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Bright Horizons Family Solutions Reports Fourth Quarter and Full Year 2022 Financial Results

Bright Horizons Family Solutions® Inc. (NYSE: BFAM), a leading provider of high-quality education and care solutions designed to help employers support employees across life and career stages, today announced financial results for the fourth quarter and full year of 2022 and provided guidance for 2023.

Fourth Quarter 2022 Highlights (compared to Fourth Quarter 2021):

  • Revenue of $530 million (increase of 15%)
  • Income from operations of $40 million (increase of 12%)
  • Net income of $18 million and diluted earnings per common share of $0.31 (increases of 2% and 7%, respectively)

Non-GAAP measures:

  • Adjusted income from operations* of $56 million (increase of 19%)
  • Adjusted EBITDA* of $91 million (increase of 15%)
  • Adjusted net income* of $44 million and diluted adjusted earnings per common share* of $0.77 (increases of 13% and 18%, respectively)

Year Ended December 31, 2022 Highlights (compared to Year Ended December 31, 2021):

  • Revenue of $2 billion (increase of 15%)
  • Income from operations of $158 million (increase of 22%)
  • Net income of $81 million and diluted earnings per common share of $1.37 (increases of 14% and 19%, respectively)

Non-GAAP measures:

  • Adjusted income from operations* of $183 million (increase of 30%)
  • Adjusted EBITDA* of $317 million (increase of 17%)
  • Adjusted net income* of $152 million and diluted adjusted earnings per common share* of $2.60 (increases of 25% and 31%, respectively)

“I am pleased to close out 2022 on a strong note, with revenue growth across all of our service lines, solid progression toward our enrollment growth goals, and solid use and participation activity in Back-Up Care and Educational Advisory,” said Stephen Kramer, Chief Executive Officer.

“We achieved a lot in 2022 from investing in our product and people, expanding our footprint, deepening our client relationships, and adapting to a dynamic environment. We enter 2023 with a strong foundation and well positioned to capitalize on the growth prospects that lie ahead.”

Fourth Quarter 2022 Results

Revenue increased $66.9 million, or 15%, in the fourth quarter of 2022, from the fourth quarter of 2021, attributable to contributions from the 75 centers acquired in Australia in July 2022, enrollment gains at our existing centers, alongside, expanded sales and utilization of back-up care and educational advisory services. These contributions were partially offset by lower foreign currency exchange rates for our United Kingdom and Netherlands operations.

Income from operations was $39.6 million for the fourth quarter of 2022 compared to $35.3 million for the same period in 2021, representing a 12% increase. The increase in income from operations reflects improved gross profit contributions in the full service center-based child care segment resulting from higher enrollment compared to the prior year, as well as increased contributions from back-up care and educational advisory services, partially offset by incremental impairment costs of $3.5 million in the full service center-based child care segment. Net income was $18.0 million for the fourth quarter of 2022, compared to $17.7 million for the fourth quarter of 2021, an increase of 2%, due to the increase in income from operations noted above, partially offset by higher interest expense and a higher effective tax rate. Diluted earnings per common share was $0.31 for the fourth quarter of 2022 compared to $0.29 for the fourth quarter of 2021.

In the fourth quarter of 2022, adjusted EBITDA* increased $11.7 million, or 15%, to $90.5 million, and adjusted income from operations* increased $9.0 million, or 19%, to $55.5 million from the fourth quarter of 2021, due primarily to the increase in gross profit in the full service center-based child care segment, and increased contributions from our back-up care and educational advisory services. Adjusted net income* increased by $5.2 million, or 13%, to $44.3 million, due to the increase in income from operations, partially offset by higher interest expense and a higher effective tax rate. Diluted adjusted earnings per common share* was $0.77 for the fourth quarter of 2022 compared to $0.65 in the same period in 2021.

As of December 31, 2022, the Company had more than 1,400 client relationships with employers across a diverse array of industries, and operated 1,078 early education and child care centers with the capacity to serve approximately 120,000 children and their families.

*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, stock-based compensation expense, and at times, non-recurring costs, such as impairment costs and other costs incurred due to the impact of COVID-19, transaction costs, loss on foreign currency forward contracts, loss on extinguishment of debt, and costs incurred in relation to a cyber incident. Adjusted income from operations represents income from operations before non-recurring costs, such as impairment costs and other costs incurred due to the impact of COVID-19, transaction costs, and costs incurred in relation to a cyber incident. Adjusted net income represents net income determined in accordance with GAAP, adjusted for stock-based compensation expense, amortization expense, and non-recurring costs, such as impairment costs and other costs incurred due to the impact of COVID-19, transaction costs, loss on foreign currency forward contracts, loss on extinguishment of debt, interest on deferred consideration, and costs incurred and any insurance recoveries received in relation to a cyber incident, and the income tax provision (benefit) thereon. Diluted adjusted earnings per common share is 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,” respectively.

Balance Sheet and Liquidity

At December 31, 2022, Bright Horizons had $36.2 million of cash and cash equivalents and $310.8 million available for borrowing under our revolving credit facility. In the year ended December 31, 2022, we generated approximately $188.5 million of cash from operations, compared to $227.3 million for the same period in 2021, and made investments in acquisitions, fixed assets, and other investments totaling $278.0 million, compared to $117.4 million for the same period in the prior year.

2023 Outlook

Based on current trends and expectations, we currently expect fiscal year 2023 revenue to be in the range of $2.3 billion to $2.4 billion, and diluted adjusted earnings per common share to be in the range of $2.80 to $3.00. The Company will provide additional information on its outlook during its earnings conference call.

Conference Call

Bright Horizons Family Solutions will host an investor conference call today at 5:00 pm ET to discuss the fourth quarter 2022 results, as well as the Company’s updated business outlook, its strategy and 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 March 9, 2023 at 1-844-512-2921 or, for international callers, at 1-412-317-6671, conference ID #13726922. 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.

Forward-Looking Statements

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, our investments, impact of our services, our market position, business trends, our future opportunities and business model, enrollment and occupancy levels, long-term growth strategy and value, estimated effective tax rate and tax expense and benefits, our care solutions, quality and expanded service offerings, our ability to respond to changing demands, our future business and financial performance, and our 2023 financial guidance. 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, ongoing disruptions to our operations as a result of the COVID-19 pandemic; the availability or lack of government support; changes in the demand for child care, dependent care and other workplace solutions, including variations in enrollment trends and lower than expected demand from employer sponsor clients as well as variations in return to work protocols; the constrained labor market for teachers and staff and ability to hire and retain talent, including the impact of increased compensation and labor costs; the possibility that acquisitions may disrupt our operations and expose us to additional risk; 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; the overall macroeconomic environment, including the impact of inflation and interest rate fluctuations; fluctuations in currency exchange rates; the effects of a cyber-attack, data breach or other security incident on our information technology system or software or those of our third party vendors; changes in tax rates or policies; and other risks and uncertainties more fully described in the “Risk Factors” section of our Annual Report on Form 10-K filed on February 25, 2022, 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.

With respect to our outlook for diluted adjusted earnings per common share, we do not provide the most directly comparable GAAP financial measure or corresponding reconciliation to such GAAP financial measure on a forward-looking basis. We are unable to predict with reasonable certainty and without unreasonable effort certain items such as the timing and amount of future impairments, transaction costs, net excess income tax benefits, and other non-recurring costs, as well as gains or losses from the early retirement of debt and the outcome from legal proceedings. These items are uncertain, depend on various factors outside our management’s control, and could significantly impact, either individually or in the aggregate, our future period earnings per common share as calculated and presented in accordance with GAAP.

For more information regarding adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per common share, please see the reconciliation of GAAP financial measures to non-GAAP financial measures 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 early education and child care, back-up care, and workforce education services. For 35 years, we have partnered with employers to support workforces by providing services that help working families and employees thrive personally and professionally. Bright Horizons operates approximately 1,100 early education and child care centers in the United States, the United Kingdom, the Netherlands, Australia and India, and serves more than 1,400 of the world’s leading employers. Bright Horizons’ early education and child care centers, back-up child and elder care, and workforce education programs help employees succeed at each life and career stage. For more information, go to www.brighthorizons.com.

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share data)

(Unaudited)

 

 

Three Months Ended December 31,

 

2022

 

%

 

2021

 

%

Revenue

$

529,522

 

 

100.0

%

 

$

462,656

 

 

100.0

%

Cost of services

 

418,262

 

 

79.0

%

 

 

355,250

 

 

76.8

%

Gross profit

 

111,260

 

 

21.0

%

 

 

107,406

 

 

23.2

%

Selling, general and administrative expenses

 

62,925

 

 

11.9

%

 

 

65,118

 

 

14.1

%

Amortization of intangible assets

 

8,785

 

 

1.7

%

 

 

6,980

 

 

1.5

%

Income from operations

 

39,550

 

 

7.4

%

 

 

35,308

 

 

7.6

%

Loss on extinguishment of debt

 

 

 

%

 

 

(2,571

)

 

(0.5

)%

Interest expense — net

 

(12,791

)

 

(2.4

)%

 

 

(8,350

)

 

(1.8

)%

Income before income tax

 

26,759

 

 

5.0

%

 

 

24,387

 

 

5.3

%

Income tax expense

 

(8,717

)

 

(1.6

)%

 

 

(6,694

)

 

(1.5

)%

Net income

$

18,042

 

 

3.4

%

 

$

17,693

 

 

3.8

%

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

Common stock — basic

$

0.31

 

 

 

 

$

0.29

 

 

 

Common stock — diluted

$

0.31

 

 

 

 

$

0.29

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Common stock — basic

 

57,506,602

 

 

 

 

 

59,886,195

 

 

 

Common stock — diluted

 

57,554,377

 

 

 

 

 

60,309,067

 

 

 

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share data)

(Unaudited)

 

 

Years Ended December 31,

 

2022

 

%

 

2021

 

%

Revenue

$

2,020,487

 

 

100.0

%

 

$

1,755,307

 

 

100.0

%

Cost of services

 

1,541,834

 

 

76.3

%

 

 

1,340,296

 

 

76.4

%

Gross profit

 

478,653

 

 

23.7

%

 

 

415,011

 

 

23.6

%

Selling, general and administrative expenses

 

289,156

 

 

14.3

%

 

 

256,821

 

 

14.6

%

Amortization of intangible assets

 

31,912

 

 

1.6

%

 

 

29,172

 

 

1.6

%

Income from operations

 

157,585

 

 

7.8

%

 

 

129,018

 

 

7.4

%

Loss on foreign currency forward contracts

 

(5,917

)

 

(0.3

)%

 

 

 

 

%

Loss on extinguishment of debt

 

 

 

%

 

 

(2,571

)

 

(0.2

)%

Interest expense — net

 

(39,486

)

 

(1.9

)%

 

 

(36,099

)

 

(2.1

)%

Income before income tax

 

112,182

 

 

5.6

%

 

 

90,348

 

 

5.1

%

Income tax expense

 

(31,541

)

 

(1.6

)%

 

 

(19,889

)

 

(1.1

)%

Net income

$

80,641

 

 

4.0

%

 

$

70,459

 

 

4.0

%

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

Common stock — basic

$

1.38

 

 

 

 

$

1.16

 

 

 

Common stock — diluted

$

1.37

 

 

 

 

$

1.15

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Common stock — basic

 

58,344,817

 

 

 

 

 

60,312,690

 

 

 

Common stock — diluted

 

58,490,652

 

 

 

 

 

60,871,399

 

 

 

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

 

 

 

 

December 31,

 

 

2022

 

2021

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

36,224

 

$

260,980

Accounts receivable — net

 

217,170

 

 

210,971

Prepaid expenses and other current assets

 

94,316

 

 

68,320

Total current assets

 

347,710

 

 

540,271

Fixed assets — net

 

571,471

 

 

598,134

Goodwill

 

1,727,852

 

 

1,481,725

Other intangible assets — net

 

245,574

 

 

251,032

Operating lease right-of-use assets

 

801,626

 

 

696,425

Other assets

 

104,636

 

 

72,460

Total assets

$

3,798,869

 

$

3,640,047

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Current portion of long-term debt

$

16,000

 

$

16,000

Borrowings under revolving credit facility

 

84,000

 

 

Accounts payable and accrued expenses

 

230,634

 

 

197,366

Current portion of operating lease liabilities

 

94,092

 

 

87,341

Deferred revenue

 

222,994

 

 

258,438

Other current liabilities

 

138,574

 

 

63,030

Total current liabilities

 

786,294

 

 

622,175

Long-term debt — net

 

961,581

 

 

976,396

Operating lease liabilities

 

810,403

 

 

703,911

Deferred income taxes

 

50,739

 

 

48,509

Other long-term liabilities

 

109,399

 

 

109,780

Total liabilities

 

2,718,416

 

 

2,460,771

Total stockholders’ equity

 

1,080,453

 

 

1,179,276

Total liabilities and stockholders’ equity

$

3,798,869

 

$

3,640,047

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

 

 

Years Ended December 31,

 

 

2022

 

2021

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

Net income

$

80,641

 

 

$

70,459

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation and amortization

 

106,142

 

 

 

108,830

 

Stock-based compensation expense

 

28,111

 

 

 

23,060

 

Impairment losses

 

14,061

 

 

 

10,582

 

Loss on foreign currency forward contracts

 

5,917

 

 

 

 

Loss on extinguishment of debt

 

 

 

 

2,571

 

Deferred income taxes

 

(9,644

)

 

 

(4,996

)

Other non-cash adjustments — net

 

3,419

 

 

 

9,701

 

Changes in assets and liabilities

 

(40,176

)

 

 

7,046

 

Net cash provided by operating activities

 

188,471

 

 

 

227,253

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

Purchases of fixed assets — net

 

(60,009

)

 

 

(57,662

)

Purchases of debt securities and other investments

 

(25,106

)

 

 

(29,912

)

Proceeds from the maturity of debt securities and sale of other investments

 

23,392

 

 

 

24,080

 

Payments and settlements for acquisitions — net of cash acquired

 

(210,409

)

 

 

(53,895

)

Settlement of foreign currency forward contracts

 

(5,917

)

 

 

 

Net cash used in investing activities

 

(278,049

)

 

 

(117,389

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

Extinguishment of long-term debt

 

 

 

 

(1,026,625

)

Borrowings of long-term debt

 

 

 

 

992,298

 

Revolving credit facility — net

 

84,000

 

 

 

 

Principal payments of long-term debt

 

(16,000

)

 

 

(8,063

)

Payments for debt issuance costs

 

 

 

 

(2,057

)

Purchase of treasury stock

 

(182,570

)

 

 

(213,830

)

Proceeds from issuance of common stock upon exercise of options and restricted stock upon purchase

 

13,235

 

 

 

37,503

 

Taxes paid related to the net share settlement of stock options and restricted stock

 

(6,138

)

 

 

(8,662

)

Payments of contingent consideration for acquisitions

 

(13,865

)

 

 

(594

)

Net cash used in financing activities

 

(121,338

)

 

 

(230,030

)

Effect of exchange rates on cash, cash equivalents and restricted cash

 

(2,471

)

 

 

(3,018

)

Net decrease in cash, cash equivalents and restricted cash

 

(213,387

)

 

 

(123,184

)

Cash, cash equivalents and restricted cash — beginning of year

 

265,281

 

 

 

388,465

 

Cash, cash equivalents and restricted cash — end of year

$

51,894

 

 

$

265,281

 

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

SEGMENT INFORMATION

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Full service

center-based

child care

 

Back-up care

 

Educational

advisory and

other services

 

Total

Three months ended December 31, 2022

 

 

 

 

 

 

 

Revenue

$

387,954

 

 

$

108,390

 

 

$

33,178

 

 

$

529,522

 

Income (loss) from operations

 

(4,112

)

 

 

32,806

 

 

 

10,856

 

 

 

39,550

 

Adjusted income from operations (1)

 

11,847

 

 

 

32,806

 

 

 

10,856

 

 

 

55,509

 

As a percentage of revenue

 

3

%

 

 

30

%

 

 

33

%

 

 

11

%

 

 

 

 

 

 

 

 

Three months ended December 31, 2021

 

 

 

 

 

 

 

Revenue

$

338,579

 

 

$

94,067

 

 

$

30,010

 

 

$

462,656

 

Income (loss) from operations

 

(4,596

)

 

 

31,391

 

 

 

8,513

 

 

 

35,308

 

Adjusted income from operations (2)

 

6,564

 

 

 

31,391

 

 

 

8,513

 

 

 

46,468

 

As a percentage of revenue

 

2

%

 

 

33

%

 

 

28

%

 

 

10

%

(1)

 

For the three months ended December 31, 2022, adjusted income from operations for the full service center-based child care segment represents loss from operations excluding impairment losses of $14.1 million for fixed assets and operating lease right-of-use assets, and costs incurred in relation to a cyber incident of $1.9 million.

(2)

 

For the three months ended December 31, 2021, adjusted income from operations for the full service center-based child care segment represents loss from operations excluding impairment losses incurred due to the impact of COVID-19 on our operations of $10.6 million for fixed assets and operating lease right-of-use assets, and transaction costs of $0.6 million related to acquisitions.

 

Full service

center-based

child care

 

Back-up care

 

Educational

advisory and

other services

 

Total

Year ended December 31, 2022

 

 

 

 

 

 

 

Revenue

$

1,493,758

 

 

$

409,554

 

 

$

117,175

 

 

$

2,020,487

 

Income from operations

 

12,937

 

 

 

118,788

 

 

 

25,860

 

 

 

157,585

 

Adjusted income from operations (1)

 

38,093

 

 

 

118,788

 

 

 

25,860

 

 

 

182,741

 

As a percentage of revenue

 

3

%

 

 

29

%

 

 

22

%

 

 

9

%

 

 

 

 

 

 

 

 

Year ended December 31, 2021

 

 

 

 

 

 

 

Revenue

$

1,297,208

 

 

$

351,103

 

 

$

106,996

 

 

$

1,755,307

 

Income (loss) from operations

 

(8,431

)

 

 

115,173

 

 

 

22,276

 

 

 

129,018

 

Adjusted income from operations (2)

 

2,729

 

 

 

115,173

 

 

 

22,276

 

 

 

140,178

 

As a percentage of revenue

 

%

 

 

33

%

 

 

21

%

 

 

8

%

(1)

 

For the year ended December 31, 2022, adjusted income from operations for the full service center-based child care segment represents income from operations excluding impairment losses of $14.1 million for fixed assets and operating lease right-of-use assets, transaction costs of $9.2 million related to acquisitions, and costs incurred in relation to a cyber incident of $1.9 million.

(2)

 

For the year ended December 31, 2021, adjusted income from operations for the full service center-based child care segment represents loss from operations excluding impairment losses incurred due to the impact of COVID-19 on our operations of $10.6 million for fixed assets and operating lease right-of-use assets, and transaction costs of $0.6 million related to acquisitions.

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

NON-GAAP RECONCILIATIONS

(In thousands, except share data)

(Unaudited)

 

 

 

 

 

 

 

Three Months Ended December 31,

 

Years Ended December 31,

 

 

2022

 

2021

 

2022

 

2021

Net income

$

18,042

 

 

$

17,693

 

 

$

80,641

 

 

$

70,459

 

Interest expense — net

 

12,791

 

 

 

8,350

 

 

 

39,486

 

 

 

36,099

 

Income tax expense

 

8,717

 

 

 

6,694

 

 

 

31,541

 

 

 

19,889

 

Depreciation

 

19,399

 

 

 

18,992

 

 

 

74,230

 

 

 

79,658

 

Amortization of intangible assets (a)

 

8,785

 

 

 

6,980

 

 

 

31,912

 

 

 

29,172

 

EBITDA

 

67,734

 

 

 

58,709

 

 

 

257,810

 

 

 

235,277

 

As a percentage of revenue

 

13

%

 

 

13

%

 

 

13

%

 

 

13

%

Additional adjustments:

 

 

 

 

 

 

 

COVID-19 related costs and impairments (b)

 

14,061

 

 

 

10,582

 

 

 

14,061

 

 

 

10,582

 

Stock-based compensation expense (c)

 

6,829

 

 

 

6,325

 

 

 

28,111

 

 

 

23,060

 

Other costs (d)

 

1,898

 

 

 

578

 

 

 

11,095

 

 

 

578

 

Loss on foreign currency forward contracts (e)

 

 

 

 

 

 

 

5,917

 

 

 

 

Loss on extinguishment of debt

 

 

 

 

2,571

 

 

 

 

 

 

2,571

 

Total adjustments

 

22,788

 

 

 

20,056

 

 

 

59,184

 

 

 

36,791

 

Adjusted EBITDA

$

90,522

 

 

$

78,765

 

 

$

316,994

 

 

$

272,068

 

As a percentage of revenue

 

17

%

 

 

17

%

 

 

16

%

 

 

16

%

 

 

 

 

 

 

 

 

Income from operations

$

39,550

 

 

$

35,308

 

 

$

157,585

 

 

$

129,018

 

COVID-19 related costs and impairments (b)

 

14,061

 

 

 

10,582

 

 

 

14,061

 

 

 

10,582

 

Other costs (d)

 

1,898

 

 

 

578

 

 

 

11,095

 

 

 

578

 

Adjusted income from operations

$

55,509

 

 

$

46,468

 

 

$

182,741

 

 

$

140,178

 

As a percentage of revenue

 

11

%

 

 

10

%

 

 

9

%

 

 

8

%

 

 

 

 

 

 

 

 

Net income

$

18,042

 

 

$

17,693

 

 

$

80,641

 

 

$

70,459

 

Income tax expense

 

8,717

 

 

 

6,694

 

 

 

31,541

 

 

 

19,889

 

Income before income tax

 

26,759

 

 

 

24,387

 

 

 

112,182

 

 

 

90,348

 

Amortization of intangible assets (a)

 

8,785

 

 

 

6,980

 

 

 

31,912

 

 

 

29,172

 

COVID-19 related costs and impairments (b)

 

14,061

 

 

 

10,582

 

 

 

14,061

 

 

 

10,582

 

Stock-based compensation expense (c)

 

6,829

 

 

 

6,325

 

 

 

28,111

 

 

 

23,060

 

Other costs (d)

 

1,898

 

 

 

578

 

 

 

11,095

 

 

 

578

 

Loss on foreign currency forward contracts (e)

 

 

 

 

 

 

 

5,917

 

 

 

 

Loss on extinguishment of debt

 

 

 

 

2,571

 

 

 

 

 

 

2,571

 

Interest on deferred consideration (f)

 

1,486

 

 

 

 

 

 

2,957

 

 

 

 

Adjusted income before income tax

 

59,818

 

 

 

51,423

 

 

 

206,235

 

 

 

156,311

 

Adjusted income tax expense (g)

 

(15,553

)

 

 

(12,393

)

 

 

(54,036

)

 

 

(34,915

)

Adjusted net income

$

44,265

 

 

$

39,030

 

 

$

152,199

 

 

$

121,396

 

As a percentage of revenue

 

8

%

 

 

8

%

 

 

8

%

 

 

7

%

 

 

 

 

 

 

 

 

Weighted average common shares outstanding — diluted

 

57,554,377

 

 

 

60,309,067

 

 

 

58,490,652

 

 

 

60,871,399

 

Diluted adjusted earnings per common share

$

0.77

 

 

$

0.65

 

 

$

2.60

 

 

$

1.99

 

(a)

 

Amortization of intangible assets represents amortization expense, including quarterly amortization expense of $5.0 million associated with intangible assets recorded in connection with our going private transaction in May 2008.

(b)

 

COVID-19 related costs and impairments represent impairment costs for long-lived assets as a result of temporary and permanent center closures and decreased operating performance due to the impact of the COVID-19 pandemic on our operations or the recovery therefrom. For the three and twelve months ended December 31, 2022, impairment costs totaled $14.1 million related to the full service center-based child care segment. For the three and twelve months ended December 31, 2021, impairment costs totaled $10.6 million related to the full service center-based child care segment.

(c)

 

Stock-based compensation expense represents non-cash stock-based compensation expense in accordance with Accounting Standards Codification Topic 718, Compensation-Stock Compensation.

(d)

 

Other costs in the three and twelve months ended December 31, 2022 consist of costs incurred in relation to a cyber incident of $1.9 million, and other costs in the year ended December 31, 2022 also consist of transaction costs incurred in connection with acquisitions of $9.2 million. Other costs in the three and twelve months ended December 31, 2021 consist of transaction costs incurred in connection with acquisitions.

(e)

 

During the year ended December 31, 2022, the Company entered into foreign currency forward contracts for the purchase of Australian dollars to satisfy the purchase price of an acquisition completed on July 1, 2022. The Company entered into the foreign currency forwards to lock the purchase price in US dollars at closing and mitigate the impact of any foreign currency fluctuations. A loss of $5.9 million resulting from fluctuations in foreign currency rates was recognized in the year ended December 31, 2022 in relation to these contracts.

(f)

 

Interest on deferred consideration represents the imputed interest on the deferred consideration issued in connection with the July 1, 2022 acquisition of Only About Children, a child care operator in Australia.

(g)

 

Adjusted income tax expense represents income tax expense calculated on adjusted income before income tax at an effective tax rate of approximately 26% for the three and twelve months ended December 31, 2022, and of approximately 24% and 22% for the three and twelve months ended December 31, 2021, respectively. The tax rate for 2022 represents a tax rate of approximately 28% applied to the adjusted income before income tax, less the effect of net excess tax benefits related to equity transactions.

 

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