Delaware | 001-35780 | 80-0188269 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) |
200 Talcott Avenue Watertown, MA | 02472 | |
(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)) |
Item 2.02 | Results of Operations and Financial Condition |
Item 9.01 | Financial Statements and Exhibits |
(d) | Exhibits |
BRIGHT HORIZONS FAMILY SOLUTIONS INC. | |||
Date: | April 30, 2019 | By: | /s/ Elizabeth Boland |
Elizabeth Boland | |||
Chief Financial Officer |
• | Revenue increased 8% to $502 million |
• | Income from operations increased 14% to $63 million |
• | Net income increased 13% to $42 million and diluted earnings per common share increased 15% to $0.71 |
• | Adjusted income from operations* increased 14% to $63 million |
• | Adjusted EBITDA* increased 13% to $94 million |
• | Adjusted net income* increased 12% to $48 million and diluted adjusted earnings per common share* increased 13% to $0.81 |
• | Revenue growth in 2019 in the range of 8-10% |
• | Net income in the range of $173 million to $176 million and diluted earnings per common share in the range of $2.93 to $2.97 |
• | Adjusted net income in the range of $211 million to $214 million and diluted adjusted earnings per common share in the range of $3.58 to $3.64 |
• | Diluted weighted average shares of approximately 59 million shares |
Investors: | ||
Elizabeth Boland | ||
CFO - Bright Horizons | ||
eboland@brighthorizons.com | ||
617-673-8125 | ||
Kevin Doherty | ||
MD - Solebury Communications Group | ||
kdoherty@soleburyir.com | ||
203-428-3233 | ||
Media: | ||
Ilene Serpa | ||
VP - 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 March 31, | |||||||||||
2019 | % | 2018 | % | ||||||||
Revenue | $ | 501,758 | 100.0 | % | $ | 463,657 | 100.0 | % | |||
Cost of services | 374,811 | 74.7 | % | 350,113 | 75.5 | % | |||||
Gross profit | 126,947 | 25.3 | % | 113,544 | 24.5 | % | |||||
Selling, general and administrative expenses | 55,875 | 11.1 | % | 50,212 | 10.8 | % | |||||
Amortization of intangible assets | 8,162 | 1.6 | % | 8,048 | 1.8 | % | |||||
Income from operations | 62,910 | 12.6 | % | 55,284 | 11.9 | % | |||||
Interest expense — net | (11,948 | ) | (2.4 | )% | (11,503 | ) | (2.5 | )% | |||
Income before income tax | 50,962 | 10.2 | % | 43,781 | 9.4 | % | |||||
Income tax expense | (8,920 | ) | (1.8 | )% | (6,483 | ) | (1.4 | )% | |||
Net income | $ | 42,042 | 8.4 | % | $ | 37,298 | 8.0 | % | |||
Earnings per common share: | |||||||||||
Common stock — basic | $ | 0.73 | $ | 0.64 | |||||||
Common stock — diluted | $ | 0.71 | $ | 0.62 | |||||||
Weighted average number of common shares outstanding: | |||||||||||
Common stock — basic | 57,679,041 | 58,190,819 | |||||||||
Common stock — diluted | 58,752,384 | 59,448,031 |
BRIGHT HORIZONS FAMILY SOLUTIONS INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) | |||||||
March 31, 2019 | December 31, 2018 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 20,129 | $ | 15,450 | |||
Accounts receivable — net | 130,298 | 131,178 | |||||
Prepaid expenses and other current assets | 37,208 | 47,263 | |||||
Total current assets | 187,635 | 193,891 | |||||
Fixed assets — net | 603,117 | 597,141 | |||||
Goodwill | 1,381,044 | 1,347,611 | |||||
Other intangibles — net | 322,388 | 323,035 | |||||
Operating lease right-of-use assets (1) | 651,480 | — | |||||
Other assets | 50,872 | 62,628 | |||||
Total assets | $ | 3,196,536 | $ | 2,524,306 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Current portion of long-term debt | $ | 10,750 | $ | 10,750 | |||
Borrowings under revolving credit facility | 50,150 | 118,200 | |||||
Accounts payable and accrued expenses | 153,328 | 154,195 | |||||
Operating lease liabilities (1) | 79,617 | — | |||||
Deferred revenue and other current liabilities | 220,411 | 200,640 | |||||
Total current liabilities | 514,256 | 483,785 | |||||
Long-term debt — net | 1,034,664 | 1,036,870 | |||||
Operating lease liabilities (1) | 636,831 | 71,817 | |||||
Deferred income taxes | 75,486 | 71,306 | |||||
Other long-term liabilities | 98,287 | 81,051 | |||||
Total liabilities | 2,359,524 | 1,744,829 | |||||
Total stockholders’ equity | 837,012 | 779,477 | |||||
Total liabilities and stockholders’ equity | $ | 3,196,536 | $ | 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 those leases with lease terms longer than twelve months. Lease obligations associated with deferred rent and tenant improvement allowances recorded under the previous guidance were reclassified from other current liabilities and operating lease liabilities to the operating lease right-of-use assets. The Company adopted ASC 842 using the modified retrospective method, electing to use the effective date as the date of initial application. Therefore, comparative information for prior periods has not been adjusted. |
BRIGHT HORIZONS FAMILY SOLUTIONS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) | |||||||
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 42,042 | $ | 37,298 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 26,462 | 24,683 | |||||
Stock-based compensation expense | 3,106 | 2,891 | |||||
Deferred income taxes | 3,796 | (490 | ) | ||||
Other non-cash adjustments — net | 1,460 | 724 | |||||
Changes in assets and liabilities | 30,147 | 40,742 | |||||
Net cash provided by operating activities | 107,013 | 105,848 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Purchases of fixed assets — net | (21,061 | ) | (12,767 | ) | |||
Purchases of investments | (20,011 | ) | — | ||||
Payments and settlements for acquisitions — net of cash acquired | (19,490 | ) | (16,716 | ) | |||
Net cash used in investing activities | (60,562 | ) | (29,483 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Revolving credit facility — net | (68,150 | ) | 2,300 | ||||
Principal payments of long-term debt | (2,688 | ) | (2,688 | ) | |||
Purchase of treasury stock | (60 | ) | (85,725 | ) | |||
Taxes paid related to the net share settlement of stock options and restricted stock | (2,779 | ) | (3,176 | ) | |||
Proceeds from issuance of common stock upon exercise of options and restricted stock upon purchase | 11,414 | 12,303 | |||||
Payments of contingent consideration for acquisitions | — | (2,615 | ) | ||||
Net cash used in financing activities | (62,263 | ) | (79,601 | ) | |||
Effect of exchange rates on cash, cash equivalents and restricted cash | 548 | 431 | |||||
Net increase in cash, cash equivalents and restricted cash | (15,264 | ) | (2,805 | ) | |||
Cash, cash equivalents and restricted cash — beginning of period | 38,478 | 36,570 | |||||
Cash, cash equivalents and restricted cash — end of period | $ | 23,214 | $ | 33,765 |
BRIGHT HORIZONS FAMILY SOLUTIONS INC. SEGMENT INFORMATION (In thousands) (Unaudited) | |||||||||||||||
Full service center-based child care | Back-up care | Educational advisory services | Total | ||||||||||||
Three Months Ended March 31, 2019 | |||||||||||||||
Revenue | $ | 418,320 | $ | 64,694 | $ | 18,744 | $ | 501,758 | |||||||
Income from operations | 41,530 | 17,117 | 4,263 | 62,910 | |||||||||||
Adjusted income from operations (1) | 41,530 | 17,550 | 4,263 | 63,343 | |||||||||||
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 (2) | 37,239 | 14,125 | 4,248 | 55,612 |
(1) | Adjusted income from operations represents income from operations excluding expenses incurred in connection with completed acquisitions, which have been allocated to the back-up care segment. |
(2) | Adjusted income from operations represents income from operations excluding expenses incurred related to a secondary offering, which have been allocated to the full service center-based child care segment. |
BRIGHT HORIZONS FAMILY SOLUTIONS INC. NON-GAAP RECONCILIATIONS (In thousands, except share data) (Unaudited) | |||||||
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Net income | $ | 42,042 | $ | 37,298 | |||
Interest expense — net | 11,948 | 11,503 | |||||
Income tax expense | 8,920 | 6,483 | |||||
Depreciation | 18,300 | 16,635 | |||||
Amortization of intangible assets (a) | 8,162 | 8,048 | |||||
EBITDA | 89,372 | 79,967 | |||||
Additional Adjustments: | |||||||
Non-cash operating lease expense (b) | 927 | 8 | |||||
Stock-based compensation expense (c) | 3,106 | 2,891 | |||||
Transaction costs (d) | 433 | 328 | |||||
Total adjustments | 4,466 | 3,227 | |||||
Adjusted EBITDA | $ | 93,838 | $ | 83,194 | |||
Income from operations | $ | 62,910 | $ | 55,284 | |||
Transaction costs (d) | 433 | 328 | |||||
Adjusted income from operations | $ | 63,343 | $ | 55,612 | |||
Net income | $ | 42,042 | $ | 37,298 | |||
Income tax expense | 8,920 | 6,483 | |||||
Income before income tax | 50,962 | 43,781 | |||||
Stock-based compensation expense (c) | 3,106 | 2,891 | |||||
Amortization of intangible assets (a) | 8,162 | 8,048 | |||||
Transaction costs (d) | 433 | 328 | |||||
Adjusted income before income tax | 62,663 | 55,048 | |||||
Adjusted income tax expense (e) | (14,851 | ) | (12,468 | ) | |||
Adjusted net income | $ | 47,812 | $ | 42,580 | |||
Weighted average number of common shares — diluted | 58,752,384 | 59,448,031 | |||||
Diluted adjusted earnings per common share | $ | 0.81 | $ | 0.72 |
BRIGHT HORIZONS FAMILY SOLUTIONS INC. NON-GAAP RECONCILIATIONS (In thousands, except share data) (Unaudited) | |||||||||||||||
Forward Guidance (h) | |||||||||||||||
Three Months Ended June 30, 2019 | Year Ended December 31, 2019 | ||||||||||||||
Low | High | Low | High | ||||||||||||
Net income | $ | 46,600 | $ | 47,200 | $ | 173,200 | $ | 175,600 | |||||||
Net income allocated to unvested participating shares | (200 | ) | (200 | ) | (800 | ) | (800 | ) | |||||||
Income tax expense (f) | 15,200 | 15,600 | 51,900 | 52,700 | |||||||||||
Income before income tax | 61,600 | 62,600 | 224,300 | 227,500 | |||||||||||
Stock-based compensation expense (c) | 4,800 | 5,000 | 17,750 | 18,250 | |||||||||||
Amortization of intangible assets (a) | 8,300 | 8,500 | 33,500 | 34,000 | |||||||||||
Transaction costs (d) | — | — | 400 | 400 | |||||||||||
Adjusted income before income tax | 74,700 | 76,100 | 275,950 | 280,150 | |||||||||||
Tax impact on adjusted income before income tax (g) | (17,700 | ) | (18,000 | ) | (65,300 | ) | (66,300 | ) | |||||||
Adjusted net income attributable to common stockholders | $ | 57,000 | $ | 58,100 | $ | 210,650 | $ | 213,850 | |||||||
Per common share information: | |||||||||||||||
Diluted earnings per common share | $ | 0.79 | $ | 0.80 | $ | 2.93 | $ | 2.97 | |||||||
Income tax expense (f) | 0.26 | 0.27 | 0.88 | 0.90 | |||||||||||
Income before income tax | 1.05 | 1.07 | 3.81 | 3.87 | |||||||||||
Stock-based compensation expense (c) | 0.08 | 0.08 | 0.30 | 0.31 | |||||||||||
Amortization of intangible assets (a) | 0.14 | 0.14 | 0.57 | 0.58 | |||||||||||
Transaction costs (d) | — | — | 0.01 | 0.01 | |||||||||||
Tax impact on adjusted income before income tax (g) | (0.30 | ) | (0.31 | ) | (1.11 | ) | (1.13 | ) | |||||||
Diluted adjusted earnings per common share | $ | 0.97 | $ | 0.98 | $ | 3.58 | $ | 3.64 |
(a) | Represents amortization of intangible assets, including approximately $4.7 million in both the three months ended March 31, 2019 and 2018, associated with intangible assets recorded in connection with our going private transaction in May 2008. |
(b) | Represents non-cash operating lease expense in accordance with Accounting Standards Codification Topic 842, Leases, in 2019, and Topic 840, Leases, in 2018. |
(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 and the March 2018 secondary offering. |
(e) | Represents income tax expense calculated on adjusted income before income tax at an effective tax rate of approximately 24% and 23% for 2019 and 2018, respectively. The tax rate for 2019 represents a tax rate of approximately 27% 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 2019, which the Company estimates will be in the range of $7 million to $10 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 calculated using an effective tax rate of approximately 23% for the year ended December 31, 2019, based on projected income before tax, less the estimated impact of additional excess tax benefits related to equity transactions, which the Company estimates in the range of $7 million to $10 million for the full year in 2019. 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. |
(g) | Represents estimated tax on adjusted income before income tax using an effective tax rate of approximately 24%. |
(h) | Forward guidance amounts are estimated based on a number of assumptions and actual results could differ materially from the estimates provided herein. |