense Adjustments 2.0 - (6.0) -Income Tax Expense (10.1) (7.0) (25.3) (19.6)Tax Adjustments (0.7) (2.4) (6.0) (7.1)Non-Controlling Interest (0.5) (0.4) (1.4) (0.7)Adjusted Net Income 28.8 23.2 83.1 66.4
Adjusted earnings per ordinary share (in $)Basic 0.28 0.24 0.80 0.68Diluted 0.28 0.23 0.80 0.68
31The world's leading premium schools organization