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Bright Horizons Family Solutions Reports Third Quarter of 2019 Financial Results

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Bright Horizons Family Solutions® Inc. (NYSE:BFAM), a leading provider of high-quality education and care solutions designed to help leading employers support employees across life and career stages, today announced financial results for the third quarter of 2019 and updated certain financial guidance for the full year 2019.

Third Quarter 2019 Highlights (compared to third quarter 2018):

  • Revenue increased 8% to $512 million
  • Income from operations increased 13% to $63 million
  • Net income increased 23% to $41 million and diluted earnings per common share increased 21% to $0.69

Non-GAAP measures

  • Adjusted income from operations* increased 13% to $63 million
  • Adjusted EBITDA* increased 11% to $95 million
  • Adjusted net income* increased 19% to $51 million and diluted adjusted earnings per common share* increased 18% to $0.86

"We are pleased to report strong financial results for the third quarter of 2019," said Stephen Kramer, Chief Executive Officer. "Our full suite of solutions continues to be well received in the marketplace and reflects our commitment to providing high-quality, critical supports that are needed to maximize talent acquisition, retention and productivity in today's competitive environment."

"We are also honored once again to have been named one of Fortune magazine's "Best Workplaces for Women." This recognition personifies our commitment to creating an inclusive environment along with promotion of women into leadership and executive roles. We stand alongside many of our clients who are also leading the way in supporting women and working parents alike," Kramer continued.

Third Quarter 2019 Results

Revenue increased $40.0 million, or 8%, in the third quarter of 2019 from the third quarter of 2018 on contributions from new and ramping full service child care centers, average price increases of 3% to 4%, and expanded sales and utilization of our back-up care and educational advisory services.

Income from operations was $62.6 million for the third quarter of 2019, an increase from $55.5 million in the same 2018 period. Increases in revenue and gross profit reflect contributions from enrollment gains in mature and ramping centers, new child care centers, as well as back-up care and educational advisory clients that have increased utilization levels or been added since the third quarter of 2018, efficiencies in service delivery across the expanding customer base, and strong cost management. These gains were partially offset by investments in marketing and technology to support our customer user experience, service delivery and operating efficiency, and costs incurred during the pre-opening and ramp-up phase of newer lease/consortium centers. Net income was $41.3 million for the third quarter of 2019 compared to net income of $33.6 million in the same 2018 period, an increase of $7.7 million, or 23%, primarily attributable to the expanded income from operations and a lower effective tax rate. Diluted earnings per common share was $0.69 for the third quarter of 2019 compared to $0.57 in the same 2018 period.

In the third quarter of 2019, adjusted EBITDA increased $9.5 million, or 11%, to $94.8 million, and adjusted income from operations increased $7.4 million, or 13%, to $62.8 million from the third quarter of 2018 due primarily to the expanded gross profit. Adjusted net income increased by $7.9 million, or 19%, to $50.8 million on the expanded income from operations. Diluted adjusted earnings per common share was $0.86 compared to $0.73 in the third quarter of 2018.

As of September 30, 2019, the Company had more than 1,100 client relationships with employers across a diverse array of industries and operated 1,083 child care and early education 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, the excess of lease expense over cash lease expense, stock-based compensation expense, and transaction costs. Adjusted income from operations represents income from operations before transaction costs. Adjusted net income represents net income determined in accordance with GAAP, adjusted for stock-based compensation expense, amortization expense, transaction costs, and the income tax provision (benefit) thereon. Diluted adjusted earnings per common share is a non-GAAP measure, 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."

Balance Sheet and Cash Flow

For the nine months ended September 30, 2019, the Company generated approximately $272.4 million of cash from operations compared to $239.7 million for the same period in 2018, and invested $126.9 million in fixed assets, acquisitions, and other investments compared to $114.3 million for the same period in 2018. Net cash used in financing activities totaled $127.2 million in the nine months ended September 30, 2019 compared to $118.2 million for the same 2018 period. The Company reported cash and cash equivalents of $48.5 million as of September 30, 2019, a net increase of $33.1 million during the year.

2019 Outlook

As described below, the Company is updating certain financial guidance. For the full year 2019, the Company currently expects:

  • Revenue growth in 2019 in the range of 8-9%
  • Net income in the range of $175 million to $176 million and diluted earnings per common share in the range of $2.95 to $2.98
  • Adjusted net income in the range of $212 million to $214 million and diluted adjusted earnings per common share in the range of $3.61 to $3.64
  • Diluted weighted average shares of approximately 59 million shares

For a reconciliation of the non-GAAP measures to their most directly comparable GAAP measure, refer to the attached table "Bright Horizons Family Solutions Inc. Non-GAAP Reconciliations."

Conference Call

Bright Horizons Family Solutions will host an investor conference call today at 5:00 pm ET to discuss the third quarter 2019, the Company's updated business outlook, its strategy and results. 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 20, 2019 at 1-844-512-2921, or, for international callers, 1-412-317-6671, conference ID #13685055. 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, prospects, estimated effective tax rate and tax expense, estimates and impact of equity transactions and excess tax benefits, and our full year 2019 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, changes in the demand for child care and other dependent care services, including variation in enrollment trends and lower than expected demand from employer sponsor clients; 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; and other risks and uncertainties more fully described in the "Risk Factors" section of our Annual Report on Form 10-K filed February 27, 2019, 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. Adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per common share are reconciled from the respective measures under GAAP in the attached table "Bright Horizons Family Solutions Inc. Non-GAAP Reconciliations."

Guidance for non-GAAP financial measures excludes stock-based compensation, amortization of intangible assets, and transaction costs related to the completion of debt financing transactions and completed acquisitions, as well as tax effects associated with these items. These adjustments to net income and diluted earnings per common share in future periods are generally expected to be similar to the types of charges and costs excluded from adjusted net income and diluted adjusted earnings per common share in prior quarters, although we can provide no assurance as to the timing or magnitude of any such adjustments. The exclusion of these charges and costs in future periods will have an impact on the Company's adjusted net income and diluted adjusted earnings per common share.

About Bright Horizons Family Solutions Inc.

Bright Horizons is trusted by employers and families around the world to provide care and education. Operating approximately 1,100 child care centers, Bright Horizons cares for approximately 120,000 children annually in the United States, the United Kingdom, the Netherlands, Canada and India. Used by more than 1,100 of the world's best employers across industries, Bright Horizons back-up child and elder care, tuition program management, education advising, and student loan repayment programs support employees through every life and career stage, and help people succeed at work and at home. 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,

 

2019

 

%

 

2018

 

%

Revenue

$

 

511,584

 

 

100.0

%

 

$

 

471,585

 

 

100.0

%

Cost of services

 

386,364

 

 

75.5

%

 

 

358,545

 

 

76.0

%

Gross profit

 

125,220

 

 

24.5

%

 

 

113,040

 

 

24.0

%

Selling, general and administrative expenses

 

53,964

 

 

10.5

%

 

 

49,427

 

 

10.5

%

Amortization of intangible assets

 

8,627

 

 

1.8

%

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