(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) |
(Address of principal executive offices) | (Zip code) |
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)) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Item 2.02 | Results of Operations and Financial Condition |
Item 9.01 | Financial Statements and Exhibits |
(d) | Exhibits |
99.1 | |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
BRIGHT HORIZONS FAMILY SOLUTIONS INC. | |||
Date: | February 13, 2020 | By: | /s/ Elizabeth Boland |
Elizabeth Boland | |||
Chief Financial Officer |
• | 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 |
• | 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 |
• | 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 |
• | 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 |
• | 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 |
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. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except share data) (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. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except share data) (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. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (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. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (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 |
Three months ended December 31, 2019 | Full service center-based child care | Back-up care | Educational advisory 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 center-based child care | Back-up care | Educational advisory 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). |
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 |
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. |
(b) | Represents the excess of lease expense over cash lease expense. |
(c) | Represents non-cash stock-based compensation expense in accordance with Accounting Standards Codification Topic 718, Compensation-Stock Compensation. |
(d) | Represents transaction costs incurred in connection with completed acquisitions, the March 2018 secondary offering, and the May 2018 amendment to the credit agreement. |
(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. |
(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. |
(g) | Represents estimated tax on adjusted income before income tax using an effective tax rate of approximately 23-24%. |
(h) | Represents estimated occupancy costs for office space during construction period in 2020, which represents duplicative cost for our new corporate headquarters. |
(i) | Forward guidance amounts are estimated based on a number of assumptions and actual results could differ materially from the estimates provided herein. |