8-K
BRIGHT HORIZONS FAMILY SOLUTIONS INC. (BFAM)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 13, 2020
BRIGHT HORIZONS FAMILY SOLUTIONS INC.
(Exact name of registrant as specified in its charter)
| Delaware | 001-35780 | 80-0188269 |
|---|---|---|
| (State or other jurisdiction<br><br>of incorporation) | (Commission<br><br>File Number) | (I.R.S. Employer<br><br>Identification Number) |
| 200 Talcott Avenue | ||
| --- | --- | --- |
| Watertown, | Massachusetts | 02472 |
| (Address of principal executive offices) | (Zip code) |
Registrant’s telephone number, including area code: (617) 673-8000
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | | --- | --- || ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | | --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $0.001 par value per share | BFAM | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition |
|---|
On February 13, 2020, Bright Horizons Family Solutions Inc. issued a press release announcing its financial results for the fiscal quarter and year ended December 31, 2019 and provided financial guidance for the year 2020. A copy of the press release is furnished as Exhibit 99.1 hereto and is incorporated herein by reference.
The information contained in this Item, including Exhibit 99.1 attached hereto, is being furnished and shall not be deemed “filed” for any purpose, and shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, regardless of any general incorporation language in any such filing.
| Item 9.01 | Financial Statements and Exhibits |
|---|---|
| (d) | Exhibits |
| --- | --- |
| 99.1 | Press Release of Bright Horizons Family Solutions Inc. dated February 13, 2020. |
| --- | --- |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| BRIGHT HORIZONS FAMILY SOLUTIONS INC. | |||
|---|---|---|---|
| Date: | February 13, 2020 | By: | /s/ Elizabeth Boland |
| Elizabeth Boland | |||
| Chief Financial Officer |
Exhibit
Exhibit 99.1
Bright Horizons Family Solutions Reports Fourth Quarter and Full Year 2019 Financial Results
WATERTOWN, MA - (Business Wire - February 13, 2020) - Bright Horizons Family Solutions^®^ Inc. (NYSE: BFAM), a leading provider of high-quality education and care solutions designed to help employers support employees across life and career stages, today announced financial results for the fourth quarter and full year of 2019 and provided guidance for 2020.
Fourth Quarter 2019 Highlights (compared to fourth quarter 2018):
| • | Revenue increased 9% to $521 million |
|---|---|
| • | Income from operations increased 6% to $67 million |
| --- | --- |
| • | Net income increased 2% to $48 million and diluted earnings per common share increased 3% to $0.81 |
| --- | --- |
Non-GAAP measures
| • | Adjusted income from operations* increased 6% to $67 million |
|---|---|
| • | Adjusted EBITDA* increased 8% to $100 million |
| --- | --- |
| • | Adjusted net income* increased 12% to $59 million and diluted adjusted earnings per common share* increased 12% to $1.01 |
| --- | --- |
Year Ended December 31, 2019 Highlights (compared to year ended December 31, 2018):
| • | Revenue increased 8% to $2.1 billion |
|---|---|
| • | Income from operations increased 12% to $268 million |
| --- | --- |
| • | Net income increased 14% to $180 million and diluted earnings per common share increased 15% to $3.05 |
| --- | --- |
Non-GAAP measures
| • | Adjusted income from operations* increased 11% to $268 million |
|---|---|
| • | Adjusted EBITDA* increased 11% to $395 million |
| --- | --- |
| • | Adjusted net income* increased 14% to $217 million and diluted adjusted earnings per common share* increased 14% to $3.67 |
| --- | --- |
“We are pleased to report strong financial results for the fourth quarter and full year 2019,” said Stephen Kramer, Chief Executive Officer. “Our solid financial results in 2019 reflect the positive momentum across our business and the results from recent investments we have made in our people and systems to strengthen our market position.”
“As we look ahead to 2020 and beyond, we believe we are well positioned to deliver on our growth plans,” added Mr. Kramer. “Equally important, I am especially honored by the recent recognition we received from Bloomberg, Forbes and Fortune Magazine as leaders in creating inclusive workplaces for all of our employees. These awards help create real business value, validate our unique culture and reputation, and demonstrate to our clients the values of the Bright Horizons Family.”
Fourth Quarter 2019 Results
Revenue increased $42.4 million, or 9%, in the fourth quarter of 2019 from the fourth quarter of 2018 on contributions from new and ramping full-service child care centers, average price increases of 3-4%, expanded sales of our back-up care and educational advisory services, and acquisitions.
Income from operations was $67.4 million for the fourth quarter of 2019, an increase from $63.7 million in the same 2018 period. Increases in revenue and gross profit reflect contributions from enrollment gains in new and ramping centers, as well as back-up care and educational advisory clients that have increased utilization levels or been added since the fourth quarter of 2018 and efficiencies in service delivery across the expanding customer base. These gains were partially offset by investments in marketing and technology to support our end-user experience, and costs incurred during the pre-opening and ramp-up phase of newer lease/consortium centers. Net income was $47.8 million for the fourth quarter of 2019 compared to net income of $46.7 million in the same 2018 period, an increase of $1.1 million, or 2%, attributable to the expanded income from operations, and offset by a higher effective tax rate for the fourth quarter of 2019. The tax rate for the fourth quarter of 2018 included a one-time benefit related to the finalization of tax positions for foreign tax filings. Diluted earnings per common share was $0.81 for the fourth quarter of 2019 compared to $0.79 in the fourth quarter of 2018.
In the fourth quarter of 2019, adjusted EBITDA increased $7.1 million, or 8%, to $100.4 million, and adjusted income from operations increased $3.7 million, or 6%, to $67.4 million from the fourth quarter of 2018 due primarily to the expanded gross profit. Adjusted net income increased by $6.3 million, or 12%, to $59.5 million on the expanded income from operations. Diluted adjusted earnings per common share was $1.01 compared to $0.90 in the fourth quarter of 2018.
As of December 31, 2019, the Company had more than 1,150 client relationships with employers across a diverse array of industries, and operated 1,084 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 expense (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 year ended December 31, 2019, the Company generated approximately $330.4 million of cash flow from operations compared to $294.7 million for the same period in 2018, and invested $189.1 million in fixed assets, acquisitions, and other investments compared to $158.5 million for the same period in 2018. Net cash used in financing activities totaled $149.1 million in the year ended December 31, 2019 compared to $134.2 million for the same period in 2018. The Company reported cash and cash equivalents of $27.9 million at December 31, 2019, an increase of $12.4 million during the year.
2020 Outlook
As described below, the Company is providing certain financial guidance. For the full year 2020, the Company currently expects:
| • | Revenue growth in 2020 in the range of 8%-10% |
|---|---|
| • | Net income in the range of $201 million to $204 million and diluted earnings per common share in the range of $3.41 to $3.45 |
| --- | --- |
| • | Adjusted net income in the range of $242 million to $246 million and diluted adjusted earnings per common share in the range of $4.11 to $4.18 |
| --- | --- |
| • | Diluted weighted average shares of approximately 59 million shares |
| --- | --- |
For a reconciliation of the non-GAAP measures to their most directly comparable GAAP measures, 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 fourth quarter 2019, the Company’s 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 March 5, 2020 at 1-844-512-2921 or, for international callers, at 1-412-317-6671, conference ID #13685056. 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 and growth prospects and plans, our market position, estimated effective tax rate and tax expense, estimates and impact of equity transactions and excess tax benefits, our investments, estimated occupancy costs, and our 2020 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, dependent care, and other workplace solutions, 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 other non-recurring costs 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. The Company has provided reconciliations of forward-looking non-GAAP financial measures to the most directly comparable GAAP financial measure where possible without unreasonable effort.
About Bright Horizons Family Solutions Inc.
Bright Horizons is a leading global provider of high-quality child care and early education, back-up care, and workplace employee services. For over 30 years, Bright Horizons has been a champion for working families, designing and providing innovative solutions to help families, employers, and their employees better address the challenges of balancing work and family life. Operating approximately 1,100 child care centers in the United States, the United Kingdom, the Netherlands, Canada and India, and serving more than 1,150 of the world’s leading organizations, Bright Horizons’ child care centers, back-up child and elder care, tuition program management, education advising, and student loan repayment programs help employees succeed at every life and career stage, both at work and at home. For more information, go to www.brighthorizons.com.
Contacts:
| Investors: | |
|---|---|
| Elizabeth Boland | |
| Chief Financial Officer - Bright Horizons | |
| eboland@brighthorizons.com | |
| 617-673-8125 | |
| Michael Flanagan | |
| Senior Director 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 |
| BRIGHT HORIZONS FAMILY SOLUTIONS INC.<br><br>CONDENSED CONSOLIDATED STATEMENTS OF INCOME<br><br>(In thousands, except share data)<br><br>(Unaudited) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended December 31, | ||||||||||
| 2019 | % | 2018 | % | |||||||
| Revenue | $ | 520,615 | 100.0 | % | $ | 478,241 | 100.0 | % | ||
| Cost of services | 389,467 | 74.8 | % | 357,607 | 74.8 | % | ||||
| Gross profit | 131,148 | 25.2 | % | 120,634 | 25.2 | % | ||||
| Selling, general and administrative expenses | 55,166 | 10.6 | % | 48,815 | 10.2 | % | ||||
| Amortization of intangible assets | 8,535 | 1.6 | % | 8,092 | 1.7 | % | ||||
| Income from operations | 67,447 | 13.0 | % | 63,727 | 13.3 | % | ||||
| Interest expense—net | (10,528 | ) | (2.1 | )% | (12,049 | ) | (2.5 | )% | ||
| Income before income tax | 56,919 | 10.9 | % | 51,678 | 10.8 | % | ||||
| Income tax expense | (9,156 | ) | (1.7 | )% | (5,021 | ) | (1.0 | )% | ||
| Net income | $ | 47,763 | 9.2 | % | $ | 46,657 | 9.8 | % | ||
| Earnings per common share: | ||||||||||
| Common stock—basic | $ | 0.82 | $ | 0.80 | ||||||
| Common stock—diluted | $ | 0.81 | $ | 0.79 | ||||||
| Weighted average common shares outstanding: | ||||||||||
| Common stock—basic | 57,891,192 | 57,726,263 | ||||||||
| Common stock—diluted | 58,964,125 | 58,868,992 |
| BRIGHT HORIZONS FAMILY SOLUTIONS INC.<br><br>CONDENSED CONSOLIDATED STATEMENTS OF INCOME<br><br>(In thousands, except share data)<br><br>(Unaudited) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Years Ended December 31, | ||||||||||
| 2019 | % | 2018 | % | |||||||
| Revenue | $ | 2,062,017 | 100.0 | % | $ | 1,903,182 | 100.0 | % | ||
| Cost of services | 1,539,081 | 74.6 | % | 1,429,927 | 75.1 | % | ||||
| Gross profit | 522,936 | 25.4 | % | 473,255 | 24.9 | % | ||||
| Selling, general and administrative expenses | 221,496 | 10.7 | % | 201,591 | 10.6 | % | ||||
| Amortization of intangible assets | 33,621 | 1.7 | % | 32,569 | 1.7 | % | ||||
| Income from operations | 267,819 | 13.0 | % | 239,095 | 12.6 | % | ||||
| Interest expense—net | (45,154 | ) | (2.2 | )% | (47,508 | ) | (2.5 | )% | ||
| Income before income tax | 222,665 | 10.8 | % | 191,587 | 10.1 | % | ||||
| Income tax expense | (42,279 | ) | (2.1 | )% | (33,606 | ) | (1.8 | )% | ||
| Net income | $ | 180,386 | 8.7 | % | $ | 157,981 | 8.3 | % | ||
| Earnings per common share: | ||||||||||
| Common stock—basic | $ | 3.10 | $ | 2.72 | ||||||
| Common stock—diluted | $ | 3.05 | $ | 2.66 | ||||||
| Weighted average common shares outstanding: | ||||||||||
| Common stock—basic | 57,838,245 | 57,812,602 | ||||||||
| Common stock—diluted | 58,947,240 | 59,000,669 |
| BRIGHT HORIZONS FAMILY SOLUTIONS INC.<br><br>CONDENSED CONSOLIDATED BALANCE SHEETS<br><br>(In thousands)<br><br>(Unaudited) | ||||
|---|---|---|---|---|
| December 31, | ||||
| 2019 | 2018 | |||
| ASSETS | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 27,872 | $ | 15,450 |
| Accounts receivable—net | 148,855 | 131,178 | ||
| Prepaid expenses and other current assets | 52,161 | 47,263 | ||
| Total current assets | 228,888 | 193,891 | ||
| Fixed assets—net | 636,153 | 597,141 | ||
| Goodwill | 1,412,873 | 1,347,611 | ||
| Other intangible assets—net | 304,673 | 323,035 | ||
| Operating lease right-of-use assets^(1)^ | 700,956 | — | ||
| Other assets | 46,877 | 62,628 | ||
| Total assets | $ | 3,330,420 | $ | 2,524,306 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||
| Current liabilities: | ||||
| Current portion of long-term debt | $ | 10,750 | $ | 10,750 |
| Borrowings under revolving credit facility | — | 118,200 | ||
| Accounts payable and accrued expenses | 167,059 | 154,195 | ||
| Current portion of operating lease liabilities^(1)^ | 83,123 | — | ||
| Deferred revenue and other current liabilities | 222,358 | 200,640 | ||
| Total current liabilities | 483,290 | 483,785 | ||
| Long-term debt—net | 1,028,049 | 1,036,870 | ||
| Operating lease liabilities ^(1)^ | 685,910 | 71,817 | ||
| Deferred income taxes | 58,940 | 71,306 | ||
| Other long-term liabilities | 102,963 | 81,051 | ||
| Total liabilities | 2,359,152 | 1,744,829 | ||
| Total stockholders’ equity | 971,268 | 779,477 | ||
| Total liabilities and stockholders’ equity | $ | 3,330,420 | $ | 2,524,306 |
| (1) | The Company adopted Accounting Standards Codification No. 842, Leases (ASC 842), effective January 1, 2019. Upon adoption, the Company recognized operating lease right-of-use assets and liabilities for the rights and obligations created by lease arrangements. Lease obligations associated with deferred rent and lease incentives recorded under previous guidance were reclassified from other current liabilities and operating lease liabilities to the operating lease right-of-use assets. The Company adopted the new lease guidance using the modified retrospective approach and the transition method available in accordance with Accounting Standards Update 2018-11, Leases (Topic 842): Targeted Improvements, which provides the option to use the effective date as the date of initial application of the guidance. As a result, the comparative information for prior periods has not been adjusted and continues to be reported in accordance with the accounting standards in effect for those periods under the previously applicable guidance. | |||
| --- | --- |
| BRIGHT HORIZONS FAMILY SOLUTIONS INC.<br><br>CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS<br><br>(In thousands)<br><br>(Unaudited) | ||||||
|---|---|---|---|---|---|---|
| Years Ended December 31, | ||||||
| 2019 | 2018 | |||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
| Net income | $ | 180,386 | $ | 157,981 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
| Depreciation and amortization | 108,269 | 100,943 | ||||
| Stock-based compensation expense | 17,283 | 13,811 | ||||
| Deferred income taxes | (11,344 | ) | (5,469 | ) | ||
| Other non-cash adjustments—net | (555 | ) | 3,822 | |||
| Changes in assets and liabilities | 36,314 | 23,659 | ||||
| Net cash provided by operating activities | 330,353 | 294,747 | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
| Purchases of fixed assets—net | (104,765 | ) | (90,665 | ) | ||
| Payments and settlements for acquisitions—net of cash acquired | (53,425 | ) | (67,111 | ) | ||
| Purchases of debt securities and other investments—net | (25,015 | ) | (767 | ) | ||
| Purchase of equity method investment | (5,865 | ) | — | |||
| Net cash used in investing activities | (189,070 | ) | (158,543 | ) | ||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
| Revolving credit facility—net | (117,858 | ) | (8,900 | ) | ||
| Principal payments of long-term debt | (10,750 | ) | (10,750 | ) | ||
| Purchase of treasury stock | (31,553 | ) | (126,679 | ) | ||
| Proceeds from issuance of common stock upon exercise of options and restricted stock upon purchase | 26,559 | 22,933 | ||||
| Taxes paid related to the net share settlement of stock options and restricted stock | (11,326 | ) | (7,540 | ) | ||
| Payments of deferred and contingent consideration for acquisitions and other | (4,200 | ) | (3,257 | ) | ||
| Net cash used in financing activities | (149,128 | ) | (134,193 | ) | ||
| Effect of exchange rates on cash, cash equivalents and restricted cash | 559 | (103 | ) | |||
| Net (decrease) increase in cash, cash equivalents and restricted cash | (7,286 | ) | 1,908 | |||
| Cash, cash equivalents and restricted cash—beginning of year | 38,478 | 36,570 | ||||
| Cash, cash equivalents and restricted cash—end of year | $ | 31,192 | $ | 38,478 |
BRIGHT HORIZONS FAMILY SOLUTIONS INC.
SEGMENT INFORMATION
(In thousands)
(Unaudited)
| Three months ended December 31, 2019 | Full service<br><br>center-based<br><br>child care | Back-up care | Educational<br><br>advisory<br><br>services | Total | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | $ | 416,317 | $ | 81,528 | $ | 22,770 | $ | 520,615 | ||||||||||||||||||
| Income from operations | 35,693 | 25,132 | 6,622 | 67,447 | ||||||||||||||||||||||
| Adjusted income from operations | 35,693 | 25,132 | 6,622 | 67,447 | ||||||||||||||||||||||
| As a percentage of revenue | 9 | % | 31 | % | 29 | % | 13 | % | ||||||||||||||||||
| Three months ended December 31, 2018 | ||||||||||||||||||||||||||
| Revenue | $ | 392,529 | $ | 65,513 | $ | 20,199 | $ | 478,241 | ||||||||||||||||||
| Income from operations | 36,149 | 21,255 | 6,323 | 63,727 | ||||||||||||||||||||||
| Adjusted income from operations | 36,149 | 21,255 | 6,323 | 63,727 | ||||||||||||||||||||||
| As a percentage of revenue | 9 | % | 32 | % | 31 | % | 13 | % | Year ended December 31, 2019 | Full service<br><br>center-based<br><br>child care | Back-up care | Educational<br><br>advisory<br><br>services | Total | |||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||||||
| Revenue | $ | 1,684,006 | $ | 296,330 | $ | 81,681 | $ | 2,062,017 | ||||||||||||||||||
| Income from operations | 166,011 | 80,394 | 21,414 | 267,819 | ||||||||||||||||||||||
| Adjusted income from operations ^(1)^ | 166,204 | 80,827 | 21,414 | 268,445 | ||||||||||||||||||||||
| As a percentage of revenue | 10 | % | 27 | % | 26 | % | 13 | % | ||||||||||||||||||
| Year ended December 31, 2018 | ||||||||||||||||||||||||||
| Revenue | $ | 1,586,323 | $ | 245,498 | $ | 71,361 | $ | 1,903,182 | ||||||||||||||||||
| Income from operations | 152,006 | 68,462 | 18,627 | 239,095 | ||||||||||||||||||||||
| Adjusted income from operations ^(2)^ | 153,921 | 68,462 | 18,627 | 241,010 | ||||||||||||||||||||||
| As a percentage of revenue | 10 | % | 28 | % | 26 | % | 13 | % | ||||||||||||||||||
| (1) | Adjusted income from operations represents income from operations excluding expenses incurred related to completed acquisitions, which have been allocated to the full service center-based child care ($0.2 million) and back-up care ($0.4 million) segments. | |||||||||||||||||||||||||
| --- | --- | |||||||||||||||||||||||||
| (2) | Adjusted income from operations represents income from operations excluding expenses incurred in connection with the May 2018 amendment to the credit agreement, the March 2018 secondary offering, and completed acquisitions, which have been allocated to the full service center-based child care segment ($1.9 million). | |||||||||||||||||||||||||
| --- | --- |
BRIGHT HORIZONS FAMILY SOLUTIONS INC.
NON-GAAP RECONCILIATIONS
(In thousands, except share data)
(Unaudited)
| Three Months Ended December 31, | Years Ended December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2019 | 2018 | |||||||||
| Net income | $ | 47,763 | $ | 46,657 | $ | 180,386 | $ | 157,981 | ||||
| Interest expense—net | 10,528 | 12,049 | 45,154 | 47,508 | ||||||||
| Income tax expense | 9,156 | 5,021 | 42,279 | 33,606 | ||||||||
| Depreciation | 19,307 | 17,705 | 74,648 | 68,374 | ||||||||
| Amortization of intangible assets ^(a)^ | 8,535 | 8,092 | 33,621 | 32,569 | ||||||||
| EBITDA | 95,289 | 89,524 | 376,088 | 340,038 | ||||||||
| As a percentage of total revenue | 18.3 | % | 18.7 | % | 18.2 | % | 17.9 | % | ||||
| Additional adjustments: | ||||||||||||
| Non-cash operating lease expense ^(b)^ | 142 | 262 | 860 | 1,317 | ||||||||
| Stock-based compensation expense ^(c)^ | 4,944 | 3,507 | 17,283 | 13,811 | ||||||||
| Transaction costs ^(d)^ | — | — | 626 | 1,915 | ||||||||
| Total adjustments | 5,086 | 3,769 | 18,769 | 17,043 | ||||||||
| Adjusted EBITDA | $ | 100,375 | $ | 93,293 | $ | 394,857 | $ | 357,081 | ||||
| As a percentage of total revenue | 19.3 | % | 19.5 | % | 19.1 | % | 18.8 | % | ||||
| Income from operations | $ | 67,447 | $ | 63,727 | $ | 267,819 | $ | 239,095 | ||||
| As a percentage of total revenue | 13.0 | % | 13.3 | % | 13.0 | % | 12.6 | % | ||||
| Transaction costs^(d)^ | — | — | 626 | 1,915 | ||||||||
| Adjusted income from operations | $ | 67,447 | $ | 63,727 | $ | 268,445 | $ | 241,010 | ||||
| As a percentage of total revenue | 13.0 | % | 13.3 | % | 13.0 | % | 12.7 | % | ||||
| Net income | $ | 47,763 | $ | 46,657 | $ | 180,386 | $ | 157,981 | ||||
| Income tax expense | 9,156 | 5,021 | 42,279 | 33,606 | ||||||||
| Income before income tax | 56,919 | 51,678 | 222,665 | 191,587 | ||||||||
| Stock-based compensation expense ^(c)^ | 4,944 | 3,507 | 17,283 | 13,811 | ||||||||
| Amortization of intangible assets ^(a)^ | 8,535 | 8,092 | 33,621 | 32,569 | ||||||||
| Transaction costs ^(d)^ | — | — | 626 | 1,915 | ||||||||
| Adjusted income before income tax | 70,398 | 63,277 | 274,195 | 239,882 | ||||||||
| Adjusted income tax expense ^(e)^ | (10,912 | ) | (10,124 | ) | (57,591 | ) | (50,345 | ) | ||||
| Adjusted net income | $ | 59,486 | $ | 53,153 | $ | 216,604 | $ | 189,537 | ||||
| As a percentage of total revenue | 11.4 | % | 11.1 | % | 10.5 | % | 10.0 | % | ||||
| Weighted average common shares outstanding—diluted | 58,964,125 | 58,868,992 | 58,947,240 | 59,000,669 | ||||||||
| Diluted adjusted earnings per common share | $ | 1.01 | $ | 0.90 | $ | 3.67 | $ | 3.21 |
BRIGHT HORIZONS FAMILY SOLUTIONS INC.
NON-GAAP RECONCILIATIONS
(In thousands, except share data)
(Unaudited)
| Forward Guidance (i) | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended March 31, 2020 | Year Ended December 31, 2020 | |||||||||||
| Low | High | Low | High | |||||||||
| Per common share information: | ||||||||||||
| Diluted earnings per common share | $ | 0.81 | $ | 0.83 | $ | 3.41 | $ | 3.45 | ||||
| Income tax expense ^(f)^ | 0.20 | 0.20 | 1.00 | 1.02 | ||||||||
| Income before income tax | 1.01 | 1.03 | 4.41 | 4.47 | ||||||||
| Stock-based compensation expense ^(c)^ | 0.07 | 0.08 | 0.35 | 0.37 | ||||||||
| Amortization of intangible assets^(a)^ | 0.14 | 0.14 | 0.54 | 0.56 | ||||||||
| Nonrecurring costs ^(h)^ | 0.01 | 0.01 | 0.06 | 0.06 | ||||||||
| Tax impact on adjusted income before income tax ^(g)^ | (0.29 | ) | (0.30 | ) | (1.25 | ) | (1.28 | ) | ||||
| Diluted adjusted earnings per common share | $ | 0.94 | $ | 0.96 | $ | 4.11 | $ | 4.18 | ||||
| (a) | Represents amortization of intangible assets, including approximately $3.3 million and $4.7 million for the three months ended December 31, 2019 and 2018, respectively, and $17.6 million and $18.9 million for the years ended December 31, 2019 and 2018, respectively, associated with intangible assets recorded in connection with our going private transaction in May 2008. | |||||||||||
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| (b) | Represents the excess of lease expense over cash lease expense. | |||||||||||
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| (c) | Represents non-cash stock-based compensation expense in accordance with Accounting Standards Codification Topic 718, Compensation-Stock Compensation. | |||||||||||
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| (d) | Represents transaction costs incurred in connection with completed acquisitions, the March 2018 secondary offering, and the May 2018 amendment to the credit agreement. | |||||||||||
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| (e) | Represents income tax expense calculated on adjusted income before income tax at an annual effective tax rate of approximately 21% in 2019 and 2018. The tax rate for 2019 represents a tax rate of approximately 26% applied to the adjusted income before income tax for the full year, less the effect of excess tax benefits related to equity transactions for the full year. | |||||||||||
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| (f) | Represents estimated income tax expense calculated using an effective tax rate of approximately 23-24% for the year ended December 31, 2020, based on projected income before income tax, less the impact of excess tax benefits related to equity transactions, which the Company estimates will be in the range of $3.0 million to $4.0 million for the three months ended March 31, 2020 and of $8.0 million to $10.0 million for the year ended December 31, 2020. However, the timing and volume of the tax benefits associated with such future equity activity will affect these estimates and the estimated effective tax rate for the year. | |||||||||||
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| (g) | Represents estimated tax on adjusted income before income tax using an effective tax rate of approximately 23-24%. | |||||||||||
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| (h) | Represents estimated occupancy costs for office space during construction period in 2020, which represents duplicative cost for our new corporate headquarters. | |||||||||||
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| (i) | Forward guidance amounts are estimated based on a number of assumptions and actual results could differ materially from the estimates provided herein. | |||||||||||
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