Bright Horizons Family Solutions(BFAM) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for the period ended June 30, 2025, reflect increased total assets to $3.92 billion, total stockholders' equity to $1.40 billion, and strong revenue and net income growth to $1.40 billion and $92.8 million respectively, with robust operating cash flow Condensed Consolidated Balance Sheets As of June 30, 2025, total assets increased to $3.92 billion from $3.85 billion at year-end 2024, driven by higher cash and goodwill, while total liabilities decreased slightly to $2.52 billion, and total stockholders' equity grew to $1.40 billion Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $3,919,797 | $3,850,319 | | Cash and cash equivalents | $179,222 | $110,327 | | Goodwill | $1,824,479 | $1,762,683 | | Total Liabilities | $2,520,676 | $2,571,923 | | Current portion of revolving credit facility | $101,500 | $— | | Long-term debt — net | $796,956 | $918,449 | | Total Stockholders' Equity | $1,399,121 | $1,278,396 | Condensed Consolidated Statements of Income For Q2 2025, revenue grew 9.2% to $731.6 million and net income increased 39.8% to $54.8 million, with six-month revenue reaching $1.40 billion and net income rising 65.3% to $92.8 million, resulting in diluted EPS of $1.61 Statement of Income Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $731,570 | $670,059 | $1,397,097 | $1,292,768 | | Gross Profit | $182,550 | $162,412 | $338,287 | $297,540 | | Income from Operations | $86,052 | $69,059 | $148,324 | $108,996 | | Net Income | $54,775 | $39,174 | $92,824 | $56,163 | | Diluted EPS | $0.95 | $0.67 | $1.61 | $0.96 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash from operations was $220.4 million, with decreased investing activities and increased financing activities driven by debt repayments and treasury stock purchases, resulting in a net cash increase of $73.4 million Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $220,374 | $225,750 | | Net cash used in investing activities | ($37,968) | ($64,132) | | Net cash used in financing activities | ($116,087) | ($106,757) | | Net increase in cash | $73,364 | $54,138 | - Financing activities in H1 2025 included $405 million in borrowings under the revolving credit facility, offset by $451 million in principal payments on long-term debt and $60.3 million in treasury stock purchases[22] Notes to Condensed Consolidated Financial Statements The notes detail operations, revenue recognition, debt, acquisitions, and segment performance, highlighting revenue growth, a new $500 million share repurchase program, a $900 million revolving credit facility, and the impact of a new U.S. tax law - The company provides early education, back-up care, and educational advisory services, operating 1,020 early education and child care centers as of June 30, 2025[27][28] Revenue by Segment - Six Months Ended June 30 (in thousands) | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Full service center-based child care | $1,050,814 | $990,717 | | Back-up care | $291,282 | $251,162 | | Educational advisory services | $55,001 | $50,889 | | Total | $1,397,097 | $1,292,768 | - In April 2025, the company acquired two centers in the United Kingdom for $5.1 million, recording $3.6 million in goodwill[41] - On April 17, 2025, the company amended its credit facilities, increasing the revolving credit facility to $900 million and repaying the term loan A facility[49] - A new U.S. tax law, the One Big Beautiful Bill Act (OBBBA), was signed on July 4, 2025, with the company currently assessing its impact on financial statements[78] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes strong H1 2025 performance to growth across all segments, particularly 19% in back-up care, alongside successful debt refinancing, increased liquidity, and a new $500 million share repurchase program, navigating a dynamic environment with strategic focus Results of Operations For Q2 2025, revenue increased 9.2% to $731.6 million, driven by 19.2% growth in back-up care and 6.5% in full-service child care, improving gross profit margin to 25.0%, with H1 2025 income from operations rising 36.1% to $148.3 million Q2 2025 vs Q2 2024 Revenue Growth by Segment | Segment | Q2 2025 Revenue | Q2 2024 Revenue | % Change | | :--- | :--- | :--- | :--- | | Full service center-based child care | $540,267 | $507,077 | +6.5% | | Back-up care | $162,670 | $136,490 | +19.2% | | Educational advisory services | $28,633 | $26,492 | +8.1% | | Total Revenue | $731,570 | $670,059 | +9.2% | - Full service child care revenue growth in Q2 was driven by a 2% net increase in enrollment and average tuition rate increases of 4-5%[110] - Personnel costs, representing approximately 70% of costs for the full service segment, increased 10% in Q2 year-over-year due to enrollment growth and a 3-4% increase in average hourly wages[114] - For the six months ended June 30, 2025, income from operations increased 36% for the full-service child care segment and 41% for the back-up care segment compared to the prior year[141] Non-GAAP Financial Measures and Reconciliation For Q2 2025, Adjusted EBITDA increased 12.7% to $115.6 million and Adjusted Net Income rose 19.9% to $61.5 million, with six-month Adjusted EBITDA growing 17.1% to $207.9 million and Adjusted Net Income increasing 31.3% to $106.2 million Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $54,775 | $39,174 | $92,824 | $56,163 | | Adjustments | $60,840 | $63,456 | $115,095 | $121,448 | | Adjusted EBITDA | $115,615 | $102,630 | $207,919 | $177,611 | Reconciliation of Net Income to Adjusted Net Income (in thousands) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $54,775 | $39,174 | $92,824 | $56,163 | | Adjustments | $6,729 | $12,127 | $13,399 | $24,759 | | Adjusted Net Income | $61,504 | $51,301 | $106,223 | $80,922 | Liquidity and Capital Resources The company maintains strong liquidity with $179.2 million in cash and $483.3 million available under its upsized $900 million revolving credit facility, supported by a new $500 million share repurchase program and sufficient funds for future obligations - As of June 30, 2025, the company had $179.2 million in cash and $483.3 million available for borrowing under its revolving credit facility[151][152] - A new $500 million share repurchase program was authorized on June 3, 2025. During H1 2025, the company repurchased approximately 0.5 million shares for $60.7 million[156] - In April 2025, the company amended its credit facilities, increasing the revolving credit facility from $400 million to $900 million and used proceeds to repay the term loan A facility[166] - The company uses interest rate caps to mitigate risk on its variable-rate debt, with agreements covering a total notional value of $1.15 billion with various strike rates and expiration dates[169][170] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes in its exposure to market risks, including interest rate and foreign currency exchange rate fluctuations, since December 31, 2024 - The company is exposed to market risk from changes in interest rates and foreign currency exchange rates, but reports no material changes in this exposure since year-end 2024[175] Item 4. Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - Based on an evaluation as of June 30, 2025, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[176] - No changes occurred during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[177] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is subject to various ordinary course legal claims and suits, but does not anticipate a material adverse effect on its financial position or results from their resolution - The company is involved in ordinary course legal matters and believes their resolution will not have a material adverse effect on its financial results[178] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes have been made to the company's risk factors as disclosed in its 2024 Form 10-K[179] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, the company repurchased 348,375 shares of common stock under board-authorized programs, with a new $500 million share repurchase program becoming effective on June 3, 2025 Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid | Shares Purchased as Part of Program | | :--- | :--- | :--- | :--- | | April 2025 | 249,178 | $115.48 | 245,654 | | May 2025 | 58,570 | $123.13 | 54,500 | | June 2025 | 48,221 | $122.15 | 48,221 | | Total | 355,969 | | 348,375 | - A new $500 million share repurchase program was authorized effective June 3, 2025, replacing the prior program. As of June 30, 2025, $494.1 million remained available for future repurchases[181][185] Item 5. Other Information The company reports that no directors or officers adopted, modified, or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during Q2 2025 - No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading plan during the three months ended June 30, 2025[184] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the Refinancing Amendment dated April 17, 2025, officer certifications, and XBRL data files - Exhibits filed include the Refinancing Amendment for the credit facility, CEO/CFO certifications under Sarbanes-Oxley Sections 302 and 906, and Inline XBRL documents[186]