• Total Revenue: Increased 11% to $719 million.
• Adjusted EBITDA: Up 20% to $121 million.
• Adjusted EPS: Grew 26% to $1.11 per share.
• Full-Service Childcare Revenue: Increased 9% to $487 million.
• Backup Care Revenue: Increased 18% to $202 million.
• Education Advisory Revenue: Grew to $31 million.
• Adjusted Operating Income: Increased 34% to $89 million, or 12.4% of revenue.
• Net Interest Expense: $12 million in Q3 2024.
• Cash from Operations: Generated $217 million year-to-date.
• Centers: Ended the quarter with 1,028 centers, adding 6 and closing 10.
• Full-Year Revenue Guidance: Approximately $2.675 billion, representing 11% growth.
• Full-Year Adjusted EPS Guidance: Range of $3.37 to $3.42.

• Warning! GuruFocus has detected 8 Warning Signs with BFAM.

Release Date: November 04, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Bright Horizons Family Solutions Inc (NYSE:BFAM) reported a strong third quarter with total revenue increasing by 11% to $719 million.
• The backup care segment performed exceptionally well, with revenue increasing by 18% to $202 million, driven by stronger employee engagement and use.
• Adjusted EBITDA increased by 20% to $121 million, and adjusted EPS grew by 26% to $1.11 per share.
• The company added six new centers in the third quarter, including partnerships with notable clients such as Colorado School of Mines and Yale New Haven Health system.
• The UK operations showed significant improvement, narrowing losses compared to the previous year, indicating progress towards pre-pandemic performance levels.

Negative Points

• Enrollment growth in the full-service childcare segment was only in the low single digits, indicating slower-than-desired growth.
• Occupancy rates remained in the low 60s, with a significant portion of centers still underperforming, particularly in the UK.
• The educational advisory segment experienced muted participant growth, with efforts ongoing to revitalize this area.
• The company closed 10 centers in the third quarter, reflecting challenges in certain locations.
• The bottom cohort of centers, particularly those under 40% occupied, continues to face challenges in improving enrollment momentum.

Q & A Highlights

Q: Elizabeth, could you tell us what your organic constant currency revenue growth was in the third quarter post the center closings? Also, have there been any centers acquired through M&A over the last 12 months? A: Overall, the full-service revenue growth was 9.4%. Organic constant currency growth was 8%, with FX contributing around 100 basis points and M&A about 50 basis points.

Q: Can you provide a breakdown of enrollment growth, particularly in the US and for different age groups? A: Enrollment was consistent both domestically and internationally in the low single-digits range. Infant and toddler enrollment has been stronger and is now more in line with preschool growth, which is why we didn't isolate them.

Q: What are your expectations for occupancy rates by the end of this year, and when do you expect them to recover to pre-COVID levels? A: We expect to continue around the low 60s range for the rest of this year. Our top cohort of centers is already at high occupancy, and we expect the mid-cohort group to get close to pre-COVID levels in 2025. The bottom cohort, however, is less clear and will take longer to recover.

Q: Can you discuss the key challenges around the momentum in the bottom cohort of centers? A: There is no single factor, but some are client centers, which are at the discretion of the client. In the lease consortium, there is an imbalance with more centers in the UK. Each center is being addressed individually with specific actions.

Q: Could you elaborate on the drivers of backup care growth? A: The growth is primarily driven by more utilization by eligible employees at existing clients, rather than new clients. Additional care types and options have allowed us to reach more employees at different stages of their care needs.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.