Bright Horizons Family Solutions Reports Third Quarter of 2017 Financial Results

WATERTOWN, Mass., Nov. 1, 2017 /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 family life, today announced financial results for the third quarter of 2017 and updated certain financial guidance for the full year 2017.

Third Quarter 2017 Highlights (compared to third quarter 2016):

• Revenue increased 13% to $433 million
• Income from operations remained consistent at $45 million
• Net income increased 38% to $31 million and diluted earnings per common share increased 38% to $0.51

Non-GAAP measures

• Adjusted income from operations* increased 8% to $49 million
• Adjusted EBITDA* increased 10% to $77 million
• Adjusted net income* increased 27% to $37 million and diluted adjusted earnings per common share* increased 27% to $0.62

"We are pleased to report strong results for the third quarter of 2017," said David Lissy, Chief Executive Officer.  "Our results reflect positive momentum across our entire suite of solutions, and we continue to provide our employer clients and the families we serve with the high quality critical supports they need to maximize their productivity.  We are proud to serve companies that are committed to leading the way in supporting working parents, including 80 of our clients honored last month among the 100 Best Companies by Working Mother magazine."

"We are also proud of our employees working and living in the areas hit hard by Hurricanes Harvey, Irma, and Maria," Lissy continued. "Not only have they been able to support each other through this difficult time, but we've also been able to provide our clients with critical emergency child care services in Houston, Florida and Puerto Rico, allowing employers, including hospitals and medical centers in those areas, to provide continuous services for their communities while their employees know they have safe, dependable child care at a time when many other support services have been unavailable."

Third Quarter 2017 Results

Revenue increased $49.4 million, or 13%, in the third quarter of 2017 from the third quarter of 2016 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.

Income from operations was $45.0 million for the third quarter of 2017 compared to $44.7 million in the same 2016 period, due to increases in revenue and gross profit, partially offset by increases in selling, general and administrative expenses and other expenses.  The increase in gross profit reflects operating leverage from tuition increases and 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 2016, and strong cost management.  These gains were partially offset by costs incurred during the ramp-up of certain new lease/consortium centers opened during 2016 and 2017, investments in technology to support our service delivery and operating efficiency, costs incurred in relation to the integration of acquisitions, amortization expense for intangible assets acquired, and transaction costs related to the disposition of our remaining assets in Ireland.  Net income was $31.1 million for the third quarter of 2017 compared to net income of $22.5 million in the same 2016 period, an increase of $8.6 million, or 38%, due to improved operating performance as well as lower tax expense.  Tax expense was reduced for the third quarter of 2017 to reflect the tax benefit of $7.0 million related to the disposition of our remaining assets in Ireland as well as the tax benefit of $3.4 million associated with certain equity transactions which are now included in the provision for income taxes upon the adoption of new accounting guidance on January 1, 2017.  In 2016, the excess tax benefit from stock-based compensation of $5.4 million was recorded to the balance sheet in accordance with previous guidance. 

Diluted earnings per common share was $0.51 for the third quarter of 2017 compared to $0.37 in the same 2016 period, which would have been $0.45 had the new accounting guidance regarding excess tax benefits for stock-based compensation applied to the 2016 period.  In the third quarter of 2017 adjusted EBITDA increased $7.0 million, or 10%, to $76.6 million, and adjusted income from operations increased $3.8 million, or 8%, to $48.6 million, from the third quarter of 2016 due primarily to the expanded gross profit.   Adjusted net income increased by $7.8 million, or 27%, to $37.1 million on the expanded income from operations and a lower effective tax rate.  Diluted adjusted earnings per common share was $0.62 compared to $0.49 in the third quarter of 2016.

As of September 30, 2017, the Company operated 1,037 early care and education centers with the capacity to serve 116,000 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, 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, 2017, the Company generated approximately $201.2 million of cash flows from operations compared to $165.0 million for the same period in 2016 and invested $80.6 million in fixed assets and acquisitions compared to $72.8 million in the same 2016 period.  Net cash used in financing activities totaled $95.1 million in the nine months ended September 30, 2017 compared to $83.0 million for the same 2016 period.  During the nine months ended September 30, 2017, the Company's cash and cash equivalents grew $27.6 million to $42.3 million.

2017 Outlook

As described below, the Company is updating certain financial guidance.  For the full year 2017, the Company currently expects:

• Revenue growth in 2017 of approximately 10-11%
• Net income growth and diluted earnings per common share growth in 2017 of approximately 42%
• Adjusted net income growth and diluted adjusted earnings per common share growth in 2017 of approximately 22%
• Diluted weighted average shares of approximately 60.5 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.  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 15, 2017 at 1-844-512-2921 or, for international callers, at 1-412-317-6671, conference ID #13656544.  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, our service offerings, future estimates and impact of excess tax benefits and our 2017 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 March 1, 2017, 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 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, expenses related to the completion of secondary offerings and debt financing transactions, and expenses associated with completed acquisitions and dispositions as well as tax effects associated with these items.  The 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 adjusted diluted earnings per common share in prior quarters.  The exclusion of these charges and costs in future periods will have an impact on the Company's adjusted net income and adjusted diluted earnings per common share.

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 family life.  The Company provides center-based full service child care, back-up dependent care and educational advisory services to more than 1,100 clients across the United States, the United Kingdom, the Netherlands, Canada and India, including 150 FORTUNE 500 companies and 80 of Working Mother magazine's 2017 "100 Best Companies for Working Mothers."  Bright Horizons has been recognized 17 times as one of FORTUNE magazine's "100 Best Companies to Work For" and is one of the U.K.'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