Investor Presentation March 2019

Transcription

1 Investor Presentation March 2019

2 Forward Looking Statements Disclaimer This presentation includes forwardlooking statements within the meaning of, and made pursuant to, the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of Forwardlooking statements can be identified by the fact that they do not relate strictly to historical or current facts and generally contain words such as "believes," "expects," "may," "will," "should," "seeks," projects, "approximately," "intends," "plans," "estimates, targets or "anticipates" or similar expressions. These forwardlooking statements include, without limitation, statements regarding future economic performance, guidance, operating targets, financial condition, prospects, growth, strategies, expectations and objectives of management, growth drivers, crossselling opportunities, center expansion, interest rates, and our international opportunities. Our forwardlooking statements are subject to risks and uncertainties. Numerous factors, many of which are beyond Bright Horizons Family Solutions Inc. s (the Company ) control, could cause actual results to differ materially from those projected or implied by the forwardlooking statements. These risks and uncertainties include, without limitation, changes in the demand for child care and other dependent care services; our ability to hire and retain teachers; the possibility that acquisitions may disrupt our operations and expose us to additional risk; our ability to pass on our increased costs; changes in our relationships with employer sponsors; our substantial indebtedness and the terms of such indebtedness; our ability to withstand seasonal fluctuations; our ability to implement our growth strategies successfully; litigation risk; possible breaches in data security; and our ability to maintain our reputation and brand. Additional information concerning these and other risks and uncertainties are discussed in the Company s filings with the Securities and Exchange Commission including, without limitation, the Company s Annual Report on Form 10K for the year ended December 31, 2018 as filed on February 27, 2019, under the headings Risk Factors and Management s Discussion and Analysis of Financial Condition and Results of Operations. Forwardlooking statements are based on current expectations and assumptions and currently available data and are neither predictions nor guarantees of future events or performance. There can be no assurance that the Company will realize these expectations or that these beliefs will prove correct. You should not place undue reliance on forwardlooking statements, which speak only as of the date hereof. We do not undertake to update or revise any forwardlooking statements after they are made, whether as a result of new information, future events, or otherwise, except as required by applicable law. NonGAAP Measures This presentation contains certain nongaap measures which are provided to assist in an understanding of the Bright Horizons Family Solutions Inc. business and its performance. These measures should always be considered in conjunction with the appropriate GAAP measure. Reconciliations of nongaap measures to the relevant GAAP measures are provided in our SEC filings. 2

3 A Family of Solutions at Work FULL SERVICE Customized child care and early education centers at or near the work site BACKUP Family support services for dependents of all ages, meeting shortterm and longterm needs ED ADVISORY Advisory services for adult learners and prospective college students. Manage employer tuition assistance programs for cost efficiency and loan repayment programs. 1,082 Centers 120,000 Capacity 83% of Revenue 6.0MM+ Lives Covered > 930,000 BackUp Days 13% of Revenue $781MM of Tuition Managed for Ed Assist clients 3 MM Employees covered by College Advising services 4% of Revenue 3

4 Bright Horizons at a Glance BY THE NUMBERS $1,903 MM $357 MM 18.8% 1,082 1, ,000+ SALES HIGHLIGHTS ADJUSTED EBITDA ADJUSTED EBITDA MARGIN CENTERS GLOBALLY CLIENTS EMPLOYEES SERVED GLOBALLY We have been named A Great Place to Work around the Globe! 15+ years of sustained sales growth and margin expansion Longterm contracts with blue chip customers that cofund capital investment 95% employersponsored center client retention New lines of business + international presence expand the growth opportunity Premier brand with focus on quality through all aspects of service experience 13x Recipient 6x Recipient Notes: LTM as of 12/31/2018; see Summary of Adjustments for reconciliation of Adjusted EBITDA 11x Recipient 4

5 Solving the Work/Life Challenge At All Life Stages Expectant Parent Parent of Infant Parent of Toddler/ Preschooler Parent of School Ager Parent of Teenager Caregiver for a Senior Early Career MidCareer Late Career Child Care Centers Backup Child & Elder Care College Advising Special Needs Resources Tuition Assistance Student Loan Assistance Return to Work LIFE STAGES CAREER STAGES 5

6 Diversified Blue Chip Base Customer End Markets (FYE 18 All Segments) Representative Clients >1,150 Client Relationships >170 of Fortune 500 Largest Customer < 2% of Revenue Top 10 Customers < 8% of Revenue Notes: Industry allocations based on client revenues only. 6

7 Significant Scale and Expanding International Presence U.S. U.K. Netherlands Centers: 708 Capacity: 89,400 Centers: 318 Capacity: 25,800 Centers: 56 Capacity: 4,400 COMPETITIVE ADVANTAGES Established track record of quality care, effective management and sustainable growth Consistent service, quality and scalability that s difficult to replicate No other competitor with matching suite of services 6x more employersponsored centers in the U.S. than next competitor Focus on accreditation 95% Parent + employer satisfaction Employee retention 2x industry average Notes: Two centers in India; grouped with Netherlands. 7

8 Demographic Tailwinds Support our Service Offerings 60+% FULL TIME WOMEN WORKING IN THE U.S. TWO PARENT HOUSEHOLDS THAT ARE DUAL CAREER EARNERS OVER THE PAST 20 YEARS IN THE U.S., BIRTH RATES FOR WORKING MOMS OVER 35 HAVE DRAMATICALLY INCREASED NEARLY HALF OF ADULTS IN THEIR 40 S & 50 S HAVE A PARENT OVER 65 WHILE CARING FOR A CHILD *Bureau of Labor Statistics, Current Population Survey, "Table 3: Employment Status of the Civilian Non institutional Population by Age, Sex, and Race," Annual Averages 2012 (2013). **U.S. Census Bureau, Current Population Survey, 1968 to 2009 Annual Social and Economic Supplements. 8

9 Strength of the Employer Partnership Worksite locations / builtin enrollment partner HIGH QUALITY Industry leading teacher compensation, benefits, training and career opportunities More intensive ratios Premier purpose built facilities EMPLOYER SPONSORSHIP AND CAPITAL INVESTMENT Sponsor ROI driven through retention, recruitment, productivity, and employee engagement levels NAEYC accreditation Parent and family partnership Staff retention 2x industry Longterm contracts with builtin escalators Steady, recurring revenue stream with nearterm forward visibility Predictable earnings model STRONG, STABLE MODEL Limited capital investment (employer funding) Strong cash flow generation and operating leverage Childcare is a sticky benefit with high renewal rates 9

10 Diverse Center Operating Models Support Capital Efficiency and Mitigate Financial Risk Client Sponsor Model Cost Plus Single Sponsor / Bottom Line Client funds development / Client funds development / CAPEX / CAPEX / maintenance Located on client premises Facility built / operated to client specifications Enrollment exclusive to client sponsor Bright Horizons receives management fee, and client bears financial risk Client contract 35 years maintenance Located on client premises Facility built / operated to client specifications Client receives priority enrollment Center may be open to community and backup customers Bright Horizons bears financial risk; client provides modest operating support through management fee and / or tuition subsidy Consortium Lease Bright Horizons funds development / CAPEX / maintenance Located near office hub or residential / commuter corridor Open to Community, Backup customers, and consortium of employers Bright Horizons bears financial risk Lease 1015 years Client contract 310 years Bright Horizons P&L Model 10

11 Client Funding of Center Capital Drives High Returns on Investment Full Service Child Care is delivered through the following center operating models: United States Europe Cost Plus Single Sponsor Consortium Lease % of Total Centers ~33% ~33% ~33% ~85% Revenue / Center $1,850 $1,500 $1,850 $1,200 Gross Margin 1520% 1725% 2025% 1525% Average ROI on Center Contribution 100%+ 75%+ 25%+ 25%+ 35y 310y 1015y 1015y ($ in 000s) Contract Term 11 Lease

12 Adjacent Services are High Growth Contributors $ in millions BackUp Revenue 12 Ed Advisory Revenue CAGR 11% CAGR 21% BackUp contracts range from 25 yrs Ed Assist / College advising contracts 13 yrs Clients purchase basket of uses that are center based / inhome Main service offerings (Network access, Administration, Counseling) Annual contract range from $50K $4M Typical annual contract value: $125$175K Annual price escalators Annual price escalators Opportunity to upsell for expanded use Opportunity to upsell for expanded use

13 Business Model Delivers Consistent Adjusted EBITDA and Margin Growth Multiple Drivers of Operating Leverage: Tuition rate increases coupled with efficient labor and other cost management High incremental margins on enrollment growth in ramping and mature P+L centers Contributions from higher margin services Mix of new centers, Acquisitions + Transitions Scale and growth of European operations Overhead productivity gains supported by investments in technology and scale Adjusted EBITDA CAGR: 15% 1,000 bps Adj EBITDA Margin Expansion Total Sales CAGR: 10% Annual Adjusted EBITDA Margin Note: See Summary of Adjustments for reconciliation of Adjusted EBITDA , prior periods please see Company s public filings. 13

14 GROWTH STRATEGY

15 Multiple Growth Channels Opportunity in every industry sector Addressable market of ~13,000 employers with >1,000 employees in the U.S. and U.K suitable worldwide locations identified 1020 new locations targeted per year 15 New Client Relationships Select New Consortium/ Lease Locations CrossSelling/ Existing Clients 1,150+ existing clients, 200+ clients buy > one service 60+ clients sponsor > one full service center Acquisitions Avg. 30 centers acquired annually last 15 years Expanded BackUp + Ed Advisory thru tuckin acquisitions

16 LongTerm Revenue Bridge Organic Growth = 810% Notes: Excludes variation from potential foreign currency translation effects. 16

17 Lease Models Lease Model Opportunities Sample Geographies: Core Criteria: Greater London Amsterdam Greater New York / New Jersey Chicago Seattle Bay Area Urban Ring Proximity to Work Hubs / Residential Corridors / Clients Young Professionals / Families Supply / Demand Imbalance Proforma Lease Model Gross Profit $ Total Cash Margin New Lease Model Center Openings Capital: $2.5MM Capacity: ROIC Maturity: 2530% Revenue Maturity: $2.5MM Breakeven: 1218 months Note: Proforma figures in USD MM 17

18 Acquisitions Licensed Centers Geographic Mix: Recent Acquisitions Enter UK Acquisition History Enter UK Sites Acquired: Enter Netherlands Ed Assist Work Options Group College Coach 4 14 College Nannies & Tutors Ed Link Notes: YTD 12/31/

19 FINANCIAL HIGHLIGHTS

20 Performance Drivers 20 Long track record of sustained growth and margin expansion Sticky, recurring revenue base Diversified across services and geography High free cash flow conversion

21 Consistent Sales Growth and Margin Expansion $ in millions Revenue Adjusted EBITDA & Margin 15 Yr CAGR 10% 15 Yr CAGR 15% 9%10 Growth % 14% 11% 8% Centers % 11% 9% Growth % 15% 14% 15% 10% 8% 10% 1,035 1,038 1,082 Note: See Summary of Adjustments for reconciliation of Adjusted EBITDA. LTM as of 12/31/2018. Growth rates are Y/Y comparison. CAGR figures reflected through FY

22 Diversified Business Adds Earnings Velocity Legacy US Full Service business continues to grow and leverage operating margins Core growth augmented with acceleration from geographic expansion + adjacent business lines (BackUp + Ed Advisory) Operating Margin EBIT CAGR 8% 26% 49% 4% 8% 32% 21% 28% 16% 7% 10% 14% Note: Operating income, $ in millions, excluding transaction costs. 22

23 Strong Cash Flow Generation Supports Leverage and Capital Allocation Strategy Free Cash Flow (Cash Flow Operations Maintenance Capex) FCF / ADJ. EBITDA % 62% 60% 50% 58% 60% 68% Total Debt / Adj. EBITDA LBO at May 2008 Represented 7.2x Adj. EBITDA $209 $238 $273 $299 $324 $357 Note: LTM Cash Flow Operations reflects Restricted Cash to be included with Cash and Cash Equivalents see Form 10Q Notes to Consolidated Condensed Financial Statements for further explanation. Adoption of this guidance resulted in $8.9MM increase in net cash provided from operations for the LTM period. Leverage figures are Total Debt / Adjusted EBITDA and exclude Cash and OID; see appendix for reconciliation of Adjusted EBITDA Leverage inclusive of proforma adjustments for Acquisition of Asquith. 23

24 APPENDIX

25 Recent Performance ($ millions) Q YR 2018 % Change (QTR) % Change (YTD) $ 392 $ 1,586 +8% +9% % +10% % +21% Total Revenue $ 478 $ 1,903 +9% +10% Gross Profit $ 121 $ % +9% % Margin 25.2% 24.9% Adj. EBITDA $ 93 $ % +10% % Margin 19.5% 18.8% Adj. Net Income $ 53 $ % +17% Adj. EPS $.90 $ % +19% FullService CenterBased Care BackUp Dependent Care Services Other Educational Advisory Service Note: See Form 10Q for reconciliation of Adjusted EBITDA and Adjusted Net Income. Minor differences due to rounding. 25

26 Historical P&L ($ millions) % Change % Change % Change % Change YR 2014 YR 2015 YR 2016 YR 2017 $ 1,157 $ 1,236 $1,322 $1, % +7% +7% +10% % +11% +10% +12% % +20% +20% +23% $ 1,353 $ 1,458 $ 1,570 $ 1, % +8% +8% +11% Gross Profit $ 314 $ 358 $ 391 $ % +14% +9% +10% % Margin 23.2% 24.5% 24.9% 24.7% Adj. EBITDA $ 238 $ 273 $ 299 $ % +15% +10% % Margin 17.6% 18.7% 19.1% 18.6% $ 97 $ 115 $ 131 $ % +19% +14% +24% $ 1.45 $ 1.85 $ 2.16 $ % +28% +17% +25% FullService CenterBased Care BackUp Dependent Care Services Other Educational Advisory Service Total Revenue Adj. Net Income Adj. EPS +8% Note: See Form 10K for reconciliation of historical Adjusted EBITDA and Adjusted Net Income. 26

27 Summary of Adjustments to EBITDA and Net Income Fiscal Year Ended December 31, $224.3 $260.2 $271.4 $300.2 $340.1 Straight Line Rent Expense Stock Compensation Expense Total Adjustments $ 13.7 $12.8 $27.8 $23.4 $17.0 Adjusted EBITDA $238.0 $273.0 $299.2 $323.6 $357.1 $112.3 $140.1 $143.2 $161.4 $ Tax Effect (54.7) (62.8) (67.3) (50.8) (50.3) Adjusted Net Income $97.2 $115.4 $130.7 $162.2 $189.5 Adjustments to EBITDA ($mm) EBITDA Loss on Extinguishment of Debt Offering, Refinancing & Acquisition Costs Adjustments to Net Income Income (loss) before tax Stock Compensation Expense Amortization Loss on Extinguishment of Debt Offering, Refinancing & Acquisition Costs Note: See Form 10K for reconciliation of historical year end Adjusted EBITDA and Adjusted Net Income for FY

28 Thank You! Bright Horizons provides an array of work/life benefits that helps employees be their most productive and present at work by ensuring they can manage their most pressing responsibilities at home. For 30+ years, our services have helped leading employers in every industry meet strategic business objectives including: Recruitment Retention Employee engagement & productivity Reduced absenteeism 28