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Bright Horizons Family Solutions Reports Second Quarter of 2023 Financial Results

Bright Horizons Family Solutions® Inc. (NYSE: BFAM), a leading provider of high-quality early education and child care, family care solutions, and workforce education services designed to support working families and client employees across life and career stages, today announced financial results for the second quarter of 2023 and updated financial guidance for 2023.

Second Quarter 2023 Highlights (compared to Second Quarter 2022):

  • Revenue of $603 million (increase of 23%)
  • Income from operations of $46 million (decrease of 5%)
  • Net income of $21 million and diluted earnings per common share of $0.35 (decreases of 17%)

Non-GAAP measures

  • Adjusted income from operations* of $46 million (decrease of 10%)
  • Adjusted EBITDA* of $82 million (decrease of 1%)
  • Adjusted net income* of $37 million and diluted adjusted earnings per common share* of $0.64 (decreases of 13% and 10%, respectively)

“I am pleased with our results this past quarter and for the first half of the year,” said Stephen Kramer, Chief Executive Officer. “Our full service segment performed well in the second quarter, highlighted by sequential occupancy improvement and total revenue growth of 23%, along with our back-up care segment which delivered strong results with 27% revenue growth and record utilization of traditional back-up care in the month of June. While the labor market for early childhood teachers remains tight, I am encouraged by our performance and the growth opportunity we have ahead across our full suite of solutions.”

Second Quarter 2023 Results

Revenue increased by $112.9 million, or 23%, in the second quarter of 2023 from the second quarter of 2022, attributable to enrollment gains and price increases at our existing centers, contributions from the 75 centers acquired in Australia in July 2022, as well as expanded sales and utilization of back-up care and educational advisory services.

Income from operations was $45.5 million for the second quarter of 2023 compared to $47.8 million for the second quarter of 2022, a decrease of 5%. Incremental gross profit contributions from the back-up care segment, resulting from higher utilization of back-up care services and from expanded sales of educational advisory services, were offset by decreased gross profit in the full service center-based child care segment as a result of operating cost increases and reduced funding from COVID-19 pandemic-related government support programs. Net income was $20.6 million for the second quarter of 2023 compared to $24.9 million for the second quarter of 2022, a decrease of 17%, due to the decrease in income from operations noted above, as well as higher net interest expense and a higher effective tax rate. Diluted earnings per common share was $0.35 for the second quarter of 2023 compared to $0.42 for the second quarter of 2022.

In the second quarter of 2023, adjusted EBITDA* decreased by $1.2 million, or 1%, to $81.9 million, and adjusted income from operations* decreased by $4.8 million, or 10%, to $45.5 million from the second quarter of 2022, due primarily to the decrease in gross profit in the full service center-based child care segment and partially offset by contributions from the back-up care and educational advisory and other services segments. Adjusted net income* decreased by $5.3 million, or 13%, to $36.8 million, as a result of the decrease in adjusted income from operations, as well as higher net interest expense and a higher effective tax rate. Diluted adjusted earnings per common share* was $0.64 for the second quarter of 2023 compared to $0.71 for the second quarter of 2022.

As of June 30, 2023, the Company had more than 1,400 client relationships with employers across a diverse array of industries, and operated 1,068 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 non-recurring costs, such as value-added tax expense related to prior periods, transaction costs, loss on foreign currency forward contracts and, at times, other non-recurring costs, such as impairment costs and other costs incurred due to the impact of COVID-19, and net costs incurred in relation to a cyber incident. Adjusted income from operations represents income from operations before non-recurring costs, such as value-added tax expense related to prior periods, transaction costs and, at times, other non-recurring costs, such as impairment costs and other costs incurred due to the impact of COVID-19, and net 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, and non-recurring costs, such as value-added tax expense related to prior periods, transaction costs, loss on foreign currency forward contracts, interest on deferred consideration and the income tax provision (benefit) thereon, and at times, other non-recurring costs, such as impairment costs and other costs incurred due to the impact of COVID-19, and net costs incurred in relation to a cyber incident. 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 June 30, 2023, the Company had $66.0 million of cash and cash equivalents and $385.7 million available for borrowing under our revolving credit facility. In the six months ended June 30, 2023, we generated $180.0 million of cash from operations, compared to $125.8 million for the same period in 2022, and made net investments primarily in fixed assets and acquisitions, totaling $68.7 million, compared to $23.1 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 $2.35 billion to $2.4 billion, and diluted adjusted earnings per common share to be in the range of $2.70 to $2.80. 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 results for the second quarter of 2023, as well as the Company’s updated business outlook, 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 August 22, 2023 at 1-844-512-2921 or, for international callers, at 1-412-317-6671, conference ID #13736587. 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, impact of our services, business trends, our future growth opportunities, enrollment and occupancy levels, back-up care utilization, the labor market, long-term growth strategy and value, estimated effective tax rate and tax expense and benefits related to equity transactions, our care solutions, 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; changes in general economic, political, business and financial market conditions, 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 28, 2023, 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 net excess income tax benefits, future impairments, transaction costs, 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, refer to the reconciliation of GAAP financial measures to the 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 more than 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 June 30,

 

 

2023

 

 

%

 

 

2022

 

 

%

Revenue

$

603,216

 

 

100.0

%

 

$

490,341

 

 

100.0

%

Cost of services

 

466,653

 

 

77.4

%

 

 

361,816

 

 

73.8

%

Gross profit

 

136,563

 

 

22.6

%

 

 

128,525

 

 

26.2

%

Selling, general and administrative expenses

 

81,899

 

 

13.6

%

 

 

73,673

 

 

15.0

%

Amortization of intangible assets

 

9,132

 

 

1.5

%

 

 

7,030

 

 

1.4

%

Income from operations

 

45,532

 

 

7.5

%

 

 

47,822

 

 

9.8

%

Loss on foreign currency forward contracts

 

 

 

%

 

 

(5,917

)

 

(1.2

)%

Interest expense — net

 

(12,219

)

 

(2.0

)%

 

 

(7,942

)

 

(1.7

)%

Income before income tax

 

33,313

 

 

5.5

%

 

 

33,963

 

 

6.9

%

Income tax expense

 

(12,719

)

 

(2.1

)%

 

 

(9,018

)

 

(1.8

)%

Net income

$

20,594

 

 

3.4

%

 

$

24,945

 

 

5.1

%

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

Common stock — basic

$

0.36

 

 

 

 

$

0.42

 

 

 

Common stock — diluted

$

0.35

 

 

 

 

$

0.42

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Common stock — basic

 

57,707,565

 

 

 

 

 

59,113,044

 

 

 

Common stock — diluted

 

57,905,424

 

 

 

 

 

59,252,869

 

 

 

 

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share data)

(Unaudited)

 

 

Six Months Ended June 30,

 

 

2023

 

 

%

 

 

2022

 

 

%

Revenue

$

1,156,822

 

 

100.0

%

 

$

950,750

 

 

100.0

%

Cost of services

 

898,645

 

 

77.7

%

 

 

712,166

 

 

74.9

%

Gross profit

 

258,177

 

 

22.3

%

 

 

238,584

 

 

25.1

%

Selling, general and administrative expenses

 

164,670

 

 

14.2

%

 

 

145,419

 

 

15.3

%

Amortization of intangible assets

 

17,330

 

 

1.5

%

 

 

14,179

 

 

1.5

%

Income from operations

 

76,177

 

 

6.6

%

 

 

78,986

 

 

8.3

%

Loss on foreign currency forward contracts

 

 

 

%

 

 

(5,917

)

 

(0.6

)%

Interest expense — net

 

(25,135

)

 

(2.2

)%

 

 

(14,988

)

 

(1.6

)%

Income before income tax

 

51,042

 

 

4.4

%

 

 

58,081

 

 

6.1

%

Income tax expense

 

(22,322

)

 

(1.9

)%

 

 

(13,730

)

 

(1.4

)%

Net income

$

28,720

 

 

2.5

%

 

$

44,351

 

 

4.7

%

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

Common stock — basic

$

0.50

 

 

 

 

$

0.75

 

 

 

Common stock — diluted

$

0.50

 

 

 

 

$

0.74

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Common stock — basic

 

57,655,715

 

 

 

 

 

59,103,884

 

 

 

Common stock — diluted

 

57,807,667

 

 

 

 

 

59,334,107

 

 

 

 

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

 

June 30, 2023

 

December 31, 2022

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

66,011

 

$

36,224

Accounts receivable — net

 

181,261

 

 

217,170

Prepaid expenses and other current assets

 

88,839

 

 

94,316

Total current assets

 

336,111

 

 

347,710

Fixed assets — net

 

580,888

 

 

571,471

Goodwill

 

1,767,480

 

 

1,727,852

Other intangible assets — net

 

231,477

 

 

245,574

Operating lease right-of-use assets

 

807,530

 

 

801,626

Other assets

 

99,879

 

 

104,636

Total assets

$

3,823,365

 

$

3,798,869

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

 

238,808

 

 

230,634

Current portion of operating lease liabilities

 

97,469

 

 

94,092

Deferred revenue

 

239,965

 

 

222,994

Other current liabilities

 

165,687

 

 

138,574

Total current liabilities

 

757,929

 

 

786,294

Long-term debt — net

 

954,172

 

 

961,581

Operating lease liabilities

 

812,632

 

 

810,403

Other long-term liabilities

 

103,490

 

 

109,399

Deferred income taxes

 

45,374

 

 

50,739

Total liabilities

 

2,673,597

 

 

2,718,416

Total stockholders’ equity

 

1,149,768

 

 

1,080,453

Total liabilities and stockholders’ equity

$

3,823,365

 

$

3,798,869

 

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Six Months Ended June 30,

 

 

2023

 

 

 

2022

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

Net income

$

28,720

 

 

$

44,351

 

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

 

 

 

Depreciation and amortization

 

56,229

 

 

 

50,661

 

Stock-based compensation expense

 

13,313

 

 

 

13,768

 

Loss on foreign currency forward contracts

 

 

 

 

5,917

 

Deferred income taxes

 

(4,250

)

 

 

(4,269

)

Non-cash interest and other — net

 

5,434

 

 

 

(451

)

Changes in assets and liabilities

 

80,596

 

 

 

15,793

 

Net cash provided by operating activities

 

180,042

 

 

 

125,770

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

Purchases of fixed assets — net

 

(40,115

)

 

 

(19,246

)

Purchases of debt securities and other investments

 

(8,956

)

 

 

(7,030

)

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

 

11,227

 

 

 

11,009

 

Payments and settlements for acquisitions — net of cash acquired

 

(30,884

)

 

 

(3,282

)

Settlement of foreign currency forward contracts

 

 

 

 

(4,591

)

Net cash used in investing activities

 

(68,728

)

 

 

(23,140

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

Revolving credit facility — net

 

(84,000

)

 

 

 

Principal payments of long-term debt

 

(8,000

)

 

 

(8,000

)

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

 

7,382

 

 

 

10,554

 

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

 

(1,629

)

 

 

(5,154

)

Purchase of treasury stock

 

 

 

 

(72,554

)

Payments of contingent consideration for acquisitions

 

(225

)

 

 

(13,865

)

Net cash used in financing activities

 

(86,472

)

 

 

(89,019

)

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

 

(330

)

 

 

(2,215

)

Net increase in cash, cash equivalents and restricted cash

 

24,512

 

 

 

11,396

 

Cash, cash equivalents and restricted cash — beginning of period

 

51,894

 

 

 

265,281

 

Cash, cash equivalents and restricted cash — end of period

$

76,406

 

 

$

276,677

 

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

SEGMENT INFORMATION

(In thousands)

(Unaudited)

 

Three Months Ended June 30, 2023

Full service

center-based

child care

 

Back-up care

 

Educational

advisory and

other services

 

Total

Revenue

$

458,531

 

 

$

116,403

 

 

$

28,282

 

 

$

603,216

 

Income from operations

 

13,070

 

 

 

26,908

 

 

 

5,554

 

 

 

45,532

 

Adjusted income from operations

 

13,070

 

 

 

26,908

 

 

 

5,554

 

 

 

45,532

 

As a percentage of revenue

 

3

%

 

 

23

%

 

 

20

%

 

 

8

%

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2022

 

 

 

 

 

 

 

Revenue

$

371,316

 

 

$

91,714

 

 

$

27,311

 

 

$

490,341

 

Income from operations

 

19,722

 

 

 

25,119

 

 

 

2,981

 

 

 

47,822

 

Adjusted income from operations (1)

 

22,219

 

 

 

25,119

 

 

 

2,981

 

 

 

50,319

 

As a percentage of revenue

 

6

%

 

 

27

%

 

 

11

%

 

 

10

%

(1)

For the three months ended June 30, 2022, adjusted income from operations for the full service center-based child care segment represents income from operations excluding transaction costs of $2.5 million related to acquisitions.

Six Months Ended June 30, 2023

Full service

center-based

child care

 

Back-up care

 

Educational

advisory and

other services

 

Total

Revenue

$

888,722

 

 

$

212,733

 

 

$

55,367

 

 

$

1,156,822

 

Income from operations

 

21,503

 

 

 

44,279

 

 

 

10,395

 

 

 

76,177

 

Adjusted income from operations (1)

 

23,247

 

 

 

48,575

 

 

 

10,395

 

 

 

82,217

 

As a percentage of revenue

 

3

%

 

 

23

%

 

 

19

%

 

 

7

%

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2022

 

 

 

 

 

 

 

Revenue

$

725,248

 

 

$

172,558

 

 

$

52,944

 

 

$

950,750

 

Income from operations

 

26,883

 

 

 

45,577

 

 

 

6,526

 

 

 

78,986

 

Adjusted income from operations (2)

 

29,380

 

 

 

45,577

 

 

 

6,526

 

 

 

81,483

 

As a percentage of revenue

 

4

%

 

 

26

%

 

 

12

%

 

 

9

%

(1)

For the six months ended June 30, 2023, adjusted income from operations represents income from operations excluding value-added-tax expense of $6.0 million related to prior periods, of which $4.3 million was associated with the back-up care segment and $1.7 million was associated with the full service center-based child care segment.

(2)

For the six months ended June 30, 2022, adjusted income from operations for the full service center-based child care segment represents income from operations excluding transaction costs of $2.5 million related to acquisitions.

 

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

NON-GAAP RECONCILIATIONS

(In thousands, except share data)

(Unaudited)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net income

$

20,594

 

 

$

24,945

 

 

$

28,720

 

 

$

44,351

 

Interest expense — net

 

12,219

 

 

 

7,942

 

 

 

25,135

 

 

 

14,988

 

Income tax expense

 

12,719

 

 

 

9,018

 

 

 

22,322

 

 

 

13,730

 

Depreciation

 

19,787

 

 

 

18,055

 

 

 

38,899

 

 

 

36,482

 

Amortization of intangible assets (a)

 

9,132

 

 

 

7,030

 

 

 

17,330

 

 

 

14,179

 

EBITDA

 

74,451

 

 

 

66,990

 

 

 

132,406

 

 

 

123,730

 

As a percentage of revenue

 

12

%

 

 

14

%

 

 

11

%

 

 

13

%

Additional adjustments:

 

 

 

 

 

 

 

Stock-based compensation expense (b)

 

7,463

 

 

 

7,672

 

 

 

13,313

 

 

 

13,768

 

Other costs (c)

 

 

 

 

2,497

 

 

 

6,040

 

 

 

2,497

 

Loss on foreign currency forward contracts (d)

 

 

 

 

5,917

 

 

 

 

 

 

5,917

 

Total adjustments

 

7,463

 

 

 

16,086

 

 

 

19,353

 

 

 

22,182

 

Adjusted EBITDA

$

81,914

 

 

$

83,076

 

 

$

151,759

 

 

$

145,912

 

As a percentage of revenue

 

14

%

 

 

17

%

 

 

13

%

 

 

15

%

 

 

 

 

 

 

 

 

Income from operations

$

45,532

 

 

$

47,822

 

 

$

76,177

 

 

$

78,986

 

Other costs (c)

 

 

 

 

2,497

 

 

 

6,040

 

 

 

2,497

 

Adjusted income from operations

$

45,532

 

 

$

50,319

 

 

$

82,217

 

 

$

81,483

 

As a percentage of revenue

 

8

%

 

 

10

%

 

 

7

%

 

 

9

%

 

 

 

 

 

 

 

 

Net income

$

20,594

 

 

$

24,945

 

 

$

28,720

 

 

$

44,351

 

Income tax expense

 

12,719

 

 

 

9,018

 

 

 

22,322

 

 

 

13,730

 

Income before income tax

 

33,313

 

 

 

33,963

 

 

 

51,042

 

 

 

58,081

 

Amortization of intangible assets (a)

 

9,132

 

 

 

7,030

 

 

 

17,330

 

 

 

14,179

 

Stock-based compensation expense (b)

 

7,463

 

 

 

7,672

 

 

 

13,313

 

 

 

13,768

 

Other costs (c)

 

 

 

 

2,497

 

 

 

6,040

 

 

 

2,497

 

Loss on foreign currency forward contracts (d)

 

 

 

 

5,917

 

 

 

 

 

 

5,917

 

Interest on deferred consideration (e)

 

1,471

 

 

 

 

 

 

2,925

 

 

 

 

Adjusted income before income tax

 

51,379

 

 

 

57,079

 

 

 

90,650

 

 

 

94,442

 

Adjusted income tax expense (f)

 

(14,540

)

 

 

(14,966

)

 

 

(25,536

)

 

 

(24,606

)

Adjusted net income

$

36,839

 

 

$

42,113

 

 

$

65,114

 

 

$

69,836

 

As a percentage of revenue

 

6

%

 

 

9

%

 

 

6

%

 

 

7

%

 

 

 

 

 

 

 

 

Weighted average common shares outstanding — diluted

 

57,905,424

 

 

 

59,252,869

 

 

 

57,807,667

 

 

 

59,334,107

 

Diluted adjusted earnings per common share

$

0.64

 

 

$

0.71

 

 

$

1.13

 

 

$

1.18

 

(a)

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

(b)

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

(c)

Other costs in the six months ended June 30, 2023 consist of value-added tax expense of $6.0 million related to prior periods, of which $4.3 million was associated with the back-up care segment and $1.7 million was associated with the full service center-based child care segment. Other costs in the three and six months ended June 30, 2022 represent transaction costs incurred in connection with acquisitions.

(d)

During the three months ended June 30, 2022, we entered into foreign currency forward contracts for the purchase of Australian dollars to satisfy the purchase price of an acquisition completed July 1, 2022. A loss of $5.9 million resulting from fluctuations in foreign currency rates was recognized during the three and six months ended June 30, 2022 in relation to these contracts.

(e)

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.

(f)

Adjusted income tax expense represents income tax expense calculated on adjusted income before income tax at an effective tax rate of approximately 28% and 26% for the three and six months ended June 30, 2023 and 2022, respectively. The prior year tax rate included net excess income tax benefits related to equity transactions, which are not projected in 2023. The jurisdictional mix of the expected adjusted income before income tax for the full year will affect the estimated effective tax rate for the year.

 

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