Financial Data and Key Metrics Changes - Total revenue increased by 11% for the year, with Q4 revenue rising 10% to $674 million [8][10] - Adjusted EPS grew by 22% for the year, with Q4 adjusted EPS increasing 18% to $0.98 per share [8][10] - Adjusted EBITDA for Q4 was up 12% to $111 million, representing 16.4% of revenue [10][24] Business Line Data and Key Metrics Changes - Full Service Child Care segment revenue increased by 8% to $485 million in Q4, with occupancy levels in the low 60s [10][25] - Backup Care segment revenue grew by 15% to $157 million in Q4, with operating income of $53 million, or 33% of revenue [16][27] - Education Advisory business revenue reached $32 million in Q4, with an operating margin of 29% [18][28] Market Data and Key Metrics Changes - Enrollment in centers opened for more than one year increased at a low single-digit rate in Q4, with average occupancy in the low 60s [11][25] - The top-performing cohort of centers, with occupancy above 70%, improved from 36% to 39% year-over-year [25][26] - The bottom cohort of centers, under 40% occupancy, decreased from 18% to 16% [26] Company Strategy and Development Direction - The company aims to improve underperforming centers through enhanced family experiences and marketing efforts [66][70] - There is a focus on expanding the Backup Care benefit and increasing unique users among clients [72][75] - The UK segment is expected to reach breakeven in 2025, driven by enrollment growth and reduced reliance on agency staffing [15][88] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth trajectory for 2025, projecting revenue between $2.85 billion and $2.9 billion [22][31] - Adjusted EPS for 2025 is expected to grow approximately 15% to 20%, with a range of $3.95 to $4.15 per share [23][34] - The company anticipates continued enrollment growth, particularly in the second half of 2025 [48][52] Other Important Information - The company repurchased approximately $85 million of stock in Q4, marking its first repurchase activity since summer 2022 [30][111] - The structural effective tax rate on adjusted net income was 27.5% in Q4, consistent with the full-year rate [29] Q&A Session Summary Question: Can you break out the 6% to 8% growth guidance for 2025? - Management indicated a pricing increase of 4% to 5%, enrollment growth of 2.5% to 3.5%, and a net closure effect of about 0.5% [40] Question: What are the margin expectations for the three segments in 2025? - Full Service segment margins are expected to improve to mid-single digits, Backup Care margins to remain in the 25% to 30% range, and Ed Advisory margins in the mid to high teens [42] Question: How do you expect occupancy rates to trend in 2025? - Management expects occupancy to reach mid-60s by the end of 2025, with steady growth throughout the year [50][52] Question: What are the initiatives to improve underperforming centers? - The company is focusing on enhancing the inquiry process for prospective families and leveraging Backup Care usage to convert inquiries into full-time enrollments [66][70] Question: How significant is the return to office trend for enrollment? - While not the key driver, return to office policies are expected to positively impact enrollment inquiries in urban centers [82][83] Question: What is the expected performance of the UK segment? - The UK segment is projected to reach breakeven in 2025, supported by enrollment growth and increased government funding for early childhood education [88][89]

Core Insights - Bright Horizons Family Solutions (BFAM) reported revenue of $674.15 million for Q4 2024, marking a year-over-year increase of 9.5% and exceeding the Zacks Consensus Estimate by 0.60% [1] - The company's EPS for the same period was $0.98, up from $0.83 a year ago, representing a surprise of 7.69% over the consensus estimate of $0.91 [1] Revenue Breakdown - Full service center-based child care revenue was $484.50 million, slightly below the average estimate of $485.72 million, with a year-over-year change of +8.4% [4] - Educational advisory and other services generated $32.48 million, exceeding the average estimate of $31.98 million, but reflecting a year-over-year decline of 4.3% [4] - Back-up care revenue reached $157.17 million, surpassing the average estimate of $152.22 million, with a year-over-year increase of 16.8% [4] Operational Performance - Adjusted income from operations for full service center-based child care was $17.20 million, below the average estimate of $18.14 million [4] - Adjusted income from operations for educational advisory and other services was $9.53 million, exceeding the average estimate of $7.28 million [4] - Adjusted income from operations for back-up care was $52.63 million, surpassing the average estimate of $49.35 million [4] Stock Performance - Bright Horizons shares have returned +2.1% over the past month, compared to a +3.9% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]

Company Performance - Bright Horizons Family Solutions (BFAM) reported quarterly earnings of $0.98 per share, exceeding the Zacks Consensus Estimate of $0.91 per share, and up from $0.83 per share a year ago [1] - The company achieved revenues of $674.15 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 0.60% and increasing from $615.65 million year-over-year [3] - Over the last four quarters, Bright Horizons has consistently surpassed consensus EPS and revenue estimates [2][3] Stock Movement and Outlook - The stock has gained approximately 6.7% since the beginning of the year, outperforming the S&P 500's gain of 2.9% [4] - The current consensus EPS estimate for the upcoming quarter is $0.64 on revenues of $669.66 million, and for the current fiscal year, it is $3.94 on revenues of $2.9 billion [8] Industry Context - Bright Horizons operates within the Zacks Business - Services industry, which is currently ranked in the bottom 26% of over 250 Zacks industries [9] - The performance of the stock may be influenced by the overall outlook for the industry, as research indicates that the top 50% of Zacks-ranked industries outperform the bottom 50% by more than 2 to 1 [9]

Financial Performance - Revenue for Q4 2024 was $674 million, an increase of 10% compared to Q4 2023[3] - Income from operations for Q4 2024 was $48.2 million, reflecting a 71% increase from $28.2 million in Q4 2023[4] - Net income for Q4 2024 reached $29.1 million, a significant increase of 427% from $5.5 million in Q4 2023[4] - Adjusted EBITDA for Q4 2024 was $110.7 million, up 12% from the previous year[5] - For the full year 2024, revenue totaled $2.7 billion, an increase of 11% year-over-year[6] - Adjusted net income for Q4 2024 was $57.4 million, a 19% increase from the previous year[5] - Revenue for the year ended December 31, 2024, increased to $2,686,013 thousand, a 11.1% increase from $2,418,257 thousand in 2023[21] - Net income for 2024 was $140,191 thousand, representing a 88.8% increase from $74,223 thousand in 2023, with net income margin at 5.2%[21] - Adjusted income from operations for the year 2024 was $277,753 thousand, up from $212,602 thousand in 2023, reflecting a 30.7% increase[29] - Adjusted EBITDA for the full year 2024 was $409.3 million, up from $352.1 million in 2023, reflecting a year-over-year increase of 16%[32] - Adjusted net income for the full year 2024 was $203.2 million, an increase of 23.7% from $164.3 million in 2023[32] Cash Flow and Assets - The company generated approximately $337.5 million of cash from operations in 2024, compared to $256.1 million in 2023[9] - Cash provided by operating activities increased to $337,462 thousand in 2024, compared to $256,140 thousand in 2023, marking a 31.7% increase[25] - Total assets decreased slightly to $3,850,319 thousand in 2024 from $3,896,144 thousand in 2023[23] - Total stockholders' equity increased to $1,278,396 thousand in 2024, up from $1,212,676 thousand in 2023, indicating a growth of 5.4%[23] Expenses and Liabilities - The company reported a decrease in interest expense to $48,761 thousand in 2024 from $51,609 thousand in 2023, a reduction of 3.6%[21] - The current portion of long-term debt increased to $28,500 thousand in 2024 from $18,500 thousand in 2023, reflecting a 54.1% increase[23] - The company incurred stock-based compensation expenses of $9.0 million in Q4 2024, compared to $7.7 million in Q4 2023, reflecting an increase of 17%[32] Operational Metrics - The company operated 1,019 early education and child care centers as of December 31, 2024, with a capacity to serve approximately 115,000 children[7] - EBITDA as a percentage of revenue improved to 16% in Q4 2024, consistent with the previous year, while full-year EBITDA margin also held steady at 15%[32] - Impairment losses for Q4 2024 totaled $30.3 million, compared to $35.9 million in Q4 2023, indicating a decrease of 15.6%[32] - Income from operations for Q4 2024 was $48.2 million, up from $28.2 million in Q4 2023, representing a growth of 70.8%[32] Future Outlook - The company expects fiscal year 2025 revenue to be in the range of $2.85 billion to $2.9 billion[10] - The company plans to continue focusing on market expansion and new product development to drive future growth[21] Shareholder Information - The company repurchased $84.6 million of its common stock during the year ended December 31, 2024[9] - The company reported a diluted adjusted earnings per share of $0.98 for Q4 2024, compared to $0.83 in Q4 2023, marking a growth of 18.1%[32] - The weighted average diluted shares outstanding increased slightly to 58.4 million in Q4 2024 from 58.1 million in Q4 2023[32]

Core Viewpoint - Bright Horizons Family Solutions (BFAM) is expected to report quarterly earnings of $0.91 per share, a 9.6% increase year-over-year, with revenues projected at $670.11 million, reflecting an 8.9% year-over-year growth [1]. Earnings Estimates - The consensus EPS estimate for the quarter has remained unchanged over the last 30 days, indicating stability in analysts' projections [2]. - Revisions to earnings projections are crucial for predicting investor behavior and stock price performance [3]. Revenue Projections - Revenue from full-service center-based child care is estimated at $485.72 million, showing an 8.6% year-over-year increase [5]. - Revenue from educational advisory and other services is expected to be $31.98 million, indicating a decline of 5.8% from the previous year [5]. - Revenue from back-up care is projected at $152.22 million, reflecting a 13.1% year-over-year increase [6]. Adjusted Income Estimates - Adjusted income from operations for educational advisory and other services is forecasted to be $7.28 million, down from $9.91 million year-over-year [6]. - Adjusted income from operations for back-up care is expected to reach $34.93 million, compared to $37.43 million in the previous year [7]. Stock Performance - Over the past month, Bright Horizons shares have increased by 6.7%, outperforming the Zacks S&P 500 composite, which rose by 2.1% [8]. - Despite recent performance, BFAM holds a Zacks Rank 4 (Sell), suggesting potential underperformance in the near future [8].

PART I. FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section details Bright Horizons' unaudited financial statements, including balance sheets, income, comprehensive income, equity, and cash flows, with explanatory notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Summarizes the company's financial position, showing total assets, liabilities, and stockholders' equity at period-end Balance Sheet Summary | Metric | September 30, 2024 (In thousands) | December 31, 2023 (In thousands) | | :----- | :-------------------------------- | :------------------------------- | | Total Assets | $3,914,813 | $3,896,144 | | Total Liabilities | $2,515,622 | $2,683,468 | | Total Stockholders' Equity | $1,399,191 | $1,212,676 | [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Details the company's revenue, net income, and diluted EPS for the three and nine months ended September 30, 2024 and 2023 Income Statement Summary | Metric | Three months ended Sep 30, 2024 (In thousands) | Three months ended Sep 30, 2023 (In thousands) | Change (YoY) | | :----- | :--------------------------------------------- | :--------------------------------------------- | :----------- | | Revenue | $719,099 | $645,787 | +11.4% | | Net income | $54,905 | $39,979 | +37.3% | | Common stock — diluted EPS | $0.94 | $0.69 | +36.2% | | Metric | Nine months ended Sep 30, 2024 (In thousands) | Nine months ended Sep 30, 2023 (In thousands) | Change (YoY) | | :----- | :-------------------------------------------- | :-------------------------------------------- | :----------- | | Revenue | $2,011,867 | $1,802,609 | +11.6% | | Net income | $111,068 | $68,699 | +61.7% | | Common stock — diluted EPS | $1.90 | $1.18 | +61.0% | [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Presents net income and other comprehensive income components, including foreign currency adjustments, for the reporting periods Comprehensive Income Summary | Metric | Three months ended Sep 30, 2024 (In thousands) | Three months ended Sep 30, 2023 (In thousands) | Change (YoY) | | :----- | :--------------------------------------------- | :--------------------------------------------- | :----------- | | Net income | $54,905 | $39,979 | +37.3% | | Foreign currency translation adjustments | $47,343 | $(31,179) | N/A | | Total other comprehensive income (loss) | $37,039 | $(32,783) | N/A | | Comprehensive income | $91,944 | $7,196 | +1177.7% | | Metric | Nine months ended Sep 30, 2024 (In thousands) | Nine months ended Sep 30, 2023 (In thousands) | Change (YoY) | | :----- | :-------------------------------------------- | :-------------------------------------------- | :----------- | | Net income | $111,068 | $68,699 | +61.7% | | Foreign currency translation adjustments | $33,949 | $(14,843) | N/A | | Total other comprehensive income (loss) | $24,302 | $(20,041) | N/A | | Comprehensive income | $135,370 | $48,658 | +178.2% | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Outlines changes in stockholders' equity, including net income, stock-based compensation, and common stock issuance Stockholders' Equity Changes | Metric | September 30, 2024 (In thousands) | September 30, 2023 (In thousands) | | :----- | :-------------------------------- | :-------------------------------- | | Total Stockholders' Equity | $1,399,191 | $1,165,420 | | Metric | Nine months ended Sep 30, 2024 (In thousands) | Nine months ended Sep 30, 2023 (In thousands) | | :----- | :-------------------------------------------- | :-------------------------------------------- | | Net income | $111,068 | $68,699 | | Stock-based compensation expense | $24,607 | $21,154 | | Issuance of common stock under Equity Incentive Plan | $31,296 | $17,551 | | Other comprehensive income (loss) | $24,302 | $(20,041) | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Reports cash flows from operating, investing, and financing activities, showing changes in cash and equivalents Cash Flow Summary | Metric | Nine months ended Sep 30, 2024 (In thousands) | Nine months ended Sep 30, 2023 (In thousands) | Change (YoY) | | :----- | :-------------------------------------------- | :-------------------------------------------- | :----------- | | Net cash provided by operating activities | $216,813 | $160,971 | +34.7% | | Net cash used in investing activities | $(92,662) | $(92,009) | -0.7% | | Net cash used in financing activities | $(95,822) | $(60,457) | +58.5% | | Net increase in cash, cash equivalents and restricted cash | $29,636 | $7,225 | +310.2% | | Cash, cash equivalents and restricted cash — end of period | $119,087 | $59,119 | +101.4% | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures supporting the condensed consolidated financial statements [Note 1. Organization and Basis of Presentation](index=11&type=section&id=Note%201.%20Organization%20and%20Basis%20of%20Presentation) Describes Bright Horizons' business, segment realignment, and share repurchase program status - As of **September 30, 2024**, the company operated **1,028 centers** early education and child care centers[26](index=26&type=chunk) - Effective **January 1, 2024**, the company realigned its organizational structure, moving Sittercity operations from the Educational Advisory and Other Services segment to the Back-up Care segment[26](index=26&type=chunk) - Most pandemic-related government support programs, including child care stabilization grants, ended on **September 30, 2023**[26](index=26&type=chunk) - No share repurchases were made under the **$400 million** repurchase program during the nine months ended September 30, 2024 and 2023. **$198.3 million** remained available under the program as of September 30, 2024[26](index=26&type=chunk) [Note 2. Revenue Recognition](index=12&type=section&id=Note%202.%20Revenue%20Recognition) Disaggregates revenue by segment and geography, detailing recognized deferred revenue Revenue by Segment and Region | Segment/Region | Three months ended Sep 30, 2024 (In thousands) | Three months ended Sep 30, 2023 (In thousands) | | :--------------- | :--------------------------------------------- | :--------------------------------------------- | | North America | $521,576 | $473,490 | | International | $197,523 | $172,297 | | Total Revenue | $719,099 | $645,787 | | Segment/Region | Nine months ended Sep 30, 2024 (In thousands) | Nine months ended Sep 30, 2023 (In thousands) | | :--------------- | :-------------------------------------------- | :-------------------------------------------- | | North America | $1,450,271 | $1,309,396 | | International | $561,596 | $493,213 | | Total Revenue | $2,011,867 | $1,802,609 | - The company recognized **$243.6 million** and **$200.7 million** as revenue during the nine months ended September 30, 2024 and 2023, respectively, from deferred revenue balances at the beginning of each period[29](index=29&type=chunk) [Note 3. Leases](index=13&type=section&id=Note%203.%20Leases) Explains the company's operating lease arrangements, lease expenses, and future payment obligations Lease Expense Summary | Metric | Three months ended Sep 30, 2024 (In thousands) | Three months ended Sep 30, 2023 (In thousands) | | :----- | :--------------------------------------------- | :--------------------------------------------- | | Total lease expense | $51,536 | $49,033 | | Metric | Nine months ended Sep 30, 2024 (In thousands) | Nine months ended Sep 30, 2023 (In thousands) | | :----- | :-------------------------------------------- | :-------------------------------------------- | | Total lease expense | $149,847 | $148,200 | Lease Term and Discount Rate | Metric | September 30, 2024 | December 31, 2023 | | :----- | :----------------- | :---------------- | | Weighted average remaining lease term (in years) | 10 | 10 | | Weighted average discount rate | 7.1% | 7.1% | Operating Lease Maturity Schedule | Maturity Period | Operating Leases (In thousands) | | :---------------- | :------------------------------ | | Remainder of 2024 | $30,283 | | 2025 | $160,590 | | 2026 | $154,663 | | 2027 | $144,969 | | 2028 | $134,039 | | Thereafter | $627,922 | | Total lease payments | $1,252,466 | | Present value of lease liabilities | $891,759 | [Note 4. Acquisitions](index=14&type=section&id=Note%204.%20Acquisitions) Details recent acquisitions in the Netherlands and Australia, including goodwill recorded and deferred consideration payments - In April **2024**, the company acquired the remaining shares of a Netherlands provider for **$1.3 million** cash and **$0.7 million** contingent consideration, recording **$9.8 million** in goodwill[37](index=37&type=chunk) - During the nine months ended **September 30, 2024**, the company acquired two centers in Australia for **$7.2 million** cash, recording **$6.8 million** in goodwill[37](index=37&type=chunk) - In January **2024**, the company paid **$106.5 million** in deferred consideration for the **2022** acquisition of Only About Children[37](index=37&type=chunk) - In April **2024**, the company paid **$14.3 million** in contingent consideration related to a **2021** acquisition[37](index=37&type=chunk) - During **2023**, the company acquired four centers in the US and six in Australia for **$39.5 million** cash, recording **$37.2 million** in goodwill[38](index=38&type=chunk) [Note 5. Goodwill and Intangible Assets](index=15&type=section&id=Note%205.%20Goodwill%20and%20Intangible%20Assets) Reports changes in goodwill and the net carrying amount of definite and indefinite-lived intangible assets Goodwill Movement | Metric | January 1, 2024 (In thousands) | September 30, 2024 (In thousands) | | :----- | :----------------------------- | :-------------------------------- | | Balance of Goodwill | $1,786,405 | $1,827,935 | | Additions from acquisitions | — | $16,586 | | Effect of foreign currency translation | — | $24,837 | Intangible Assets Net Carrying Amount | Intangible Asset Type | September 30, 2024 Net Carrying Amount (In thousands) | December 31, 2023 Net Carrying Amount (In thousands) | | :-------------------- | :---------------------------------------------------- | :---------------------------------------------------- | | Definite-lived intangible assets | $22,109 | $35,985 | | Indefinite-lived intangible assets | $180,937 | $180,591 | | Total other intangible assets — net | $203,046 | $216,576 | Estimated Amortization Expense | Period | Estimated Amortization Expense (In thousands) | | :----- | :-------------------------------------------- | | Remainder of 2024 | $2,387 | | 2025 | $6,568 | | 2026 | $4,532 | | 2027 | $3,396 | | 2028 | $1,955 | | Thereafter | $3,271 | | Total | $22,109 | [Note 6. Credit Arrangements and Debt Obligations](index=16&type=section&id=Note%206.%20Credit%20Arrangements%20and%20Debt%20Obligations) Outlines the company's senior secured credit facilities, total debt, and interest rate hedging strategies Debt Obligations Summary | Debt Type | September 30, 2024 (In thousands) | December 31, 2023 (In thousands) | | :-------- | :-------------------------------- | :------------------------------- | | Term loan B | $583,500 | $588,000 | | Term loan A | $372,500 | $380,000 | | Total debt | $951,653 | $962,764 | | Long-term debt | $925,653 | $944,264 | - The effective interest rate for term loans was **6.92%** at September 30, 2024, compared to **7.52%** at December 31, 2023[44](index=44&type=chunk) - The weighted average interest rate for term loans and revolving credit facility (prior to hedges) was **7.44%** for the nine months ended September 30, 2024, compared to **7.08%** for the same period in 2023[44](index=44&type=chunk) - At September 30, 2024, **$389.8 million** was available for borrowing under its **$400 million** revolving credit facility[48](index=48&type=chunk) - The company entered into **$900 million** notional value interest rate cap agreements, effective **October 31, 2023**, to provide interest rate protection against SOFR increases above **2.4%** (**$600M**) and **2.9%** (**$300M**)[51](index=51&type=chunk) - The company estimates a net gain of **$7.7 million** (pre-tax) will be reclassified from accumulated other comprehensive loss and recorded as a reduction to interest expense related to derivative financial instruments over the next **12 months**[52](index=52&type=chunk) [Note 7. Earnings Per Share](index=19&type=section&id=Note%207.%20Earnings%20Per%20Share) Presents basic and diluted earnings per share for the three and nine months ended September 30, 2024 and 2023 Earnings Per Share Performance | Metric | Three months ended Sep 30, 2024 | Three months ended Sep 30, 2023 | | :----- | :------------------------------ | :------------------------------ | | Basic EPS | $0.95 | $0.69 | | Diluted EPS | $0.94 | $0.69 | | Metric | Nine months ended Sep 30, 2024 | Nine months ended Sep 30, 2023 | | :----- | :----------------------------- | :----------------------------- | | Basic EPS | $1.92 | $1.19 | | Diluted EPS | $1.90 | $1.18 | - Weighted average common shares outstanding (diluted) for the three months ended September 30, 2024, were **58,701,618**, up from **58,045,137** in the prior year[55](index=55&type=chunk) [Note 8. Income Taxes](index=20&type=section&id=Note%208.%20Income%20Taxes) Discusses the effective income tax rate, influencing factors, and unrecognized tax benefits Effective Income Tax Rates | Metric | Three months ended Sep 30, 2024 | Three months ended Sep 30, 2023 | | :----- | :------------------------------ | :------------------------------ | | Effective income tax rate | 29.4% | 26.8% | | Metric | Nine months ended Sep 30, 2024 | Nine months ended Sep 30, 2023 | | :----- | :----------------------------- | :----------------------------- | | Effective income tax rate | 31.0% | 35.0% | - Unrecognized tax benefits were **$5.0 million** at September 30, 2024, and **$4.6 million** at December 31, 2023[57](index=57&type=chunk) - Net shortfall tax expense from stock-based compensation increased tax expense by **$0.2 million** and **$0.9 million** for the three and nine months ended September 30, 2024, respectively[57](index=57&type=chunk) [Note 9. Fair Value Measurements](index=20&type=section&id=Note%209.%20Fair%20Value%20Measurements) Classifies fair value measurements for financial instruments, including debt securities and contingent consideration - Fair value of interest rate cap agreements was **$13.5 million** at September 30, 2024, and **$29.0 million** at December 31, 2023, classified as Level 2[59](index=59&type=chunk) - Fair value of available-for-sale debt securities was **$38.9 million** at September 30, 2024, with **$23.1 million** classified as Level 1 and **$15.8 million** as Level 2[59](index=59&type=chunk) Contingent Consideration Liabilities | Metric | September 30, 2024 (In thousands) | | :----- | :-------------------------------- | | Balance of contingent consideration liabilities | $752 | | Issuance of contingent consideration | $696 | | Settlement of contingent consideration liabilities | $(14,300) | | Changes in fair value | $2,819 | - Contingent consideration liabilities are classified as Level 3 fair value measurements[59](index=59&type=chunk) [Note 10. Accumulated Other Comprehensive Loss](index=22&type=section&id=Note%2010.%20Accumulated%20Other%20Comprehensive%20Loss) Details the components and changes in accumulated other comprehensive loss, primarily foreign currency adjustments Accumulated Other Comprehensive Loss Balance | Metric | January 1, 2024 (In thousands) | September 30, 2024 (In thousands) | | :----- | :----------------------------- | :-------------------------------- | | Balance of AOCL | $(59,101) | $(34,799) | Components of Other Comprehensive Income (Loss) | Component | Nine months ended Sep 30, 2024 (In thousands) | Nine months ended Sep 30, 2023 (In thousands) | | :-------- | :-------------------------------------------- | :-------------------------------------------- | | Foreign currency translation adjustments | $33,949 | $(14,843) | | Unrealized gain (loss) on cash flow hedges | $(10,115) | $(5,278) | | Unrealized gain (loss) on investments | $468 | $80 | | Net other comprehensive income (loss) | $24,302 | $(20,041) | [Note 11. Segment Information](index=22&type=section&id=Note%2011.%20Segment%20Information) Provides disaggregated financial data for the company's full service, back-up care, and educational advisory segments - Effective **January 1, 2024**, Sittercity operations were moved from the educational advisory and other services segment to the back-up care segment[65](index=65&type=chunk) Segment Revenue Performance (Three Months) | Segment | Three months ended Sep 30, 2024 Revenue (In thousands) | Three months ended Sep 30, 2023 Revenue (In thousands) | YoY Change (Revenue) | | :------ | :--------------------------------------------- | :--------------------------------------------- | :------------------- | | Full service center-based child care | $486,567 | $444,747 | +9.4% | | Back-up care | $201,783 | $171,423 | +17.7% | | Educational advisory services | $30,749 | $29,617 | +3.8% | Segment Income from Operations (Three Months) | Segment | Three months ended Sep 30, 2024 Income from Operations (In thousands) | Three months ended Sep 30, 2023 Income from Operations (In thousands) | YoY Change (Income from Operations) | | :------ | :---------------------------------------------------- | :---------------------------------------------------- | :---------------------------------- | | Full service center-based child care | $12,465 | $6,990 | +78.3% | | Back-up care | $70,487 | $52,257 | +34.9% | | Educational advisory services | $6,444 | $7,577 | -15.0% | Segment Revenue Performance (Nine Months) | Segment | Nine months ended Sep 30, 2024 Revenue (In thousands) | Nine months ended Sep 30, 2023 Revenue (In thousands) | YoY Change (Revenue) | | :------ | :-------------------------------------------- | :-------------------------------------------- | :------------------- | | Full service center-based child care | $1,477,284 | $1,333,469 | +10.8% | | Back-up care | $452,945 | $389,391 | +16.3% | | Educational advisory services | $81,638 | $79,749 | +2.4% | Segment Income from Operations (Nine Months) | Segment | Nine months ended Sep 30, 2024 Income from Operations (In thousands) | Nine months ended Sep 30, 2023 Income from Operations (In thousands) | YoY Change (Income from Operations) | | :------ | :--------------------------------------------------- | :--------------------------------------------------- | :---------------------------------- | | Full service center-based child care | $66,553 | $28,493 | +133.6% | | Back-up care | $118,063 | $97,500 | +21.1% | | Educational advisory services | $13,776 | $17,008 | -19.0% | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, liquidity, and cash flows, highlighting revenue and net income growth [Special Note Regarding Forward-Looking Statements](index=24&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) Cautions readers about forward-looking statements, inherent risks, and the company's non-obligation to update - The report contains **forward-looking statements**, identifiable by terms such as 'believes,' 'expects,' 'may,' 'will,' 'should,' 'seeks,' 'projects,' 'intends,' 'plans,' 'estimates,' or 'anticipates'[69](index=69&type=chunk) - **Forward-looking statements** involve inherent risks and uncertainties, and actual results may differ materially from those projected[69](index=69&type=chunk) - The company undertakes no obligation to update any **forward-looking statements** to reflect future events or developments, except as required by law[69](index=69&type=chunk) [Overview](index=24&type=section&id=Overview) Provides an overview of Bright Horizons' business, strategic priorities, and operating environment challenges - Bright Horizons is a leading provider of early education and child care, back-up and family care solutions, and workforce education services, operating **1,028 centers** as of **September 30, 2024**[71](index=71&type=chunk) - For the three months ended **September 30, 2024**, the full service center-based child care segment saw a **9%** revenue increase and **3%** net enrollment growth, while back-up care revenue increased by **18%** year-over-year due to increased utilization[71](index=71&type=chunk) - The company continues to navigate a **dynamic operating environment** characterized by increased costs, a tight labor market, varying enrollment demands, and shifting work demographics, leading to **portfolio optimization efforts** including center closures[71](index=71&type=chunk) - **Strategic priorities** include delivering high-quality services, connecting service lines, extending impact to new customers, and preserving a strong culture[71](index=71&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) Analyzes the company's financial performance, including revenue, gross profit, and net income, for the reporting periods [Three Months Ended September 30, 2024 Compared to the Three Months Ended September 30, 2023](index=27&type=section&id=Three%20Months%20Ended%20September%2030,%202024%20Compared%20to%20the%20Three%20Months%20Ended%20September%2030,%202023) Compares Q3 2024 and Q3 2023 financial results, highlighting revenue and net income growth drivers Financial Performance (Three Months) | Metric | 2024 (In thousands) | 2023 (In thousands) | Change (YoY) | | :----- | :------------------ | :------------------ | :----------- | | Revenue | $719,099 | $645,787 | +11.4% | | Cost of services | $537,564 | $488,142 | +10.1% | | Gross profit | $181,535 | $157,645 | +15.1% | | Income from operations | $89,396 | $66,824 | +33.8% | | Net income | $54,905 | $39,979 | +37.3% | - Full service center-based child care revenue increased by **9.4%** due to a **3%** net increase in enrollment and approximately **5%** average tuition rate increases[75](index=75&type=chunk) - Back-up care services revenue increased by **17.7%** primarily due to increased utilization of center-based, in-home, and school-age camp back-up care[75](index=75&type=chunk) - Personnel costs in the full service center-based child care segment increased by **6%**, including a **4%** increase in average hourly wages, and were impacted by reduced pandemic-related government support programs (which reduced operating expenses by **$13.2 million** in Q3 2023)[75](index=75&type=chunk) - Income from operations for the full service center-based child care segment increased by **78%** (**$5.5 million**), while back-up care segment income from operations increased by **35%** (**$18.2 million**). Educational advisory services income from operations decreased by **15%** (**$1.1 million**) due to investments[77](index=77&type=chunk) [Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023](index=29&type=section&id=Nine%20Months%20Ended%20September%2030,%202024%20Compared%20to%20the%20Nine%20Months%20Ended%20September%2030,%202023) Compares YTD 2024 and YTD 2023 financial results, showing significant revenue and net income increases Financial Performance (Nine Months) | Metric | 2024 (In thousands) | 2023 (In thousands) | Change (YoY) | | :----- | :------------------ | :------------------ | :----------- | | Revenue | $2,011,867 | $1,802,609 | +11.6% | | Cost of services | $1,532,792 | $1,386,787 | +10.5% | | Gross profit | $479,075 | $415,822 | +15.2% | | Income from operations | $198,392 | $143,001 | +38.7% | | Net income | $111,068 | $68,699 | +61.7% | - Full service center-based child care revenue increased by **10.8%** due to a **5%** net increase in enrollment and approximately **5%** average tuition rate increases[80](index=80&type=chunk) - Back-up care services revenue increased by **16.3%** primarily due to increased utilization[81](index=81&type=chunk) - Personnel costs in the full service center-based child care segment increased by **7%**, including a **4%** increase in average hourly wages, and were impacted by reduced pandemic-related government support programs (which reduced operating expenses by **$48.3 million** in 2023)[81](index=81&type=chunk) - Income from operations for the full service center-based child care segment increased by **134%** (**$38.1 million**), while back-up care segment income from operations increased by **21%** (**$20.6 million**). Educational advisory services income from operations decreased by **19%** (**$3.2 million**) due to investments[82](index=82&type=chunk) [Non-GAAP Financial Measures and Reconciliation](index=32&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliation) Reconciles non-GAAP financial measures to GAAP, explaining their use and showing year-over-year growth Non-GAAP Financial Measures Reconciliation (Three Months) | Metric | Three months ended Sep 30, 2024 (In thousands) | Three months ended Sep 30, 2023 (In thousands) | Change (YoY) | | :----- | :--------------------------------------------- | :--------------------------------------------- | :----------- | | Adjusted EBITDA | $120,989 | $101,168 | +19.6% | | Adjusted income from operations | $89,396 | $66,824 | +33.8% | | Adjusted net income | $64,901 | $51,121 | +27.0% | | Diluted adjusted earnings per common share | $1.11 | $0.88 | +26.1% | Non-GAAP Financial Measures Reconciliation (Nine Months) | Metric | Nine months ended Sep 30, 2024 (In thousands) | Nine months ended Sep 30, 2023 (In thousands) | Change (YoY) | | :----- | :-------------------------------------------- | :-------------------------------------------- | :----------- | | Adjusted EBITDA | $298,600 | $252,927 | +18.1% | | Adjusted income from operations | $198,392 | $149,041 | +33.1% | | Adjusted net income | $145,823 | $116,235 | +25.4% | | Diluted adjusted earnings per common share | $2.49 | $2.01 | +23.9% | - Non-GAAP financial measures exclude items such as **amortization of intangible assets**, **stock-based compensation expense**, and other costs (e.g., value-added tax expense related to prior periods, interest on deferred consideration)[84](index=84&type=chunk)[85](index=85&type=chunk) - These non-GAAP measures are used to facilitate **comparative assessment of operating performance**, **evaluate internal performance**, and **determine incentive compensation**[86](index=86&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) Discusses the company's cash position, operating cash flows, debt, and ability to meet future obligations - Cash and cash equivalents were **$109.9 million** (**$119.1 million** including restricted cash) at September 30, 2024, up from **$71.6 million** (**$89.5 million** including restricted cash) at December 31, 2023[88](index=88&type=chunk) - The company had **$389.8 million** available for borrowing under its **$400 million** revolving credit facility at September 30, 2024[88](index=88&type=chunk) - Net cash provided by operating activities increased to **$216.8 million** for the nine months ended **September 30, 2024**, from **$161.0 million** in the prior year, primarily due to increased net income and favorable working capital timing[91](index=91&type=chunk)[92](index=92&type=chunk) - Net cash used in financing activities increased to **$95.8 million** for the nine months ended **September 30, 2024**, from **$60.5 million** in the prior year, mainly due to **$103.9 million** in payments for deferred and contingent consideration related to acquisitions[91](index=91&type=chunk)[94](index=94&type=chunk) - The company believes its current liquidity sources are **adequate** to fund obligations and liquidity requirements for at least the **next 12 months**[89](index=89&type=chunk) [Critical Accounting Policies](index=36&type=section&id=Critical%20Accounting%20Policies) States that no material changes have occurred to critical accounting policies since the prior annual report - There have been no **material changes** to the company's critical accounting policies since **December 31, 2023**, as discussed in its Annual Report on Form 10-K[99](index=99&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Addresses the company's exposure to interest rate and foreign currency exchange rate risks - The company is exposed to **market risk** from changes in interest rates and foreign currency exchange rates[100](index=100&type=chunk) - No **material changes** in market risk exposure have occurred since **December 31, 2023**[100](index=100&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Confirms the effectiveness of disclosure controls and procedures, with no material changes in internal control - The Chief Executive Officer and Chief Financial Officer concluded that **disclosure controls and procedures were effective** as of **September 30, 2024**[102](index=102&type=chunk) - No **material changes** in internal control over financial reporting occurred during the quarter ended **September 30, 2024**[102](index=102&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) Discusses ongoing legal claims and management's assessment of their potential financial impact - The company is subject to claims, suits, and matters arising in the **ordinary course of business**[104](index=104&type=chunk) - Management believes the resolution of such legal matters will not have a **material adverse effect** on the company's financial position, results of operations, or cash flows[104](index=104&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) Refers to the annual report for risk factors, noting no material changes since the last filing - No **material changes** to the company's risk factors have occurred since the prior annual report[105](index=105&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details common stock purchases for tax payments and the status of the share repurchase program - The company purchased **225 shares** of common stock during the three months ended **September 30, 2024**, which were withheld for tax payments due upon the vesting of employee restricted stock unit awards[106](index=106&type=chunk) - No shares were repurchased under the **board-authorized share repurchase program** during the three months ended **September 30, 2024**[106](index=106&type=chunk) - **$198.3 million** remained available under the share repurchase program as of September 30, 2024[106](index=106&type=chunk) [Item 3. Defaults Upon Senior Securities](index=38&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Reports no defaults on senior securities [Item 4. Mine Safety Disclosures](index=38&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) States that this item is not applicable to the company [Item 5. Other Information](index=38&type=section&id=Item%205.%20Other%20Information) Confirms no Rule 10b5-1 trading arrangements were adopted, modified, or terminated by directors or officers - No directors or officers adopted, modified, or terminated any Rule 10b5-1 trading arrangements during the three months ended **September 30, 2024**[108](index=108&type=chunk) [Item 6. Exhibits](index=39&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the Form 10-Q, including certifications and XBRL documents - Exhibits include **Principal Executive Officer Certification (31.1, 32.1)** and **Principal Financial Officer Certification (31.2, 32.2)**[109](index=109&type=chunk) - **Inline XBRL documents** (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase Documents) are filed as exhibits[109](index=109&type=chunk) [Signatures](index=40&type=section&id=Signatures) Confirms the official signing of the Form 10-Q report by the Chief Financial Officer - The report was signed by **Elizabeth Boland, Chief Financial Officer**[113](index=113&type=chunk) - The signing date was **November 7, 2024**[113](index=113&type=chunk)

I gave a buy rating to Bright Horizons Family (NYSE: BFAM ) in June, with my key thesis being that the business will continue to grow for a long period of time given the secularI'm a passionate investor with a strong foundation in fundamental analysis and a keen eye for identifying undervalued companies with long-term growth potential. My investment approach is a blend of value investing principles and a focus on long-term growth. I believe in buying quality companies at a discount to their intrinsic value ...

Bright Horizons Family Solutions Inc. (NYSE:BFAM) Q3 2024 Earnings Conference Call November 4, 2024 5:00 PM ET Company Participants Michael Flanagan - VP, IR Stephen Kramer - CEO Elizabeth Boland - CFO Conference Call Participants Andrew Steinerman - J.P. Morgan Manav Patnaik - Barclays George Tong - Goldman Sachs Jeff Meuler - Baird Toni Kaplan - Morgan Stanley Jeff Silber - BMO Capital Markets Josh Chan - UBS Faiza Alwy - Deutsche Bank Harold Antor - Jefferies Operator Greetings, and welcome to the Bright ...

Financial Data and Key Metrics Changes - Total revenue increased by 11% to $719 million, adjusted EBITDA rose by 20% to $121 million, and adjusted EPS grew by 26% to $1.11 per share [9][18] - Adjusted operating income of $89 million represented 12.4% of revenue, a 34% increase year-over-year [18] - The company generated $217 million in cash from operations, compared to $161 million last year, and ended the quarter with $110 million in cash [24] Business Line Data and Key Metrics Changes - Full service child care revenue increased by 9% to $487 million, with occupancy levels averaging in the low 60s [9][19] - Back-up care revenue grew by 18% to $202 million, with adjusted operating income of $70 million, representing 35% of revenue [11][22] - Educational Advisory revenue increased by 4% to $31 million, with an operating margin of 21% [14][22] Market Data and Key Metrics Changes - Enrollment in centers opened for more than one year increased at a low single-digit rate across U.S. and international operations [10] - The U.K. operations showed progress, narrowing losses compared to last year, but still require work to return to pre-pandemic performance levels [10][80] Company Strategy and Development Direction - The company is refining its full-year revenue guidance to approximately $2.675 billion, representing 11% growth, and adjusted EPS range of $3.37 to $3.42 [17][25] - Continued investments in building supply, new care types, and personalized market initiatives are expected to drive growth [13][59] - The company is focused on improving its EdAssist business through team investments, product enhancements, and marketing efforts [58] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's performance and outlook for Q4, with expectations of continued growth in back-up care and stabilization in full service [8][17] - The company anticipates low single-digit enrollment growth for the remainder of the year and into 2025 [32][69] - Management noted challenges in the bottom cohort of centers, particularly related to occupancy recovery and geographic factors [38][41] Other Important Information - The company held its first in-person client event since the pandemic, reinforcing its commitment to innovation and client engagement [15][16] - The company is maintaining a disciplined approach to M&A, focusing on long-term strategy rather than short-term acquisitions [54] Q&A Session Summary Question: What was the organic constant currency revenue growth in Q3? - Full service revenue growth was 9.4%, with organic constant currency at 8% [26][27] Question: Can you provide a breakdown of enrollment growth? - Enrollment growth was consistent in low single digits, with stronger infant and toddler enrollment aligning with preschool growth [29][30] Question: What are the expectations for occupancy rates? - Occupancy rates are expected to remain in the low 60s for the rest of the year, with gradual recovery anticipated in 2025 [36][37] Question: What are the key challenges in the bottom cohort of centers? - Challenges include geographic imbalances and client center utilization, with specific actions being taken for improvement [41][42] Question: What are the drivers of back-up care growth? - Growth is primarily driven by increased utilization by existing clients rather than new clients [51][52] Question: What is the outlook for EdAssist participation growth? - Participation growth has been muted, influenced by market conditions, but the company is focused on transformation and investment in this area [56][58] Question: How is the company addressing pricing strategies? - The company is considering price increases while balancing service delivery and cost structures, with a cautious approach to future pricing [74][75]

For the quarter ended September 2024, Bright Horizons Family Solutions (BFAM) reported revenue of $719.1 million, up 11.4% over the same period last year. EPS came in at $1.11, compared to $0.88 in the year-ago quarter.The reported revenue represents a surprise of +1.18% over the Zacks Consensus Estimate of $710.72 million. With the consensus EPS estimate being $1.06, the EPS surprise was +4.72%.While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street expe ...