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 first
quarter of 2023 and reaffirmed financial guidance for 2023.
First Quarter 2023 Highlights (compared to First Quarter
2022):
- Revenue of $554 million (increase of 20%)
- Income from operations of $31 million (decrease of 2%)
- Net income of $8 million and diluted earnings per common share
of $0.14 (decreases of 58%)
Non-GAAP measures
- Adjusted income from operations* of $37 million (increase of
18%)
- Adjusted EBITDA* of $70 million (increase of 11%)
- Adjusted net income* of $28 million and diluted adjusted
earnings per common share* of $0.49 (increases of 2% and 4%,
respectively)
“I am pleased to report a solid start to 2023 as we continue to
grow each of our service offerings, expand our portfolio of client
partners and support working families and learners so they can
thrive and prosper at work and at home,” said Stephen Kramer, Chief
Executive Officer.
“I am especially proud of the manner in which we continue to
execute across each of our services, and to deliver quality care,
education, and support for those we have the privilege to serve,”
Kramer continued. “Our continued success is the direct result of
the work of our more than 29,000 employees and their dedication to
our important mission and unique culture.”
First Quarter 2023 Results
Revenue increased by $93.2 million, or 20%, in the first quarter
of 2023 from the first quarter of 2022, attributable to
contributions from the 75 centers acquired in Australia in July
2022, enrollment gains and price increases at our existing centers,
as well as expanded sales and utilization of back-up care and
educational advisory services. These contributions were partially
offset by the impacts of lower foreign currency exchange rates for
our United Kingdom and Netherlands operations.
Income from operations was $30.6 million for the first quarter
of 2023 compared to $31.2 million for the first quarter of 2022.
Incremental gross profit contributions from the full service
center-based child care segment, resulting from higher enrollment,
and the back-up care segment, resulting from higher utilization of
back-up care services, were offset by expense of $6.0 million
recorded in the first quarter of 2023 related to value-added tax
incurred in prior periods. Net income was $8.1 million for the
first quarter of 2023 compared to $19.4 million for the first
quarter of 2022, a decrease of 58%, due to the decrease in income
from operations noted above, as well as higher net interest expense
and a higher effective tax rate. Diluted earnings per common share
was $0.14 for the first quarter of 2023 compared to $0.33 for the
first quarter of 2022.
In the first quarter of 2023, adjusted EBITDA* increased by $7.0
million, or 11%, to $69.8 million, and adjusted income from
operations* increased by $5.5 million, or 18%, to $36.7 million
from the first quarter of 2022, due primarily to the increase in
gross profit in the full service center-based child care segment.
Adjusted net income* increased by $0.6 million, or 2%, to $28.3
million, as a result of the increase in adjusted income from
operations, partially offset by higher interest expense and a
higher effective tax rate. Diluted adjusted earnings per common
share* was $0.49 for the first quarter of 2023 compared to $0.47
for the same period in 2022.
As of March 31, 2023, the Company had more than 1,400 client
relationships with employers across a diverse array of industries,
and operated 1,076 early education and child care centers with the
capacity to serve approximately 120,000 children and their
families.
*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 and, at times, other non-recurring costs,
such as impairment costs and other costs incurred due to the impact
of COVID-19, transaction costs, loss on foreign currency forward
contracts, 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 and, at times, other non-recurring costs, such as
impairment costs and other costs incurred due to the impact of
COVID-19, transaction costs, 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, interest on
deferred consideration and, at times, other non-recurring costs,
such as impairment costs and other costs incurred due to the impact
of COVID-19, transaction costs, loss on foreign currency forward
contracts, and net costs incurred in relation to a cyber incident,
and the income tax provision (benefit) thereon. 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 March 31, 2023, the Company had $44.6 million of cash and
cash equivalents and $350.3 million available for borrowing under
our revolving credit facility. In the three months ended March 31,
2023, we generated approximately $67.3 million of cash from
operations, compared to $58.6 million for the same period in 2022,
and made investments, primarily in fixed assets, totaling $18.2
million, compared to $9.4 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 $2.3 billion to $2.4
billion, and diluted adjusted earnings per common share to be in
the range of $2.80 to $3.00. 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
first 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 May 16, 2023 at
1-844-512-2921 or, for international callers, at 1-412-317-6671,
conference ID #13736586. 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, our investments, impact of our services,
business trends, our future opportunities and business model,
enrollment and occupancy levels, long-term growth strategy and
value, estimated effective tax rate and tax expense and benefits
related to equity transactions, our care solutions, quality and
expanded service offerings and portfolio, our ability to respond to
changing demands, 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 non-GAAP measurements -
adjusted EBITDA, adjusted income from operations, adjusted net
income and diluted adjusted earnings per common share - which
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 also believe 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 March
31,
2023
%
2022
%
Revenue
$
553,606
100.0
%
$
460,409
100.0
%
Cost of services
431,992
78.0
%
350,350
76.1
%
Gross profit
121,614
22.0
%
110,059
23.9
%
Selling, general and administrative
expenses
82,771
15.0
%
71,746
15.6
%
Amortization of intangible assets
8,198
1.5
%
7,149
1.5
%
Income from operations
30,645
5.5
%
31,164
6.8
%
Interest expense — net
(12,916
)
(2.3
)%
(7,046
)
(1.6
)%
Income before income tax
17,729
3.2
%
24,118
5.2
%
Income tax expense
(9,603
)
(1.7
)%
(4,712
)
(1.0
)%
Net income
$
8,126
1.5
%
$
19,406
4.2
%
Earnings per common share:
Common stock — basic
$
0.14
$
0.33
Common stock — diluted
$
0.14
$
0.33
Weighted average common shares
outstanding:
Common stock — basic
57,603,866
59,094,724
Common stock — diluted
57,709,909
59,415,345
BRIGHT HORIZONS FAMILY
SOLUTIONS INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands)
(Unaudited)
March 31, 2023
December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents
$
44,629
$
36,224
Accounts receivable — net
230,769
217,170
Prepaid expenses and other current
assets
95,966
94,316
Total current assets
371,364
347,710
Fixed assets — net
575,440
571,471
Goodwill
1,731,758
1,727,852
Other intangible assets — net
237,255
245,574
Operating lease right-of-use assets
796,257
801,626
Other assets
93,277
104,636
Total assets
$
3,805,351
$
3,798,869
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Current portion of long-term debt
$
16,000
$
16,000
Borrowings under revolving credit
facility
44,500
84,000
Accounts payable and accrued expenses
210,524
230,634
Current portion of operating lease
liabilities
95,733
94,092
Deferred revenue
263,977
222,994
Other current liabilities
157,647
138,574
Total current liabilities
788,381
786,294
Long-term debt — net
957,876
961,581
Operating lease liabilities
804,821
810,403
Deferred income taxes
46,889
50,739
Other long-term liabilities
103,941
109,399
Total liabilities
2,701,908
2,718,416
Total stockholders’ equity
1,103,443
1,080,453
Total liabilities and stockholders’
equity
$
3,805,351
$
3,798,869
BRIGHT HORIZONS FAMILY
SOLUTIONS INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended March
31,
2023
2022
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income
$
8,126
$
19,406
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
27,310
25,576
Stock-based compensation expense
5,850
6,096
Deferred income taxes
(597
)
376
Other non-cash adjustments — net
2,478
159
Changes in assets and liabilities
24,146
6,945
Net cash provided by operating
activities
67,313
58,558
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of fixed assets — net
(19,333
)
(11,595
)
Proceeds from the maturity of debt
securities and sale of other investments
7,450
5,569
Purchases of debt securities and other
investments
(6,225
)
(3,180
)
Payments and settlements for acquisitions
— net of cash acquired
(121
)
(147
)
Net cash used in investing activities
(18,229
)
(9,353
)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Revolving credit facility — net
(39,500
)
—
Principal payments of long-term debt
(4,000
)
(4,000
)
Proceeds from issuance of common stock
upon exercise of options and restricted stock upon purchase
4,287
8,823
Taxes paid related to the net share
settlement of stock options and restricted stock
(1,525
)
(3,174
)
Purchase of treasury stock
—
(39,913
)
Payments of contingent consideration for
acquisitions
(225
)
(13,865
)
Net cash used in financing activities
(40,963
)
(52,129
)
Effect of exchange rates on cash, cash
equivalents and restricted cash
(114
)
(605
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
8,007
(3,529
)
Cash, cash equivalents and restricted cash
— beginning of period
51,894
265,281
Cash, cash equivalents and restricted cash
— end of period
$
59,901
$
261,752
BRIGHT HORIZONS FAMILY
SOLUTIONS INC.
SEGMENT INFORMATION
(In thousands)
(Unaudited)
Three Months
Ended March 31, 2023
Full service
center-based
child care
Back-up care
Educational
advisory and
other services
Total
Revenue
$
430,191
$
96,330
$
27,085
$
553,606
Income from operations
8,433
17,371
4,841
30,645
Adjusted income from operations
10,177
21,667
4,841
36,685
As a percentage of revenue
2
%
22
%
18
%
7
%
Three Months Ended
March 31, 2022
Revenue
$
353,932
$
80,844
$
25,633
$
460,409
Income from operations
7,161
20,458
3,545
31,164
Adjusted income from operations
7,161
20,458
3,545
31,164
As a percentage of revenue
2
%
25
%
14
%
7
%
(1)
For the three months ended March
31, 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.
BRIGHT HORIZONS FAMILY
SOLUTIONS INC.
NON-GAAP
RECONCILIATIONS
(In thousands, except share
data)
(Unaudited)
Three Months Ended March
31,
2023
2022
Net income
$
8,126
$
19,406
Interest expense — net
12,916
7,046
Income tax expense
9,603
4,712
Depreciation
19,112
18,427
Amortization of intangible assets (a)
8,198
7,149
EBITDA
57,955
56,740
As a percentage of revenue
10
%
12
%
Additional adjustments:
Stock-based compensation expense (b)
5,850
6,096
Other costs (c)
6,040
—
Total adjustments
11,890
6,096
Adjusted EBITDA
$
69,845
$
62,836
As a percentage of revenue
13
%
14
%
Income from operations
$
30,645
$
31,164
Other costs (c)
6,040
—
Adjusted income from operations
$
36,685
$
31,164
As a percentage of revenue
7
%
7
%
Net income
$
8,126
$
19,406
Income tax expense
9,603
4,712
Income before income tax
17,729
24,118
Amortization of intangible assets (a)
8,198
7,149
Stock-based compensation expense (b)
5,850
6,096
Other costs (c)
6,040
—
Interest on deferred consideration (d)
1,454
—
Adjusted income before income tax
39,271
37,363
Adjusted income tax expense (e)
(10,996
)
(9,640
)
Adjusted net income
$
28,275
$
27,723
As a percentage of revenue
5
%
6
%
Weighted average common shares outstanding
— diluted
57,709,909
59,415,345
Diluted adjusted earnings per common
share
$
0.49
$
0.47
(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 three months
ended March 31, 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.
(d)
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.
(e)
Adjusted income tax expense
represents income tax expense calculated on adjusted income before
income tax at an effective tax rate of approximately 28% and 26%
for the three months ended March 31, 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230502006046/en/
Investors: Elizabeth Boland Chief Financial Officer - Bright
Horizons eboland@brighthorizons.com 617-673-8125
Michael Flanagan Vice President of Investor Relations - Bright
Horizons michael.flanagan@brighthorizons.com 617-673-8720
Media: Ilene Serpa Vice President - Communications - Bright
Horizons iserpa@brighthorizons.com 617-673-8044
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