Bright Horizons Family Solutions® Reports Third Quarter of 2014 Financial Results

BOSTON, Nov. 4, 2014 /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 2014.

Third Quarter 2014 Highlights (compared to third quarter 2013):

• Revenue increased 9% to $335 million
• Adjusted EBITDA* increased 11% to $55 million
• Adjusted income from operations* increased 12% to $33 million
• Adjusted net income* increased 16% to $21 million
• Diluted adjusted earnings per pro forma common share* increased 14% to $0.32

"We are very pleased to report strong operating results for the third quarter, including contributions across our broad suite of solutions," said David Lissy, Chief Executive Officer.  "Our solid financial performance allows us to continue to invest in the people and systems needed to further deepen our position as the leader in our field."

"Bright Horizons' partners include many industry-leading employers who recognize the value of investing in programs and services that help their employees balance their work and family responsibilities," added Lissy.  "I'm very proud that 84 of the employers honored by Working Mother magazine on their '2014 Working Mother 100 Best Companies' list, released in September, are Bright Horizons clients, including once again all of the Top-Ten employers on the list.  Our suite of services, from full service centers to back-up care and educational advisory services, allows employers to improve productivity by helping their employees to achieve a healthy integration between work and life."

Third Quarter 2014 Results

Revenue increased $26.3 million in 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.

Adjusted EBITDA increased $5.3 million and adjusted income from operations increased $3.5 million in the third quarter of 2014.  The adjusted EBITDA increase 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 2013, and strong cost management, partially offset by the costs incurred during the ramp up of certain new lease/consortium centers opened during 2013 and 2014.  The increase in adjusted operating income reflects a $4.4 million increase in gross profit, partially offset by increases in recurring selling, general and administrative expenses ("SG&A").

Income from operations was $33.0 million for the third quarter of 2014 compared to $27.8 million in the same 2013 period,  and net income was $15.4 million for the third quarter of 2014 compared to net income of $14.9 million in the same 2013 period.  In the third quarter of 2013, the provision for income taxes of $3.7 million represented an effective tax rate of 19.6% due to the projection of the expected applicable tax rate for the full year 2013, including the impact on income before income taxes of the expenses related to the initial public offering (the "IPO") and debt refinancing that were completed in the first quarter of 2013.  Adjusted net income increased by $2.9 million, or 16%, to $21.4 million on the expanded income from operations.  Diluted adjusted earnings per pro forma common share was $0.32, an increase of 14% compared to the third quarter in 2013.

As of September 30, 2014, the Company operated 876 early care and education centers with the capacity to serve 99,900 children and families.

*Adjusted EBITDA, adjusted income from operations and adjusted net income are non-GAAP measures.  Adjusted EBITDA represents earnings before interest, taxes, depreciation, amortization, straight line rent expense, stock compensation expense, expenses related to the IPO and refinancing that were completed in January 2013, expenses related to secondary offerings, expenses associated with completed acquisitions, and the management agreement fee paid to Bain Capital Partners LLC (the "Sponsor").  Adjusted income from operations represents income from operations before expenses related to the completion of the IPO and secondary offerings, and expenses associated with completed acquisitions. Adjusted net income represents net income determined in accordance with GAAP, adjusted for stock compensation expense, amortization expense, the Sponsor management agreement fee, IPO and refinancing expenses, secondary offering expenses, expenses associated with completed acquisitions and the income tax provision (benefit) thereon. These non-GAAP measures are more fully described and are reconciled from the respective measures determined under GAAP in the table referred to below. Diluted adjusted earnings per pro forma common share is a non-GAAP measure, calculated using adjusted net income, and gives effect to the conversion of Class L common stock as if the conversion were completed at the beginning of the respective fiscal period. Please refer to "Non-GAAP Measures," "Bright Horizons Family Solutions Inc. Non-GAAP Reconciliations," and "Bright Horizons Family Solutions Inc. Diluted Adjusted Earnings per Pro Forma Common Share" for further detail.

Balance Sheet and Cash Flow

During the nine months ended September 30, 2014, the Company generated approximately $121.3 million of cash flow from operations compared to $121.5 million for the same period in 2013 and invested $53.4 million in fixed assets and acquisitions compared to $180.5 million in the same 2013 period.  Net cash provided by financing activities totaled $12.1 million in the nine months ended September 30, 2014 compared to $60.0 million for the same 2013 period.  The Company raised $234.9 million of net proceeds from the IPO completed on January 30, 2013, and repaid all of its outstanding indebtedness with the proceeds from the IPO and proceeds from the issuance of $790.0 million in new secured term loans.  During the nine months ended September 30, 2014, the Company's cash and cash equivalents grew $79.4 million to $109.0 million.

2014 Outlook

As described below, the Company is updating certain targets regarding its 2014 expectations.

• Overall revenue growth in 2014 of approximately 11%
• Adjusted EBITDA growth in 2014 in the range of 15-16%
• Adjusted net income growth in 2014 in the range of 23-25%
• Diluted adjusted earnings per pro forma common share growth in the range of 20-22%

In addition, for the full year in 2014, the Company estimates that pro forma diluted weighted average shares will approximate 68 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 11, 2014 at 1-877-870-5176 or, for international callers, at 1-858-384-5517, conference ID # 13593208.  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." Bright Horizons Family Solutions' 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 and the industries in which we and our partners operate. 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, the following: 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; as well as those risks and uncertainties described in the "Risk Factors" section of our Annual Report on Form 10-K filed March 25, 2014. 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, unless required by law.

Non-GAAP Measures

In addition to the results provided in accordance with U.S. generally accepted accounting principles ("GAAP") throughout this document, the Company has provided non-GAAP measurements - adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per pro forma 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 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 pro forma common share may differ from similar measures reported by other companies.  Adjusted EBITDA, adjusted income from operations, and adjusted net income are reconciled from the respective measures under GAAP in the attached table "Bright Horizons Family Solutions Inc. Non-GAAP Reconciliations."

The number of common shares used in the calculations of diluted adjusted earnings per pro forma common share for the 2013 reported periods give effect to the conversion of all outstanding shares of Class L common stock at the conversion factor of 35.1955 common shares for each Class L share, as if the conversion was completed at January 1, 2013. Diluted adjusted earnings per pro forma common share is calculated using the two-class method and includes the dilutive effect of stock options.  Shares sold in the IPO are included in the diluted adjusted earnings per pro forma common share calculations beginning on the date that such shares were actually issued. Diluted adjusted earnings per pro forma common share is calculated using adjusted net income, as defined above. See the attached table "Bright Horizons Family Solutions Inc. Diluted Adjusted Earnings per Pro Forma Common Share" for further detail.

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 900 clients across the United States, the United Kingdom, Ireland, the Netherlands, Canada and India, including more than 130 FORTUNE 500 companies and 84 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.

SOURCE Bright Horizons Family Solutions