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Bright Horizons Family Solutions® Reports First Quarter of 2016 Financial Results

May 3, 2016 4:18 PM

BOSTON, May 3, 2016 /PRNewswire/ -- Bright Horizons Family Solutions® Inc. (NYSE: BFAM), a leading provider of high-quality child care, early education and other services designed to help employers and families better address the challenges of work and family life, today announced financial results for the first quarter of 2016 and confirmed certain financial guidance for the full year 2016.

First Quarter 2016 Highlights (compared to first quarter 2015):

  • Revenue increased 10% to $385 million
  • GAAP income from operations increased 13% to $49 million
  • Non-GAAP adjusted income from operations* increased 14% to $49 million
  • Adjusted EBITDA* increased 10% to $72 million
  • GAAP net income increased 10% to $25 million and GAAP diluted earnings per common share increased 14% to $0.40 per share
  • Non-GAAP adjusted net income* increased 15% to $31 million and diluted adjusted earnings per common share* increased 19% to $0.51

"We are pleased to report a strong start to 2016, as we continue to execute on our growth strategy here in the U.S. and in Europe, and in India," said David Lissy, Chief Executive Officer. "At Bright Horizons, we are proud to celebrate our 30th year of partnering with leading employers to provide working families with the critical supports they need to maximize their productivity."

"For today's workforce, the workplace and its culture are an integral part of both professional and personal satisfaction and well-being," continued Lissy. "In 1986, Bright Horizons was on the forefront of the challenges that employers and their working families faced then as now, and we have continued to evolve our services to meet the myriad ways that employers look to support employees and families in their ability to achieve a healthy integration between work and life."

First Quarter 2016 Results

Revenue increased $34.9 million, or 10%, in the first quarter of 2016 from the first quarter of 2015 on contributions from new and ramping full-service child care centers, average price increases of 3-4%, and expanded sales of back-up dependent care and educational advisory services.

Income from operations was $48.6 million for the first quarter of 2016 compared to $42.8 million in the same 2015 period, an increase of $5.8 million, primarily due to a $9.2 million increase in gross profit, partially offset by increases in recurring selling, general and administrative expenses. The increase in gross profit and income from operations reflects operating leverage from enrollment gains in mature and ramping centers, contributions from new child care centers, back-up dependent care and educational advisory clients that have been added since the first quarter of 2015, and strong cost management, partially offset by the costs incurred during the ramp-up of certain new lease/consortium centers opened during 2015 and 2016 and ongoing investments in systems and personnel to support the delivery of our services. Net income was $24.7 million for the first quarter of 2016 compared to net income of $22.5 million in the same 2015 period, an increase of $2.2 million on the expanded income from operations. Diluted earnings per common share was $0.40 compared to $0.35 in the first quarter of 2015.

In the first quarter of 2016, adjusted EBITDA increased $6.9 million, to $72.4 million, and adjusted income from operations increased $6.0 million, to $48.8 million, from the first quarter of 2015 due primarily to the expanded gross profit. Adjusted net income increased by $4.0 million, or 14.8%, to $31.1 million on the expanded income from operations. Diluted adjusted earnings per common share was $0.51 compared to $0.43 in the first quarter of 2015.

As of March 31, 2016, the Company operated 936 early care and education centers with the capacity to serve 107,400 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, expenses related to secondary offerings, and expenses associated with completed acquisitions. Adjusted income from operations represents income from operations before expenses related to the completion of secondary offerings, and expenses associated with completed acquisitions. Adjusted net income represents net income determined in accordance with GAAP, adjusted for stock-based compensation expense, amortization expense, secondary offering expenses, expenses associated with completed acquisitions 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

During the three months ended March 31, 2016, the Company generated approximately $85.8 million of cash flows from operations compared to $47.3 million for the same period in 2015 and invested $13.6 million in fixed assets and acquisitions compared to $18.0 million in the same 2015 period. Net cash used in financing activities totaled $43.8 million in the three months ended March 31, 2016 compared to $8.0 million provided by financing activities for the same 2015 period. During the three months ended March 31, 2016, the Company's cash and cash equivalents increased $28.6 million to $40.2 million.

2016 Outlook

As described below, the Company is confirming certain financial guidance. For the full year 2016, the Company currently expects:

  • Overall revenue growth in 2016 in the range of 8-10%
  • Adjusted EBITDA growth in 2016 in the range of 13-14%
  • Adjusted net income growth in 2016 in the range of 15-17%
  • Diluted adjusted earnings per common share growth in the range of 18-20%
  • Diluted weighted average shares of approximately 61.5 million shares

Conference Call

Bright Horizons Family Solutions will host an investor conference call today at 5:00 pm ET. Interested parties are invited to listen to the conference call by dialing 1-877-407-9039 or, for international callers, 1-201-689-8470, and asking for the Bright Horizons Family Solutions conference call, moderated by Chief Executive Officer David Lissy. Replays of the entire call will be available through May 17, 2016 at 1-877-870-5176 or, for international callers, at 1-858-384-5517, conference ID # 13632730. The webcast of the conference call, including replays, and a copy of this press release are also available through the Investor Relations section of the Company's web site, www.brighthorizons.com.

Forward-Looking Statements

This press release includes statements that express the Company's opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, "forward-looking statements." The Company's actual results may vary significantly from the results anticipated in these forward-looking statements, which can generally be identified by the use of forward-looking terminology, including the terms "believes," "expects," "may," "will," "should," "seeks," "projects," "approximately," "intends," "plans," "estimates" or "anticipates," or, in each case, their negatives or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They include statements regarding the Company's intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies, the industries in which we and our partners operate, our service offerings, and our 2016 financial guidance. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. The Company believes that these risks and uncertainties include, but are not limited to, changes in the demand for child care and other dependent care services, including variation in enrollment trends and lower than expected demand from employer sponsor clients; the possibility that acquisitions may disrupt our operations and expose us to additional risk; our ability to pass on our increased costs; our indebtedness and the terms of such indebtedness; our ability to withstand seasonal fluctuations in the demand for our services; our ability to implement our growth strategies successfully; and other risks and uncertainties more fully described in the "Risk Factors" section of our Annual Report on Form 10-K filed February 29, 2016, and other filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the time of this release and we do not undertake to publicly update or revise them, whether as a result of new information, future events or otherwise, except as required by law.

Presentation of Non-GAAP Measures

In addition to the results provided in accordance with U.S. generally accepted accounting principles ("GAAP") throughout this press release, the Company has provided non-GAAP measurements - adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per common share - which present operating results on a basis adjusted for certain items. The Company uses these non-GAAP measures as key performance measures for the purpose of evaluating performance internally. 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."

About Bright Horizons Family Solutions® Inc.

Bright Horizons Family Solutions® is a leading provider of high-quality child care, early education and other services designed to help employers and families better address the challenges of work and family life. The Company provides center-based full service child care, back-up dependent care and educational advisory services to more than 1,000 clients across the United States, the United Kingdom, Ireland, the Netherlands, Canada and India, including more than 150 FORTUNE 500 companies and more than 80 of Working Mother magazine's 2015 "100 Best Companies for Working Mothers." Bright Horizons has been recognized sixteen times as one of FORTUNE magazine's "100 Best Companies to Work For" and is one of the UK's Best Workplaces as designated by the Great Place to Work® Institute. Bright Horizons is headquartered in Watertown, MA. The Company's web site is located at www.brighthorizons.com.

Contacts:

Investors:

Elizabeth Boland

CFO - Bright Horizons

[email protected]

617-673-8125

Kevin Doherty

MD - Solebury Communications Group

[email protected]

203-428-3233

Media:

Ilene Serpa

VP - Communications - Bright Horizons

[email protected]

617-673-8044

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share data)

(Unaudited)

Three Months Ended March 31,

2016

%

2015

%

Revenue

$

385,322

100.0

%

$

350,440

100.0

%

Cost of services

289,546

75.1

%

263,832

75.3

%

Gross profit

95,776

24.9

%

86,608

24.7

%

Selling, general and administrative expenses

40,031

10.4

%

36,845

10.5

%

Amortization of intangible assets

7,148

1.9

%

6,922

2.0

%

Income from operations

48,597

12.6

%

42,841

12.2

%

Interest expense, net

(10,684)

(2.8)

%

(10,031)

(2.9)

%

Income before income taxes

37,913

9.8

%

32,810

9.3

%

Income tax expense

(13,186)

(3.4)

%

(10,278)

(2.9)

%

Net income

$

24,727

6.4

%

$

22,532

6.4

%

Earnings per common share:

Common stock—basic

$

0.41

$

0.36

Common stock—diluted

$

0.40

$

0.35

Weighted average number of common shares outstanding:

Common stock—basic

59,832,168

61,682,964

Common stock—diluted

61,300,409

63,189,367

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

March 31, 2016

December 31, 2015

ASSETS

Current assets:

Cash and cash equivalents

$

40,152

$

11,539

Accounts receivable—net

84,312

97,295

Other current assets

35,195

43,879

Total current assets

159,659

152,713

Fixed assets—net

424,986

429,736

Goodwill

1,147,236

1,147,809

Other intangibles—net

382,111

389,331

Other assets

29,999

30,952

Total assets

$

2,143,991

$

2,150,541

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Current portion of long-term debt

$

9,550

$

9,550

Borrowings on revolving line of credit

24,000

Accounts payable and accrued expenses

118,677

114,776

Deferred revenue and other current liabilities

173,454

157,017

Total current liabilities

301,681

305,343

Long-term debt—net

903,215

905,661

Deferred income taxes

111,286

113,100

Other long-term liabilities

99,741

98,829

Total liabilities

1,415,923

1,422,933

Total stockholders' equity

728,068

727,608

Total liabilities and stockholders' equity

$

2,143,991

$

2,150,541

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Three months ended March 31,

2016

2015

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$

24,727

$

22,532

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

20,525

19,386

Stock-based compensation

2,597

2,300

Deferred income taxes

(1,766)

4,395

Other non-cash adjustments, net

1,051

2,034

Changes in assets and liabilities:

Accounts receivable

12,905

8,180

Prepaid expenses and other current assets

8,601

(4,267)

Accounts payable and accrued expenses

5,238

(6,912)

Other, net

11,919

(386)

Net cash provided by operating activities

85,797

47,262

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of fixed assets, net

(10,637)

(16,911)

Payments for acquisitions, net of cash acquired

(2,933)

(1,072)

Net cash used in investing activities

(13,570)

(17,983)

CASH FLOWS FROM FINANCING ACTIVITIES:

Line of credit, net

(24,000)

Principal payments of long-term debt

(2,388)

(2,388)

Payments for debt issuance costs

(1,002)

Purchase of treasury stock

(23,385)

(738)

Proceeds from issuance of common stock upon exercise of options

1,682

4,210

Proceeds from issuance of restricted stock

3,351

3,864

Tax benefit from stock-based compensation

1,920

3,072

Net cash (used in) provided by financing activities

(43,822)

8,020

Effect of exchange rates on cash and cash equivalents

208

(1,524)

Net increase in cash and cash equivalents

28,613

35,775

Cash and cash equivalents—beginning of period

11,539

87,886

Cash and cash equivalents—end of period

$

40,152

$

123,661

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

SEGMENT INFORMATION

(In thousands)

(Unaudited)

Full service

center-based

care

Back-up

dependent

care

Other

educational

advisory

services

Total

Three months ended March 31, 2016

Revenue

$

328,827

$

45,131

$

11,364

$

385,322

Amortization of intangibles

6,823

181

144

7,148

Income from operations

32,891

13,206

2,500

48,597

Adjusted income from operations (1)

33,097

13,206

2,500

48,803

Three months ended March 31, 2015

Revenue

$

300,334

$

41,601

$

8,505

$

350,440

Amortization of intangibles

6,597

181

144

6,922

Income from operations

28,275

13,761

805

42,841

Adjusted income from operations

28,275

13,761

805

42,841

(1) Adjusted income from operations represents income from operations excluding expenses incurred in connection with the January 2016 amendment to the Credit Agreement and completed acquisitions.

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

NON-GAAP RECONCILIATIONS

(In thousands, except share data)

(Unaudited)

Three Months Ended March 31,

2016

2015

Net income

$

24,727

$

22,532

Interest expense, net

10,684

10,031

Income tax expense

13,186

10,278

Depreciation

13,377

12,464

Amortization of intangible assets (a)

7,148

6,922

EBITDA

69,122

62,227

Additional Adjustments:

Deferred rent (b)

425

967

Stock-based compensation expense (c)

2,597

2,300

Expenses related to the Credit Agreement amendment and completed acquisitions (d)

206

Total adjustments

3,228

3,267

Adjusted EBITDA

$

72,350

$

65,494

Income from operations

$

48,597

$

42,841

Expenses related to the Credit Agreement amendment and completed acquisitions (d)

206

Adjusted income from operations

$

48,803

$

42,841

Net income

$

24,727

$

22,532

Income tax expense

13,186

10,278

Income before tax

37,913

32,810

Stock-based compensation expense (c)

2,597

2,300

Amortization of intangible assets (a)

7,148

6,922

Expenses related to the Credit Agreement amendment and completed acquisitions (d)

206

Adjusted income before tax

47,864

42,032

Adjusted income tax expense (e)

(16,752)

(14,921)

Adjusted net income

$

31,112

$

27,111

Weighted average number of common shares—diluted

61,300,409

63,189,367

Diluted adjusted earnings per common share

$

0.51

$

0.43

(a) Represents amortization of intangible assets, including approximately $4.5 million and $5.0 million for the three months ended March 31, 2016 and 2015, respectively, associated with intangible assets recorded in connection with our going private transaction in May 2008.

(b) Represents rent 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.

(d) Represents costs incurred in connection with the January 2016 amendment to the Credit Agreement and completed acquisitions.

(e) Represents income tax expense calculated on adjusted income before tax at the effective rate of approximately 35% and 36% in 2016 and 2015, respectively.

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/bright-horizons-family-solutions-reports-first-quarter-of-2016-financial-results-300262138.html

SOURCE Bright Horizons Family Solutions Inc.

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