Bright Horizons Family Solutions Reports First Quarter of 2018 Financial Results
First Quarter 2018 Highlights (compared to first quarter 2017):
-
Revenue increased 10% to
$464 million -
Income from operations increased 8% to
$55 million -
Net income decreased 10% to
$37 million and diluted earnings per common share decreased 9% to$0.62
Non-GAAP measures
-
Adjusted income from operations* increased 8% to
$56 million -
Adjusted EBITDA* increased 6% to
$83 million -
Adjusted net income* increased 15% to
$43 million and diluted adjusted earnings per common share* increased 18% to$0.72
“We are pleased with the strong start to 2018, as we continue to grow
each of our service offerings, expand our portfolio of client partners,
and support working families so they can thrive and prosper at work and
at home,” said
First Quarter 2018 Results
Revenue increased
Income from operations was
In the first quarter of 2018 adjusted EBITDA increased
As of March 31, 2018, the Company operated 1,051 child care and early education centers with the capacity to serve 117,250 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 three months ended March 31, 2018, the Company generated
approximately
2018 Outlook
As described below, the Company is updating certain financial guidance. For the full year 2018, the Company currently expects:
- Revenue growth in 2018 in the range of 8-10%
-
Net income in the range of
$150 million to $152 million and diluted earnings per common share in the range of$2.53 to $2.56 -
Adjusted net income in the range of
$183 million to $186 million and diluted adjusted earnings per common share in the range of$3.12 to$3.16 - 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
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 plan, strategies, our service offerings, our clients,
estimates and impact of recently enacted tax legislation and excess tax
benefits, and our 2018 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; the impact of
recently enacted tax legislation; and other risks and uncertainties more
fully described in the “Risk Factors” section of our Annual Report on
Form 10-K filed
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 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. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except share data) (Unaudited) |
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Three Months Ended March 31, | |||||||||||||||||||||
2018 | % | 2017 | % | ||||||||||||||||||
Revenue | $ | 463,657 | 100.0 | % | $ | 422,164 | 100.0 | % | |||||||||||||
Cost of services | 350,113 | 75.5 | % | 317,230 | 75.1 | % | |||||||||||||||
Gross profit | 113,544 | 24.5 | % | 104,934 | 24.9 | % | |||||||||||||||
Selling, general and administrative expenses | 50,212 | 10.8 | % | 46,146 | 10.9 | % | |||||||||||||||
Amortization of intangible assets | 8,048 | 1.8 | % | 7,384 | 1.7 | % | |||||||||||||||
Income from operations | 55,284 | 11.9 | % | 51,404 | 12.3 | % | |||||||||||||||
Interest expense—net | (11,503 | ) | (2.5 | )% | (10,774 | ) | (2.6 | )% | |||||||||||||
Income before income tax | 43,781 | 9.4 | % | 40,630 | 9.7 | % | |||||||||||||||
Income tax (expense) benefit | (6,483 | ) | (1.4 | )% | 744 | 0.2 | % | ||||||||||||||
Net income | $ | 37,298 | 8.0 | % | $ | 41,374 | 9.9 | % | |||||||||||||
Earnings per common share: | |||||||||||||||||||||
Common stock—basic | $ | 0.64 | $ | 0.69 | |||||||||||||||||
Common stock—diluted | $ | 0.62 | $ | 0.68 | |||||||||||||||||
Weighted average number of common shares outstanding: | |||||||||||||||||||||
Common stock—basic | 58,190,819 | 59,255,105 | |||||||||||||||||||
Common stock—diluted | 59,448,031 | 60,903,277 | |||||||||||||||||||
BRIGHT HORIZONS FAMILY SOLUTIONS INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) |
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March 31, 2018 | December 31, 2017 | |||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 20,324 | $ | 23,227 | ||||||||
Accounts receivable—net | 107,272 | 117,138 | ||||||||||
Prepaid expenses and other current assets | 68,750 | 52,096 | ||||||||||
Total current assets | 196,346 | 192,461 | ||||||||||
Fixed assets—net | 584,935 | 575,185 | ||||||||||
Goodwill | 1,335,297 | 1,306,792 | ||||||||||
Other intangibles—net | 342,525 | 348,540 | ||||||||||
Other assets | 55,377 | 45,666 | ||||||||||
Total assets | $ | 2,514,480 | $ | 2,468,644 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Current portion of long-term debt | $ | 10,750 | $ | 10,750 | ||||||||
Borrowings under revolving credit facility | 129,400 | 127,100 | ||||||||||
Accounts payable and accrued expenses | 153,370 | 132,897 | ||||||||||
Deferred revenue and other current liabilities | 218,203 | 189,908 | ||||||||||
Total current liabilities | 511,723 | 460,655 | ||||||||||
Long-term debt—net | 1,043,788 | 1,046,011 | ||||||||||
Deferred income taxes | 76,177 | 74,069 | ||||||||||
Other long-term liabilities | 145,615 | 138,849 | ||||||||||
Total liabilities | 1,777,303 | 1,719,584 | ||||||||||
Total stockholders’ equity | 737,177 | 749,060 | ||||||||||
Total liabilities and stockholders’ equity | $ | 2,514,480 | $ | 2,468,644 | ||||||||
BRIGHT HORIZONS FAMILY SOLUTIONS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) |
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Three Months Ended March 31, | |||||||||||||
2018 | 2017 | ||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||||
Net income | $ | 37,298 | $ | 41,374 | |||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||
Depreciation and amortization | 24,683 | 23,414 | |||||||||||
Stock-based compensation expense | 2,891 | 2,377 | |||||||||||
Deferred income taxes | (490 | ) | 2,785 | ||||||||||
Other non-cash adjustments—net | 724 | 2,242 | |||||||||||
Changes in assets and liabilities | 40,644 | 34,481 | |||||||||||
Net cash provided by operating activities | 105,750 | 106,673 | |||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||||
Purchases of fixed assets—net | (12,767 | ) | (19,894 | ) | |||||||||
Payments and settlements for acquisitions—net of cash acquired | (16,716 | ) | (2,979 | ) | |||||||||
Net cash used in investing activities | (29,483 | ) | (22,873 | ) | |||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||||
Revolving credit facility—net | 2,300 | (61,100 | ) | ||||||||||
Principal payments of long-term debt | (2,688 | ) | (2,688 | ) | |||||||||
Purchase of treasury stock | (85,725 | ) | (6,470 | ) | |||||||||
Taxes paid related to the net share settlement of stock options and restricted stock | (3,176 | ) | (23,272 | ) | |||||||||
Proceeds from issuance of common stock upon exercise of options | 7,846 | 12,171 | |||||||||||
Proceeds from issuance of restricted stock | 4,457 | 4,305 | |||||||||||
Payments of contingent consideration for acquisitions | (2,615 | ) | — | ||||||||||
Net cash used in financing activities | (79,601 | ) | (77,054 | ) | |||||||||
Effect of exchange rates on cash and cash equivalents | 431 | 115 | |||||||||||
Net (decrease) increase in cash and cash equivalents | (2,903 | ) | 6,861 | ||||||||||
Cash and cash equivalents—beginning of period | 23,227 | 14,633 | |||||||||||
Cash and cash equivalents—end of period | $ | 20,324 | $ | 21,494 | |||||||||
BRIGHT HORIZONS FAMILY SOLUTIONS INC. |
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Full service center-based child care |
Back-up dependent care |
Other educational advisory services |
Total | |||||||||||||||||||
Three months ended March 31, 2018 | ||||||||||||||||||||||
Revenue | $ | 392,625 | $ | 54,679 | $ | 16,353 | $ | 463,657 | ||||||||||||||
Income from operations | 36,911 | 14,125 | 4,248 | 55,284 | ||||||||||||||||||
Adjusted income from operations (1) | 37,239 | 14,125 | 4,248 | 55,612 | ||||||||||||||||||
Three months ended March 31, 2017 | ||||||||||||||||||||||
Revenue | $ | 358,759 | $ | 50,408 | $ | 12,997 | $ | 422,164 | ||||||||||||||
Income from operations | 35,425 | 13,661 | 2,318 | 51,404 | ||||||||||||||||||
Adjusted income from operations | 35,425 | 13,661 | 2,318 | 51,404 |
(1) | Adjusted income from operations represents income from operations excluding expenses incurred in connection with a secondary offering. | ||
BRIGHT HORIZONS FAMILY SOLUTIONS INC. |
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Three Months Ended March 31, | |||||||||||||
2018 | 2017 | ||||||||||||
Net income | $ | 37,298 | $ | 41,374 | |||||||||
Interest expense—net | 11,503 | 10,774 | |||||||||||
Income tax expense (benefit) | 6,483 | (744 | ) | ||||||||||
Depreciation | 16,635 | 16,030 | |||||||||||
Amortization of intangible assets (a) | 8,048 | 7,384 | |||||||||||
EBITDA | 79,967 | 74,818 | |||||||||||
Additional Adjustments: | |||||||||||||
Deferred rent (b) | 8 | 1,153 | |||||||||||
Stock-based compensation expense (c) | 2,891 | 2,377 | |||||||||||
Transaction costs (d) | 328 | — | |||||||||||
Total adjustments | 3,227 | 3,530 | |||||||||||
Adjusted EBITDA | $ | 83,194 | $ | 78,348 | |||||||||
Income from operations | $ | 55,284 | $ | 51,404 | |||||||||
Transaction costs (d) | 328 | — | |||||||||||
Adjusted income from operations | $ | 55,612 | $ | 51,404 | |||||||||
Net income | $ | 37,298 | $ | 41,374 | |||||||||
Income tax expense (benefit) | 6,483 | (744 | ) | ||||||||||
Income before income tax | 43,781 | 40,630 | |||||||||||
Stock-based compensation expense (c) | 2,891 | 2,377 | |||||||||||
Amortization of intangible assets (a) | 8,048 | 7,384 | |||||||||||
Transaction costs (d) | 328 | — | |||||||||||
Adjusted income before income tax | 55,048 | 50,391 | |||||||||||
Adjusted income tax expense (e) | (12,468 | ) | (13,487 | ) | |||||||||
Adjusted net income | $ | 42,580 | $ | 36,904 | |||||||||
Weighted average number of common shares—diluted | 59,448,031 | 60,903,277 | |||||||||||
Diluted adjusted earnings per common share | $ | 0.72 | $ | 0.61 | |||||||||
BRIGHT HORIZONS FAMILY SOLUTIONS INC. |
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Forward Guidance (h) |
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Three Months Ended |
Year Ended |
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Low | High | Low | High | ||||||||||||||||||||
Net income | $ | 40,000 | $ | 41,000 | $ | 150,000 | $ | 152,000 | |||||||||||||||
Net income allocated to unvested participating shares | (200 | ) | (200 | ) | (800 | ) | (800 | ) | |||||||||||||||
Income tax expense (f) | 12,300 | 12,600 | 41,000 | 41,700 | |||||||||||||||||||
Income before income tax | 52,100 | 53,400 | 190,200 | 192,900 | |||||||||||||||||||
Stock-based compensation expense (c) | 3,750 | 4,000 | 14,000 | 14,500 | |||||||||||||||||||
Amortization of intangible assets (a) | 8,200 | 8,400 | 32,250 | 32,750 | |||||||||||||||||||
Transaction costs (d) | — | — | 400 | 400 | |||||||||||||||||||
Adjusted income before income tax | 64,050 | 65,800 | 236,850 | 240,550 | |||||||||||||||||||
Tax impact on adjusted income before income tax (g) | (14,550 | ) | (14,900 | ) | (53,600 | ) | (54,600 | ) | |||||||||||||||
Adjusted net income attributable to common stockholders | $ | 49,500 | $ | 50,900 | $ | 183,250 | $ | 185,950 | |||||||||||||||
Per common share information: | |||||||||||||||||||||||
Diluted earnings per common share | $ | 0.68 | $ | 0.69 | $ | 2.53 | $ | 2.56 | |||||||||||||||
Income tax expense (f) | 0.21 | 0.21 | 0.70 | 0.71 | |||||||||||||||||||
Income before income tax | 0.89 | 0.90 | 3.23 | 3.27 | |||||||||||||||||||
Stock-based compensation expense (c) | 0.06 | 0.07 | 0.24 | 0.25 | |||||||||||||||||||
Amortization of intangible assets (a) | 0.14 | 0.14 | 0.55 | 0.56 | |||||||||||||||||||
Transaction costs (d) | — | — | 0.01 | 0.01 | |||||||||||||||||||
Tax impact on adjusted income before income tax (g) | (0.25 | ) | (0.25 | ) | (0.91 | ) | (0.93 | ) | |||||||||||||||
Diluted adjusted earnings per common share | $ | 0.84 | $ | 0.86 | $ | 3.12 | $ | 3.16 |
(a) | Represents amortization of intangible assets, including approximately $4.7 million and $4.6 million in 2018 and 2017, respectively, associated with intangible assets recorded in connection with our going private transaction in May 2008. | ||
(b) |
Represents rent expense 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 in accordance with Accounting Standards Codification Topic 718, Compensation-Stock Compensation. |
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(d) | Represents transaction costs incurred in connection with a secondary offering. | ||
(e) | Represents income tax expense calculated on adjusted income before income tax at an effective tax rate of approximately 23% and 27% for the three months ended March 31, 2018, and 2017, respectively. The tax rate for 2018 represents a tax rate of approximately 27-28% applied to the expected adjusted income before tax for the full year, less the estimated effect of additional excess tax benefits related to equity transactions for the full year 2018, which the Company estimates will be in the range of $10.5 million to $12.5 million. However, the timing, volume and tax benefits associated with such future equity activity will affect these estimates and the estimated effective tax rate for the year. | ||
(f) | Represents estimated income tax expense using an effective tax rate of approximately 22% for the year ended December 31, 2018, based on projected consolidated income before income tax and including the estimated impact of excess tax benefits related to equity transactions, which the Company estimates in the range of $10.5 million to $12.5 million for the full year in 2018. However, the timing, volume and tax benefits associated with such future equity activity will affect these estimates and the estimated effective tax rate for the year. In addition, the impact of the U.S. Tax Cuts and Jobs Act may differ from these estimates due to, among other things, changes in interpretations, analysis and assumptions made by the Company, additional guidance that may be issued, and tax planning the Company may undertake. | ||
(g) | Represents estimated tax on adjusted income before income tax using an effective tax rate of approximately 23%. | ||
(h) | Forward guidance amounts are estimated based on a number of assumptions and actual results could differ materially from the estimates provided herein. | ||
View source version on businesswire.com: https://www.businesswire.com/news/home/20180430006425/en/
Source:
Investors:
Bright Horizons
Elizabeth Boland, 617-673-8125
CFO
eboland@brighthorizons.com
or
Solebury
Communications Group
Kevin Doherty, 203-428-3233
MD
kdoherty@soleburyir.com
or
Media:
Bright
Horizons
Ilene Serpa, 617-673-8044
VP - Communications
iserpa@brighthorizons.com