Bright Horizons Family Solutions® Inc. (NYSE: BFAM), a leading
provider of high-quality early education and child care, family
care solutions, and workforce education services designed to
support working families and client employees across life and
career stages, today announced financial results for the third
quarter of 2023 and updated financial guidance for 2023.
Third Quarter 2023 Highlights (compared to Third Quarter
2022):
- Revenue of $646 million (increase of 20%)
- Income from operations of $67 million (increase of 71%)
- Net income of $40 million and diluted earnings per common share
of $0.69 (increases of 119% and 123%, respectively)
Non-GAAP measures
- Adjusted income from operations* of $67 million (increase of
46%)
- Adjusted EBITDA* of $101 million (increase of 26%)
- Adjusted net income* of $51 million and diluted adjusted
earnings per common share* of $0.88 (increases of 34% and 33%,
respectively)
“I am pleased with our third quarter results featuring 20%
revenue growth and more than 30% adjusted EPS growth,” said Stephen
Kramer, Chief Executive Officer. “Our Full Service segment
performed well with continued enrollment gains and 17% revenue
growth, while our Back-Up Care segment reported a record revenue
quarter with more than 30% year-over-year growth. Our results
demonstrate the positive momentum in our business, the breadth of
our suite of solutions and our steadfast commitment to quality in
all that we do.”
Third Quarter 2023 Results
Revenue increased by $105.6 million, or 20%, in the third
quarter of 2023 from the third quarter of 2022, due to enrollment
gains and price increases at our existing centers, as well as
expanded sales and increased utilization of back-up care.
Income from operations was $66.8 million for the third quarter
of 2023 compared to $39.0 million for the third quarter of 2022, an
increase of 71%. Incremental gross profit contributions from the
full service center-based child care segment, resulting from
enrollment growth and price increases, and from the back-up care
segment, resulting from higher utilization of back-up care
services, were partially offset by reduced funding from COVID-19
pandemic-related government support programs. Net income was $40.0
million for the third quarter of 2023 compared to $18.2 million for
the third quarter of 2022, an increase of 119%, due to the increase
in income from operations noted above, as well as a lower effective
tax rate, partially offset by higher net interest expense. Diluted
earnings per common share was $0.69 for the third quarter of 2023
compared to $0.31 for the third quarter of 2022.
In the third quarter of 2023, adjusted EBITDA* increased by
$20.6 million, or 26%, to $101.2 million, and adjusted income from
operations* increased by $21.1 million, or 46%, to $66.8 million
from the third quarter of 2022, due primarily to the increase in
gross profit in the full service center-based child care and
back-up care segments. Adjusted net income* increased by $13.0
million, or 34%, to $51.1 million, as a result of the increase in
adjusted income from operations, partially offset by a higher net
interest expense and a higher effective tax rate. Diluted adjusted
earnings per common share* was $0.88 for the third quarter of 2023
compared to $0.66 for the third quarter of 2022.
As of September 30, 2023, the Company had more than 1,400 client
relationships with employers across a diverse array of industries,
and operated 1,063 early education and child care centers with the
capacity to serve approximately 120,000 children.
*Adjusted EBITDA, adjusted income from operations, adjusted net
income and diluted adjusted earnings per common share are non-GAAP
measures. Adjusted EBITDA represents earnings before interest,
taxes, depreciation, amortization, stock-based compensation
expense, and non-recurring costs, such as value-added tax expense
related to prior periods, transaction costs, loss on foreign
currency forward contracts and, at times, other non-recurring
costs, such as impairment costs and other costs incurred due to the
impact of COVID-19, and net costs incurred in relation to a cyber
incident. Adjusted income from operations represents income from
operations before non-recurring costs, such as value-added tax
expense related to prior periods, transaction costs and, at times,
other non-recurring costs, such as impairment costs and other costs
incurred due to the impact of COVID-19, and net costs incurred in
relation to a cyber incident. Adjusted net income represents net
income determined in accordance with GAAP, adjusted for stock-based
compensation expense, amortization, and non-recurring costs, such
as value-added tax expense related to prior periods, transaction
costs, loss on foreign currency forward contracts, interest on
deferred consideration and the income tax provision (benefit)
thereon, and at times, other non-recurring costs, such as
impairment costs and other costs incurred due to the impact of
COVID-19, and net costs incurred in relation to a cyber incident.
Diluted adjusted earnings per common share is calculated using
adjusted net income. These non-GAAP measures are more fully
described and are reconciled from the respective measures
determined under GAAP in “Presentation of Non-GAAP Measures” and
the attached table “Bright Horizons Family Solutions Inc. Non-GAAP
Reconciliations,” respectively.
Balance Sheet and Liquidity
At September 30, 2023, the Company had $40.9 million of cash and
cash equivalents and $351.4 million available for borrowing under
our revolving credit facility. In the nine months ended September
30, 2023, we generated $161.0 million of cash from operations,
compared to $131.0 million for the same period in 2022, and made
net investments primarily in fixed assets and acquisitions totaling
$92.0 million, compared to $250.9 million for the same period in
the prior year.
2023 Outlook
Based on current trends and expectations, we currently expect
fiscal year 2023 revenue to be in the range of $2.375 billion to
$2.4 billion, and diluted adjusted earnings per common share to be
in the range of $2.73 to $2.78. The Company will provide additional
information on its outlook during its earnings conference call.
Conference Call
Bright Horizons Family Solutions will host an investor
conference call today at 5:00 pm ET to discuss the results for the
third quarter of 2023, as well as the Company’s updated business
outlook, strategy and operating expectations. Interested parties
are invited to listen to the conference call by dialing
1-877-407-9039 or, for international callers, 1-201-689-8470, and
asking for the Bright Horizons Family Solutions conference call
moderated by Chief Executive Officer Stephen Kramer. Replays of the
entire call will be available through November 22, 2023 at
1-844-512-2921 or, for international callers, at 1-412-317-6671,
conference ID #13736588. A link to the audio webcast of the
conference call and a copy of this press release are also available
through the Investor Relations section of the Company’s web site,
www.brighthorizons.com.
Forward-Looking Statements
This press release includes forward looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. The Company’s actual results may vary significantly from
the results anticipated in these forward-looking statements, which
can generally be identified by the use of forward-looking
terminology, including the terms “believes,” “expects,” “may,”
“will,” “should,” “seeks,” “projects,” “approximately,” “intends,”
“plans,” “estimates” or “anticipates,” or, in each case, their
negatives or other variations or comparable terminology. These
forward-looking statements include all matters that are not
historical facts, including statements regarding the Company’s
intentions, beliefs or current expectations concerning, among other
things, our results of operations, financial condition, liquidity,
operating expectations, impact of our services and solutions,
business trends, our future growth opportunities, enrollment and
occupancy levels, back-up care utilization, the labor market,
long-term growth strategy and value, estimated effective tax rate
and jurisdictional mix, tax expense and benefits related to equity
transactions, commitment to quality, our future business and
financial performance, and our 2023 financial guidance. By their
nature, forward-looking statements involve risks and uncertainties
because they relate to events and depend on circumstances that may
or may not occur in the future. The Company believes that these
risks and uncertainties include, but are not limited to, ongoing
disruptions to our operations as a result of the COVID-19 pandemic;
the availability or lack of government support; changes in the
demand for child care, dependent care and other workplace
solutions, including variations in enrollment trends and lower than
expected demand from employer sponsor clients as well as variations
in return to work protocols; the constrained labor market for
teachers and staff and ability to hire and retain talent, including
the impact of increased compensation and labor costs; the
possibility that acquisitions may disrupt our operations and expose
us to additional risk; our ability to pass on our increased costs;
our indebtedness and the terms of such indebtedness; our ability to
withstand seasonal fluctuations in the demand for our services; our
ability to implement our growth strategies successfully; changes in
general economic, political, business and financial market
conditions, including the impact of inflation and interest rate
fluctuations; fluctuations in currency exchange rates; the effects
of a cyber attack, data breach or other security incident on our
information technology system or software or those of our third
party vendors; changes in tax rates or policies; and other risks
and uncertainties more fully described in the “Risk Factors”
section of our Annual Report on Form 10-K filed on February 28,
2023, and other factors disclosed from time to time in our other
filings with the Securities and Exchange Commission. These
forward-looking statements speak only as of the time of this
release and we do not undertake to publicly update or revise them,
whether as a result of new information, future events or otherwise,
except as required by law.
Presentation of Non-GAAP Measures
In addition to the results provided in accordance with U.S.
generally accepted accounting principles (“GAAP”) throughout this
press release, the Company has provided certain non-GAAP
measurements that present operating results on a basis adjusted for
certain items. The Company uses these non-GAAP measures as key
performance indicators for the purpose of evaluating performance
internally, and in connection with determining incentive
compensation for Company management, including executive officers.
Adjusted EBITDA is also used in connection with the determination
of certain ratio requirements under our credit agreement. We
believe that these non-GAAP measures provide investors with useful
information with respect to our historical operations. These
non-GAAP measures are not intended to replace, and should not be
considered superior to, the presentation of our financial results
in accordance with GAAP. The use of the terms adjusted EBITDA,
adjusted income from operations, adjusted net income and diluted
adjusted earnings per common share may differ from similar measures
reported by other companies and may not be comparable to other
similarly titled measures.
With respect to our outlook for diluted adjusted earnings per
common share, we do not provide the most directly comparable GAAP
financial measure or corresponding reconciliation to such GAAP
financial measure on a forward-looking basis. We are unable to
predict with reasonable certainty and without unreasonable effort
certain items such as the timing and amount of net excess income
tax benefits, future impairments, transaction costs, and other
non-recurring costs, as well as gains or losses from the early
retirement of debt and the outcome from legal proceedings. These
items are uncertain, depend on various factors outside our
management’s control, and could significantly impact, either
individually or in the aggregate, our future period earnings per
common share as calculated and presented in accordance with
GAAP.
For more information regarding adjusted EBITDA, adjusted income
from operations, adjusted net income and diluted adjusted earnings
per common share, refer to the reconciliation of GAAP financial
measures to the non-GAAP financial measures in the attached table
“Bright Horizons Family Solutions Inc. Non-GAAP
Reconciliations.”
About Bright Horizons Family Solutions Inc.
Bright Horizons® is a leading global provider of high-quality
early education and child care, back-up care, and workforce
education services. For more than 35 years, we have partnered with
employers to support workforces by providing services that help
working families and employees thrive personally and
professionally. Bright Horizons operates approximately 1,100 early
education and child care centers in the United States, the United
Kingdom, the Netherlands, Australia and India, and serves more than
1,400 of the world’s leading employers. Bright Horizons’ early
education and child care centers, back-up child and elder care, and
workforce education programs help employees succeed at each life
and career stage. For more information, go to
www.brighthorizons.com.
BRIGHT HORIZONS FAMILY
SOLUTIONS INC.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(In thousands, except share
data)
(Unaudited)
Three Months Ended September
30,
2023
%
2022
%
Revenue
$
645,787
100.0
%
$
540,215
100.0
%
Cost of services
488,142
75.6
%
411,406
76.2
%
Gross profit
157,645
24.4
%
128,809
23.8
%
Selling, general and administrative
expenses
83,253
12.9
%
80,812
15.0
%
Amortization of intangible assets
7,568
1.2
%
8,948
1.6
%
Income from operations
66,824
10.3
%
39,049
7.2
%
Interest expense — net
(12,222
)
(1.8
)%
(11,707
)
(2.1
)%
Income before income tax
54,602
8.5
%
27,342
5.1
%
Income tax expense
(14,623
)
(2.3
)%
(9,094
)
(1.7
)%
Net income
$
39,979
6.2
%
$
18,248
3.4
%
Earnings per common share:
Common stock — basic
$
0.69
$
0.32
Common stock — diluted
$
0.69
$
0.31
Weighted average common shares
outstanding:
Common stock — basic
57,765,332
57,664,895
Common stock — diluted
58,045,137
57,740,013
BRIGHT HORIZONS FAMILY
SOLUTIONS INC.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(In thousands, except share
data)
(Unaudited)
Nine Months Ended September
30,
2023
%
2022
%
Revenue
$
1,802,609
100.0
%
$
1,490,965
100.0
%
Cost of services
1,386,787
76.9
%
1,123,572
75.4
%
Gross profit
415,822
23.1
%
367,393
24.6
%
Selling, general and administrative
expenses
247,923
13.8
%
226,231
15.2
%
Amortization of intangible assets
24,898
1.4
%
23,127
1.5
%
Income from operations
143,001
7.9
%
118,035
7.9
%
Loss on foreign currency forward
contracts
—
—
%
(5,917
)
(0.4
)%
Interest expense — net
(37,357
)
(2.0
)%
(26,695
)
(1.8
)%
Income before income tax
105,644
5.9
%
85,423
5.7
%
Income tax expense
(36,945
)
(2.1
)%
(22,824
)
(1.5
)%
Net income
$
68,699
3.8
%
$
62,599
4.2
%
Earnings per common share:
Common stock — basic
$
1.19
$
1.06
Common stock — diluted
$
1.18
$
1.06
Weighted average common shares
outstanding:
Common stock — basic
57,692,254
58,624,221
Common stock — diluted
57,886,823
58,802,742
BRIGHT HORIZONS FAMILY
SOLUTIONS INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands)
(Unaudited)
September 30, 2023
December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents
$
40,927
$
36,224
Accounts receivable — net
223,318
217,170
Prepaid expenses and other current
assets
105,003
94,316
Total current assets
369,248
347,710
Fixed assets — net
572,356
571,471
Goodwill
1,750,568
1,727,852
Other intangible assets — net
223,381
245,574
Operating lease right-of-use assets
788,483
801,626
Other assets
98,349
104,636
Total assets
$
3,802,385
$
3,798,869
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Current portion of long-term debt
$
16,000
$
16,000
Borrowings under revolving credit
facility
29,400
84,000
Accounts payable and accrued expenses
241,578
230,634
Current portion of operating lease
liabilities
96,388
94,092
Deferred revenue
210,002
222,994
Other current liabilities
150,057
138,574
Total current liabilities
743,425
786,294
Long-term debt — net
950,468
961,581
Operating lease liabilities
794,717
810,403
Other long-term liabilities
102,749
109,399
Deferred income taxes
45,606
50,739
Total liabilities
2,636,965
2,718,416
Total stockholders’ equity
1,165,420
1,080,453
Total liabilities and stockholders’
equity
$
3,802,385
$
3,798,869
BRIGHT HORIZONS FAMILY
SOLUTIONS INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended September
30,
2023
2022
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income
$
68,699
$
62,599
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
82,732
77,958
Stock-based compensation expense
21,154
21,282
Loss on foreign currency forward
contracts
—
5,917
Deferred income taxes
(3,688
)
(8,209
)
Non-cash interest and other — net
8,867
1,894
Changes in assets and liabilities
(16,793
)
(30,463
)
Net cash provided by operating
activities
160,971
130,978
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of fixed assets — net
(60,225
)
(37,772
)
Proceeds from the maturity of debt
securities and sale of other investments
15,451
16,009
Purchases of debt securities and other
investments
(9,463
)
(13,838
)
Payments and settlements for acquisitions
— net of cash acquired
(37,772
)
(209,421
)
Settlement of foreign currency forward
contracts
—
(5,917
)
Net cash used in investing activities
(92,009
)
(250,939
)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Revolving credit facility — net
(54,600
)
113,000
Principal payments of long-term debt
(12,000
)
(12,000
)
Proceeds from issuance of common stock
upon exercise of options and restricted stock upon purchase
8,764
11,412
Taxes paid related to the net share
settlement of stock options and restricted stock
(2,396
)
(5,432
)
Purchase of treasury stock
—
(182,570
)
Payments of contingent consideration for
acquisitions
(225
)
(13,865
)
Net cash used in financing activities
(60,457
)
(89,455
)
Effect of exchange rates on cash, cash
equivalents and restricted cash
(1,280
)
(4,018
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
7,225
(213,434
)
Cash, cash equivalents and restricted cash
— beginning of period
51,894
265,281
Cash, cash equivalents and restricted cash
— end of period
$
59,119
$
51,847
BRIGHT HORIZONS FAMILY
SOLUTIONS INC.
SEGMENT INFORMATION
(In thousands)
(Unaudited)
Three Months
Ended September 30, 2023
Full service
center-based
child care
Back-up care
Educational
advisory and
other services
Total
Revenue
$
444,747
$
169,117
$
31,923
$
645,787
Income from operations
6,990
51,684
8,150
66,824
Adjusted income from operations
6,990
51,684
8,150
66,824
As a percentage of revenue
2
%
31
%
26
%
10
%
Three Months Ended
September 30, 2022
Revenue
$
380,556
$
128,606
$
31,053
$
540,215
Income (loss) from operations
(9,834
)
40,405
8,478
39,049
Adjusted income (loss) from operations
(1)
(3,134
)
40,405
8,478
45,749
As a percentage of revenue
(1
)%
31
%
27
%
8
%
(1)
For the three months ended September 30,
2022, adjusted loss from operations for the full service
center-based child care segment represents loss from operations
excluding transaction costs of $6.7 million related to
acquisitions.
Nine Months Ended
September 30, 2023
Full service
center-based
child care
Back-up care
Educational
advisory and
other services
Total
Revenue
$
1,333,469
$
381,850
$
87,290
$
1,802,609
Income from operations
28,493
95,963
18,545
143,001
Adjusted income from operations
(1)
30,237
100,259
18,545
149,041
As a percentage of revenue
2
%
26
%
21
%
8
%
Nine Months Ended
September 30, 2022
Revenue
$
1,105,804
$
301,164
$
83,997
$
1,490,965
Income from operations
17,049
85,982
15,004
118,035
Adjusted income from operations (2)
26,246
85,982
15,004
127,232
As a percentage of revenue
2
%
29
%
18
%
9
%
(1)
For the nine months ended September 30,
2023, adjusted income from operations represents income from
operations excluding value-added-tax expense of $6.0 million
related to prior periods, of which $4.3 million was associated with
the back-up care segment and $1.7 million was associated with the
full service center-based child care segment.
(2)
For the nine months ended September 30,
2022, adjusted income from operations for the full service
center-based child care segment represents income from operations
excluding transaction costs of $9.2 million related to
acquisitions.
BRIGHT HORIZONS FAMILY
SOLUTIONS INC.
NON-GAAP
RECONCILIATIONS
(In thousands, except share
data)
(Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Net income
$
39,979
$
18,248
$
68,699
$
62,599
Interest expense — net
12,222
11,707
37,357
26,695
Income tax expense
14,623
9,094
36,945
22,824
Depreciation
18,935
18,349
57,834
54,831
Amortization of intangible assets (a)
7,568
8,948
24,898
23,127
EBITDA
93,327
66,346
225,733
190,076
As a percentage of revenue
14
%
12
%
13
%
13
%
Additional adjustments:
Stock-based compensation expense (b)
7,841
7,514
21,154
21,282
Other costs (c)
—
6,700
6,040
9,197
Loss on foreign currency forward contracts
(d)
—
—
—
5,917
Total adjustments
7,841
14,214
27,194
36,396
Adjusted EBITDA
$
101,168
$
80,560
$
252,927
$
226,472
As a percentage of revenue
16
%
15
%
14
%
15
%
Income from operations
$
66,824
$
39,049
$
143,001
$
118,035
Other costs (c)
—
6,700
6,040
9,197
Adjusted income from operations
$
66,824
$
45,749
$
149,041
$
127,232
As a percentage of revenue
10
%
8
%
8
%
9
%
Net income
$
39,979
$
18,248
$
68,699
$
62,599
Income tax expense
14,623
9,094
36,945
22,824
Income before income tax
54,602
27,342
105,644
85,423
Amortization of intangible assets (a)
7,568
8,948
24,898
23,127
Stock-based compensation expense (b)
7,841
7,514
21,154
21,282
Other costs (c)
—
6,700
6,040
9,197
Loss on foreign currency forward contracts
(d)
—
—
—
5,917
Interest on deferred consideration (e)
1,487
1,471
4,412
1,471
Adjusted income before income tax
71,498
51,975
162,148
146,417
Adjusted income tax expense (f)
(20,377
)
(13,877
)
(45,913
)
(38,483
)
Adjusted net income
$
51,121
$
38,098
$
116,235
$
107,934
As a percentage of revenue
8
%
7
%
6
%
7
%
Weighted average common shares outstanding
— diluted
58,045,137
57,740,013
57,886,823
58,802,742
Diluted adjusted earnings per common
share
$
0.88
$
0.66
$
2.01
$
1.84
(a)
Amortization of intangible assets
represents amortization expense, including quarterly amortization
expense of approximately $5.0 million associated with intangible
assets recorded in connection with our going private transaction in
May 2008.
(b)
Stock-based compensation expense
represents non-cash stock-based compensation expense in accordance
with Accounting Standards Codification Topic 718,
Compensation-Stock Compensation.
(c)
Other costs in the nine months ended
September 30, 2023 consist of value-added tax expense of $6.0
million related to prior periods, of which $4.3 million was
associated with the back-up care segment and $1.7 million was
associated with the full service center-based child care segment.
Other costs in the three and nine months ended September 30, 2022
represent transaction costs incurred in connection with
acquisitions.
(d)
During the nine months ended September 30,
2022, we entered into foreign currency forward contracts for the
purchase of Australian dollars to satisfy the purchase price of an
acquisition completed July 1, 2022. A loss of $5.9 million
resulting from fluctuations in foreign currency rates was
recognized during the nine months ended September 30, 2022 in
relation to these contracts.
(e)
Interest on deferred consideration
represents the imputed interest on the deferred consideration
issued in connection with the July 1, 2022 acquisition of Only
About Children, a child care operator in Australia.
(f)
Adjusted income tax expense represents
income tax expense calculated on adjusted income before income tax
at an effective tax rate of approximately 29% and 27% for the three
months ended September 30, 2023 and 2022, respectively, and at an
effective tax rate of approximately 28% and 26% for the nine months
ended September 30, 2023 and 2022, respectively. The prior year tax
rate included net excess income tax benefits related to equity
transactions, which are not projected in 2023. The jurisdictional
mix of the expected adjusted income before income tax for the full
year will affect the estimated effective tax rate for the year.
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version on businesswire.com: https://www.businesswire.com/news/home/20231101645936/en/
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