Bright Horizons Family Solutions® Reports Third Quarter of 2015 Financial Results

05 Nov, 2015, 16:19 ET from Bright Horizons Family Solutions

BOSTON, Nov. 5, 2015 /PRNewswire/ -- Bright Horizons Family Solutions® Inc. (NYSE: BFAM), a leading provider of high-quality child care, early education and other services designed to help employers and families better address the challenges of work and life, today announced financial results for the third quarter of 2015 and confirmed and updated certain financial guidance for the full year 2015.

Third Quarter 2015 Highlights (compared to third quarter 2014):

  • Revenue increased 9% to $366 million
  • GAAP income from operations increased 26% to $42 million
  • Non-GAAP adjusted income from operations* increased 27% to $42 million
  • Adjusted EBITDA* increased 17% to $65 million
  • GAAP net income increased 34% to $21 million and GAAP earnings per share increased 43% to $0.33
  • Non-GAAP adjusted net income* increased 24% to $27 million and adjusted earnings per common share* increased 34% to $0.43

"We are very pleased to report another strong quarter, with solid top line growth and expanding operating performance across all of our business lines," said David Lissy, Chief Executive Officer.  "We are delighted to welcome 22 new early care and education centers to the Bright Horizons family this past quarter, and continue to be very excited by the expansion of our newer lines of business. Our continued growth and commitment to quality in all that we do positions us well to advance our mission to make an impact in the lives of those we serve around the world."

"We also recently released the results of our second annual Modern Family Index, which uncovers the challenges working parents in America face as they try to meet the overwhelming demands of work and family responsibilities and also explores employers' attitudes towards the value of working parents to their workforce," continued Lissy.  "The survey once again underscored the value of workplace cultures that place an emphasis on a healthy integration between work and life.

Our growing client base in our back-up care and educational advisory services segments, and the continued expansion of our full service child care business, collectively demonstrate that employers who understand this and are ready to meet these challenges can benefit in the race to recruit and retain top talent in a tightening labor market."

Third Quarter 2015 Results

Revenue increased $30.9 million, or 9%, in the third quarter of 2015 from the third quarter of 2014 on contributions from new and ramping full-service child care centers, average price increases of 3-4%, and expanded sales of back-up dependent care and educational advisory services, partially offset by the effects of foreign currency translation on our European business.

Income from operations was $41.7 million for the third quarter of 2015, an increase of $8.7 million, compared to $33.0 million in the same 2014 period, primarily due to a $12.5 million increase in gross profit, partially offset by increases in recurring selling, general and administrative expenses. The increase in gross profit and income from operations reflects operating leverage from enrollment gains in mature and ramping centers, contributions from new child care centers, back-up dependent care and educational advisory clients that have been added since the third quarter of 2014, and strong cost management, partially offset by the costs incurred during the ramp-up of certain new lease/consortium centers opened during 2014 and 2015 and the effects of foreign currency translation on our European business. Net income was $20.6 million for the third quarter of 2015 compared to net income of $15.4 million in the same 2014 period, an increase of $5.2 million on the expanded income from operations. Diluted earnings per common share was $0.33 compared to $0.23 in the third quarter of 2014.

In the third quarter of 2015, adjusted EBITDA increased $9.4 million, to $64.7 million, and adjusted income from operations increased $8.9 million, to $41.9 million, from the third quarter of 2014 due primarily to the expanded gross profit.   Adjusted net income increased by $5.1 million, or 24%, to $26.5 million on the expanded income from operations.  Diluted adjusted earnings per common share was $0.43 compared to $0.32 in the third quarter of 2014.

As of September 30, 2015, the Company operated 928 early care and education centers with the capacity to serve 106,500 children and 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, straight line rent expense, stock-based compensation expense, expenses related to secondary offerings, and expenses associated with completed acquisitions. Adjusted income from operations represents income from operations before expenses related to the completion of secondary offerings, and expenses associated with completed acquisitions. Adjusted net income represents net income determined in accordance with GAAP, adjusted for stock-based compensation expense, amortization expense, secondary offering expenses, expenses associated with completed acquisitions 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 "Bright Horizons Family Solutions Inc. Non-GAAP Reconciliations."

Balance Sheet and Cash Flow

During the nine months ended September 30, 2015, the Company generated approximately $142.3 million of cash flow from operations compared to $121.3 million for the same period in 2014 and invested $128.1 million in fixed assets and acquisitions compared to $53.4 million in the same 2014 period.  Net cash used in financing activities totaled $80.5 million in the nine months ended September 30, 2015 compared to $12.1 million provided by financing activities for the same 2014 period.  The Company repurchased a total of 2.1 million shares of common stock for a total of $117.5 million during the first nine months of 2015, including a 1.25 million share repurchase in connection with the secondary offering of stock completed in June 2015 and a 700,000 share repurchase in connection with the secondary offering of stock completed in August 2015. During the nine months ended September 30, 2015, the Company's cash and cash equivalents decreased $66.5 million to $21.4 million.

2015 Outlook

As described below, the Company is confirming and updating certain financial guidance.  For the full year 2015, the Company currently expects:

  • Overall revenue growth in 2015 in the range of 7-9%
  • Adjusted EBITDA growth in 2015 in the range of 14-16%
  • Adjusted net income growth in 2015 in the range of 16-17%
  • Diluted adjusted earnings per common share growth in the range of 25-26%
  • Diluted weighted average shares of approximately 62.5 million shares

Conference Call

Bright Horizons Family Solutions will host an investor conference call today at 5:00 pm ET.  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 David Lissy.  Replays of the entire call will be available through November 23, 2015 at 1-877-870-5176 or, for international callers, at 1-858-384-5517, conference ID # 13621226.  The webcast of the conference call, including replays, 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 statements that express the Company's opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, "forward-looking statements." 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. They include statements regarding the Company's intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies, the industries in which we and our partners operate, and our 2015 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; changes in our relationships with employer sponsors; our substantial indebtedness and the terms of such indebtedness; our ability to withstand seasonal fluctuations in the demand for our services; significant competition within our industry; 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 March 2, 2015, and 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 measures for the purpose of evaluating performance internally.  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."

About Bright Horizons Family Solutions® Inc.

Bright Horizons Family Solutions® is a leading provider of high-quality child care, early education and other services designed to help employers and families better address the challenges of work and life. The Company provides center-based full service child care, back-up dependent care and educational advisory services to more than 1,000 clients across the United States, the United Kingdom, Ireland, the Netherlands, Canada and India, including more than 140 FORTUNE 500 companies and more than 80 of Working Mother magazine's 2014 "100 Best Companies for Working Mothers."  Bright Horizons is one of FORTUNE magazine's "100 Best Companies to Work For" and is one of the UK's Best Workplaces as designated by the Great Place to Work® Institute. Bright Horizons is headquartered in Watertown, MA. The Company's web site is located at www.brighthorizons.com.

Contacts:

Investors:

Elizabeth Boland

CFO - Bright Horizons

eboland@brighthorizons.com

617-673-8125

Kevin Doherty

MD - Solebury Communications Group

kdoherty@soleburyir.com

203-428-3233

Media:

Ilene Serpa

VP - Communications - Bright Horizons

iserpa@brighthorizons.com

617-673-8044

 

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share data)

(Unaudited)

 

Three Months Ended September 30,

2015

%

2014

%

Revenue

$

365,944

100.0

%

$

334,976

100.0

%

Cost of services

280,560

76.7

%

262,115

78.2

%

Gross profit

85,384

23.3

%

72,861

21.8

%

Selling, general and administrative expenses

36,419

10.0

%

32,856

9.8

%

Amortization of intangible assets

7,224

2.0

%

6,959

2.1

%

Income from operations

41,741

11.3

%

33,046

9.9

%

Interest expense, net

(10,330)

(2.8)%

(8,395)

(2.5)%

Income before income taxes

31,411

8.5

%

24,651

7.4

%

Income tax expense

(10,853)

(3.0)%

(9,272)

(2.8)%

Net income

$

20,558

5.5

%

$

15,379

4.6

%

Earnings per common share:

Common stock—basic

$

0.34

$

0.23

Common stock—diluted

$

0.33

$

0.23

Weighted average number of common shares outstanding:

Common stock—basic

60,290,842

66,087,184

Common stock—diluted

61,846,725

67,635,657

 

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share data)

(Unaudited)

 

Nine Months Ended September 30,

2015

%

2014

%

Revenue

$

1,086,849

100.0

%

$

1,015,231

100.0

%

Cost of services

818,997

75.4

%

782,107

77.0

%

Gross profit

267,852

24.6

%

233,124

23.0

%

Selling, general and administrative expenses

110,154

10.1

%

101,464

10.0

%

Amortization of intangible assets

20,978

1.9

%

22,068

2.2

%

Income from operations

136,720

12.6

%

109,592

10.8

%

Interest expense, net

(30,714)

(2.8)%

(25,736)

(2.5)%

Income before income taxes

106,006

9.8

%

83,856

8.3

%

Income tax expense

(35,997)

(3.3)%

(30,715)

(3.0)%

Net income

$

70,009

6.5

%

$

53,141

5.3

%

Earnings per common share:

Common stock—basic

$

1.14

$

0.81

Common stock—diluted

$

1.11

$

0.79

Weighted average number of common shares outstanding:

Common stock—basic

61,112,263

65,755,911

Common stock—diluted

62,631,444

67,433,972

 

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

September 30,  2015

December 31,  2014

ASSETS

Current assets:

Cash and cash equivalents

$

21,393

$

87,886

Accounts receivable—net

73,331

83,066

Other current assets

72,417

52,206

Total current assets

167,141

223,158

Fixed assets—net

430,380

398,947

Goodwill

1,141,285

1,095,738

Other intangibles—net

394,545

406,249

Other assets

20,590

16,984

Total assets

$

2,153,941

$

2,141,076

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Current portion of long-term debt

$

9,550

$

9,550

Borrowings on revolving line of credit

26,500

Accounts payable and accrued expenses

139,456

116,425

Deferred revenue and other current liabilities

140,106

153,448

Total current liabilities

315,612

279,423

Long-term debt—net

907,137

911,627

Deferred income taxes

131,563

127,036

Other long-term liabilities

84,806

72,031

Total liabilities

1,439,118

1,390,117

Total stockholders' equity

714,823

750,959

Total liabilities and stockholders' equity

$

2,153,941

$

2,141,076

 

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

Nine months ended September 30,

2015

2014

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$

70,009

$

53,141

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

58,539

58,332

Stock-based compensation

6,900

6,462

Deferred income taxes

5,263

(59)

Other non-cash adjustments, net

5,392

4,598

Changes in assets and liabilities:

Accounts receivable

11,388

13,938

Prepaid expenses and other current assets

(19,267)

(1,121)

Accounts payable and accrued expenses

16,380

(3,617)

Other, net

(12,341)

(10,363)

Net cash provided by operating activities

142,263

121,311

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of fixed assets

(61,415)

(47,953)

Payments for acquisitions, net of cash acquired

(66,659)

(6,522)

Settlement of purchase price for prior year acquisitions

23

1,030

Net cash used in investing activities

(128,051)

(53,445)

CASH FLOWS FROM FINANCING ACTIVITIES:

Line of credit, net

26,500

Principal payments of long-term debt

(7,163)

(5,925)

Purchase of treasury stock

(117,538)

(7,233)

Proceeds from issuance of common stock upon exercise of options

7,452

13,656

Proceeds from issuance of restricted stock

3,864

4,709

Tax benefit from stock-based compensation

6,379

6,856

Net cash (used in) provided by financing activities

(80,506)

12,063

Effect of exchange rates on cash and cash equivalents

(199)

(506)

Net (decrease) increase in cash and cash equivalents

(66,493)

79,423

Cash and cash equivalents—beginning of period

87,886

29,585

Cash and cash equivalents—end of period

$

21,393

$

109,008

 

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

SEGMENT INFORMATION

(In thousands)

(Unaudited)

Full service

center-based

care

Back-up

dependent

care

Other

educational

advisory

services

Total

Three months ended September 30, 2015

Revenue

$

307,512

$

47,935

$

10,497

$

365,944

Amortization of intangibles

6,899

181

144

7,224

Income from operations

24,414

14,082

3,245

41,741

Adjusted income from operations (1)

24,579

14,082

3,245

41,906

Three months ended September 30, 2014

Revenue

$

282,798

$

43,493

$

8,685

$

334,976

Amortization of intangibles

6,634

181

144

6,959

Income from operations

19,079

12,356

1,611

33,046

Adjusted income from operations

19,079

12,356

1,611

33,046

(1)     Adjusted income from operations represents income from operations excluding expenses incurred in connection with secondary offerings and completed acquisitions.

 

Full service

center-based

care

Back-up

dependent

care

Other

educational

advisory

services

Total

Nine months ended September 30, 2015

Revenue

$

925,027

$

133,940

$

27,882

$

1,086,849

Amortization of intangibles

20,003

543

432

20,978

Income from operations

89,012

42,083

5,625

136,720

Adjusted income from operations (1)

89,523

42,083

5,625

137,231

Nine months ended September 30, 2014

Revenue

$

870,546

$

120,689

$

23,996

$

1,015,231

Amortization of intangibles

21,090

543

435

22,068

Income from operations

70,587

36,229

2,776

109,592

Adjusted income from operations (1)

71,137

36,229

2,776

110,142

(1)     Adjusted income from operations represents income from operations excluding expenses incurred in connection with secondary offerings and completed 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,

2015

2014

2015

2014

Net income

$

20,558

$

15,379

$

70,009

$

53,141

Interest expense, net

10,330

8,395

30,714

25,736

Income tax expense

10,853

9,272

35,997

30,715

Depreciation

12,649

12,423

37,561

36,264

Amortization of intangible assets (a)

7,224

6,959

20,978

22,068

EBITDA

61,614

52,428

195,259

167,924

Additional Adjustments:

Deferred rent (b)

650

817

2,304

2,132

Stock-based compensation expense (c)

2,300

2,039

6,900

6,462

Expenses related to secondary offerings and completed acquisitions (d)

165

511

550

Total adjustments

3,115

2,856

9,715

9,144

Adjusted EBITDA

$

64,729

$

55,284

$

204,974

$

177,068

Income from operations

$

41,741

$

33,046

$

136,720

$

109,592

Expenses related to secondary offerings and completed acquisitions (d)

165

511

550

Adjusted income from operations

$

41,906

$

33,046

$

137,231

$

110,142

Net income

$

20,558

$

15,379

$

70,009

$

53,141

Income tax expense

10,853

9,272

35,997

30,715

Income before tax

31,411

24,651

106,006

83,856

Stock-based compensation expense (c)

2,300

2,039

6,900

6,462

Amortization of intangible assets (a)

7,224

6,959

20,978

22,068

Expenses related to secondary offerings and completed acquisitions (d)

165

511

550

Adjusted income before tax

41,100

33,649

134,395

112,936

Adjusted income tax expense (e)

(14,591)

(12,282)

(47,710)

(41,401)

Adjusted net income

$

26,509

$

21,367

$

86,685

$

71,535

Weighted average number of common shares—diluted

61,846,725

67,635,657

62,631,444

67,433,972

Diluted adjusted earnings per common share

$

0.43

$

0.32

$

1.38

$

1.06

(a)            Represents amortization of intangible assets, including approximately $5.0 million for the three months ended September 30, 2015 and 2014, respectively, and $14.0 million and $15.0 million for the nine months ended September 30, 2015 and 2014, respectively, associated with intangible assets recorded in connection with our going private transaction in May 2008.

(b)            Represents rent in excess of cash paid for rent, recognized on a straight line basis over the life of the lease in accordance with Accounting Standards Codification Topic 840, Leases.

(c)            Represents non-cash stock-based compensation expense.

(d)            Represents costs incurred in connection with completed acquisitions and secondary offering of common stock in March 2014, May 2015 and August 2015.

(e)            Represents income tax expense calculated on adjusted income before tax at the effective rate of approximately 36% and 37% in 2015 and 2014, respectively.

 

SOURCE Bright Horizons Family Solutions



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