Bright Horizons Family Solutions Reports Second Quarter of 2020 Financial Results
WATERTOWN, MA - (Business Wire - August 5, 2020) - Bright Horizons Family Solutions® Inc. (NYSE: BFAM), a leading provider of high-quality education and care solutions designed to help leading employers support employees across life and career stages, today announced financial results for the second quarter of 2020 and provided an update on the status of current operations resulting from the COVID-19 pandemic.
Second Quarter 2020 Highlights (compared to second quarter 2019):
•Revenue of $294 million (decrease of 44%)
•Income from operations of $8 million (decrease of 89%)
•Net income of $0.4 million and diluted earnings per common share of $0.01 (decreases of 99%)
•Adjusted income from operations* of $27 million (decrease of 64%)
•Adjusted EBITDA* of $60 million (decrease of 43%)
•Adjusted net income* of $26 million and diluted adjusted earnings per common share* of $0.44 (decreases of 55%)
“While this past quarter has been one of the most challenging in the Company’s history, I couldn’t be more proud of the Bright Horizons team for rising to the challenges presented by the COVID-19 pandemic,” said Stephen Kramer, Chief Executive Officer. “We have made incredible progress during the second quarter, and we are excited to be welcoming families and staff back to our centers. The support of our clients through these challenging times has allowed us to provide creative solutions to meet the needs of their employees, while at the same time demonstrating the financial resiliency of our model.”
“This pandemic has refocused the nation’s attention on how crucial childcare is to the country’s economic recovery and stability,” Kramer continued. “Now more than ever, our centers provide vital care and education for young children and are a critical support to working parents juggling work and home life in new ways. At the same time, we continue to provide reliable and effective solutions for our employer partners who rely on us to enable their workforces to be productive. Our experience over the last several months operating our child care centers during the pandemic has extended our expertise in safe and healthy practices and uniquely positions us to capitalize on the long-term opportunity that lies ahead.”
COVID-19 Response Update
As we previously disclosed, the COVID-19 pandemic has substantially disrupted Bright Horizons’ global operations resulting in the temporary closure of a significant number of our child care centers. In mid-March, in response to the growing challenges presented by COVID-19, we began the temporary closure of a significant portion of our centers, while continuing to operate critical health care client and “hub” centers to provide care and support services to the children whose parents work on the front lines of the response. As countries and local jurisdictions have begun to lift certain restrictions and re-open, we have commenced a phased re-opening of our temporarily closed centers. As of June 30, 2020, over 400 of our child care centers were operating, out of a total of 1,076 centers we manage. Open centers are operating with specific COVID-19 protocols in place to protect the health and safety of the children, families and staff, including social distancing procedures for pick-up and drop-off, daily health checks, the use of face masks by our staff, limited group sizes, and enhanced hygiene and cleaning practices. We plan to continue this phased re-opening through the third and fourth quarters of 2020, and potentially in subsequent periods, and expect to have more than 85% of our centers open by September 30, 2020. However, as this is a continuously changing environment, the timing and cadence of re-opening the remaining temporarily closed centers may change as we continue to evaluate local conditions and factors governing opening decisions, including federal and state guidelines. We cannot anticipate how long it will take for re-opened centers to reach typical enrollment levels and there is no assurance that centers currently open will continue to operate. Additionally, as we continue to analyze the current environment, we may decide to not re-open certain centers in locations where demand and economic trends have shifted. Below is an update on the status of our operations and the actions we have taken in response to COVID-19.
United States: As of June 30, 2020, we were operating approximately 210 centers, most of which are employer-sponsored centers, and approximately 500 centers remained temporarily closed. As of July 31, 2020, we had re-opened a further 180 centers, bringing the total operating locations to approximately 390 centers. We are continuously monitoring guidance and taking direction from medical experts, the Centers for Disease Control and Prevention (CDC) and local, state and federal government authorities in order to determine the timing and cadence of re-opening our temporarily closed centers.
United Kingdom: As of June 30, 2020, we were operating approximately 135 centers, and approximately 170 centers remained temporarily closed. As of July 31, 2020, we had re-opened a further 130 centers, bringing the total operating locations to approximately 265 centers. We are continuously monitoring guidance from the U.K. health authorities in order to determine the timing and cadence of re-opening our temporarily closed centers.
Netherlands: We operate 61 centers in the Netherlands which have remained operational under the Dutch government mandate that requires nurseries to remain open to serve the children of parents who work in vital professions, such as health care or emergency services. In May 2020, the Dutch government lifted restrictions and centers opened to all families.
Back-up Care and Educational Advisory: Our other service offerings — Back-up Care and Educational Advisory — have remained fully operational for our clients and their employees. In response to the acute need for child care support during this pandemic, we have expanded Back-Up Care services to both current and new clients, supporting the needs of families affected by other child care and/or school closures, primarily through in-home and reimbursed self-sourced care. This pivot provided great value to our clients and their employees and, as a result, supported the economics of our business in the second quarter while a significant portion of our child care centers remained temporarily closed. As businesses and families adapt to new conditions in the coming months, we expect our Back-up Care services to return to primarily in-center and in-home service delivery at more normalized levels going forward.
Balance Sheet and Liquidity
Bright Horizons has a strong balance sheet, with $270 million of cash and an undrawn $400 million multi-currency revolving credit facility at June 30, 2020. For the six months ended June 30, 2020, we generated approximately $51.3 million of cash from operations, compared to $190.6 million in 2019, and made modest investments in fixed assets and acquisitions of $28.3 million, compared to $90.9 million in the prior year. We completed the issuance and sale of 2.1 million shares of common stock to a private investor on April 21, 2020, resulting in proceeds of $250 million, and we amended and expanded the capacity under our revolving credit facility to $400 million, effective May 7, 2020.
Second Quarter 2020 Results
Revenue decreased $234.3 million, or 44%, in the second quarter of 2020 from the second quarter of 2019. The decrease in revenue is related to the temporary closure of approximately 850 of our child care centers in March 2020 as a result of required business/school closures and shelter-in-place mandates due to the COVID-19 pandemic, partially offset by contributions from growth in our back-up care services.
Income from operations of $8.1 million for the second quarter of 2020 decreased from $74.8 million in the same 2019 period. The decrease in income from operations reflects reduced gross profit contributions in the full service center-based child care segment arising from the temporary closure of centers, related impairment charges on long-lived assets, investments and center closing costs of $18.4 million, partially offset by incremental contributions from our back-up care segment on expanded sales and increased utilization, as well as reductions in overhead spending from cost management initiatives. Net income was $0.4 million for the second quarter of 2020 compared to net income of $49.3 million in the same 2019 period, a decrease of $49.0 million, or 99%, due to the decrease in income from operations, partially offset by a lower effective tax rate. Diluted earnings per common share was $0.01 for the second quarter of 2020 compared to diluted earnings per share of $0.83 in the same 2019 period.
In the second quarter of 2020, adjusted EBITDA* decreased $45.9 million from the second quarter of 2019, or 43%, to $60.0 million, and adjusted income from operations* decreased $47.6 million, or 64%, to $27.2 million, due primarily to the decrease in gross profit in the full service center-based child care segment, partially offset by growth in the back-up care segment. Adjusted net income* decreased by $32.0 million, or 55%, to $26.4 million, due to the decrease in income from operations, partially offset by a lower effective tax rate. Diluted adjusted earnings per common share* was $0.44 compared to $0.99 in the second quarter of 2019.
As of June 30, 2020, the Company managed the operations of 1,076 child care and early education centers with the capacity to serve approximately 120,000 children and their families. As described above, over 400 child care centers with the capacity to serve approximately 50,000 children remained open or have re-opened after the temporary center closures due to the COVID-19 pandemic.
*Adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per common share are non-GAAP measures. Adjusted EBITDA represents earnings before interest, taxes, depreciation, amortization, the excess of lease expense over cash lease expense (prior to fiscal 2020), stock-based compensation expense, impairment costs including costs incurred due to the impact of COVID-19, transaction costs, center closing costs and duplicative corporate office costs. Adjusted income from operations represents income from operations before impairment costs, transaction costs, center closing costs and duplicative corporate office costs. Adjusted net income represents net income determined in accordance with GAAP, adjusted for stock-based compensation expense, amortization expense, impairment costs, transaction costs, center closing costs, duplicative corporate office costs, and the income tax provision (benefit) thereon. Diluted adjusted earnings per common share is a non-GAAP measure, calculated using adjusted net income. These non-GAAP measures are more fully described and are reconciled from the respective measures determined under GAAP in “Presentation of Non-GAAP Measures” and the attached table “Bright Horizons Family Solutions Inc. Non-GAAP Reconciliations.”
At this time, the duration and scope of the ongoing business disruption, including the pace of re-opening and ramping temporarily closed centers, cannot be predicted, and is dependent on many interdependent variables and decisions by government authorities and our client partners. As previously disclosed, the negative financial impact to our results and future financial or operational performance, including our annual performance for 2020, cannot be reasonably estimated. Therefore, we do not expect to provide financial guidance for fiscal 2020.
We will continue to work with our local teams on the operational decisions and prudently managing our spending to support the current operations, while we continue to re-ramp enrollment and re-open the remainder of our business. While these are unprecedented circumstances, our value proposition to families, staff and clients remains consistent and strong — to provide high-quality child care and early education, dependent care, and workforce education services. These challenging times highlight our crisis management abilities, our critical role in the business continuity plans of our client partners, our leadership in developing and implementing enhanced health and safety protocols, and the value that our unique service offering provides to the families and clients we serve. We remain confident in our business model, the strength of our client partnerships, the strength of our balance sheet and liquidity position, and in our ability to respond to changing market conditions.
Bright Horizons Family Solutions will host an investor conference call today at 5:00 pm ET to discuss the second quarter 2020, and the Company’s updated business and near term operating expectations. Interested parties are invited to listen to the conference call by dialing 1-877-407-9039 or, for international callers, 1-201-689-8470, and asking for the Bright Horizons Family Solutions conference call moderated by Chief Executive Officer Stephen Kramer. Replays of the entire call will be available through August 26, 2020 at 1-844-512-2921, or, for international callers, 1-412-317-6671, conference ID #13698065. A link to the audio webcast of the conference call and a copy of this press release are also available through the Investor Relations section of the Company’s web site, www.brighthorizons.com.
This press release includes forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company’s actual results may vary significantly from the results anticipated in these forward-looking statements, which can generally be identified by the use of forward-looking terminology, including the terms “believes,” “expects,” “may,” “will,” “should,” “seeks,” “projects,” “approximately,” “intends,” “plans,” “estimates” or “anticipates,” or, in each case, their negatives or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts, including statements regarding the Company’s intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, operating expectations, effects of COVID-19 on our operations, the continued operation of currently open centers, our phased re-opening plans for temporarily closed center locations, permanent center closures, timing when a majority of our centers will re-open, timing to re-ramp enrollment, impact of government mandates, cost-saving initiatives, future opportunities in the industry, growth in our back-up care segment, future financial performance, estimated effective tax rate and tax expense and our investments. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. The Company believes that these risks and uncertainties include, but are not limited to, prolonged disruptions to our operations as a result of required school and business closures and stay-at-home mandates in response to the COVID-19 pandemic, including current conditions and future developments in the public health arena; the impact of COVID-19 on the global economy; the availability or lack of government supports; changes in the demand for child care, dependent care and other workplace solutions, including variation in enrollment trends and lower than expected demand from employer sponsor clients as well as variations in return to work protocols as the economy re-opens; the possibility that acquisitions may disrupt our operations and expose us to additional risk; increased costs resulting from recommended or mandated enhanced health and safety protocols and physical distancing; our ability to pass on our increased costs; our indebtedness and the terms of such indebtedness; our ability to withstand seasonal fluctuations in the demand for our services; our ability to implement our growth strategies successfully; and other risks and uncertainties more fully described in the “Risk Factors” section of our Annual Report on Form 10-K filed February 27, 2020, and other factors disclosed from time to time in our other filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the time of this release and we do not undertake to publicly update or revise them, whether as a result of new information, future events or otherwise, except as required by law.
Presentation of Non-GAAP Measures
In addition to the results provided in accordance with U.S. generally accepted accounting principles (“GAAP”) throughout this press release, the Company has provided non-GAAP measurements - adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per common share - which present operating results on a basis adjusted for certain items. The Company uses these non-GAAP measures as key performance indicators for the purpose of evaluating performance internally, and in connection with determining incentive compensation for Company management, including executive officers. Adjusted EBITDA is also used in connection with the determination of certain ratio requirements under our credit agreement. We also believe these non-GAAP measures provide investors with useful information with respect to our historical operations. These non-GAAP measures are not intended to replace, and should not be considered superior to, the presentation of our financial results in accordance with GAAP. The use of the terms adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per common share may differ from similar measures reported by other companies and may not be comparable to other similarly titled measures. Adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per common share are reconciled from the respective measures under GAAP in the attached table “Bright Horizons Family Solutions Inc. Non-GAAP Reconciliations.”
About Bright Horizons Family Solutions Inc.
Bright Horizons® is a leading global provider of high-quality child care and early education, back-up care, and workplace education services. For more than 30 years, we have partnered with employers to support workforces by providing services that help working families and employees thrive personally and professionally. We operate approximately 1,100 child care centers in the United States, the United Kingdom, the Netherlands, Canada and India and serve more than 1,200 of the world’s leading organizations. Bright Horizons’ child care centers, back-up child and elder care, and workforce education programs, including tuition program management, education advising, and student loan repayment, help employees succeed at each life and career stage. For more information, go to www.brighthorizons.com.
|Chief Financial Officer - Bright Horizons|
|Senior Director of Investor Relations - Bright Horizons|
|Vice President - Communications - Bright Horizons|
The following information was filed by Bright Horizons Family Solutions Inc. (BFAM) on Wednesday, August 5, 2020 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.