NEWTON, Mass.–(BUSINESS WIRE)–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 2022 and provided guidance for 2023.
Fourth Quarter 2022 Highlights (compared to Fourth Quarter 2021):
Revenue of $530 million (increase of 15%)
Income from operations of $40 million (increase of 12%)
Net income of $18 million and diluted earnings per common share of $0.31 (increases of 2% and 7%, respectively)
Non-GAAP measures:
Adjusted income from operations* of $56 million (increase of 19%)
Adjusted EBITDA* of $91 million (increase of 15%)
Adjusted net income* of $44 million and diluted adjusted earnings per common share* of $0.77 (increases of 13% and 18%, respectively)
Year Ended December 31, 2022 Highlights (compared to Year Ended December 31, 2021):
Revenue of $2 billion (increase of 15%)
Income from operations of $158 million (increase of 22%)
Net income of $81 million and diluted earnings per common share of $1.37 (increases of 14% and 19%, respectively)
Non-GAAP measures:
Adjusted income from operations* of $183 million (increase of 30%)
Adjusted EBITDA* of $317 million (increase of 17%)
Adjusted net income* of $152 million and diluted adjusted earnings per common share* of $2.60 (increases of 25% and 31%, respectively)
“I am pleased to close out 2022 on a strong note, with revenue growth across all of our service lines, solid progression toward our enrollment growth goals, and solid use and participation activity in Back-Up Care and Educational Advisory,” said Stephen Kramer, Chief Executive Officer.
“We achieved a lot in 2022 from investing in our product and people, expanding our footprint, deepening our client relationships, and adapting to a dynamic environment. We enter 2023 with a strong foundation and well positioned to capitalize on the growth prospects that lie ahead.”
Fourth Quarter 2022 Results
Revenue increased $66.9 million, or 15%, in the fourth quarter of 2022, from the fourth quarter of 2021, attributable to contributions from the 75 centers acquired in Australia in July 2022, enrollment gains at our existing centers, alongside, expanded sales and utilization of back-up care and educational advisory services. These contributions were partially offset by lower foreign currency exchange rates for our United Kingdom and Netherlands operations.
Income from operations was $39.6 million for the fourth quarter of 2022 compared to $35.3 million for the same period in 2021, representing a 12% increase. The increase in income from operations reflects improved gross profit contributions in the full service center-based child care segment resulting from higher enrollment compared to the prior year, as well as increased contributions from back-up care and educational advisory services, partially offset by incremental impairment costs of $3.5 million in the full service center-based child care segment. Net income was $18.0 million for the fourth quarter of 2022, compared to $17.7 million for the fourth quarter of 2021, an increase of 2%, due to the increase in income from operations noted above, partially offset by higher interest expense and a higher effective tax rate. Diluted earnings per common share was $0.31 for the fourth quarter of 2022 compared to $0.29 for the fourth quarter of 2021.
In the fourth quarter of 2022, adjusted EBITDA* increased $11.7 million, or 15%, to $90.5 million, and adjusted income from operations* increased $9.0 million, or 19%, to $55.5 million from the fourth quarter of 2021, due primarily to the increase in gross profit in the full service center-based child care segment, and increased contributions from our back-up care and educational advisory services. Adjusted net income* increased by $5.2 million, or 13%, to $44.3 million, due to the increase in income from operations, partially offset by higher interest expense and a higher effective tax rate. Diluted adjusted earnings per common share* was $0.77 for the fourth quarter of 2022 compared to $0.65 in the same period in 2021.
As of December 31, 2022, the Company had more than 1,400 client relationships with employers across a diverse array of industries, and operated 1,078 early education and child care 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, stock-based compensation expense, and at times, non-recurring costs, such as impairment costs and other costs incurred due to the impact of COVID-19, transaction costs, loss on foreign currency forward contracts, loss on extinguishment of debt, and costs incurred in relation to a cyber incident. Adjusted income from operations represents income from operations before non-recurring costs, such as impairment costs and other costs incurred due to the impact of COVID-19, transaction costs, and costs incurred in relation to a cyber incident. Adjusted net income represents net income determined in accordance with GAAP, adjusted for stock-based compensation expense, amortization expense, and non-recurring costs, such as impairment costs and other costs incurred due to the impact of COVID-19, transaction costs, loss on foreign currency forward contracts, loss on extinguishment of debt, interest on deferred consideration, and costs incurred and any insurance recoveries received in relation to a cyber incident, and the income tax provision (benefit) thereon. Diluted adjusted earnings per common share is 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,” respectively.
Balance Sheet and Liquidity
At December 31, 2022, Bright Horizons had $36.2 million of cash and cash equivalents and $310.8 million available for borrowing under our revolving credit facility. In the year ended December 31, 2022, we generated approximately $188.5 million of cash from operations, compared to $227.3 million for the same period in 2021, and made investments in acquisitions, fixed assets, and other investments totaling $278.0 million, compared to $117.4 million for the same period in the prior year.
2023 Outlook
Based on current trends and expectations, we currently expect fiscal year 2023 revenue to be in the range of $2.3 billion to $2.4 billion, and diluted adjusted earnings per common share to be in the range of $2.80 to $3.00. The Company will provide additional information on its outlook during its earnings conference call.
Conference Call
Bright Horizons Family Solutions will host an investor conference call today at 5:00 pm ET to discuss the fourth quarter 2022 results, as well as the Company’s updated business outlook, its strategy and operating expectations. 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 9, 2023 at 1-844-512-2921 or, for international callers, at 1-412-317-6671, conference ID #13726922. 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 expectations, our investments, impact of our services, our market position, business trends, our future opportunities and business model, enrollment and occupancy levels, long-term growth strategy and value, estimated effective tax rate and tax expense and benefits, our care solutions, quality and expanded service offerings, our ability to respond to changing demands, our future business and financial performance, and our 2023 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, ongoing disruptions to our operations as a result of the COVID-19 pandemic; the availability or lack of government support; changes in the demand for child care, dependent care and other workplace solutions, including variations in enrollment trends and lower than expected demand from employer sponsor clients as well as variations in return to work protocols; the constrained labor market for teachers and staff and ability to hire and retain talent, including the impact of increased compensation and labor costs; 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 overall macroeconomic environment, including the impact of inflation and interest rate fluctuations; fluctuations in currency exchange rates; the effects of a cyber-attack, data breach or other security incident on our information technology system or software or those of our third party vendors; changes in tax rates or policies; and other risks and uncertainties more fully described in the “Risk Factors” section of our Annual Report on Form 10-K filed on February 25, 2022, 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.
With respect to our outlook for diluted adjusted earnings per common share, we do not provide the most directly comparable GAAP financial measure or corresponding reconciliation to such GAAP financial measure on a forward-looking basis. We are unable to predict with reasonable certainty and without unreasonable effort certain items such as the timing and amount of future impairments, transaction costs, net excess income tax benefits, and other non-recurring costs, as well as gains or losses from the early retirement of debt and the outcome from legal proceedings. These items are uncertain, depend on various factors outside our management’s control, and could significantly impact, either individually or in the aggregate, our future period earnings per common share as calculated and presented in accordance with GAAP.
For more information regarding adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per common share, please see the reconciliation of GAAP financial measures to non-GAAP financial measures in the attached table “Bright Horizons Family Solutions Inc. Non-GAAP Reconciliations.”
About Bright Horizons Family Solutions Inc.
Bright Horizons® is a leading global provider of high-quality early education and child care, back-up care, and workforce education services. For 35 years, we have partnered with employers to support workforces by providing services that help working families and employees thrive personally and professionally. Bright Horizons operates approximately 1,100 early education and child care centers in the United States, the United Kingdom, the Netherlands, Australia and India, and serves more than 1,400 of the world’s leading employers. Bright Horizons’ early education and child care centers, back-up child and elder care, and workforce education programs help employees succeed at each life and career stage. For more information, go to www.brighthorizons.com.
BRIGHT HORIZONS FAMILY SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
(Unaudited)
Three Months Ended December 31,
2022
%
2021
%
Revenue
$
529,522
100.0
%
$
462,656
100.0
%
Cost of services
418,262
79.0
%
355,250
76.8
%
Gross profit
111,260
21.0
%
107,406
23.2
%
Selling, general and administrative expenses
62,925
11.9
%
65,118
14.1
%
Amortization of intangible assets
8,785
1.7
%
6,980
1.5
%
Income from operations
39,550
7.4
%
35,308
7.6
%
Loss on extinguishment of debt
—
—
%
(2,571
)
(0.5
)%
Interest expense — net
(12,791
)
(2.4
)%
(8,350
)
(1.8
)%
Income before income tax
26,759
5.0
%
24,387
5.3
%
Income tax expense
(8,717
)
(1.6
)%
(6,694
)
(1.5
)%
Net income
$
18,042
3.4
%
$
17,693
3.8
%
Earnings per common share:
Common stock — basic
$
0.31
$
0.29
Common stock — diluted
$
0.31
$
0.29
Weighted average common shares outstanding:
Common stock — basic
57,506,602
59,886,195
Common stock — diluted
57,554,377
60,309,067
BRIGHT HORIZONS FAMILY SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
(Unaudited)
Years Ended December 31,
2022
%
2021
%
Revenue
$
2,020,487
100.0
%
$
1,755,307
100.0
%
Cost of services
1,541,834
76.3
%
1,340,296
76.4
%
Gross profit
478,653
23.7
%
415,011
23.6
%
Selling, general and administrative expenses
289,156
14.3
%
256,821
14.6
%
Amortization of intangible assets
31,912
1.6
%
29,172
1.6
%
Income from operations
157,585
7.8
%
129,018
7.4
%
Loss on foreign currency forward contracts
(5,917
)
(0.3
)%
—
—
%
Loss on extinguishment of debt
—
—
%
(2,571
)
(0.2
)%
Interest expense — net
(39,486
)
(1.9
)%
(36,099
)
(2.1
)%
Income before income tax
112,182
5.6
%
90,348
5.1
%
Income tax expense
(31,541
)
(1.6
)%
(19,889
)
(1.1
)%
Net income
$
80,641
4.0
%
$
70,459
4.0
%
Earnings per common share:
Common stock — basic
$
1.38
$
1.16
Common stock — diluted
$
1.37
$
1.15
Weighted average common shares outstanding:
Common stock — basic
58,344,817
60,312,690
Common stock — diluted
58,490,652
60,871,399
BRIGHT HORIZONS FAMILY SOLUTIONS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
December 31,
2022
2021
ASSETS
Current assets:
Cash and cash equivalents
$
36,224
$
260,980
Accounts receivable — net
217,170
210,971
Prepaid expenses and other current assets
94,316
68,320
Total current assets
347,710
540,271
Fixed assets — net
571,471
598,134
Goodwill
1,727,852
1,481,725
Other intangible assets — net
245,574
251,032
Operating lease right-of-use assets
801,626
696,425
Other assets
104,636
72,460
Total assets
$
3,798,869
$
3,640,047
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt
$
16,000
$
16,000
Borrowings under revolving credit facility
84,000
—
Accounts payable and accrued expenses
230,634
197,366
Current portion of operating lease liabilities
94,092
87,341
Deferred revenue
222,994
258,438
Other current liabilities
138,574
63,030
Total current liabilities
786,294
622,175
Long-term debt — net
961,581
976,396
Operating lease liabilities
810,403
703,911
Deferred income taxes
50,739
48,509
Other long-term liabilities
109,399
109,780
Total liabilities
2,718,416
2,460,771
Total stockholders’ equity
1,080,453
1,179,276
Total liabilities and stockholders’ equity
$
3,798,869
$
3,640,047
BRIGHT HORIZONS FAMILY SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Years Ended December 31,
2022
2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$
80,641
$
70,459
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
106,142
108,830
Stock-based compensation expense
28,111
23,060
Impairment losses
14,061
10,582
Loss on foreign currency forward contracts
5,917
—
Loss on extinguishment of debt
—
2,571
Deferred income taxes
(9,644
)
(4,996
)
Other non-cash adjustments — net
3,419
9,701
Changes in assets and liabilities
(40,176
)
7,046
Net cash provided by operating activities
188,471
227,253
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets — net
(60,009
)
(57,662
)
Purchases of debt securities and other investments
(25,106
)
(29,912
)
Proceeds from the maturity of debt securities and sale of other investments
23,392
24,080
Payments and settlements for acquisitions — net of cash acquired
(210,409
)
(53,895
)
Settlement of foreign currency forward contracts
(5,917
)
—
Net cash used in investing activities
(278,049
)
(117,389
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Extinguishment of long-term debt
—
(1,026,625
)
Borrowings of long-term debt
—
992,298
Revolving credit facility — net
84,000
—
Principal payments of long-term debt
(16,000
)
(8,063
)
Payments for debt issuance costs
—
(2,057
)
Purchase of treasury stock
(182,570
)
(213,830
)
Proceeds from issuance of common stock upon exercise of options and restricted stock upon purchase
13,235
37,503
Taxes paid related to the net share settlement of stock options and restricted stock
(6,138
)
(8,662
)
Payments of contingent consideration for acquisitions
(13,865
)
(594
)
Net cash used in financing activities
(121,338
)
(230,030
)
Effect of exchange rates on cash, cash equivalents and restricted cash
(2,471
)
(3,018
)
Net decrease in cash, cash equivalents and restricted cash
(213,387
)
(123,184
)
Cash, cash equivalents and restricted cash — beginning of year
265,281
388,465
Cash, cash equivalents and restricted cash — end of year
$
51,894
$
265,281
BRIGHT HORIZONS FAMILY SOLUTIONS INC.
SEGMENT INFORMATION
(In thousands)
(Unaudited)
Full service
center-based
child care
Back-up care
Educational
advisory and
other services
Total
Three months ended December 31, 2022
Revenue
$
387,954
$
108,390
$
33,178
$
529,522
Income (loss) from operations
(4,112
)
32,806
10,856
39,550
Adjusted income from operations (1)
11,847
32,806
10,856
55,509
As a percentage of revenue
3
%
30
%
33
%
11
%
Three months ended December 31, 2021
Revenue
$
338,579
$
94,067
$
30,010
$
462,656
Income (loss) from operations
(4,596
)
31,391
8,513
35,308
Adjusted income from operations (2)
6,564
31,391
8,513
46,468
As a percentage of revenue
2
%
33
%
28
%
10
%
(1)
For the three months ended December 31, 2022, adjusted income from operations for the full service center-based child care segment represents loss from operations excluding impairment losses of $14.1 million for fixed assets and operating lease right-of-use assets, and costs incurred in relation to a cyber incident of $1.9 million.
(2)
For the three months ended December 31, 2021, adjusted income from operations for the full service center-based child care segment represents loss from operations excluding impairment losses incurred due to the impact of COVID-19 on our operations of $10.6 million for fixed assets and operating lease right-of-use assets, and transaction costs of $0.6 million related to acquisitions.
Full service
center-based
child care
Back-up care
Educational
advisory and
other services
Total
Year ended December 31, 2022
Revenue
$
1,493,758
$
409,554
$
117,175
$
2,020,487
Income from operations
12,937
118,788
25,860
157,585
Adjusted income from operations (1)
38,093
118,788
25,860
182,741
As a percentage of revenue
3
%
29
%
22
%
9
%
Year ended December 31, 2021
Revenue
$
1,297,208
$
351,103
$
106,996
$
1,755,307
Income (loss) from operations
(8,431
)
115,173
22,276
129,018
Adjusted income from operations (2)
2,729
115,173
22,276
140,178
As a percentage of revenue
—
%
33
%
21
%
8
%
(1)
For the year ended December 31, 2022, adjusted income from operations for the full service center-based child care segment represents income from operations excluding impairment losses of $14.1 million for fixed assets and operating lease right-of-use assets, transaction costs of $9.2 million related to acquisitions, and costs incurred in relation to a cyber incident of $1.9 million.
(2)
For the year ended December 31, 2021, adjusted income from operations for the full service center-based child care segment represents loss from operations excluding impairment losses incurred due to the impact of COVID-19 on our operations of $10.6 million for fixed assets and operating lease right-of-use assets, and transaction costs of $0.6 million related to acquisitions.
BRIGHT HORIZONS FAMILY SOLUTIONS INC.
NON-GAAP RECONCILIATIONS
(In thousands, except share data)
(Unaudited)
Three Months Ended December 31,
Years Ended December 31,
2022
2021
2022
2021
Net income
$
18,042
$
17,693
$
80,641
$
70,459
Interest expense — net
12,791
8,350
39,486
36,099
Income tax expense
8,717
6,694
31,541
19,889
Depreciation
19,399
18,992
74,230
79,658
Amortization of intangible assets (a)
8,785
6,980
31,912
29,172
EBITDA
67,734
58,709
257,810
235,277
As a percentage of revenue
13
%
13
%
13
%
13
%
Additional adjustments:
COVID-19 related costs and impairments (b)
14,061
10,582
14,061
10,582
Stock-based compensation expense (c)
6,829
6,325
28,111
23,060
Other costs (d)
1,898
578
11,095
578
Loss on foreign currency forward contracts (e)
—
—
5,917
—
Loss on extinguishment of debt
—
2,571
—
2,571
Total adjustments
22,788
20,056
59,184
36,791
Adjusted EBITDA
$
90,522
$
78,765
$
316,994
$
272,068
As a percentage of revenue
17
%
17
%
16
%
16
%
Income from operations
$
39,550
$
35,308
$
157,585
$
129,018
COVID-19 related costs and impairments (b)
14,061
10,582
14,061
10,582
Other costs (d)
1,898
578
11,095
578
Adjusted income from operations
$
55,509
$
46,468
$
182,741
$
140,178
As a percentage of revenue
11
%
10
%
9
%
8
%
Net income
$
18,042
$
17,693
$
80,641
$
70,459
Income tax expense
8,717
6,694
31,541
19,889
Income before income tax
26,759
24,387
112,182
90,348
Amortization of intangible assets (a)
8,785
6,980
31,912
29,172
COVID-19 related costs and impairments (b)
14,061
10,582
14,061
10,582
Stock-based compensation expense (c)
6,829
6,325
28,111
23,060
Other costs (d)
1,898
578
11,095
578
Loss on foreign currency forward contracts (e)
—
—
5,917
—
Loss on extinguishment of debt
—
2,571
—
2,571
Interest on deferred consideration (f)
1,486
—
2,957
—
Adjusted income before income tax
59,818
51,423
206,235
156,311
Adjusted income tax expense (g)
(15,553
)
(12,393
)
(54,036
)
(34,915
)
Adjusted net income
$
44,265
$
39,030
$
152,199
$
121,396
As a percentage of revenue
8
%
8
%
8
%
7
%
Weighted average common shares outstanding — diluted
57,554,377
60,309,067
58,490,652
60,871,399
Diluted adjusted earnings per common share
$
0.77
$
0.65
$
2.60
$
1.99
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