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Bright Horizons' (BFAM) Q4 Earnings Beat Estimates, Up Y/Y

Zacks Equity Research

Bright Horizons Family Solutions Inc. BFAM reported fourth-quarter 2018 results, wherein earnings surpassed the Zacks Consensus Estimate, while revenues met the same.

The company, which shares space with K12 Inc. LRN, Laureate Education, Inc. LAUR and Strategic Education, Inc. STRA in the Zacks Schools industry, recorded improved earnings and revenues on a year-over-year basis, given higher enrollments in mature and ramping centers, new child care centers, back-up care and educational advisory clients. Strong cost management as well as 3-4% growth in average price also added to the positives.

Bright Horizons Family Solutions Inc. Price, Consensus and EPS Surprise

Bright Horizons Family Solutions Inc. Price, Consensus and EPS Surprise | Bright Horizons Family Solutions Inc. Quote

While adjusted earnings came in at 90 cents per share, beating the consensus mark of 84 cents by 7.1%, revenues of $478.2 million met the same.

On a year-over-year basis, adjusted earnings increased 23.3% from 73 cents reported in the prior-year quarter. Revenues also improved 9% from the year-ago figure of $439.9 million.

The company operates 1,082 child care and early education centers, with the capacity to serve approximately 120,000 children and families as of Dec 31, 2018.

Operating Highlights

During the quarter, its adjusted operating income increased 19% from the prior-year period to $64 million. Also, adjusted EBITDA of $93 million grew 14% year over year.

Segment Details

Bright Horizons currently operates in the following three reportable segments:

Full Service Center-Based Child Care includes the traditional center-based child care, preschool and elementary education. During the reported quarter, the segment’s revenues rose 8.2% from the year-ago level to $392.5 million. Also, adjusted operating income of $36.1 million was up 14% from the prior-year quarter.

Back-Up Dependent Care Services is a back-up child care, and in-home child and adult/elder dependent care center. The segment’s revenues of $65.5 million were up 9% year over year. Adjusted operating income also increased 28.2% to $21.3 million from the prior-year figure of $16.6 million.

Educational Advisory Services provides tuition reimbursement program management and related educational consulting services, along with college admissions advisory services. The segment recorded revenues of $20.2 million, up 19.2% year over year. Adjusted operating income of $6.3 million reflected 18.9% year-over-year increase.

Liquidity & Cash Flow

As of Dec 31, 2018, Bright Horizons’ cash and equivalents were $15.4 million compared with $23.2 million in the corresponding period of 2017. Cash flow provided by operating activities totaled $294.7 million at the end of the fourth quarter, up from $248.2 million at third-quarter end.

2018 Review

For the full year of 2018, Bright Horizons reported adjusted earnings of $3.21 per share, beating the consensus mark of $3.15 by 1.9%. Revenues during the same period came in at $1.9 billion, in line with the consensus estimate.

Adjusted earnings grew 19% from $2.69 per share and revenues increased 9% from $1.7 billion year over year. Moreover, adjusted operating income increased 14% to $241 million and adjusted EBITDA improved 10% from a year ago to $357 million.

2019 Guidance

Total revenues are anticipated to grow approximately 8-10% in 2019. Adjusted earnings are expected in the range of $3.57-$3.63 per share. Capital spending is expected in the range of $65-$70 million. This includes about $20-$25 million for relocation of the RUSM campus to Barbados.

The effective income tax rate for 2019 is likely to be around 16-17%.

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