Bright Horizons Family Solutions Inc. (NYSE:BFAM) Q3 2021 Earnings Conference Call November 2, 2021 5:00 PM ET Company Participants Michael Flanagan – Director-Investor Relations Stephen Kramer – Chief Executive Officer Elizabeth Boland – Chief Financial Officer Conference Call Participants Andrew Steinerman – JP Morgan Hamzah Mazari – Jefferies Manav Patnaik – Barclays George Tong – Goldman Sachs Gary Bisbee – Bank of America Jeff Silber – BMO Capital Markets Jeff Mueller – Baird Toni Kaplan - Morgan Stanl ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________________________________________ FORM 10-Q __________________________________________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to 2 Wells Avenue Newton, Massachusetts 02459 (Address of principa ...

Financial Data and Key Metrics Changes - Revenue increased by 50% to $441 million, adjusted operating income rose by 25% to $34 million, and adjusted net income was $30 million, yielding adjusted EPS of $0.49, up 11% from last year [7][18] - Adjusted EBITDA was $68 million, representing 15% of revenue [18] Business Line Data and Key Metrics Changes - Full-service segment revenue grew by 144% in Q2, reflecting a recovery in early education operations, with 920 out of 1,006 centers open [8][19] - Backup care revenue was $81 million, down 40% year-over-year due to a surge in demand during the early pandemic [13][21] - Educational advisory business reported a 24% revenue growth, driven by new client launches and increased activity levels [15][24] Market Data and Key Metrics Changes - Occupancy levels in open full-service centers averaged between 50% to 60%, with expectations to return to pre-COVID levels by year-end [11][41] - Traditional in-center and in-home backup care usage is progressing towards pre-COVID levels, with solid growth in users and uses [22] Company Strategy and Development Direction - The company is focused on reopening centers and ramping up enrollment to pre-COVID levels, with expectations of 95% of centers open by the end of Q3 [29] - The company is actively seeking acquisition opportunities to expand its market presence and enhance service offerings [68] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about recovery and growth opportunities across all business lines, despite ongoing challenges from COVID-19 [17][31] - Labor inflation and tight labor markets are acknowledged as challenges, but the company is managing costs and pricing effectively [61][64] Other Important Information - The company has resumed its share repurchase program, acquiring $70 million of its shares in Q2 [28] - Interest expense was $9.6 million, consistent with the prior year, and the structural tax rate on adjusted net income was 21% [26] Q&A Session Summary Question: Inquiry about the economics of acquired services - Management explained that the economics of backup care services are based on usage, and the goal is to broaden service relevance to a larger employee population [34] Question: Clarification on educational advisory growth - Management indicated that mid-teens revenue growth is expected, with some headwinds on margins due to ramping the Sittercity business [38] Question: Occupancy rate expectations - Management confirmed that occupancy rates are expected to improve, with a goal of reaching near pre-COVID levels by year-end [41] Question: Addressable market for backup care - Management highlighted a significant opportunity in backup care, noting that the addressable market is larger than onsite childcare services [45] Question: Impact of Delta variant on return-to-office plans - Management noted that while some companies may delay return dates, there is a strong intent among employers to bring employees back to the office [60] Question: Labor inflation and hiring challenges - Management acknowledged labor inflation and a constrained labor pool, but emphasized their ability to price ahead of these challenges [61][64] Question: Center closures and new growth - Management clarified that the closure of centers was a location-by-location decision, with plans for most to reopen [77] Question: Future revenue recovery - Management expects full-service revenues to return to pre-COVID levels in early 2022, contingent on enrollment concentration and tuition levels [52]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________________________________________ FORM 10-Q __________________________________________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended March 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to Commission File Number: 001-35780 ____________________________ ...

Bright Horizons Family Solutions Inc. (NYSE:BFAM) Q1 2021 Results Conference Call May 5, 2021 5:00 PM ET Company Participants Michael Flanagan - Senior Director, IR Stephen Kramer - CEO, President & Director Elizabeth Boland - CFO & Treasurer Conference Call Participants Manav Patnaik - Barclays Keen Fai Tong - Goldman Sachs Hamzah Mazari - Jefferies Gary Bisbee - Bank of America Securities Jeff Silber - BMO Capital Markets Toni Kaplan - Morgan Stanley Operator Good day, ladies and gentlemen, and welcome to ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the fiscal year ended December 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to Commission File Number 001-35780 BRIGHT HORIZONS FAMILY SOLUTIONS INC. (Exact name of registrant as specified in its charter) Delaware 80-0188269 (Stat ...

Bright Horizons Family Solutions, Inc. (NYSE:BFAM) Q4 2020 Earnings Conference Call February 17, 2021 5:00 PM ET Company Participants Michael Flanagan - Senior Director, IR Stephen Kramer - CEO, President & Director Elizabeth Boland - CFO & Treasurer Conference Call Participants George Tong - Goldman Sachs Group Manav Patnaik - Barclays Bank Andrew Steinerman - JPMorgan Chase & Co. Toni Kaplan - Morgan Stanley Mario Cortellacci - Jefferies Gary Bisbee - Bank of America Merrill Lynch Jeff Silber - BMO Capita ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________________________________________ FORM 10-Q __________________________________________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended September 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to Commission File Number 001-35780 _________________________ ...

Financial Data and Key Metrics Changes - The company reported revenue of $338 million for Q3 2020, a decline of 34% compared to the previous year [30] - Adjusted EPS for the quarter was $0.02 per share [8] - Adjusted operating income declined to a loss of $3 million, with adjusted EBITDA at $30 million, representing 9% of revenue [30] Business Line Data and Key Metrics Changes - Full-service segment revenue contracted by $191 million, approximately 46% year-over-year, with adjusted operating income for this segment at a loss of $57 million [31][32] - Back-Up Care revenue grew by 16% to $93 million, with operating income of $46 million, driven by increased client engagement and new client additions [32][17] - The Ed Advisory business continued to perform well, with expectations for similar results in Q4 as seen in Q3 [44] Market Data and Key Metrics Changes - Approximately 900 centers were open by the end of Q3, representing nearly 90% of the total portfolio [13] - Enrollment in reopened centers was reported to be between 20% and 60%, with an average utilization rate of 35% to 40% [54][55] Company Strategy and Development Direction - The company is focusing on re-enrollment of previously enrolled families, followed by wait-listed families, and finally new families [14][91] - There is a strong emphasis on maintaining and deepening relationships with employer clients, which has been a key factor in navigating the pandemic [24][28] - The company plans to continue phasing in center reopenings in collaboration with client partners, supported by demand surveys [40] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery trajectory, noting that families are eager to return to centers due to the company's health and safety practices [15][28] - The company anticipates that full-service revenue will trail 2019 levels by approximately 35% to 45% in Q4, with a similar flow-through to operating income [41] - Management highlighted the importance of employer support in the recovery and the potential for long-term growth opportunities in the child care sector [28][60] Other Important Information - The company generated $170 million in cash from operations year-to-date, with $120 million generated in Q3 [36][100] - The company ended Q3 with $365 million in cash and no outstanding borrowings on its $400 million revolver [36] Q&A Session Summary Question: What characteristics are being evaluated for the centers that were closed? - Management indicated that closures were based on financial performance and overlap in the portfolio, focusing on smaller, lower-performing centers [48][49] Question: How is the utilization rate for open full-service centers? - The utilization rate is between 20% and 60%, with an average of 35% to 40% [54][55] Question: What is the growth contribution from new versus existing customers in the Back-Up Care business? - Approximately 100 new clients were added this year, contributing to growth, but a significant portion of growth is also attributed to increased usage due to COVID-19 [66][68] Question: How are clients approaching benefit commitments for 2021? - Renewal rates are high, with clients returning to traditional use banks while reserving the right to increase usage if necessary [77] Question: What is the risk of reclosure for centers? - Management does not foresee a scenario where full centers would close again, as child care is considered essential [81][82]

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements and their detailed notes for the periods ended June 30, 2020 and 2019 - The financial statements include Condensed Consolidated Balance Sheets, Statements of Income, Comprehensive Income (Loss), Changes in Stockholders' Equity, and Cash Flows[7](index=7&type=chunk)[8](index=8&type=chunk)[9](index=9&type=chunk)[10](index=10&type=chunk)[13](index=13&type=chunk)[16](index=16&type=chunk)[20](index=20&type=chunk)[23](index=23&type=chunk) - The COVID-19 pandemic led to temporary closure of a significant portion of child care centers, resulting in **$16.9 million impairment losses** on long-lived assets for the six months ended June 30, 2020[28](index=28&type=chunk)[29](index=29&type=chunk) - The Company received **$39.6 million** in government assistance (tax deferrals, tax credits, employee wage support) for the six months ended June 30, 2020[31](index=31&type=chunk) [Condensed Consolidated Balance Sheets](index=4&type=section&id=BRIGHT%20HORIZONS%20FAMILY%20SOLUTIONS%20INC.%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) The balance sheets present the company's financial position as of June 30, 2020, and December 31, 2019, detailing key asset and liability changes | Metric (in thousands) | June 30, 2020 | December 31, 2019 | Change (vs. Dec 31, 2019) | | :-------------------------- | :------------ | :---------------- | :------------------------ | | Cash and cash equivalents | $270,442 | $27,872 | +$242,570 | | Accounts receivable — net | $221,532 | $148,855 | +$72,677 | | Total current assets | $576,921 | $228,888 | +$348,033 | | Total assets | $3,611,596 | $3,330,420 | +$281,176 | | Total current liabilities | $491,547 | $483,290 | +$8,257 | | Total liabilities | $2,413,321 | $2,359,152 | +$54,169 | | Total stockholders' equity | $1,198,275 | $971,268 | +$227,007 | [Condensed Consolidated Statements of Income](index=5&type=section&id=BRIGHT%20HORIZONS%20FAMILY%20SOLUTIONS%20INC.%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20INCOME) The income statements detail financial performance for the three and six months ended June 30, 2020 and 2019, reflecting significant declines in revenue and net income | Metric (in thousands) | 3 Months Ended Jun 30, 2020 | 3 Months Ended Jun 30, 2019 | Change (YoY) | 6 Months Ended Jun 30, 2020 | 6 Months Ended Jun 30, 2019 | Change (YoY) | | :-------------------------- | :-------------------------- | :-------------------------- | :----------- | :-------------------------- | :-------------------------- | :----------- | | Revenue | $293,772 | $528,060 | -44.3% | $800,095 | $1,029,818 | -22.3% | | Gross profit | $65,236 | $139,621 | -53.3% | $174,095 | $266,568 | -34.7% | | Income from operations | $8,114 | $74,833 | -89.2% | $51,395 | $137,743 | -62.7% | | Net income | $359 | $49,327 | -99.3% | $31,091 | $91,369 | -65.9% | | Common stock — basic EPS | $0.01 | $0.85 | -98.8% | $0.53 | $1.57 | -66.2% | | Common stock — diluted EPS | $0.01 | $0.83 | -98.8% | $0.52 | $1.55 | -66.5% | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=7&type=section&id=BRIGHT%20HORIZONS%20FAMILY%20SOLUTIONS%20INC.%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME%20(LOSS)) These statements present net income adjusted for other comprehensive income or loss, including foreign currency translation and unrealized gains/losses on hedges | Metric (in thousands) | 3 Months Ended Jun 30, 2020 | 3 Months Ended Jun 30, 2019 | 6 Months Ended Jun 30, 2020 | 6 Months Ended Jun 30, 2019 | | :-------------------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income | $359 | $49,327 | $31,091 | $91,369 | | Foreign currency translation adjustments | $1,557 | $(10,796) | $(37,951) | $(3,818) | | Unrealized gain (loss) on cash flow hedges and investments, net of tax | $793 | $(4,303) | $(3,477) | $(7,170) | | Total other comprehensive income (loss) | $2,350 | $(15,099) | $(41,428) | $(10,988) | | Comprehensive income (loss) | $2,709 | $34,228 | $(10,337) | $80,381 | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=BRIGHT%20HORIZONS%20FAMILY%20SOLUTIONS%20INC.%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20STOCKHOLDERS'%20EQUITY) This section details changes in stockholders' equity for the three and six months ended June 30, 2020 and 2019, including stock issuances and compensation | Metric (in thousands) | Balance at Jan 1, 2020 | Issuance of common stock | Stock-based compensation expense | Shares received in net share settlement | Purchase of treasury stock | Retirement of treasury stock | Other comprehensive loss | Net income | Balance at Jun 30, 2020 | | :-------------------------------------------------- | :--------------------- | :----------------------- | :------------------------------- | :-------------------------------------- | :------------------------- | :--------------------------- | :----------------------- | :--------- | :---------------------- | | Common Stock (Amount) | $58 | $2 | — | — | — | $(1) | — | — | $60 | | Additional Paid-in Capital | $648,031 | $249,788 | $9,438 | $(7,715) | — | $(32,207) | — | — | $885,373 | | Accumulated Other Comprehensive Income (Loss) | $(50,331) | — | — | — | — | — | $(41,428) | — | $(91,759) | | Retained Earnings | $373,510 | — | — | — | — | — | — | $31,091 | $404,601 | | Total Stockholders' Equity | $971,268 | $249,790 | $9,438 | $(7,715) | $(32,208) | — | $(41,428) | $31,091 | $1,198,275 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=BRIGHT%20HORIZONS%20FAMILY%20SOLUTIONS%20INC.%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) The cash flow statements show a significant increase in cash from financing activities in H1 2020, primarily due to common stock issuance | Metric (in thousands) | 6 Months Ended Jun 30, 2020 | 6 Months Ended Jun 30, 2019 | Change (YoY) | | :-------------------------------------------------- | :-------------------------- | :-------------------------- | :----------- | | Net cash provided by operating activities | $51,260 | $190,611 | -73.1% | | Net cash used in investing activities | $(28,275) | $(90,899) | +68.9% | | Net cash provided by (used in) financing activities | $221,470 | $(112,378) | +297.1% | | Net increase (decrease) in cash, cash equivalents and restricted cash | $243,547 | $(12,252) | N/A | | Cash, cash equivalents and restricted cash — end of period | $274,739 | $26,226 | +948.3% | [Notes to Condensed Consolidated Financial Statements](index=13&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed explanations and disclosures for the financial statements, covering accounting policies and the COVID-19 pandemic's impact [1. Organization and Basis of Presentation](index=13&type=section&id=1.%20Organization%20and%20Basis%20of%20Presentation) This note details the company's business, geographical presence, accounting principles, and the COVID-19 pandemic's impact on liquidity - Bright Horizons provides center-based child care and early education, back-up child and adult/elder care, tuition assistance, student loan repayment program administration, and educational advisory services in the US, UK, Netherlands, Puerto Rico, Canada, and India[25](index=25&type=chunk) - The COVID-19 pandemic caused temporary closure of a significant portion of child care centers in March 2020; over **400 centers** were operating as of June 30, 2020, with phased re-opening continuing[28](index=28&type=chunk) - In response to COVID-19, the Company implemented cost management and liquidity measures including employee furloughs, reduced discretionary spending, temporary executive compensation reductions, government assistance, renegotiated lease terms, increased revolving credit facility to **$400 million**, and raised **$249.8 million** from common stock issuance[29](index=29&type=chunk) - The allowance for credit losses increased from **$1.226 million** at January 1, 2020, to **$8.351 million** at June 30, 2020, due to increased demand for back-up care services and a deteriorating economic environment[32](index=32&type=chunk)[33](index=33&type=chunk) [2. Revenue Recognition](index=16&type=section&id=2.%20Revenue%20Recognition) This note explains revenue streams from child care, back-up care, and educational advisory services, disaggregating revenue by segment and region - Revenue is comprised of full service center-based child care, back-up care (including self-sourced reimbursed care), and educational advisory services[36](index=36&type=chunk) - Revenue growth in the back-up care segment for the three months ended June 30, 2020, was primarily attributable to increased utilization for self-sourced reimbursed care due to the acute need for child care during temporary school and center closures[36](index=36&type=chunk) Disaggregated Revenue (3 Months Ended June 30, in thousands) | Segment | 2020 Revenue | 2019 Revenue | Change (YoY) | | :------------------------------ | :----------- | :----------- | :----------- | | Center-based child care | $137,306 | $438,580 | -68.7% | | Back-up care | $135,904 | $70,049 | +94.0% | | Educational advisory services | $20,562 | $19,431 | +5.8% | | **Total** | **$293,772** | **$528,060** | **-44.3%** | Disaggregated Revenue (6 Months Ended June 30, in thousands) | Segment | 2020 Revenue | 2019 Revenue | Change (YoY) | | :------------------------------ | :----------- | :----------- | :----------- | | Center-based child care | $548,697 | $856,900 | -35.9% | | Back-up care | $210,071 | $134,743 | +55.9% | | Educational advisory services | $41,327 | $38,175 | +8.2% | | **Total** | **$800,095** | **$1,029,818** | **-22.3%** | [3. Leases](index=17&type=section&id=3.%20Leases) This note outlines operating lease arrangements, expenses, and liability maturity, including COVID-19's impact on lease payment renegotiations - The Company primarily has operating leases for child care centers, corporate offices, call centers, and office equipment; it does not have any finance leases[41](index=41&type=chunk) Lease Expense (in thousands) | Expense Type | 3 Months Ended Jun 30, 2020 | 3 Months Ended Jun 30, 2019 | Change (YoY) | 6 Months Ended Jun 30, 2020 | 6 Months Ended Jun 30, 2019 | Change (YoY) | | :------------------------ | :-------------------------- | :-------------------------- | :----------- | :-------------------------- | :-------------------------- | :----------- | | Operating lease expense | $38,667 | $30,429 | +27.1% | $72,528 | $61,389 | +18.1% | | Variable lease expense | $6,120 | $8,653 | -29.3% | $15,353 | $16,986 | -9.6% | | **Total lease expense** | **$44,787** | **$39,082** | **+14.6%** | **$87,881** | **$78,375** | **+12.1%** | - Operating lease expense for the three and six months ended June 30, 2020, includes an impairment loss on operating lease right-of-use assets of **$5.2 million**[43](index=43&type=chunk) - As of June 30, 2020, the Company had deferred lease payments of **$11.7 million** due to COVID-19, with the majority payable over the next 1.5 years[45](index=45&type=chunk) [4. Acquisitions](index=18&type=section&id=4.%20Acquisitions) This note details acquisition activities for 2020 and 2019, including centers acquired, cash consideration, and goodwill allocation - During the six months ended June 30, 2020, the Company acquired **two centers** in the United States for cash consideration of **$4.3 million**, recording **$2.1 million** in goodwill to the full service center-based child care segment[47](index=47&type=chunk) - During the year ended December 31, 2019, the Company acquired **eight businesses** (three centers and a tuition program management division in the US, four centers in the Netherlands, and one back-up care provider in the UK) for **$53.3 million** cash (net of cash acquired)[48](index=48&type=chunk) - Goodwill recorded from 2019 acquisitions included **$25.4 million** for back-up care, **$14.0 million** for educational advisory services, and **$15.2 million** for full service center-based child care[48](index=48&type=chunk) [5. Goodwill and Intangible Assets](index=20&type=section&id=5.%20Goodwill%20and%20Intangible%20Assets) This note breaks down goodwill by segment and details intangible assets, including definite and indefinite-lived assets, with amortization schedules Goodwill Balance (in thousands) | Segment | Jan 1, 2019 | Dec 31, 2019 | Jun 30, 2020 | | :------------------------------ | :---------- | :----------- | :----------- | | Full service center-based child care | $1,155,705 | $1,181,230 | $1,161,873 | | Back-up care | $168,105 | $193,842 | $192,101 | | Educational advisory services | $23,801 | $37,801 | $37,676 | | **Total Goodwill** | **$1,347,611** | **$1,412,873** | **$1,391,650** | Intangible Assets (June 30, 2020, in thousands) | Asset Type | Weighted Average Amortization Period | Cost | Accumulated Amortization | Net Carrying Amount | | :------------------------------ | :----------------------------------- | :-------- | :----------------------- | :------------------ | | Customer relationships | 14 years | $402,243 | $(297,036) | $105,207 | | Trade names (definite-lived) | 6 years | $10,154 | $(8,490) | $1,664 | | Trade names (indefinite-lived) | N/A | $180,618 | — | $180,618 | | **Total Intangible Assets** | | **$593,015** | **$(305,526)** | **$287,489** | Estimated Amortization Expense (in thousands) | Period | Estimated Amortization Expense | | :-------------- | :----------------------------- | | Remainder of 2020 | $15,332 | | 2021 | $28,083 | | 2022 | $25,774 | | 2023 | $24,905 | | 2024 | $11,051 | [6. Credit Arrangements and Debt Obligations](index=21&type=section&id=6.%20Credit%20Arrangements%20and%20Debt%20Obligations) This note details senior secured credit facilities, including term loans, revolving credit, interest rates, covenants, and derivative hedging instruments - The Company's senior secured credit facilities consist of a secured term loan facility (maturing November 7, 2023) and a multi-currency revolving credit facility[53](index=53&type=chunk) - The revolving credit facility's borrowing capacity was increased from **$225 million** to **$400 million** in April and May 2020, maturing on July 31, 2022, with no outstanding borrowings at June 30, 2020[53](index=53&type=chunk) Term Loans Outstanding (in thousands) | Metric | June 30, 2020 | December 31, 2019 | | :--------------------------------------- | :------------ | :---------------- | | Term loans | $1,040,063 | $1,045,438 | | Deferred financing costs and original issue discount | $(4,512) | $(6,639) | | **Total debt** | **$1,035,551** | **$1,038,799** | - The Company uses variable-to-fixed interest rate swap agreements (**$500 million** notional, maturing October 31, 2021) and interest rate cap agreements (**$800 million** total notional, effective June 2020 and October 2021, expiring October 2023) to mitigate interest rate risk[57](index=57&type=chunk) [7. Earnings Per Share](index=25&type=section&id=7.%20Earnings%20Per%20Share) This note provides the computation of basic and diluted earnings per share using the two-class method for the periods ended June 30, 2020 and 2019 Basic Earnings Per Common Share (in thousands, except per share amounts) | Metric (in thousands, except per share) | 3 Months Ended Jun 30, 2020 | 3 Months Ended Jun 30, 2019 | 6 Months Ended Jun 30, 2020 | 6 Months Ended Jun 30, 2019 | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income | $359 | $49,327 | $31,091 | $91,369 | | Common stock — basic EPS | $0.01 | $0.85 | $0.53 | $1.57 | | Weighted average common shares outstanding — basic | 59,631,428 | 57,847,630 | 58,781,169 | 57,763,335 | Diluted Earnings Per Common Share (in thousands, except per share amounts) | Metric (in thousands, except per share) | 3 Months Ended Jun 30, 2020 | 3 Months Ended Jun 30, 2019 | 6 Months Ended Jun 30, 2020 | 6 Months Ended Jun 30, 2019 | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Earnings allocated to common stock | $358 | $49,093 | $30,947 | $90,942 | | Common stock — diluted EPS | $0.01 | $0.83 | $0.52 | $1.55 | | Weighted average common shares outstanding — diluted | 60,266,102 | 58,939,763 | 59,572,444 | 58,846,073 | [8. Income Taxes](index=26&type=section&id=8.%20Income%20Taxes) This note discusses effective income tax rates, impacted by income changes and stock-based compensation benefits, and details unrecognized tax benefits Effective Income Tax Rates | Period | 3 Months Ended Jun 30, 2020 | 3 Months Ended Jun 30, 2019 | 6 Months Ended Jun 30, 2020 | 6 Months Ended Jun 30, 2019 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Effective Tax Rate | (135.4)% | 21.8% | 3.0% | 19.9% | | Effective Tax Rate (pre-excess tax benefit) | ~29% | ~26% | ~29% | ~26% | - Excess tax benefits from stock-based compensation expense decreased tax expense by **$1.7 million** for the three months and **$8.6 million** for the six months ended June 30, 2020[68](index=68&type=chunk) - Unrecognized tax benefits were **$3.7 million** at June 30, 2020, with an expected change of **$0 to $0.3 million** over the next twelve months[68](index=68&type=chunk) [9. Fair Value Measurements](index=26&type=section&id=9.%20Fair%20Value%20Measurements) This note explains the fair value measurement hierarchy and provides details for financial instruments, including debt, derivatives, and contingent consideration - Fair value measurements are classified using a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[69](index=69&type=chunk) - Long-term debt had a carrying value of **$1.04 billion** and an estimated fair value of **$1.01 billion** at June 30, 2020, classified as Level 1[72](index=72&type=chunk) - Derivative financial instruments (interest rate swaps and caps) are classified as Level 2, with interest rate swaps as a **$7.6 million liability** and interest rate caps as a **$1.2 million asset** at June 30, 2020[73](index=73&type=chunk) - Liabilities for contingent consideration, measured at **$14.277 million** at June 30, 2020, are classified as Level 3 due to the use of unobservable inputs in the valuation model[75](index=75&type=chunk)[77](index=77&type=chunk) - Nonrecurring impairment losses of **$16.9 million** on fixed assets and operating lease right-of-use assets, and **$2.1 million** on an equity investment, were recognized for the six months ended June 30, 2020, and classified as Level 3 fair value measurements[77](index=77&type=chunk) [10. Accumulated Other Comprehensive Income (Loss)](index=29&type=section&id=10.%20Accumulated%20Other%20Comprehensive%20Income%20(Loss)) This note details components of accumulated other comprehensive income or loss, including foreign currency translation and unrealized gains/losses on hedges - Accumulated other comprehensive income (loss) is comprised of foreign currency translation adjustments and unrealized gains (losses) on cash flow hedges and investments, net of tax[81](index=81&type=chunk) Changes in Accumulated Other Comprehensive Income (Loss) by Component (Six months ended June 30, 2020, in thousands) | Component | Balance at Jan 1, 2020 | Net other comprehensive income (loss) | Balance at Jun 30, 2020 | | :------------------------------------------ | :--------------------- | :------------------------------------ | :---------------------- | | Foreign currency translation adjustments | $(47,835) | $(37,951) | $(85,786) | | Unrealized gain (loss) on interest rate swaps | $(2,566) | $(3,457) | $(6,023) | | Unrealized gain (loss) on interest rate caps | — | $(111) | $(111) | | Unrealized gain (loss) on investments | $70 | $91 | $161 | | **Total** | **$(50,331)** | **$(41,428)** | **$(91,759)** | [11. Segment Information](index=30&type=section&id=11.%20Segment%20Information) This note provides disaggregated revenue and income from operations for the three reportable segments, highlighting COVID-19's impact on child care - The Company's three operating and reportable segments are full service center-based child care, back-up care, and educational advisory services[83](index=83&type=chunk) Revenue and Income (Loss) from Operations (3 Months Ended June 30, 2020, in thousands) | Segment | Revenue | Income (Loss) from Operations | | :------------------------------ | :--------- | :---------------------------- | | Full service center-based child care | $137,306 | $(71,842) | | Back-up care | $135,904 | $75,121 | | Educational advisory services | $20,562 | $4,835 | | **Total** | **$293,772** | **$8,114** | Revenue and Income (Loss) from Operations (6 Months Ended June 30, 2020, in thousands) | Segment | Revenue | Income (Loss) from Operations | | :------------------------------ | :--------- | :---------------------------- | | Full service center-based child care | $548,697 | $(55,095) | | Back-up care | $210,071 | $97,360 | | Educational advisory services | $41,327 | $9,130 | | **Total** | **$800,095** | **$51,395** | - For the six months ended June 30, 2020, the full service center-based child care segment's income (loss) from operations included **$19.0 million** in impairment costs and **$4.4 million** in center closure costs due to the COVID-19 pandemic[85](index=85&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of financial performance, condition, liquidity, and cash flows, focusing on the COVID-19 pandemic's impact - The report contains forward-looking statements that involve risks and uncertainties, particularly those related to the COVID-19 pandemic[87](index=87&type=chunk) - The Company is a leading provider of child care, early education, back-up care, and workforce education services, primarily under multi-year contracts with employers[89](index=89&type=chunk) - The COVID-19 pandemic substantially disrupted global operations, leading to temporary center closures; a phased re-opening commenced, with over **400 centers** operating by June 30, 2020, and an expectation of over **85%** re-opening by September 30, 2020[89](index=89&type=chunk) - Back-up care services, especially self-sourced reimbursed care, saw unprecedented demand and expansion, supporting the business's economics during the second quarter[89](index=89&type=chunk) - Measures implemented to manage costs and improve liquidity include employee furloughs, reduced discretionary spending, temporary executive compensation reductions, participation in government assistance programs, renegotiating lease terms, increasing the revolving credit facility, and raising **$249.8 million** from common stock issuance[91](index=91&type=chunk) [Introduction, Overview and COVID-19 Update](index=31&type=section&id=Introduction,%20Overview%20and%20COVID-19%20Update) This section overviews the business, the COVID-19 pandemic's impact on global operations, including center closures and back-up care expansion, and mitigation measures - As of June 30, 2020, the Company managed 1,076 child care and early education centers, with over **400 operating** after temporary closures due to COVID-19[89](index=89&type=chunk) - The Company expects to have more than **85%** of its centers open by September 30, 2020, with re-opening guided by government requirements, client demand, and medical expert directives[89](index=89&type=chunk)[91](index=91&type=chunk) - Back-up care and educational advisory services remained fully operational, with expanded back-up care services (especially self-sourced reimbursed care) meeting acute demand during the pandemic[89](index=89&type=chunk) - Cost management and liquidity measures include furloughing employees, reducing discretionary spending, temporary executive compensation reductions, participating in government assistance, renegotiating lease terms, increasing the revolving credit facility to **$400 million**, and raising **$249.8 million** from common stock issuance[91](index=91&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) This section analyzes revenue, costs, and net income for the three and six months ended June 30, 2020, highlighting COVID-19's adverse impact Financial Performance Summary (3 Months Ended June 30, in thousands) | Metric | 2020 | 2019 | Change (YoY) | | :-------------------------- | :---------- | :---------- | :----------- | | Revenue | $293,772 | $528,060 | -44.3% | | Cost of services | $228,536 | $388,439 | -41.2% | | Gross profit | $65,236 | $139,621 | -53.3% | | Selling, general and administrative expenses | $49,247 | $56,491 | -12.8% | | Income from operations | $8,114 | $74,833 | -89.2% | | Net income | $359 | $49,327 | -99.3% | Financial Performance Summary (6 Months Ended June 30, in thousands) | Metric | 2020 | 2019 | Change (YoY) | | :-------------------------- | :---------- | :---------- | :----------- | | Revenue | $800,095 | $1,029,818 | -22.3% | | Cost of services | $626,000 | $763,250 | -17.9% | | Gross profit | $174,095 | $266,568 | -34.7% | | Selling, general and administrative expenses | $106,616 | $112,366 | -5.1% | | Income from operations | $51,395 | $137,743 | -62.7% | | Net income | $31,091 | $91,369 | -65.9% | [Three Months Ended June 30, 2020 Compared to the Three Months Ended June 30, 2019](index=35&type=section&id=Three%20Months%20Ended%20June%2030,%202020%20Compared%20to%20the%20Three%20Months%20Ended%20June%2030,%202019) This sub-section compares Q2 2020 financial results to Q2 2019, highlighting child care revenue decline, back-up care growth, and the impact of impairment and cost reductions - Revenue decreased by **$234.3 million (44%)** to **$293.8 million**; full service child care revenue decreased by **$301.3 million (69%)**, while back-up care revenue increased by **$65.9 million (94%)** due to unprecedented demand for self-sourced reimbursed care[95](index=95&type=chunk) - Cost of services decreased by **$159.9 million (41%)** to **$228.5 million**, primarily due to temporary center closures, furloughs, and government assistance, partially offset by **$11.9 million** in impairment costs and **$4.4 million** in center closure costs[96](index=96&type=chunk) - Income from operations decreased by **$66.7 million (89%)** to **$8.1 million**; the full service child care segment's income from operations decreased by **$123.7 million (239%)**, while the back-up care segment's income from operations increased by **$56.7 million (308%)**[101](index=101&type=chunk) - Net interest expense decreased to **$9.1 million** from **$11.7 million** due to decreased borrowings and lower interest rates[102](index=102&type=chunk) - The Company recorded an income tax benefit of **$1.4 million** at an effective rate of **(135%)**, compared to an expense of **$13.8 million** at **22%** in the prior year, influenced by changes in income (loss) before tax and excess tax benefits[103](index=103&type=chunk) [Six Months Ended June 30, 2020 Compared to the Six Months Ended June 30, 2019](index=37&type=section&id=Six%20Months%20Ended%20June%2030,%202020%20Compared%20to%20the%20Six%20Months%20Ended%20June%2030,%202019) This sub-section compares H1 2020 financial results to H1 2019, showing similar trends to quarterly results with a broader impact - Revenue decreased by **$229.7 million (22%)** to **$0.8 billion**; full service child care revenue decreased by **$308.2 million (36%)**, while back-up care revenue increased by **$75.3 million (56%)**[107](index=107&type=chunk) - Cost of services decreased by **$137.3 million (18%)** to **$0.6 billion**, driven by temporary center closures, furloughs, and government assistance, partially offset by **$16.9 million** in impairment costs and **$4.4 million** in center closure costs[108](index=108&type=chunk) - Income from operations decreased by **$86.3 million (63%)** to **$51.4 million**; the full service child care segment's income from operations decreased by **$148.5 million (159%)**, while the back-up care segment's income from operations increased by **$61.8 million (174%)**[112](index=112&type=chunk) - Net interest expense decreased to **$19.3 million** from **$23.7 million** due to decreased borrowings[113](index=113&type=chunk) - The Company recorded an income tax expense of **$1.0 million** at an effective rate of **3.0%**, compared to an expense of **$22.7 million** at **20%** in the prior year, influenced by changes in income (loss) before tax and excess tax benefits[114](index=114&type=chunk) [Non-GAAP Financial Measures and Reconciliation](index=39&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliation) This section defines and reconciles non-GAAP financial measures to GAAP equivalents, explaining their utility and limitations - Non-GAAP financial measures include Adjusted EBITDA, Adjusted Income from Operations, Adjusted Net Income, and Diluted Adjusted Earnings per Common Share[118](index=118&type=chunk)[121](index=121&type=chunk) Non-GAAP Financial Measures Reconciliation (3 Months Ended June 30, in thousands) | Metric | 2020 | 2019 | | :-------------------------- | :---------- | :---------- | | Net income (GAAP) | $359 | $49,327 | | EBITDA | $35,773 | $101,718 | | Adjusted EBITDA | $60,025 | $105,885 | | Income from operations (GAAP) | $8,114 | $74,833 | | Adjusted income from operations | $27,211 | $74,833 | | Adjusted net income | $26,445 | $58,458 | | Diluted adjusted EPS | $0.44 | $0.99 | Non-GAAP Financial Measures Reconciliation (6 Months Ended June 30, in thousands) | Metric | 2020 | 2019 | | :-------------------------- | :---------- | :---------- | | Net income (GAAP) | $31,091 | $91,369 | | EBITDA | $107,275 | $191,090 | | Adjusted EBITDA | $141,483 | $199,723 | | Income from operations (GAAP) | $51,395 | $137,743 | | Adjusted income from operations | $76,165 | $138,176 | | Adjusted net income | $70,091 | $106,270 | | Diluted adjusted EPS | $1.18 | $1.81 | - Adjustments include COVID-19 related costs (impairment, closure costs), stock-based compensation expense, other costs (new corporate headquarters occupancy), and non-cash operating lease expense[119](index=119&type=chunk)[120](index=120&type=chunk) - These non-GAAP measures are used to assess operating performance, evaluate ability to service debt, and as key performance indicators for incentive compensation, but have limitations as analytical tools and should not replace GAAP measures[121](index=121&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's liquidity, cash requirements, and sources, including measures taken to manage liquidity during the COVID-19 pandemic - Primary cash requirements are for ongoing operations and debt financing obligations; primary liquidity sources are existing cash, cash flows from operations, and borrowings under the revolving credit facility[123](index=123&type=chunk) - Cash and cash equivalents (including restricted cash) increased significantly to **$274.7 million** at June 30, 2020, from **$31.2 million** at December 31, 2019, largely due to **$249.8 million** net proceeds from common stock issuance in April 2020[123](index=123&type=chunk) - Working capital improved to a **positive $85.4 million** at June 30, 2020, from a deficit of **$254.4 million** at December 31, 2019, primarily due to the capital raise[123](index=123&type=chunk) - The Company received **$39.6 million** in government assistance (tax deferrals and wage support) for the six months ended June 30, 2020, and deferred **$11.7 million** in lease payments[123](index=123&type=chunk)[124](index=124&type=chunk) - Share repurchases were temporarily suspended due to COVID-19 after **$32.2 million** was repurchased in H1 2020, with **$194.9 million** remaining available under the program[124](index=124&type=chunk) - Management believes current funds, cash flows, and the revolving credit facility will be adequate for at least the next twelve months, but prolonged disruptions may necessitate additional financing[125](index=125&type=chunk) [Cash Provided by Operating Activities](index=43&type=section&id=Cash%20Provided%20by%20Operating%20Activities) This sub-section explains the decrease in cash from operating activities for H1 2020, primarily due to lower net income and working capital changes - Cash provided by operating activities decreased to **$51.3 million** for the six months ended June 30, 2020, from **$190.6 million** in the prior year[127](index=127&type=chunk) - The decrease was primarily due to a **$60.3 million** decrease in net income and changes in working capital, including significant increases in accounts receivable from the back-up care segment and an increase in other current assets for government support programs[127](index=127&type=chunk) [Cash Used in Investing Activities](index=43&type=section&id=Cash%20Used%20in%20Investing%20Activities) This sub-section details the decrease in cash used in investing activities for H1 2020, due to lower fixed asset additions and acquisitions - Cash used in investing activities decreased to **$28.3 million** for the six months ended June 30, 2020, from **$90.9 million** in the prior year[128](index=128&type=chunk) - The decrease was primarily due to a lower volume of fixed asset additions (**$25.0 million** net investment vs. **$45.0 million** in H1 2019) and acquisitions (**$4.3 million** for two centers vs. **$25.9 million** for five businesses in H1 2019) as investments were prioritized due to COVID-19[128](index=128&type=chunk) [Cash Provided by (Used in) Financing Activities](index=43&type=section&id=Cash%20Provided%20by%20(Used%20in)%20Financing%20Activities) This sub-section explains the shift from cash used in financing activities in H1 2019 to cash provided in H1 2020, driven by common stock issuance - Cash provided by financing activities was **$221.5 million** for the six months ended June 30, 2020, a significant shift from **$112.4 million** cash used in the prior year[129](index=129&type=chunk) - The increase was primarily due to **$249.9 million** from common stock issuance and **$21.2 million** from stock option exercises/restricted stock issuance, partially offset by **$32.7 million** for share repurchases and **$7.7 million** for taxes on stock settlements[129](index=129&type=chunk) [Debt](index=43&type=section&id=Debt) This sub-section updates on senior secured credit facilities, including term loans and revolving credit, highlighting increased capacity and hedging - Outstanding term loan borrowings were **$1,040.1 million** at June 30, 2020[131](index=131&type=chunk) - The revolving credit facility's capacity was increased to **$400 million** in April and May 2020, with the full line available for borrowings at June 30, 2020[131](index=131&type=chunk) - The Company uses **$500 million** notional interest rate swap agreements and **$800 million** notional interest rate cap agreements to manage variable interest rate exposure[131](index=131&type=chunk)[134](index=134&type=chunk) - The Company was in compliance with its financial covenants under the senior secured credit facilities at June 30, 2020[131](index=131&type=chunk) [Off-Balance Sheet Arrangements](index=44&type=section&id=Off-Balance%20Sheet%20Arrangements) This sub-section confirms the absence of off-balance sheet arrangements as of June 30, 2020 - As of June 30, 2020, the Company had no off-balance sheet arrangements[132](index=132&type=chunk) [Critical Accounting Policies](index=44&type=section&id=Critical%20Accounting%20Policies) This sub-section refers to the Annual Report on Form 10-K for critical accounting policies, noting no material changes since December 31, 2019 - There have been no material changes to the Company's critical accounting policies since December 31, 2019[133](index=133&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses market risk exposure from interest rates and foreign currency, noting no material changes since December 31, 2019, except for COVID-19 effects and new interest rate caps - The Company is exposed to market risk from changes in interest rates and fluctuations in foreign currency exchange rates[134](index=134&type=chunk) - No material changes in market risk exposure since December 31, 2019, other than the broad effects of the COVID-19 pandemic[134](index=134&type=chunk) - In June 2020, the Company entered into interest rate cap agreements with a total notional value of **$800 million** to provide interest rate protection if the one-month LIBOR rate increases above **1%**[134](index=134&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of disclosure controls and procedures and no material changes in internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of June 30, 2020[135](index=135&type=chunk) - There have been no material changes in internal control over financial reporting during the quarter ended June 30, 2020, and no material impact from the COVID-19 pandemic[136](index=136&type=chunk) [PART II. OTHER INFORMATION](index=46&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part provides other information, including legal proceedings, risk factors, equity sales, and exhibits [Item 1. Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) This section states the company is subject to ordinary course legal claims, generally covered by insurance, with no expected material adverse effect - The Company is subject to claims, suits, and matters arising in the ordinary course of business[138](index=138&type=chunk) - The resolution of such legal matters is not expected to have a material adverse effect on the Company's financial condition, results of operations, or cash flows[138](index=138&type=chunk) - There is no assurance that the Company's insurance will be adequate to cover all potential liabilities[138](index=138&type=chunk) [Item 1A. Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) This section refers to general risk factors and highlights the new material risk related to the global COVID-19 pandemic and its potential adverse impacts - The global COVID-19 pandemic has been added as a material risk factor, significantly disrupting the business and continuing to adversely impact financial condition and operating results[139](index=139&type=chunk) - Potential adverse impacts of COVID-19 include continued or permanent center closures, reduced enrollment, inability to maintain adequate staff, shifting demand, incremental costs for health protocols, decreased revenues from renegotiated contracts, deterioration in accounts receivable, inability to implement growth strategies, delayed re-openings, legal actions, reduced liquidity, and potential credit rating downgrades[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=48&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports no unregistered equity sales in Q2 2020, except for a private placement of common stock generating $249.8 million in net proceeds - No unregistered sales of equity securities occurred during the three months ended June 30, 2020, except for the private placement of **2,138,580 shares** of common stock to Durable Capital Master Fund LP on April 21, 2020[142](index=142&type=chunk) - The Company received net proceeds of **$249.8 million** from the common stock offering[142](index=142&type=chunk) - During April 2020, **467 shares** were retired in connection with tax withholding obligations for restricted stock awards, which are not part of the **$300 million** share repurchase program[143](index=143&type=chunk) - As of June 30, 2020, **$194.9 million** remained available under the share repurchase program, which has been temporarily suspended[143](index=143&type=chunk) [Item 3. Defaults Upon Senior Securities](index=48&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section confirms no defaults upon senior securities - There were no defaults upon senior securities[144](index=144&type=chunk) [Item 4. Mine Safety Disclosures](index=48&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that this item is not applicable to the company - This item is not applicable to the Company[144](index=144&type=chunk) [Item 5. Other Information](index=48&type=section&id=Item%205.%20Other%20Information) This section states no other information is reported under this item - No other information is applicable or reported under this item[144](index=144&type=chunk) [Item 6. Exhibits](index=49&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including various agreements and certifications - Exhibits include the Stock Purchase Agreement, Fourth and Fifth Amendments to the Credit Agreement, Principal Executive and Financial Officer Certifications (Sections 302 and 906), and Inline XBRL documents[145](index=145&type=chunk) [SIGNATURES](index=50&type=section&id=SIGNATURES) This section contains the signature page, confirming the report was duly authorized and signed by the Chief Financial Officer - The report was signed by Elizabeth Boland, Chief Financial Officer, on August 10, 2020[148](index=148&type=chunk)