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BRIGHT HORIZONS FAMILY SOLUTIONS INC.

BRIGHT HORIZONS FAMILY SOLUTIONS INC.BFAMEarnings & Financial Report

NYSE · Consumer Discretionary · Services-Child Day Care Services

Bright Horizons Family Solutions Inc. is a United States–based child-care provider and is the largest provider of employer-sponsored child care. It also provides back-up child care and elder care, tuition program management, education advising, and student loan repayment programs. It is headquartered in Newton, Massachusetts.

What changed in BRIGHT HORIZONS FAMILY SOLUTIONS INC.'s 10-K — 2022 vs 2023

Top changes in BRIGHT HORIZONS FAMILY SOLUTIONS INC.'s 2023 10-K

401 paragraphs added · 388 removed · 335 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

136 edited+15 added−15 removed73 unchanged
Use of our back-up care services tends to be higher when schools are not in session and during holiday periods, which can increase the operating costs of the program and impact the results of operations. Our educational advisory and other services generally have limited seasonal fluctuations.
Use of our back-up care services tends to be higher when schools are not in session and during holiday periods, which can increase the operating costs of the program and impact the results of operations. Educational advisory and other services generally have limited seasonal fluctuations.
We estimate that we have approximately six times more market share in the employer-sponsored center-based child care market in the United States than our closest competitor.
We estimate that we have approximately six times more market share than our closest competitor in the employer-sponsored center-based child care market in the United States.
We are an organization made up of employees, children and families from many cultures, backgrounds and experiences and we believe it is vital to have a workplace where all employees feel welcome, comfortable and a sense of belonging and where everyone's unique differences are celebrated and valued.
We are an organization made up of employees, children and families from many cultures, backgrounds and experiences, and we believe it is vital to have a workplace where all employees feel welcome, comfortable and have a sense of belonging and where everyone's unique differences are celebrated and valued.
Back-up care includes center-based back-up child care, in-home care for children and adult/elder dependents, school-age camps, virtual tutoring, pet care and self-sourced reimbursed care. Educational advisory and other services consist of tuition assistance and student loan repayment program management, workforce education, related educational advising, college advisory services, and Sittercity, an online marketplace for families and caregivers.
Back-up care includes center-based back-up child care, in-home care for children and adult/elder dependents, school-age camps, tutoring, pet care and self-sourced reimbursed care. Educational advisory and other services consist of tuition assistance and student loan repayment program management, workforce education, related educational advising, college advisory services, and Sittercity, an online marketplace for families and caregivers.
We provide services primarily under multi-year contracts with employers who offer early education and child care, back-up care, and educational advisory and other services as part of their employee benefits packages. These benefits help employers support their employees across life and career stages and to improve recruitment, employee engagement, productivity, retention, and career advancement.
We provide services primarily under multi-year contracts with employers who offer early education and child care, back-up care, and educational advisory and other services as part of their employee benefits packages. These benefits help employers support their employees across life and career stages and improve recruitment, employee engagement, productivity, retention, and career advancement.
From on-site child care to back-up care to help handle disruptions in child care gaps, and education programs that build critical skills, we believe our service offerings help our employees achieve more. We also offer a comprehensive total rewards program aimed at varying health, home-life and financial needs.
From on-site child care to back-up care to help handle disruptions in child care gaps, and education programs that build critical skills, we believe our service offerings help our employees achieve more. We also offer a comprehensive total rewards program aimed at addressing varying health, home-life and financial needs.
We frequently license the use of our registered trademarks to our clients in connection with the use of our services, subject to customary restrictions. We actively protect our trademarks by registering the marks in a variety of countries and geographic areas, including the United States, the United Kingdom, the European Union, Australia, New Zealand, India, and other countries in Asia.
We frequently license the use of our registered trademarks to our clients in connection with the use of our services, subject to customary restrictions. We protect our trademarks by registering the marks in a variety of countries and geographic areas, including the United States, the United Kingdom, the European Union, Australia, New Zealand, India, and other countries in Asia.
Our curriculum and teacher training programs are designed to support inclusive classrooms and create culturally authentic learning environments that celebrate and explore all backgrounds and experiences. We are also exploring with clients how our services support their diversity, equity and inclusion objectives, particularly in workforce education.
Our curriculum and teacher training programs are designed to support inclusive classrooms and create culturally authentic learning environments that celebrate and explore all backgrounds and experiences. We are also exploring with clients how our services can support their diversity, equity and inclusion objectives, particularly in workforce education.
In addition, we provide back-up care services for adults/elders through our proprietary network of quality in-home care providers, and we offer virtual tutoring for school-age children and adult learners through our network of tutoring service providers, and pet care through third-party providers. We also help to facilitate back-up care services through our self-sourced reimbursed care program.
In addition, we provide back-up care services for adults/elders through our proprietary network of quality in-home care providers, and we offer tutoring for school-age children and adult learners through our network of tutoring service providers and pet care through third-party providers. We also help to facilitate back-up care services through our self-sourced reimbursed care program.
Cost of services consist of direct expenses associated with the operation of dedicated back-up centers, fees paid to providers for care delivered as part of their contractual relationships with us, personnel and related direct service costs of the contact centers, and any other expenses related to the coordination or delivery of care and service.
Cost of services consist of direct expenses associated with the operation of dedicated back-up child care centers, fees paid to providers for care delivered as part of their contractual relationships with us, personnel and related direct service costs of the contact centers, and any other expenses related to the coordination or delivery of care and service.
Marketing tools have expanded to include text message communication; targeted back-up journeys and campaigns; outreach for flexible care offerings including virtual options such as tutoring and camps; and sharing our curriculum and extension activities with families at home through our online platforms.
Marketing tools have expanded to include text message communication; targeted back-up journeys and campaigns; outreach for flexible care offerings including options such as tutoring and camps; and sharing our curriculum and extension activities with families at home through our online platforms.
Our My Bright Horizons is a portal for client employees to instantly access all their Bright Horizons benefits and BH Central , a self-service portal for client liaisons to track real-time benefit use and access materials to support internal marketing efforts, including a newsletter with tailored resource content.
My Bright Horizons is a portal for our clients’ employees to instantly access all their Bright Horizons benefits, and BH Central is a self-service portal for client liaisons to track real-time benefit use and access materials to support internal marketing efforts, including a newsletter with tailored resource content.
We also operate in the expanding market of educational advisory services, which consists of workforce education, tuition assistance, student loan repayment and related educational advising, as well as college admissions and college financial advisory services. We believe we are one of the largest and highest quality providers of back-up care and educational advisory services.
We also operate in the educational advisory services market, which consists of workforce education, tuition assistance, student loan repayment and related educational advising, as well as college admissions and college financial advisory services. We believe we are one of the largest and highest-quality providers of back-up care and educational advisory services.
We provide back-up care services for children (primarily 0-12 years old) through our own full service centers, dedicated back-up child care centers, school-age camps, and in-home caregivers, as well as through our proprietary back-up care network of quality child care centers and in-home care providers.
We provide back-up care services for children (primarily 0-12 years old) through our own full service child care centers, dedicated back-up child care centers, school-age camps and programs, and in-home caregivers, as well as through our proprietary back-up care network of quality child care centers and in-home care providers.
We believe that our centers and operations comply in all material respects with all applicable laws and regulations. Health and Safety The health, safety and well-being of children, families and staff is our top priority. We adhere to rigorous health, hygiene, and disinfecting practices.
We believe that our centers and operations comply in all material respects with all applicable laws and regulations. Health and Safety The health, safety and well-being of children, families and staff is our top priority. We adhere to rigorous health and hygiene practices.
In addition to our annual client retention rate of approximately 95%, we have consistently achieved satisfaction ratings of over 90% among respondents in our parent satisfaction surveys, which is a testament to our ability to deliver on our commitment to quality.
In addition to our annual employer client retention rate of approximately 95%, we have consistently achieved satisfaction ratings of over 90% among respondents in our parent satisfaction surveys, which is a testament to our ability to deliver on our commitment to quality.
Proven Acquisition Track Record We have an established acquisition team that pursues targets using a proven framework to effectively evaluate potential transactions with the goal of maximizing our return on investment while minimizing risk.
Proven Acquisition Track Record We have an established acquisition team that pursues targets using an established framework to effectively evaluate potential transactions with the goal of maximizing our return on investment while minimizing risk.
Marketing Brand Awareness and Thought Leadership We market our services and build our brand through virtual events, social media, earned and paid media placements, digital and print advertising, articles and blogs, direct mail, and a robust search engine optimization strategy.
Marketing Brand Awareness and Thought Leadership We market our services and build our brand through events, social media, earned and paid media placements, digital and print advertising, articles and blogs, direct mail, and a robust search engine optimization strategy.
We look for opportunities to increase the use of our back-up care and educational advisory services, not only by growing client relationships, but also by driving use with existing clients.
We look for opportunities to increase the use of our back-up care and educational advisory services, not only by growing client relationships, but also by driving expanded use with existing clients.
The domestic and international markets for child care and other work and family support services remain highly fragmented and, as we look to fiscal 2023 and beyond, we will continue to seek attractive opportunities both for center acquisitions and the acquisition of complementary service offerings. 8 Table of Contents Our Operations Our services are designed to help families, employers, and their employees solve the challenges of the modern workforce across life and career stages.
The domestic and international markets for child care and other work and family support services remain highly fragmented and, as we look to fiscal 2024 and beyond, we will continue to seek attractive opportunities both for center acquisitions and the acquisition of complementary service offerings. 8 Table of Contents Our Operations Our services are designed to help families, employers, and their employees solve the challenges of the modern workforce across life and career stages.
Our addressable market includes approximately 13,000 employers, each with at least 1,000 employees, within the industries that we currently serve in the United States and the United Kingdom.
Our addressable market includes approximately 13,500 employers, each with at least 1,000 employees, within the industries that we currently serve in the United States and the United Kingdom.
We refer to centers that have been open for three years or less as “ramping centers.” A center will typically achieve breakeven operating performance between 12 to 24 months and will typically achieve a steady state level of enrollment that supports our average center operating profit by the end of three years, although the time period needed to reach a steady state level of enrollment may be longer or shorter.
We refer to centers that have been open for three years or less as “ramping centers.” A P&L center will typically achieve breakeven operating performance between 12 to 24 months and will typically achieve a steady state level of enrollment that supports our average center operating profit by the end of three years, although the time period needed to reach a steady state level of enrollment may be longer or shorter.
Our total rewards package, which may vary by geography, includes: • Competitive pay and healthcare benefits; • 401(k) retirement plans with matching contributions; • Paid time off; • Wellness initiatives with benefits relating to nutrition, stress management and financial well-being, mental health, work-life balance and an Employee Assistance Program; • Child care tuition subsidies for both Field and Home Team employees; • Tuition assistance programs, including the Horizons Teacher Degree Program which provides direct, no-cost access to an early childhood education degree; and • Access to back-up care, EdAssist, College Coach and Sittercity.
Our total rewards package, which may vary by geography, includes: • Competitive pay and healthcare benefits; • 401(k) retirement plans with matching contributions; • Paid time off; • Wellness initiatives with benefits relating to nutrition, stress management and financial well-being, mental health, work-life balance and an Employee Assistance Program; • Child care tuition subsidies for both Field and Home Team employees; • Tuition assistance programs, including the Horizons Teacher Degree Program which provides direct, no-cost access to an early childhood education degree; • Access to back-up care, EdAssist, College Coach and Sittercity; and • Paid Parental Bonding Leave.
Market Leading People Practices Our ability to deliver consistently high-quality care, education and other services is directly related to our ability to attract, retain, motivate and develop our skilled workforce.
Market Leading People Practices Our ability to deliver high-quality care, education and other services is directly related to our ability to attract, retain, motivate and develop our skilled workforce.
Over the last ten years, we have completed the acquisition of approximately 430 child care centers in the United States, the United Kingdom, Australia and the Netherlands, as well as providers of back-up care services and educational advisory and other services in the United States and the United Kingdom, helping us expand our client base, enhance the scope and reach of our service offerings, broaden our technological capabilities, and offer new services.
Over the last ten years, we have completed the acquisition of approximately 330 child care centers in the United States, the United Kingdom, Australia and the Netherlands, as well as providers of back-up care services and educational advisory and other services in the United States and the United Kingdom, helping us expand our client base, enhance the scope and reach of our service offerings, broaden our technological capabilities, and offer new services.
Bright Horizons College Coach provides college admissions and college financing advisory services through our team of experts, who have experience working in admissions or financial aid at colleges and universities. We also offer coaching and tools to assist families as they support their children with varying needs across life stages.
College Coach provides college admissions and college financing advisory services through our team of experts, who have experience working in admissions or financial aid at colleges and universities. We also offer coaching and tools to assist families as they support their children with varying needs across life stages.
Diversity, Equity and Inclusion We are in the unique position of educating the next generation, and with that responsibility comes the opportunity to make a difference by modeling for children and families an environment that is open, curious, and genuinely interested in what is different, and reflects broad diversity within our teaching staff.
Diversity, Equity and Inclusion We are in the unique position of educating the next generation, and with that responsibility comes the opportunity to make a difference by modeling for children and families an environment that is open, curious, and genuinely interested in what is different, and reflects broad diversity among our teaching staff.
We believe the broad geographic reach of our early education and child care centers and workplace solutions, with targeted clusters of centers in areas where we believe demand is generally higher and where demographics are attractive, provides us with a competitive platform to market our suite of services to new and existing clients.
We believe the broad geographic reach of our early education and child care centers and workplace solutions, with targeted clusters of centers in areas where we believe employer-sponsored demand is generally higher and where demographics are attractive, provides us with a competitive platform to market our suite of services to new and existing clients.
For employer sponsors and their employees , we conduct our annual Modern Family Index and The Education Index, capturing snapshots of critical market sectors at a particular moment in time. For parents and families, we offer timely webinar series as well as monthly podcasts that reflect current issues facing families.
For employer sponsors and their employees , we conduct our annual Modern Family Index and The Education Index, capturing snapshots of sentiments of critical market sectors at a particular moment in time. For parents and families, we offer webinar series as well as monthly podcasts that reflect current issues facing families.
Clients can also leverage our EdAssist Education Network of education providers and benefit from pre-negotiated tuition discounts. Customer service is also provided through our contact center in Broomfield, Colorado. EdAssist services derive revenue directly from fees paid by employers. Bright Horizons College Coach.
Clients can also leverage our EdAssist Education Network of education providers and benefit from pre-negotiated tuition discounts. Customer service is also provided through our contact center in Broomfield, Colorado. EdAssist services derive revenue directly from fees paid by employers. College Coach.
We believe our total rewards package for teachers and center staff is robust and helps recruit and retain teachers in the industry. Our Award Winning Culture We are honored and proud to have a long track record of being named an employer of choice.
We believe our total rewards package for teachers and center staff is robust and helps attract and retain teachers in the industry. Our Award Winning Culture We are honored and proud to have a long track record of being named an employer of choice.
We believe our commitment to achieving accreditation standards offers a competitive advantage in attracting and retaining families and in securing employer sponsorship opportunities as an increasing number of potential and existing employer clients require or expect adherence to accreditation criteria. 6 Table of Contents Our proprietary curriculum and educational practices are informed by the science of early learning and research on childhood development.
We believe our commitment to achieving accreditation standards offers a competitive advantage in attracting and retaining families and in securing employer sponsorship opportunities as an increasing number of potential and existing employer clients require or expect adherence to accreditation criteria. Our proprietary curriculum and educational practices are informed by the science of early learning and research on childhood development.
We are committed to providing the highest quality of education, care and service across all of our offerings.
We are committed to providing the highest quality education and care across all of our offerings.
We believe we are well-positioned to continue attracting new employer sponsors due to our extensive service offerings, established reputation, position as a quality leader, and track record of serving major employer sponsors for 35 years.
We believe we are well-positioned to continue attracting new employer sponsors due to our extensive service offerings, established reputation, position as a quality leader, and track record of serving major employer sponsors for more than 35 years.
Our Inclusion Vision, in which we are committed to creating inclusive environments where everyone has a sense of belonging and has the opportunity to contribute and thrive in meaningful and impactful ways, guides and defines our Diversity, Equity and Inclusion initiatives.
Our inclusion statement, in which we are committed to creating inclusive environments where everyone has a sense of belonging and has the opportunity to contribute and thrive in meaningful and impactful ways, guides and defines our diversity, equity and inclusion initiatives.
Investments in center-based early education and child care, back-up care and educational advisory services will help employers meet their strategic goals, bolster employee engagement, recruitment, retention and address benefit equity amongst their workforce.
Investments in center-based early education and child care, back-up care and educational advisory services will help employers meet their strategic goals, bolster employee engagement, recruitment and retention, and address benefit equity within their workforce.
Program management services are provided through proprietary software for the processing of tuition reimbursement, loan repayment transactions, and analysis of data. We provide educational advising to client employees on a one-on-one basis through our team of advisors who help employees make better decisions regarding their education and financial wellness.
Program management services are provided through proprietary software for the processing of tuition reimbursement, loan repayment transactions, and analysis of data. We provide educational advising to our client’s employees on a one-on-one basis through our team of advisors who help users make better decisions regarding their education and financial wellness.
We believe that the following key factors contribute to growth in the markets for employer-sponsored child care, back-up care, and educational advisory services. Recognized Return on Investment to Employers We believe employers across industries are looking at child care solutions, including on-site and near-site child care and other dependent care solutions, to enhance their employee value proposition.
We believe that the following key factors contribute to growth in the markets for employer-sponsored child care, back-up care, and educational advisory services. Recognized Return on Investment to Employers We believe employers across industries look at child care solutions, including on-site and near-site child care and other dependent care solutions, to enhance their employee value proposition.
Educational Advisory and Other Services Our educational advisory services primarily consist of Bright Horizons EdAssist Solutions and Bright Horizons College Coach. Educational advisory services revenue is comprised of fees paid by employer clients for policy consulting, program management, coaching, and subscription content and, to a limited extent, retail fees collected from users at the point of service.
Educational Advisory and Other Services Our educational advisory services primarily consist of EdAssist and College Coach. Educational advisory services revenue is comprised of fees paid by employer clients for policy consulting, program management, coaching, subscription content and, to a limited extent, retail fees collected from users at the point of service.
Human Capital Management We know that education and care can change lives, and for 35 years Bright Horizons has been changing the way employees and their families live and work. To achieve this mission and to deliver results, we put our HEART Principles at the forefront of everything we do.
Human Capital Management We know that education and care can change lives, and for over 35 years Bright Horizons has been changing the way families live and work. To achieve this mission and to deliver results, we put our HEART Principles at the forefront of everything we do.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports are available free of charge on our website, www.brighthorizons.com , as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports are available free of charge on the Investor Relations section of our website, www.brighthorizons.com , as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.
We also believe that the increasing emphasis on the importance of early education and child care, and ongoing efforts to make child care affordable and available for working families, will contribute to further growth in the global early education and child care market as well as the developing markets for back-up care and educational advisory services.
We also believe that the emphasis on the importance of early education and child care, and ongoing efforts to make child care affordable and accessible for working families will contribute to further growth in the global early education and child care market as well as the developing markets for back-up care and educational advisory services.
To bring this vision to life, we leverage the groups below to facilitate interactive activities, ignite and engage in bold conversations, and lead diversity awareness and inclusive leadership trainings, webinars and discussion groups: • Inclusion Steering Committee — comprised of senior leaders and executive officers who inform the strategy for Bright Horizons’ overall diversity, equity and inclusion initiatives. • Inclusion Council — includes representatives from Bright Horizons business units and functional departments, executive members, and co-chairs of our eight Employee Advisory Groups, and is guided by the Inclusion Steering Committee aimed at creating accountability in this area throughout the organization. • Employee Advisory Groups — voluntary, company-sponsored, internal associations dedicated to fostering a diverse and inclusive work environment within the context of Bright Horizons’ mission, values, goals, business practices, and objectives.
To bring this vision to life, we leverage the groups below to facilitate interactive activities, ignite and engage in bold conversations, and lead webinars and discussion groups: • Inclusion Steering Committee — comprised of senior leaders and executive officers who inform the strategy for Bright Horizons’ overall diversity, equity and inclusion initiatives. • Inclusion Council — includes representatives from Bright Horizons business units and functional departments, executive members, and co-chairs of our eight employee resource groups, and is guided by the Inclusion Steering Committee aimed at creating accountability for how we progress in this area throughout the organization. • Employee Resource Groups — voluntary, company-sponsored, internal associations dedicated to fostering a diverse and inclusive work environment within the context of Bright Horizons’ mission, values, goals, business practices, and objectives.
Industry Overview and Trends We compete in the global market for early education and child care services as well as the market for workforce education services offered by clients as benefits to their employees. The child care industry generally can be divided into center-based and home-based child care.
Industry Overview and Trends We compete in the global market for early education and child care services as well as the markets for dependent care solutions and workforce education services offered by clients as benefits to their employees. The child care industry generally can be divided into center-based and home-based child care.
In addition, enrollment at our child care centers declines as older children transition to elementary schools. Demand for our services generally increases in September and October coinciding with the beginning of the new school year and remains relatively stable throughout the rest of the school year.
In addition, enrollment at our child care centers declines as older children transition to elementary schools. Demand for our services generally increases with the beginning of the new school year and remains relatively stable throughout the rest of the school year.
Our North American early education and child care centers have an average capacity of 129 children per location, while our international centers have an average capacity of 86 children per location.
Our North American early education and child care centers have an average capacity of 130 children per location, while our international centers have an average capacity of 86 children per location.
Our dedicated sales team focuses on establishing new client relationships and is supported by our workforce consulting practice, which helps potential clients identify the precise offerings that will best meet their strategic goals. • Cross-Sell and Expand Services to Existing Employer Clients.
Our dedicated sales team focuses on establishing new client relationships and is supported by our workforce consulting practice, which helps potential clients identify the precise offerings that will best meet their strategic goals. 7 Table of Contents • Cross-Sell and Expand Services to Existing Employer Clients.
We have extended our international footprint to become a leading provider in the center-based child care market in the United Kingdom and have expanded into the Netherlands and India as a platform for further international expansion.
We have extended our international footprint to become a leading provider in the center-based child care market in the United Kingdom and have expanded into the Netherlands, Australia, and India as platforms for further international expansion.
Our Benefits and Total Rewards More than 1,400 top employers trust us for proven solutions that support employees, advance careers, and maximize performance, and we offer our own employees the solutions and services we offer to our clients.
Our Benefits and Total Rewards More than 1,450 top employers trust us for proven solutions that support employees, advance careers, and maximize employee performance, and we offer our own employees the solutions and services we offer to our clients.
When we open a new P&L center, it generally takes two to three years for the center to ramp up to a steady state level of enrollment, as a center will typically enroll younger children at the outset with children aging into the older (preschool) classrooms over time.
When we open a new P&L center, it generally takes 2 to 3 years for the center to ramp up to a steady state level of enrollment, as a center will typically enroll younger children at the outset with children aging into the older (preschool) classrooms over time.
Other efforts include local digital advertising, partnerships with parent groups, ramped social efforts, direct mail, and webinars. Competition We believe we are a leading provider of employer-sponsored center-based child care, back-up care, and workforce education services.
Other efforts include local digital advertising, partnerships with parent groups, social efforts, direct mail, and webinars. 12 Table of Contents Competition We believe we are a leading provider of employer-sponsored center-based child care, back-up care, and workforce education services.
In addition to full service center-based child care, we provide access to a multi-national back-up care network and educational advisory support, allowing us to offer various combinations of services and solutions to best meet the needs of specific clients or specific locations for a single client across geographies and life and career stages.
In addition to full service center-based child care, we provide access to a multi-national back-up care network and educational advisory support, allowing us to offer various combinations of services and solutions to best meet the needs of clients across locations, geographies and life and career stages.
Intellectual Property We believe our name and logo have significant value to our operations. We own and use various registered and unregistered trademarks covering the names Bright Horizons ® and Bright Horizons Family Solutions ® , our logo, and a number of other names, slogans and designs.
Intellectual Property We believe our name and logo have significant value to our operations. We own and use various registered and unregistered trademarks covering the names Bright Horizons ® and Bright Horizons Family Solutions ® , our logo, and a number of other names, slogans and designs in the U.S. and abroad.
In the United States, we have grown our partnerships with employer clients by expanding and enhancing our back-up care family supports, including the addition of elder care, virtual tutoring, school-age camps, and pet care; by developing and growing our educational advisory services; and by adding to our other services by acquiring the Sittercity business.
In the United States, we continue to grow our partnerships with employer clients by expanding and enhancing our back-up care and family supports, including the addition of elder care, tutoring, school-age camps, and pet care; by developing and growing our educational advisory services; and by adding to our other services by acquiring the Sittercity business.
Based on a sample of approximately 360 of our early education and child care centers in the United States, the current average tuition at our centers is $2,350 per month for infants (typically ages 3 to 16 months), $2,200 per month for toddlers (typically ages 16 months to 3 years) and $1,850 per month for preschoolers (typically ages 3 to 5 years).
Based on a sample of approximately 360 of our early education and child care centers in the United States, the current average tuition at our centers is $2,550 per month for infants (typically ages 3 to 16 months), $2,350 per month for toddlers (typically ages 16 months to 3 years) and $2,000 per month for preschoolers (typically ages 3 to 5 years).
Advisory services are provided at live/webinar events with expert presenters, through one-on-one coaching, as well as through our online learning center. We work with employer clients who offer these services as workplace benefits to their employees, and we also provide these services directly to families on a retail basis.
Advisory services are delivered via live/webinar events with expert presenters, through one-on-one coaching, and through our online learning center. We work with employer clients who offer these services as workplace benefits to their employees, and we also provide these services directly to families on a retail basis.
Seasonality Historically, our full service center-based child care and back-up care operations are subject to seasonal and quarterly fluctuations. Demand for early education and child care services has historically decreased during the summer months when school is not in session at which time families are often on vacation or have alternative child care arrangements.
Seasonality Historically, our full service center-based child care and back-up care operations are subject to seasonal and quarterly fluctuations, which can vary by geography. Demand for early education and child care services has historically decreased during the summer months when school is not in session and families are often on vacation or have alternative child care arrangements.
As of December 31, 2022, our early education and child care centers had a total licensed capacity of approximately 120,000 children, with the smallest center having a capacity of 15 children and the largest having a capacity of approximately 500 children.
As of December 31, 2023, our early education and child care centers had a total licensed capacity of approximately 120,000 children, with the smallest center having a capacity of 10 children and the largest having a capacity of approximately 500 children.
In 2022, as our center operations continue to recover from the pandemic, annual revenue per center averaged approximately $1.7 million in North America and $1.2 million internationally, which in turn contributed to a contraction in gross margins to approximately 15% for the year.
In 2023, as our center operations continue to recover from the pandemic, annual revenue per center averaged approximately $2.0 million in North America and $1.5 million internationally, which in turn contributed to a contraction in gross margins to approximately 15% for the year.
Competition for back-up care comes from IAC/Interactivecorp (Care.com) in addition to employee assistance programs and smaller work/life companies. In the educational advisory segment, competition comes from EdCor, Guild Education and InStride. We believe the key factors in the competition for enrollment are quality, site convenience and cost.
Competition for back-up care comes from IAC/Interactivecorp (Care.com) in addition to employee assistance programs and smaller work/life companies. In the educational advisory segment competition comes from EdCor, Guild Education and InStride as well as other smaller providers entering the market. We believe the key factors in the competition for enrollment are quality, site convenience and cost.
As we continue to find innovative solutions to help families with their care needs, we have expanded our back-up care solutions to include virtual tutoring and broaden our school-age camp programs that primarily operate during school vacations and the summer months.
As we continue to find innovative solutions to help families with their care needs, we have expanded our back-up care solutions to include tutoring and broader school-age camp programs which primarily operate during school vacations and the summer months.
Collaborative, Long-Term Relationships with Diverse Customer Base We have more than 1,400 client relationships with employers across a diverse array of industries, including more than 215 of the Fortune 500 companies, with our largest client contributing 1% of our revenue in 2022 and our largest 10 clients representing approximately 8% of our revenue in the same year.
Collaborative, Long-Term Relationships with Diverse Customer Base We have more than 1,450 client relationships with employers across a diverse array of industries, including more than 220 of the Fortune 500 companies, with our largest client contributing 1% of our revenue in 2023 and our largest 10 clients representing approximately 8% of our revenue in the same year.
Care is arranged online or via our mobile application as well as through a 24/7 contact center allowing employees to reserve care in advance or at the last minute.
Care is arranged online or via our mobile app as well as through a 24/7 contact center, allowing users to reserve care in advance or at the last minute.
As of December 31, 2022, we had 643 centers in North America and 435 international centers. Additional geographical information is included in Note 18, Segment and Geographic Information , to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K.
As of December 31, 2023, we had 618 centers in North America and 431 international centers. Additional geographical information is included in Note 18, Segment and Geographic Information , to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K.
Cost of services consist of personnel and direct service costs of the contact centers, and other expenses related to the coordination and delivery of tuition assistance and student loan repayment program management, and educational advisory and counseling services. SGA related to educational advisory services is similar to SGA for back-up care. EdAssist by Bright Horizons.
Cost of services consist of personnel and direct operating costs of the contact centers and other expenses related to the coordination and delivery of tuition assistance, student loan repayment program management, and educational advisory services. SGA related to educational advisory services is similar to SGA for back-up care. EdAssist.
Gross margin at our mature centers typically averages between 20% and 25%, with our cost-plus model centers typically at the lower end of that range and our lease centers at the higher end.
Gross margins at our mature centers typically average between 20% and 25%, with our cost-plus model centers typically at the lower end of that range and our lease centers at the higher end.
We have consistently been named as a top employer by third-party sources in the United States, the United Kingdom and the Netherlands, including being named as one of the “100 Best Companies to Work For” by Fortune magazine 20 times, as well as a great place to work in the United Kingdom and in the Netherlands by the Great Place to Work Institute.
During our more than 35 year history, we have consistently been named as a top employer by third-party sources in the United States, the United Kingdom and the Netherlands, including being named as one of the “100 Best Companies to Work For” by Fortune magazine 20 times, as well as a great place to work in the United Kingdom and in the Netherlands by the Great Place to Work Institute.
These honors are awarded based largely on employee responses to surveys. • “100 Best Companies to Work For” by FORTUNE magazine Awarded 20 times — most recently in 2021 • “Best Workplaces” in the United Kingdom by the Great Place to Work Institute Awarded 17 times — most recently in 2022 • “Best Workplaces” in the Netherlands by the Great Place to Work Institute Awarded eight times — most recently in 2022 • “Top Places to Work” by the Boston Globe Awarded 13 times — most recently in 2022 • Forbes 2022 Best Employers for Diversity • Forbes 2022 Best Employers for Women • Bloomberg 2022 Gender Equality Index • Human Rights Campaign Foundation’s Corporate Equality Index 2022 • 2022 “Best Workplaces for Wellbeing” by the Great Place to Work Institute in the United Kingdom • PEOPLE magazine 100 Companies that Care for 2022 14 Table of Contents Our Diversity, Equity and Inclusion Focus At Bright Horizons, Diversity, Equity and Inclusion are core priorities that we believe are critical to our long-term success by improving the work we do, the services we provide and, ultimately, the value we create.
These honors are awarded based largely on employee responses to surveys. • “Top Places to Work” by the Boston Globe Awarded 14 times — most recently in 2023 • “Best Workplaces” in the United Kingdom by the Great Place to Work Institute Awarded 18 times — most recently in 2023 • Forbes 2023 Best Employers for Diversity • 2023 “Best Workplaces for Women” by the Great Place to Work Institute in the United Kingdom • Human Rights Campaign Foundation’s Corporate Equality Index 2023 • 2023 “Best Workplaces for Wellbeing” by the Great Place to Work Institute in the United Kingdom • 2023 “Best Places to Work” by the Boston Business Journal • “Best Workplaces” in the Netherlands by the Great Place to Work Institute Awarded eight times — most recently in 2022 • Named “100 Best Companies to Work For” by FORTUNE magazine 20 times — most recently in 2021 14 Table of Contents Our Diversity, Equity and Inclusion Focus At Bright Horizons, diversity, equity and inclusion are core priorities that we believe are critical to our long-term success by improving the work we do, the services we provide, and the value we create.
We are organized in three reportable segments, which are aligned with our service offerings as follows: • full service center-based child care (approximately 74% of our revenue in 2022); • back-up care (approximately 20% of our revenue in 2022); and • educational advisory and other services (approximately 6% of our revenue in 2022).
We are organized in three reportable segments, which are aligned with our service offerings as follows: • Full service center-based child care (approximately 74% of our revenue in 2023); • Back-up care (approximately 21% of our revenue in 2023); and • Educational advisory and other services (approximately 5% of our revenue in 2023).
Our Citizenship We support the communities in which we work and live, and we encourage our employees to do the same. We proudly stand with our many employees who give their time to non-profit organizations, awarding grants to their chosen charities in recognition of their volunteer work in their communities.
Our Citizenship We support the communities in which we work and live, and we actively encourage our employees to do the same. We proudly stand with our many employees who give their time to non-profit organizations, awarding grants to their chosen charities in recognition of their volunteer work in their communities through the Bright Horizons Foundation for Children ® .
We have also been named one of the “Top Places to Work” by the Boston Globe 13 times and the Denver Post nine times. We believe the education and experience of our center leaders and teachers exceed the industry average.
We have also been named one of the “Top Places to Work” by the Boston Globe 14 times and the Denver Post 9 times. We believe the education and experience of our child care center leaders and teachers exceed the industry average.
Increase Utilization at Existing Centers and Use of Back-up Care and Educational Advisory Services We are continually looking to increase enrollment levels and utilization in our profit and loss centers in order to achieve continued growth and improved center economics.
Increase Utilization at Existing Centers and Use of Back-up Care and Educational Advisory Services We focus on increasing enrollment and utilization levels in our profit and loss centers in order to achieve continued growth and improved center economics.
Outreach for these efforts includes persona-based campaigns for back-to-school and return-to-office support; initiatives aimed at supporting enrolled families including age-based developmental notifications through our parent mobile app; a health, safety and wellness parent newsletter; podcasts; and a parenting exchange workshop series. 12 Table of Contents Lead Generation and Conversion; Customer Retention Lead generation and conversion, and increased utilization, as well as customer retention, remain at the heart of our marketing efforts.
Outreach for these efforts includes campaigns for back-to-school and return-to-office support; initiatives aimed at supporting enrolled families including age-based developmental notifications through our parent mobile app; a monthly parenting newsletter; podcasts; and a parenting exchange workshop series. Lead Generation and Conversion; Customer Retention Lead generation and conversion, increased utilization, and customer retention remain at the heart of our marketing efforts.
Periodically, we assume the management of existing centers from the incumbent management which enables us to develop new client relationships, typically with no capital investment and no purchase price payment.
Periodically, we assume the management of existing child care centers or tuition assistance programs from the incumbent management which enables us to develop new client relationships, typically with no capital investment and no purchase price payment.
Our cost-plus contracts typically have initial terms ranging from three to five years with varying terms, renewal and termination options.
Our cost-plus contracts typically have initial terms ranging from 3 to 5 years with varying terms, renewal and termination options.
(2) Racial Diversity is defined as: American Indian or Alaska Native, Asian, Black or African American, Hispanic or Latino, Native Hawaiian or Other Pacific Islander, or two or more races. (3) Does not include employees that do not self-identify. (4) Senior leader is defined as Vice President and equivalent, and above, and includes executive officers.
(2) Non-White is defined as: American Indian or Alaska Native, Asian, Black or African American, Hispanic or Latino, Native Hawaiian or Other Pacific Islander, or two or more races. (3) Only includes employees that self-identify. (4) Senior leader is defined as Vice President and equivalent, and above, and includes executive officers.
Information filed electronically with, or furnished to, the SEC is also available at www.sec.gov . References to these websites do not constitute incorporation by reference of the information contained therein and should not be considered part of this document. 17 Table of Contents
Information filed electronically with, or furnished to, the SEC is also available at www.sec.gov . References to these websites do not constitute incorporation by reference of the information contained therein and should not be considered part of this document. Further, our references to website URLs are intended to be inactive textual references only. 17 Table of Contents
As of December 31, 2022, we had approximately 29,100 global employees (including part-time and substitute teachers), of whom approximately 3,100 were employed as corporate, divisional and regional employees, and approximately 26,100 were employed at our early education and child care centers and as in-home caregivers.
As of December 31, 2023, we had approximately 31,400 global employees (including part-time and substitute teachers), of whom approximately 3,200 were employed as corporate, divisional and regional employees, and approximately 28,200 were employed at our early education and child care centers and as in-home caregivers.
Since going public in 2013, we have more than doubled the number of our clients who utilize more than one of our services to more than 425 clients as of December 31, 2022. • Continue to Expand Through the Assumption of Management of Existing Sponsored Child Care Centers.
Since going public in 2013, we have more than doubled the number of our clients who utilize more than one of our services to more than 480 clients as of December 31, 2023. • Continue to Expand Through the Assumption of Existing Sponsored Child Care Centers and Tuition Assistance Programs.
We believe we are one of the largest high quality providers of employer-sponsored child care. 4 Table of Contents Additionally, we operate in the growing market for back-up care, which primarily consists of center-based back-up care, and in-home care.
We believe we are one of the largest high-quality providers of employer-sponsored child care. 4 Table of Contents Additionally, we operate in the growing market for back-up care, which consists of center-based back-up care and in-home care as well as school-age camps, tutoring, elder care and pet care.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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During the COVID-19 pandemic, a substantial portion of the workforce, including parents of children we serve at our centers, transitioned from working in traditional office environments to working in “virtual” or “home” offices, including in our primary markets of the United States, United Kingdom, Australia, and the Netherlands.
During and following the COVID-19 pandemic, a substantial portion of the workforce, including parents of children we serve at our centers, transitioned from working in traditional office environments to working in “virtual” or “home” offices, including in our primary markets of the United States, United Kingdom, Australia, and the Netherlands.
We have expanded and are continuing to expand our operations, suite of services and client relationships, which has placed, and will continue to place, significant demands on our management and our operational, IT and financial infrastructure.
We have expanded and are continuing to expand our operations, suite of services and client relationships, which has placed, and will continue to place, significant demands on our management and our operational, HR, IT and financial infrastructure.
Additionally, if we or our third-party service providers experience security incidents that result in a decline in marketplace performance, availability problems, or the loss, corruption of, unauthorized access to, or disclosure of personal data or confidential information, people may become unwilling to provide us the information necessary to receive our services, and our reputation and market position could be harmed.
Additionally, if we or our third-party service providers experience security incidents that result in a decline in the performance of our systems, availability problems, or the loss, corruption of, unauthorized access to, or disclosure of personal data or confidential information, people may become unwilling to provide us the information necessary to receive our services, and our reputation and market position could be harmed.
Existing customers may also decrease their use of our services or cease using our services altogether. The impact of these security threats, incidents, and other disruptions are difficult to predict. Our insurance coverage for such security threats, incidents, and other disruptions may not be adequate to cover all related costs, and we may not otherwise be fully indemnified for them.
Existing customers may also decrease their use of our services or cease using our services altogether. The impacts of these security threats, incidents, and other disruptions are difficult to predict. Our insurance coverage for such security threats, incidents, and other disruptions may not be adequate to cover all related costs, and we may not otherwise be fully indemnified for them.
Stock repurchases could also increase the volatility of the price of our common stock and could diminish our cash reserves. On December 16, 2021, our board of directors authorized a share repurchase program under which up to $400 million of our outstanding common stock may be repurchased, of which $198.3 million remained available as of December 31, 2022.
Stock repurchases could also increase the volatility of the price of our common stock and could diminish our cash reserves. On December 16, 2021, our board of directors authorized a share repurchase program under which up to $400 million of our outstanding common stock may be repurchased, of which $198.3 million remained available as of December 31, 2023.
In addition, we may incur other substantial costs in connection with remediating and otherwise responding to any data security incident, including potential liability for stolen client, customer, or employee data, repairing system damage, or providing credit monitoring or other benefits to clients, customers, or employees affected by the incident.
In addition, we may incur other substantial costs in connection with remediating and otherwise responding to any cybersecurity incident, including potential liability for stolen client, customer, or employee data, repairing system damage, or providing credit monitoring or other benefits to clients, customers, or employees affected by the incident.
Additionally, a health pandemic could also impair our ability to hire and maintain an adequate level of staff and may have a disproportionate impact on our business compared to other companies that depend less on the in-person provision of services.
Additionally, a health crisis could also impair our ability to hire and maintain an adequate level of staff and may have a disproportionate impact on our business compared to other companies that depend less on the in-person provision of services.
As a global company, we are subject to income and other taxes in the United States and foreign jurisdictions, and our future tax rates and operations may be adversely affected by a number of factors, including: changes in tax rates, tax laws or the interpretation of such tax laws in the various jurisdictions in which we operate; changes in the estimated realization of our deferred tax assets and settlement of our deferred tax liabilities; changes in the jurisdictions in which profits are determined to be earned and taxed; incremental taxes upon repatriation of non-U.S. earnings; adjustments to estimated taxes upon finalization of various tax returns; increases in expenses that are not deductible for tax purposes, including impairment of goodwill in connection with acquisitions; changes in available tax credits; and the resolution of issues arising from tax audits with various tax authorities.
As a global company, we are subject to income and other taxes in the United States and foreign jurisdictions, and our future tax rates and operations may be adversely affected by a number of factors, including: changes in tax rates, tax laws or the interpretation of such tax laws in the various jurisdictions in which we operate; changes in the estimated realization of our deferred tax assets and settlement of our deferred tax liabilities; changes in the jurisdictions in which profits are determined to be earned and taxed; incremental taxes upon repatriation of non-U.S. earnings; limitations on the deductibility of interest expense; adjustments to estimated taxes upon finalization of various tax returns; increases in expenses that are not deductible for tax purposes, including impairment of goodwill in connection with acquisitions; changes in available tax credits; and the resolution of issues arising from tax audits with various tax authorities.
Enrollment in our child care centers could experience sharp declines as families might avoid taking their children out in public or to center-based care in the event of a health pandemic, and local, regional or national governments might limit or ban public interactions to halt or delay the spread of diseases causing business disruptions and the temporary closure of our centers.
Enrollment in our child care centers could experience sharp declines as families might avoid taking their children out in public or to center-based care in the event of a health crisis, and local, regional or national governments might limit or ban public interactions to halt or delay the spread of diseases causing business disruptions and the temporary or permanent closure of our centers.
The price of our common stock could be subject to wide fluctuations in response to a number of factors, including those described elsewhere herein and others such as: • variations in our operating performance and the performance of our competitors; • actual or anticipated fluctuations in our quarterly or annual operating results; • publication of research reports by securities analysts about us, our competitors, or our industry; • our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market; • additions and departures of key personnel; • strategic decisions by us or our competitors, such as acquisitions, divestitures, initial public offerings, spin-offs, joint ventures, strategic investments, or changes in business strategy; • changing client and customer (parents or client employees) preferences; • the passage of legislation or other regulatory developments affecting us or our industry; • speculation in the press or investment community; • changes in accounting principles; • impact from cyber events; • changes in business activity or the economy; • terrorist acts, acts of war, or periods of widespread civil unrest; • pandemics, natural disasters and other calamities, including the COVID-19 pandemic; and • changes in general market and economic conditions.
The price of our common stock could be subject to wide fluctuations in response to a number of factors, including those described elsewhere herein and others such as: • variations in our operating performance and the performance of our competitors; • actual or anticipated fluctuations in our quarterly or annual operating results; • publication of research reports by securities analysts about us, our competitors, or our industry; • our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market; • changes in management and key personnel; • strategic decisions by us or our competitors, such as acquisitions, divestitures, initial public offerings, spin-offs, joint ventures, strategic investments, or changes in business strategy; • changing client and customer (parents or client employees) preferences; • the passage of legislation or other regulatory developments affecting us or our industry; • speculation in the press or investment community; • impairments; • impact from cyber events; • changes in business activity or the economy; • acts of violence, terrorist acts, acts of war, or periods of widespread civil unrest; • pandemics, natural disasters and other calamities; and • changes in general market and economic conditions.
Like many businesses, we, and our third-party vendors, have in the past and will in the future continue to be subject to cyber-attacks, cybersecurity threats and attempts to compromise and penetrate our data security and systems and disrupt our services.
Like many businesses, we, and our third-party vendors, have in the past and will in the future continue to be subject to cybersecurity threats, cybersecurity incidents, and attempts to compromise and penetrate our data security and systems and disrupt our services.
Actual or anticipated cyber-attacks may cause us to incur costs, including costs to deploy additional personnel and protection technologies, train employees, pay higher insurance premiums, and engage third-party specialists for additional services.
Actual or anticipated cybersecurity threats and attacks may cause us to incur costs, including costs to deploy additional personnel and protection technologies, train employees, pay higher insurance premiums, and engage third-party specialists for additional services.
However, a broad-based benefit with governmentally mandated or funded child care or preschool, could reduce the demand for early care services at our existing early education and child care centers due to the availability of lower cost care alternatives, or could place downward pressure on the tuition and fees we charge, which could adversely affect our revenues and results of operations.
However, a broad-based benefit with governmentally mandated or funded child care or preschool, such as universal pre-K, could reduce the demand for early care services at our existing early education and child care centers due to the availability of lower cost care alternatives, or could place downward pressure on the tuition and fees we charge, which could adversely affect our revenues and results of operations.
While we have entered into interest rate cap agreements to limit our exposure to higher interest rates on a portion of our debt, and may enter into additional agreements in the future, any such agreements may not offer complete protection from this risk posed by interest rate fluctuations and may carry additional risks.
While we have entered into interest rate cap agreements to limit our exposure to higher interest rates on a portion of our debt, and may enter into additional agreements in the future, any such agreements may not offer complete protection from interest rate fluctuations and may carry additional risks.
Such changes in foreign currency exchange rates could materially and adversely affect our business and operating results. 26 Table of Contents Market Related Risks We cannot guarantee that we will repurchase our common stock pursuant to our stock repurchase program or that our stock repurchase program will enhance long-term stockholder value.
Such changes in foreign currency exchange rates could materially and adversely affect our business and operating results. Market Related Risks We cannot guarantee that we will repurchase our common stock pursuant to our stock repurchase program or that our stock repurchase program will enhance long-term stockholder value.
Our level of debt could have significant consequences, including: • limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate needs, and increasing our cost of borrowing; • requiring a substantial portion of our cash flow to be dedicated to debt service payments instead of other corporate purposes, thereby reducing the amount of cash flow available for operations, capital expenditures, and acquisitions among other purposes; and, 22 Table of Contents • limiting our flexibility in planning for, and reacting to, changes in the industry in which we compete and placing us at a disadvantage compared to other, less leveraged competitors or competitors with comparable debt at more favorable interest rates.
Our level of debt could have significant consequences, including: • limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate needs, and increasing our cost of borrowing; • requiring a substantial portion of our cash flow to be dedicated to debt service payments instead of other corporate purposes, thereby reducing the amount of cash flow available for operations, capital expenditures, and acquisitions among other purposes; and, • limiting our flexibility in planning for, and reacting to, changes in the industry in which we compete and placing us at a disadvantage compared to other, less leveraged competitors or competitors with comparable debt at more favorable interest rates. 22 Table of Contents In addition, borrowings under our senior secured credit facilities bear interest at variable rates.
Our contracts with employers for full service center-based child care typically have terms of three to ten years, and our contracts related to back-up care and educational advisory services typically have terms of one to three years, with varying terms and renewal and termination options.
Our contracts with employers for full service center-based child care typically have terms of 3 to 10 years, and our contracts related to back-up care and educational advisory services typically have terms of three years, with varying terms and renewal and termination options.
As the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and changing requirements applicable to our business, including the European Union’s General Data Protection Regulation and various privacy legislation in the U.S., such as the California Consumer Privacy Act, compliance with such requirements could impose significant limitations, require changes to our business, or restrict our use or storage of personal information, which may increase our compliance expenses and make our business more costly or less efficient to conduct.
As the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and changing requirements applicable to our business, including the European Union’s General Data Protection Regulation and various privacy laws, compliance with such requirements could impose significant limitations, require changes to our business, or restrict our use or storage of personal information, which may increase our compliance expenses and make our business more costly or less efficient to conduct.
Uncertainty or a deterioration in economic conditions, including global inflationary pressures impacting our clients and customers, could lead to reduced demand for our services as employer clients may reduce or eliminate their sponsorship of work and family services, and prospective clients may not commit resources to such services.
Uncertainty or a deterioration in economic conditions, including global inflationary pressures impacting our clients and customers, could lead to reduced demand for our services as employer clients may reduce or eliminate their sponsorship of work and family services, prospective clients may not commit resources to such services or families may seek alternatives to center-based care.
Any of these results could harm our growth prospects, financial condition, business, and reputation. 20 Table of Contents Our collection, use, storage, disclosure, transfer and other processing of personal information could give rise to significant costs and liabilities, including as a result of governmental regulations, uncertain or inconsistent interpretation and enforcement of legal requirements or differing views of personal privacy rights, which may have a material adverse effect on our reputation, business, financial condition and results of operation.
Our collection, use, storage, disclosure, transfer and other processing of personal information could give rise to significant costs and liabilities, including as a result of governmental regulations, uncertain or inconsistent interpretation and enforcement of legal requirements or differing views of personal privacy rights, which may have a material adverse effect on our reputation, business, financial condition and results of operation.
Other unforeseen events, including acts of violence, war, terrorism and other international, regional or local instability or conflicts (including labor issues), embargoes, natural disasters such as earthquakes, tsunamis, hurricanes, typhoons or other adverse weather and climate conditions, whether occurring in the United States or abroad, could restrict or disrupt our operations.
Other events beyond our control, including acts of violence (including violent acts in the workplace and school settings), war, terrorism and other international, regional, or local instability or conflicts (including labor issues), embargoes, natural disasters such as earthquakes, tsunamis, hurricanes, typhoons or other adverse weather and climate conditions, whether occurring in the United States or abroad, could restrict or disrupt our operations.
Achieving and sustaining growth requires the successful execution of our growth strategies, which may require the implementation of enhancements to customer-facing, operational and financial systems, expanded sales and marketing capacity, continuous updates to technology and improvements to processes and systems, and additional or new organizational resources.
Achieving and sustaining growth requires the successful execution of our growth strategies, which may require the implementation of enhancements to customer-facing, operational and financial systems, expanded sales and marketing capacity, continuous updates to technology, such as those related to artificial intelligence, and improvements to processes and systems, and additional or new organizational resources.
However, competitors may seek to provide alternative offerings or undercut pricing in these markets. If we are unable to maintain our competitive advantage, our growth could be adversely impacted and our future operating results negatively impacted. 24 Table of Contents Governmental child care benefit programs could reduce the demand for our services.
However, competitors may seek to provide alternative offerings or undercut pricing in these markets. If we are unable to maintain our competitive advantage, our growth could be adversely impacted and our future operating results negatively impacted. Governmental child care benefit programs could reduce the demand for our services or impact our revenue and profitability.
In addition, a reduction in the size of an employer’s workforce could negatively impact the demand for our services and result in reduced enrollment or failure of our employer clients to renew their contracts.
In addition, a reduction in the size of an employer’s workforce or an increase in the cost of employer subsidies could negatively impact the demand for our services and result in reduced enrollment, failure of our employer clients to renew their contracts or center closures.
Any of these incidents could lead to interruptions or shutdowns of our platforms, disruptions in our ability to process service requests, record or analyze the use of our services, loss or corruption of data, or unauthorized access to, or acquisition of, personal information or other sensitive information, such as our intellectual property.
Any of these incidents could lead to interruptions or shutdowns of our platforms, disruptions in our ability to process service requests, limit our ability to access data, result in the loss or corruption of data, or unauthorized access to, or acquisition of, personal information or other sensitive information, such as our intellectual property.
We are also subject to inherent risks attributed to operating in a global economy. As of December 31, 2022, we had 435 centers located in four foreign countries - the United Kingdom, the Netherlands, Australia and India.
We are also subject to inherent risks attributed to operating in a global economy. As of December 31, 2023, we had 431 centers located in 4 foreign countries - the United Kingdom, the Netherlands, Australia and India.
If we are unable to hire and retain qualified teachers at a center, we could be required to reduce enrollment, close classrooms or centers or be prevented from accepting additional enrollment in order to comply with such mandated ratios.
If we are unable to hire and retain qualified teachers at a center, we have been, and may in the future be, required to constrain or reduce enrollment, close classrooms or centers or be prevented from accepting additional enrollment in order to comply with such mandated ratios.
We expect to pay employees at rates above the minimum wage, and increases in the statutory minimum wage rates could result in a corresponding increase in the wages and benefits we pay to our employees.
We expect to pay employees above applicable minimum wage rates, and increases in the statutory minimum wage rates or statutory leave requirements could result in a corresponding increase in the wages and benefits we pay to our employees.
For example, on December 12, 2022, we determined that a ransomware cyber incident had impacted and disrupted a number of our operational and information technology systems.
For example, as previously disclosed, on December 12, 2022, we determined that a cybersecurity incident had impacted and disrupted a number of our operational and information technology systems.
Additionally, we maintain other confidential, proprietary, or otherwise sensitive information relating to our business and from third parties. 19 Table of Contents The information technology networks and systems owned, operated, controlled, or used by us or our third-party vendors may be vulnerable to damage, disruptions or shutdowns, software or hardware vulnerabilities, data breaches, security incidents, failures during the process of upgrading or replacing software or databases or components thereof, power outages, natural disasters, hardware failures, attacks by computer hackers, telecommunication failures, user errors, user malfeasance, computer viruses, unauthorized access, phishing or social engineering attacks, ransomware attacks, distributed denial-of-service attacks, brute force attacks, robocalls, and other real or perceived cyber-attacks or catastrophic events, all of which may not be prevented by our efforts to secure our networks and systems.
The information technology networks and systems owned, operated, controlled, or used by us or our third-party vendors may be vulnerable to, among other things, damage, disruptions or shutdowns, software or hardware vulnerabilities, data breaches, cybersecurity incidents, failures during the process of upgrading or replacing software or databases or components thereof, power outages, natural disasters, hardware failures, attacks by computer hackers, telecommunication failures, user errors, user malfeasance, computer viruses, unauthorized access, phishing or social engineering attacks, ransomware attacks, extortion attempts, distributed denial-of-service attacks, brute force attacks, robocalls, and other real or perceived cybersecurity-attacks or catastrophic events, all of which may not be prevented by our efforts to secure our networks and systems.
If the international markets in which we compete are affected by changes in political, social, legal, economic, or other factors, such as the economic and political uncertainty following the United Kingdom’s exit from the European Union (“Brexit”), the global economic impact from the COVID-19 pandemic, and adverse global economic conditions, including slower growth or recession, higher interest rates, and foreign currency exchange rate fluctuations, our business and operating results may be materially and adversely affected.
If the international markets in which we compete are affected by changes in political, social, legal, economic, or other factors, such as adverse global economic conditions, including slower growth or recession, higher interest rates, and foreign currency exchange rate fluctuations, our business and operating results may be materially and adversely affected.
In our international locations, we are highly dependent on our local management and operating staff to operate our centers in these markets in accordance with local law and best practices.
The success of our business depends on the actions of our employees. In our international locations, we are highly dependent on our local management and operating staff to operate our centers in these markets in accordance with local law and best practices.
Our revenue and results of operations fluctuate with the seasonal demands for child care and the other services we provide. Revenue in our child care centers typically declines during the third quarter due to decreased enrollments over the summer months as families withdraw children for vacations and older children transition into elementary schools.
Revenue in our child care centers typically declines during the third quarter due to decreased enrollments over the summer months as families withdraw children for vacations and older children transition into elementary schools.
In addition to costs associated with compliance of licensing requirements and changing laws and regulations, failure to comply with applicable regulations and requirements could subject us to governmental sanctions, which can include fines, corrective orders, probation or, in more serious cases, suspension or revocation of one or more of our child care centers’ licenses to operate, and require significant expenditures to bring those centers into compliance. 25 Table of Contents Our tax rate is dependent on a number of factors, a change in any of which could impact our future tax rates and net income.
In addition to costs associated with compliance of licensing requirements and changing laws and regulations, failure to comply with applicable regulations and requirements could subject us to governmental sanctions, which can include fines, corrective orders, probation or, in more serious cases, suspension or revocation of one or more of our child care centers’ licenses to operate, and require significant expenditures to bring those centers into compliance.
Our business depends on our ability to attract, train, and retain the appropriate mix of qualified employees and on effectively implementing and maintaining strong employee relations, cultivating an atmosphere of trust, and effectively communicating the value proposition of working at Bright Horizons. The early education and child care industry traditionally has experienced high turnover rates.
The provision of child care services is personnel intensive. Our business depends on our ability to attract, train, and retain the appropriate mix of qualified employees and on effectively implementing and maintaining strong employee relations, cultivating an atmosphere of trust, and effectively communicating the value proposition of working at Bright Horizons.
In addition, from time to time, customers and others make claims and take legal action against us. Whether or not claims have merit, they may adversely affect our reputation and the demand for our services.
The proliferation of social media may increase the likelihood, speed, and magnitude of these negative brand and reputation events. In addition, from time to time, customers and others make claims and take legal action against us. Whether or not claims have merit, they may adversely affect our reputation and the demand for our services.
This may result in an increase in our costs for insurance or insurance not being available to us on economically feasible terms or at all. Insurers may also deny us coverage as to any future claim.
This may result in an increase in our costs for insurance or insurance not being available to us on economically feasible terms or at all. Insurers may also deny us coverage as to any future claim. Any of these results could harm our growth prospects, financial condition, business, and reputation.
Health pandemics, natural disaster, sociopolitical or other catastrophic event could severely disrupt our business. A regional or global health pandemic, not unlike the COVID-19 pandemic, depending on its duration and severity, could severely affect our business.
A regional or global health crisis, not unlike the COVID-19 pandemic, depending on its duration and severity, could severely affect our business.
Further, climate change may increase both the frequency and severity of extreme weather conditions and natural disasters, which may affect our business operations and our clients, either in a particular region or globally. In addition, changes in regulations brought about by climate change could impact our business, operating results, and financial condition.
Further, climate change may increase both the frequency and severity of extreme weather conditions and natural disasters, which may affect our business operations and our clients, either in a particular region or globally.
A shift in workplace demographics where employees work from home on a part- or full-time basis, or a sustained decrease in the number of women or dual-career households in the workforce, may reduce demand for center-based child care or specific center locations as well as other service offerings.
A shift in workplace demographics where employees work from home on a part- or full-time basis, may reduce demand for center-based child care or specific center locations, and may impact enrollment as well as other service offerings.
In addition, borrowings under our senior secured credit facilities bear interest at variable rates. Interest rates increased during 2022. If market interest rates continue to increase, variable rate debt will create higher interest service requirements, which could adversely affect our cash flows and impact future earnings.
Interest rates increased during 2023. If market interest rates continue to increase, variable rate debt will create higher interest service requirements, which could adversely affect our cash flows and impact future earnings.
Even as employers recognize the value of our services, demand may be adversely affected by general economic conditions or changes in workforce demographics and work-place environments as a result of COVID-19.
Even as employers recognize the value of our services, demand may be adversely affected by general economic conditions or changes in workforce demographics or workplace locations.
International Risks The success of our operations in international markets is highly dependent on the expertise of local management and operating staff, as well as the political, social, legal and economic operating conditions of each country in which we operate. The success of our business depends on the actions of our employees.
The Company is continuing to evaluate the future impact of Pillar Two in the jurisdictions in which the Company operates. International Risks The success of our operations in international markets is highly dependent on the expertise of local management and operating staff, as well as the political, social, legal and economic operating conditions of each country in which we operate.
There can be no assurance that any stock repurchases will enhance stockholder value because the market price of our common stock may decline below the levels at which we determine to repurchase our stock and short-term stock price fluctuations could reduce the program’s effectiveness.
There can be no assurance that any stock repurchases will enhance stockholder value because the market price of our common stock may decline below the levels at which we determine to repurchase our stock and short-term stock price fluctuations could reduce the program’s effectiveness. 26 Table of Contents The price of our common stock could be volatile, and, as a result, you may not be able to resell your shares at or above the price you paid for them.
While we expect that many employees will continue to return to traditional office environments, some employers may maintain a remote or work-from-home presence or may permanently move all or a portion of their workforce to remote or to a hybrid model.
While we believe that many employees have and will continue to return to traditional office environments, this can vary by geography and some employers have maintained a remote or work-from-home presence or have or will permanently transition all or a portion of their workforce to remote or to a hybrid model.
Given these challenges, we may be unable to manage our expanding operations effectively, or to maintain our growth, which could have a material adverse effect on our business or results of operations. Acquisitions present many risks and may disrupt our operations. We also may not realize the financial and strategic goals that were contemplated at the time of the transaction.
Given these challenges, we may be unable to manage our expanding operations effectively, or to maintain our growth, which could have a material adverse effect on our business or results of operations. 23 Table of Contents Acquisitions present many risks and may disrupt our operations.
Our future success depends on our ability to continue to meet the evolving needs and expectations of our customers, including enhancing our existing services. Obsolete processes and/or skill gaps could impede our ability to meet new or changing customer demand.
Our future success depends on our ability to meet the evolving needs and expectations of our customers, including enhancing our existing services and technology, and building a high-quality experience across all lines of business and geographies. Obsolete processes and/or skill gaps or a failure to scale innovation could impede our ability to meet new or changing customer demand.
Failure to retain our leadership team and attract and retain other important personnel could lead to disruptions in management and operations, which could affect our business and operating results. 21 Table of Contents Our operating results are subject to seasonal fluctuations.
Failure to retain our leadership team and attract and retain other important personnel could lead to disruptions in management and operations, which could affect our business and operating results. Our operating results are subject to seasonal fluctuations. Our revenue and results of operations fluctuate with the seasonal demands for child care and the other services we provide.
Our certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
As a result, you may lose your ability to sell your stock for a price in excess of the prevailing market price due to these protective measures, and efforts by stockholders to change our direction or management may be unsuccessful. 27 Table of Contents Our certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of legal actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Such market pressures have required us to offer increased salaries, enhanced benefits and institute additional initiatives to maintain strong employee relations, which increase costs, and may further increase costs in the future.
We have been and may continue to experience difficulty in attracting, hiring and retaining qualified teachers due to tight labor pools and general labor shortages. Such market pressures have required us to offer increased salaries, enhanced benefits and institute additional initiatives to maintain strong employee relations, which increase costs, and may further increase costs in the future.
Because our success depends substantially on the value of our brands and reputation as a provider of choice, adverse publicity or negative perceptions about our business could impact the demand for our services. Our reputation and brand are critical to our business.
If demand for our services were to decrease, it could disrupt our operations and have a material adverse effect on our business and operating results. 18 Table of Contents Because our success depends substantially on the value of our brands and reputation as a provider of choice, adverse publicity or negative perceptions about our business could impact the demand for our services.
Any significant change in our jurisdictional earnings mix or in the tax laws in those jurisdictions could impact our future tax rates and net income in those periods and any increases in income tax rates or changes in income tax laws could have a material adverse impact on our financial results.
Any significant change in our jurisdictional earnings mix or in the tax laws in those jurisdictions could impact our future tax rates and net income in those periods and any increases in income tax rates or changes in income tax laws could have a material adverse impact on our financial results. 25 Table of Contents The Organization for Economic Cooperation and Development introduced a framework to implement a global 15% minimum corporate tax (“Pillar Two”).
We may be unable to successfully meet changed client and parent demands and needs, which may have a material adverse effect on our business or results of operations. 23 Table of Contents The growth of our business may be adversely affected if we do not implement our growth strategies and initiatives successfully or if we are unable to manage our growth or operations effectively.
The growth of our business may be adversely affected if we do not implement our growth strategies and initiatives successfully or if we are unable to manage our growth or operations effectively.
Failure to meet these needs may result in client loss and reduced demand and could have a material impact on our financial results. We depend on key management and key employees to manage our business and timing considerations. Our success depends on the efforts, abilities and continued services of our executive officers and other key employees.
Additionally, client unwillingness to adopt new technology enhancements, including artificial intelligence technology, could impact our return on investment. Failure to meet these needs may result in client loss and reduced demand and could have a material impact on our financial results. We depend on key management and key employees to manage our business and timing considerations.
In addition, changes in demographic trends, including the number of dual working parent or working single parent families in the workforce, may impact the demand for our services. Further, availability of work-from-home or hybrid work options may shift demand away from locations where we currently offer services. Such changes could materially and adversely affect our business and operating results.
Further, work-from-home or hybrid work options may shift demand away from locations where we currently offer services resulting in center closures or potential impairments. Such changes could materially and adversely affect our business and operating results.
Additionally, we may not be able to increase the price for our services at a rate consistent with increases in our operating costs. If demand for our services were to decrease, it could disrupt our operations and have a material adverse effect on our business and operating results.
Additionally, we may not be able to increase the price for our services at a rate consistent with increases in our operating costs.
The inability of existing child care centers to maintain their current enrollment levels and profitability, the failure of newly opened child care centers to contribute to profitability, and the failure to maintain and grow our other services could result in additional fluctuations in our future operating results on a quarterly or annual basis.
The inability of existing child care centers to maintain their current enrollment levels and profitability, the failure of newly opened child care centers to contribute to profitability, and the failure to maintain and grow our other services could result in additional fluctuations in our future operating results on a quarterly or annual basis. 21 Table of Contents Our business could be adversely affected by events beyond our control, such as public health crises, pandemics, natural disasters, negative global climate patterns, sociopolitical events, geopolitical tensions, or other catastrophic events.
Labor union representation of a material number of our employees could impact our business, financial condition or operating results as a result of additional labor costs, payroll and benefit expenses, new rules and practices, or work stoppages. 18 Table of Contents Changes in the demand for child dependent care and workplace solutions, which may be negatively affected by demographic trends and economic conditions, may affect our operating results.
Labor union representation of a material number of our employees could impact our business, financial condition or operating results as a result of additional labor costs, payroll and benefit expenses, new rules and practices, or work stoppages.
Advances in computer capabilities, increasingly sophisticated tools and methods used by hackers and cyber terrorists, new discoveries in the field of cryptography or other developments may result in our failure or inability, or the failure or inability of our vendors, to adequately protect personal or other sensitive information, and there can be no assurance that we or our vendors will not suffer a cyber-attack, that hackers or other unauthorized parties will not gain access to or exfiltrate personal information or other sensitive data, or that any such data compromise or unauthorized access will be discovered in a timely fashion.
As a result, there can be no assurance that we or our vendors will not suffer a cybersecurity incident, that hackers or other unauthorized parties will not gain access to or exfiltrate personal information or other sensitive data, or that any such data compromise or unauthorized access will be discovered in a timely fashion.
Instability in European financial markets or other events, such as the economic uncertainty resulting from Brexit, the impact from the COVID-19 pandemic, and adverse global economic conditions, including inflation, slower growth or recession, and higher interest rates, could cause fluctuations in exchange rates that may adversely affect our revenues and net earnings.
Instability in European and other financial markets, or other geopolitical events, such as adverse global economic conditions, could cause fluctuations in exchange rates that may adversely affect our revenues and net earnings. Approximately 27% of our revenue was generated outside the United States in 2023.
Our business strategy largely depends on employers recognizing the value of providing employees with child care, dependent care, workforce education, and other workplace solutions as an employee benefit. The number of employers that view such services as cost-effective or beneficial to their workforces may not continue to grow at the levels we anticipate or may diminish.
The number of employers that view such services as cost-effective or beneficial to their workforces may not continue to grow at the levels we anticipate or may diminish.
Failure of our systems to operate effectively or a compromise in the security of our systems, or the systems of our affiliates or other third-party, that results in unauthorized persons or entities obtaining personal information or other sensitive information could materially and adversely affect our reputation, operations, operating results, and financial condition.
Although our operational and business systems and functionality were promptly restored and this incident did not have a material impact on us, similar incidents or other cybersecurity-attacks against us or our third-party vendors could lead to operational disruptions that could have an adverse effect on our ability to provide services to clients and customers and on our results of operations and financial results. 19 Table of Contents Failure of our systems to operate effectively or a compromise in the security of our systems, or the systems of our affiliates or other third-party that results in unauthorized persons or entities obtaining personal information or other sensitive information, could materially and adversely affect our reputation, operations, operating results, and financial condition.
Failure to comply with such regulations could result in enforcement actions, significant fines, penalties and damages which could materially and adversely affect our business and financial condition. Our continued profitability depends on our ability to pass on our increased costs, such as labor and related costs, to our customers.
Failure to comply with such regulations could result in enforcement actions, significant fines, penalties, and damages which could materially and adversely affect our business and financial condition. We are also subject to evolving privacy laws on the use of “cookies” and other similar technologies.
Additional risks and uncertainties, not presently known to us or that we currently deem immaterial, may also impair our business, financial condition or results of operations. Business and Operational Risks The global COVID-19 pandemic and recovery therefrom has significantly disrupted our operations and our financial condition and operating results and may continue to adversely impact our business.
Additional risks and uncertainties, not presently known to us or that we currently deem immaterial, may also impair our business, financial condition, results of operations or the trading price of our common stock. Business and Operational Risks Our business depends largely on our ability to hire and retain qualified teachers and maintain strong employee relations.
In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price.
In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources, and could also require us to make substantial payments to satisfy judgments or to settle litigation.
While working parents continue to need child care regardless of their work location, there are no assurances that parents who work from home will continue to use our centers. Additionally, we believe that as a result of COVID-19, more women have temporarily stepped back from the workforce and that traditional dual-career households may have temporarily decreased.
While working parents continue to need child care regardless of their work location, there are no assurances that parents who work from home or in a hybrid model will continue to use our centers or use our centers on a full-time basis.
This type of litigation could result in substantial costs and divert our management’s attention and resources, and could also require us to make substantial payments to satisfy judgments or to settle litigation. 27 Table of Contents Your percentage ownership may be diluted by future issuances of capital stock, which could reduce your influence over matters on which stockholders vote.
Your percentage ownership may be diluted by future issuances of capital stock, which could reduce your influence over matters on which stockholders vote.
Additionally, changes in government support programs in our international jurisdictions, such as the reduction of government-funded tuition subsidies, could reduce the demand for our services in these markets, adversely impacting our results of operations.
Additionally, changes in government support programs in our international jurisdictions, such as the reduction of government-funded tuition subsidies, or legislation aimed at the cost of child care, such as tuition caps, could reduce the demand for our services in these markets or reduce revenue, adversely impacting our results of operations. 24 Table of Contents Litigation, Insurance, Tax and Regulatory Risks Our business activities subject us to litigation risks that may lead to significant reputational damage, monetary damages and other remedies and increase our litigation expense.
Removed
The COVID-19 pandemic and the recovery therefrom has substantially disrupted our global operations, and we expect to continue to be impacted as the conditions persist. Although conditions continue to stabilize, the situation remains subject to rapid and potentially material changes. As of December 31, 2022, we operated 1,078 early education and child care centers, 99% of which were open.
Added
Difficulty hiring or retaining appropriately qualified staff may have a disproportionate impact on our business compared to other companies that depend less on the in-person provision of services and do not directly provide care and education to young children. The early education and child care industry traditionally has experienced high turnover rates.
Removed
While we are focused on the enrollment of our centers, the continued or additional disruptions to our business and potential adverse impacts to our financial condition and results of operations resulting from the COVID-19 pandemic and recovery include, but are not limited to: • significant changes in the conditions of the markets we operate in may limit our ability to provide our services, especially center-based child care and center-based back-up child care, and may result in center closures; • inability to hire and maintain an adequate level of center staff requiring us to constrain or reduce enrollment, close classrooms or centers in order to comply with mandated ratios, inability to retain teachers, and the impact to our operations if a significant percentage of our workforce is unable to work because of illness, quarantine, government restrictions, or difficulty maintaining or retaining staff, which may have a disproportionate impact on our business compared to other companies that depend less on the in-person provision of services and do not directly provide care and education to young children; • reduced or shifting demand for our services due to adverse and uncertain economic and demographic conditions, including as a result of clients that have been adversely impacted, and/or increased unemployment, school and business closures, lockdown orders, long-term shift to a remote workforce, and general effects of a broad-based economic recession; • a reduction or limit on governmental grant funding for COVID-19 relief at the federal, state and local level could adversely impact our results of operations; and, • potential asset impairments or write-downs as we review assets impacted by the COVID-19 pandemic.
Added
Changes in the demand for child dependent care and workplace solutions, which may be negatively affected by demographic trends and economic conditions, may affect our operating results. Our business strategy largely depends on employers recognizing the value of providing employees with child care, dependent care, workforce education, and other workplace solutions as an employee benefit.
Removed
These factors could place limitations on our ability to operate effectively and could have a material adverse effect on our operations, financial condition and operating results. The recovery from the COVID-19 pandemic could continue to have a negative impact on our results of operations, the size and duration of which we are currently unable to predict.
Added
In addition, changes in demographic trends, including the number of dual working parent or working single parent families in the workforce, and the number of children requiring care, may impact the demand for our services from parents and families.
Removed
Additional impacts may arise of which we are currently not aware, the nature and extent of which will depend on future developments which are highly uncertain and cannot be predicted. Our business depends largely on our ability to hire and retain qualified teachers and maintain strong employee relations. The provision of child care services is personnel intensive.
Added
Our reputation and brand are critical to our business.
Removed
We may continue to experience difficulty in attracting, hiring and retaining qualified teachers due to tight labor pools and we may experience difficulty in attracting and retaining teachers due to changes in the work environment as a result of the COVID-19 pandemic.
Added
Additionally, we maintain other confidential, proprietary, or otherwise sensitive information relating to our business and from third parties.
Removed
We maintain policies and practices and operational safeguards, measures and controls aimed at reducing our cyber risk, protecting and recovering our data and ensuring business continuity, which include reasonable efforts to ensure that our third-party vendors maintain reasonable security, including encryption and authentication technology, and will notify us promptly if a security incident occurs.
Added
While we and our vendors maintain policies and practices, operational safeguards, as well as measures and controls aimed at reducing our risks related to cybersecurity threats, none of our or our vendors’ security measures can provide absolute security.

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Item 2. Properties

Properties — owned and leased real estate

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Leases typically have initial terms ranging from 10 to 15 years, generally with renewal options. 28 Table of Contents The following table summarizes the locations of our early education and child care centers as of December 31, 2022: Location Number of Centers United States 643 United Kingdom 290 Australia 75 Netherlands 69 India 1 1,078 We believe that our properties are generally in good condition, are adequate for our operations, and meet or exceed the regulatory requirements for health, safety and child care licensing established by the governments where they are located.
The following table summarizes the locations of our early education and child care centers as of December 31, 2023: Location Number of Centers United States 618 United Kingdom 280 Australia 81 Netherlands 69 India 1 1,049 We believe that our properties are generally in good condition, are adequate for our operations, and meet or exceed the regulatory requirements for health, safety and child care licensing established by the governments where they are located.
As of December 31, 2022, we operated 1,078 early education and child care centers across the United States, and in the United Kingdom, the Netherlands, Australia and India, of which 116 were owned, with the remaining centers being operated under operating leases or service agreements.
As of December 31, 2023, we operated 1,049 early education and child care centers across the United States, and in the United Kingdom, the Netherlands, Australia and India, of which 117 were owned, with the remaining centers being operated under operating leases or service agreements. Leases typically have initial terms ranging from 10 to 15 years, generally with renewal options.
Item 2. Properties Our corporate headquarters are located in Newton, Massachusetts, where we lease approximately 110,000 square feet of office space. We also lease approximately 50,000 square feet for our contact center in Broomfield, Colorado, as well as spaces for regional administrative offices, including locations in Rushden and London in the United Kingdom, Amsterdam in the Netherlands, and St.
We also lease approximately 50,000 square feet for our contact center and regional administrative offices in Broomfield, Colorado, as well as spaces for regional administrative offices in Northampton in the United Kingdom, Amsterdam in the Netherlands, and Sydney in Australia. We also lease a number of early education and child care centers in the geographies in which we operate.
Leonards in Australia. We also lease a number of early education and child care centers in the geographies in which we operate. We do not consider any of our properties, including our corporate headquarters, to be material to our operations.
We do not consider any of our properties, including our corporate headquarters, to be material to our operations.
Added
Item 2. Properties Our corporate headquarters are located in Newton, Massachusetts, where at December 31, 2023, we lease approximately 110,000 square feet of office space.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Prior to joining Bright Horizons in 1995, Ms. Burke Afonso served as the controller for BOSE Corporation in France and worked on the audit staff at Price Waterhouse, LLP in Boston. John G. Casagrande, age 64, has served as General Counsel of the Company since January 2010 and as Secretary since December 2019. Mr.
Prior to joining Bright Horizons in 1995, Ms. Burke Afonso served as the controller for BOSE Corporation in France and worked on the audit staff at Price Waterhouse, LLP in Boston. John G. Casagrande, age 65, has served as General Counsel of the Company since January 2010 and as Secretary since December 2019. Mr.
Berman has served as a member of the Board of HarborOne Bank (NASDAQ: HONE) since 2019. Ros Marshall , age 63, has served as Managing Director, International since July 2022. Ms. Marshall joined the Company as Managing Director, United Kingdom in January 2020. Prior to joining the Company, Ms.
Berman has served as a member of the Board of HarborOne Bank (NASDAQ: HONE) since 2019. Ros Marshall , age 64, has served as Managing Director, International since July 2022. Ms. Marshall joined the Company as Managing Director, United Kingdom in January 2020. Prior to joining the Company, Ms.
Marshall was the Chief Executive Officer of Taaleem from 2013 to 2019, the second largest international school group in the United Arab Emirates. From 2010 to 2013, Ms. Marshall served as Chief Executive Officer of Kidsunlimited Group Limited, which was acquired by Bright Horizons in 2013. From 2012 to 2018, Ms.
Marshall was the Chief Executive Officer of Taaleem from 2013 to 2019, the second largest international school group in the United Arab Emirates. From 2010 to 2013, Ms. Marshall served as Chief Executive Officer of Kidsunlimited Group Limited, which was acquired by Bright Horizons in 2013. Ms.
Boland served as Chief Financial Officer and Vice President-Finance at various companies. From 1981 to 1990, Ms. Boland worked on the audit staff at Price Waterhouse, LLP in Boston, completing her tenure as a senior audit manager. Ms. Boland has served as a member of the Board and Audit Committee of The Children’s Place, Inc. (Nasdaq: PLCE) since May 2019.
Boland served as Chief Financial Officer and Vice President-Finance at various companies. From 1981 to 1990, Ms. Boland worked on the audit staff at Price Waterhouse, LLP in Boston, completing her tenure as a senior audit manager. Ms. Boland has served as a member of the Board of The Children’s Place, Inc.
Marshall served as Trustee of the British Council, and was awarded an OBE in 2021 for services to Education, the British Council, and the National Children's Orchestra of Great Britain. 30 Table of Contents PART II
Marshall was awarded an OBE in 2021 for services to Education, the British Council, and the National Children's Orchestra of Great Britain. 31 Table of Contents PART II
He joined Bright Horizons in September 2006 through the acquisition of College Coach, which he co-founded and led for eight years. Elizabeth J. Boland, age 63, has served as Chief Financial Officer of the Company since June 1999. Ms.
He served as Managing Director, Europe from January 2008 until December 2009. He joined Bright Horizons in September 2006 through the acquisition of College Coach, which he co-founded and led for eight years. Elizabeth J. Boland, age 64, has served as Chief Financial Officer of the Company since June 1999, and as Treasurer since December 2023. Ms.
Casagrande joined Bright Horizons in 2005 as Senior Counsel, Special Projects through the Company’s acquisition of ChildrenFirst, Inc., where he served as its legal counsel for eight years. Mr.
Casagrande joined Bright Horizons in 2005 as Senior Counsel, Special Projects through the Company’s acquisition of ChildrenFirst, Inc., where he served as its legal counsel for eight years. Mr. Casagrande was employed as an Associate at Palmer and Dodge LLP from 1987 through 1995.
Mary Lou Burke Afonso, age 58, has served as Chief Operating Officer, North America Center Operations of the Company since January 2016 and is a 25-year veteran of the Company. Ms.
(Nasdaq: PLCE) since May 2019 having served on the Audit Committee from May 2019 to May 2023 and on the Compensation Committee since May 2023. Mary Lou Burke Afonso, age 59, has served as Chief Operating Officer, North America Center Operations of the Company since January 2016 and is a 29-year veteran of the Company. Ms.
Kramer served as the Chief Development Officer from January 2014 until January 2016 and as Senior Vice President, Strategic Growth & Global Operations from January 2010 until December 2013. He served as Managing Director, Europe from January 2008 until December 2009.
Kramer , age 53, has served as Chief Executive Officer and a director of the Company since January 2018 and as President of the Company since January 2016. Mr. Kramer served as the Chief Development Officer from January 2014 until January 2016 and as Senior Vice President, Strategic Growth & Global Operations from January 2010 until December 2013.
Casagrande was employed as an Associate at Palmer and Dodge LLP from 1987 through 1995. 29 Table of Contents Mandy Berman , age 52, has served as Chief Operating Officer, Back-up Care and Emerging Care Services since February 2023. Prior to re-joining the Company, Ms.
Mandy Berman , age 53, has served as Chief Operating Officer, Back-up Care and Emerging Care Services since February 2023. Prior to re-joining the Company, Ms.
Item 4. Mine Safety Disclosures Not applicable. Information about our Executive Officers Set forth below is certain information about our executive officers. Ages are as of December 31, 2022. Stephen H. Kramer , age 52, has served as Chief Executive Officer and a director of the Company since January 2018 and as President of the Company since January 2016. Mr.
Item 4. Mine Safety Disclosures Not applicable. 30 Table of Contents Information about our Executive Officers Set forth below is certain information about our executive officers. Ages are as of December 31, 2023. Stephen H.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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The restricted stock units and performance stock units are excluded from the weighted average exercise price calculation. 31 Table of Contents Performance Graph The following performance graph and related information shall not be deemed to be “ soliciting material ” or to be “ filed ” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference into such filing.
The restricted stock units and performance stock units are excluded from the weighted average exercise price calculation. 32 Table of Contents Performance Graph The following performance graph and related information shall not be deemed to be “ soliciting material ” or to be “ filed ” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference into such filing.
The following graph compares the total return to stockholders of our common stock for the past five years through December 31, 2022, relative to the total return of the following: • the New York Stock Exchange Composite Index; and • the Russell Midcap Growth Index.
The following graph compares the total return to stockholders of our common stock for the past five years through December 31, 2023, relative to the total return of the following: • the New York Stock Exchange Composite Index; and • the Russell Midcap Growth Index.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Principal Market Our common stock is listed on the NYSE under the ticker symbol “BFAM”. As of February 15, 2023, there were 21 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Principal Market Our common stock is listed on the NYSE under the ticker symbol “BFAM”. As of February 14, 2024, there were 15 holders of record of our common stock.
Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (1) (a) Weighted Average Exercise Price of Outstanding Options, Warrants and Rights (1) (b) Number of Securities Remaining Available For Future Issuance under Equity Compensation Plans (excluding securities reflected in column (a)) (c) Equity compensation plans approved by security holders 2,661,880 $ 103.11 1,536,367 Equity compensation plans not approved by security holders — — — Total 2,661,880 $ 103.11 1,536,367 (1) The number of securities includes 398,522 shares that may be issued upon the settlement of restricted stock units and performance stock units.
Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (1) (a) Weighted Average Exercise Price of Outstanding Options, Warrants and Rights (1) (b) Number of Securities Remaining Available For Future Issuance under Equity Compensation Plans (excluding securities reflected in column (a)) (c) Equity compensation plans approved by security holders 2,443,660 $ 91.82 1,434,662 Equity compensation plans not approved by security holders — — — Total 2,443,660 $ 91.82 1,434,662 (1) The number of securities includes 653,646 shares that may be issued upon the settlement of restricted stock units and performance stock units.
Equity Compensation Plans The following table provides information as of December 31, 2022 with respect to shares of our common stock that may be issued under existing equity compensation plans.
Such shares may be purchased, from time to time, depending on business and market conditions. Equity Compensation Plans The following table provides information as of December 31, 2023 with respect to shares of our common stock that may be issued under existing equity compensation plans.
Issuer Purchases of Equity Securities The table below sets forth information regarding purchases of our common stock during the three months ended December 31, 2022: Period Total Number of Shares Purchased (a) Average Price Paid per Share (b) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) (c) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (In thousands) (1) (d) October 1, 2022 - October 31, 2022 — $ — — $ 198,290 November 1, 2022 - November 30, 2022 — $ — — $ 198,290 December 1, 2022 - December 31, 2022 — $ — — $ 198,290 — — (1) The board of directors of the Company authorized a share repurchase program of up to $400 million of the Company’s outstanding common stock effective December 16, 2021.
Issuer Purchases of Equity Securities The table below sets forth information regarding purchases of our common stock during the three months ended December 31, 2023: Period Total Number of Shares (or Units) Purchased (1) (a) Average Price Paid per Share (or Unit) (b) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (2) (c) Approximate Dollar Value of Shares/Units that May Yet Be Purchased Under the Plans or Programs (In thousands) (3) (d) October 1, 2023 - October 31, 2023 — $ — — $ 198,290 November 1, 2023 - November 30, 2023 — $ — — $ 198,290 December 1, 2023 - December 31, 2023 97 $ 88.38 — $ 198,290 97 — (1) The Company purchased an aggregate of 97 shares during the three months ended December 31, 2023, which shares were withheld for tax payments due upon the vesting of employee restricted stock and restricted stock unit awards.
Years ended December 31, 2017 2018 2019 2020 2021 2022 Bright Horizons Family Solutions Inc. $ 100.00 $ 118.55 $ 159.84 $ 183.96 $ 133.85 $ 67.08 NYSE Composite Index $ 100.00 $ 91.21 $ 114.69 $ 122.70 $ 148.07 $ 134.22 Russell Midcap Growth Index $ 100.00 $ 95.25 $ 129.03 $ 174.95 $ 197.22 $ 144.52 Note: Underlying data provided by Zacks Investment Research, Inc.
Years ended December 31, 2018 2019 2020 2021 2022 2023 Bright Horizons Family Solutions Inc. $ 100.00 $ 134.83 $ 155.18 $ 112.90 $ 56.59 $ 84.50 NYSE Composite Index $ 100.00 $ 125.74 $ 134.53 $ 162.34 $ 147.16 $ 167.43 Russell Midcap Growth Index $ 100.00 $ 135.47 $ 183.68 $ 207.06 $ 151.73 $ 190.98 Note: Underlying data provided by Zacks Investment Research, Inc.
Removed
The share repurchase program has no expiration date. The December 2021 repurchase program replaced the prior share repurchase program of up to $300 million effective June 2018, of which approximately $0.2 million remained available thereunder. All repurchased shares have been retired.
Added
The shares were valued using the transaction date and closing stock price for purposes of such tax withholdings. Shares retired in connection with the payment of tax withholding obligations are not included in, and are not counted against, our share repurchase authorization.
Added
(2) The board of directors of the Company authorized a share repurchase program of up to $400 million of the Company’s outstanding common stock effective December 16, 2021. The Company did not purchase any shares under the board-authorized program during the three months ended December 31, 2023. The share repurchase program has no expiration date.
Added
All repurchased shares have been retired. (3) The number shown represents, as of the end of each period, the approximate dollar value of the Company's outstanding common stock that may yet be purchased under the Company's publicly announced share repurchase program as described in footnote (2) above.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

98 edited+26 added−22 removed70 unchanged
Additionally, revenue for tuition assistance and student loan repayments is based on a fee earned for each payment processed and is recorded on a net basis as we are acting as the agent for the processing of the payment from clients to their employees, and is recognized in the month the payments are processed.
Additionally, revenue for tuition assistance and student loan repayments is based on a fee earned for each transaction processed and is recorded on a net basis as we are acting as the agent for the processing of the payment from clients to their employees and is recognized in the month the payments are processed.
Our back-up care offers access to a contracted network of in-home service agencies and center-based providers in locations where we do not otherwise have in-home caregivers or centers with available capacity, to a network of tutoring service providers and third-party pet care providers.
Our back-up care offers access to a contracted network of in-home service agencies and center-based providers in locations where we do not otherwise have in-home caregivers or child care centers with available capacity, to a network of tutoring service providers and third-party pet care providers.
Full service center-based child care includes traditional center-based early education and child care, preschool and elementary education. Back-up care consists of center-based back-up child care, in-home care for children and adult/elder dependents, school age camps, virtual tutoring, pet care and self-sourced reimbursed care.
Full service center-based child care includes traditional center-based early education and child care, preschool and elementary education. Back-up care consists of center-based back-up child care, in-home care for children and adult/elder dependents, school age camps, tutoring, pet care and self-sourced reimbursed care.
Because of these limitations, adjusted EBITDA, adjusted income from operations, and adjusted net income should not be considered as discretionary cash available to us to reinvest in the growth of our business or as measures of cash that will be available to us to meet our obligations. 40 Table of Contents Liquidity and Capital Resources Our primary cash requirements are for the ongoing operations of our existing early education and child care centers, back-up care, educational advisory and other services, the addition of new centers through development or acquisitions, and debt financing obligations.
Because of these limitations, adjusted EBITDA, adjusted income from operations, and adjusted net income should not be considered as discretionary cash available to us to reinvest in the growth of our business or as measures of cash that will be available to us to meet our obligations. 41 Table of Contents Liquidity and Capital Resources Our primary cash requirements are for the ongoing operations of our existing early education and child care centers, back-up care, educational advisory and other services, the addition of new centers through development or acquisitions, and debt financing obligations.
The tuition paid by parents is recognized on a daily basis, but for convenience is recorded on a monthly basis. 44 Table of Contents We enter into contracts with employer sponsors to manage and operate their early education and child care centers for a management fee, or to provide child care services to their employees on an exclusive or priority basis.
The tuition paid by parents is recognized on a daily basis, but for convenience is recorded on a monthly basis. 45 Table of Contents We enter into contracts with employer sponsors to manage and operate their early education and child care centers for a management fee, or to provide child care services to their employees on an exclusive or priority basis.
Interest rate cap agreements for $300 million, which have a forward starting effective date of October 31, 2023 and expire on October 31, 2026, provide the Company with interest rate protection in the event the one-month LIBOR rate increases above 3.0% (effective December 30, 2022, one-month term SOFR rate increases above 2.9%).
Interest rate cap agreements for $300 million, which had a forward starting effective date of October 31, 2023 and expire on October 31, 2026, provide the Company with interest rate protection in the event the one-month LIBOR rate increases above 3.0% (effective December 30, 2022, one-month term SOFR rate increases above 2.9%).
Subscription fees are recognized on a straight-line basis using the time-elapsed method over the contract term, and variable transaction fees earned are allocated to that distinct transaction consistent with the overall allocation objective. Goodwill and Intangible Assets — We account for business combinations under the acquisition method of accounting.
Subscription fees are recognized on a straight-line basis using the time-elapsed method over the contract term, and variable transaction fees earned are allocated to that distinct transaction consistent with the overall allocation objective. Goodwill, Intangible Assets and Long-Lived Assets — We account for business combinations under the acquisition method of accounting.
Interest rate cap agreements for $600 million, which have a forward starting effective date of October 31, 2023 and expire on October 31, 2025, provide the Company with interest rate protection in the event the one-month LIBOR rate increases above 2.5% (effective December 30, 2022, one-month term SOFR rate increases above 2.4%).
Interest rate cap agreements for $600 million, which had a forward starting effective date of October 31, 2023 and expire on October 31, 2025, provide the Company with interest rate protection in the event the one-month LIBOR rate increases above 2.5% (effective December 30, 2022, one-month term SOFR rate increases above 2.4%).
At December 31, 2022, we managed child care centers on behalf of single employers in the following industries and also managed lease/consortium locations in approximately the following proportions: Percentage of Centers Classification North America International Employer locations: Healthcare and Pharmaceuticals 20.0 % 2.0 % Government and Higher Education 12.5 4.0 Financial Services 7.5 2.0 Consumer 7.5 — Professional Services and Other 5.0 — Technology 5.0 1.0 Industrial/Manufacturing 2.5 1.0 60.0 10.0 Lease/consortium locations 40.0 90.0 100.0 % 100.0 % 33 Table of Contents Our reportable segments are comprised of (1) full service center-based child care, (2) back-up care, and (3) educational advisory and other services.
At December 31, 2023, we managed child care centers on behalf of single employers in the following industries and also managed lease/consortium locations in approximately the following proportions: Percentage of Centers Classification North America International Employer locations: Healthcare and Pharmaceuticals 20.0 % 2.0 % Government and Higher Education 12.5 4.0 Financial Services 7.5 2.0 Consumer 7.5 — Professional Services and Other 5.0 — Technology 5.0 1.0 Industrial/Manufacturing 2.5 1.0 60.0 10.0 Lease/consortium locations 40.0 90.0 100.0 % 100.0 % 34 Table of Contents Our reportable segments are comprised of (1) full service center-based child care, (2) back-up care, and (3) educational advisory and other services.
A breach of this covenant is subject to certain equity cure rights. The credit agreement governing the senior secured credit facilities contains certain customary affirmative covenants and events of default. We were in compliance with our financial covenant at December 31, 2022.
A breach of this covenant is subject to certain equity cure rights. The credit agreement governing the senior secured credit facilities contains certain customary affirmative covenants and events of default. We were in compliance with our financial covenant at December 31, 2023.
As of December 31, 2022 and 2021, there were no material estimates related to the constraint of cumulative revenue recognized. Full-Service Center-Based Child Care Our full-service center-based child care services include traditional center-based early education and child care, preschool, and elementary education.
As of December 31, 2023 and 2022, there were no material estimates related to the constraint of cumulative revenue recognized. Full-Service Center-Based Child Care Our full-service center-based child care services include traditional center-based early education and child care, preschool, and elementary education.
Revenue for College Coach is recognized over the contract term as college advisory services are provided and customers receive the benefit. 45 Table of Contents Other services consist of the Sittercity business, an online marketplace for families and caregivers.
Revenue for College Coach is recognized over the contract term as college advisory services are provided and customers receive the benefit. 46 Table of Contents Other services consist of the Sittercity business, an online marketplace for families and caregivers.
During the year ended December 31, 2022, in connection with the OAC acquisition in Australia completed on July 1, 2022, we entered into foreign currency forward contracts with a total notional value of approximately AUD$320 million, which included the expected payments for the purchase price and for letters of credit used to guarantee certain lease arrangements, to mitigate the impact of foreign currency fluctuations between signing of the definitive purchase agreement on May 3, 2022 and closing.
During the year ended December 31, 2022, in connection with the Only About Children acquisition in Australia completed on July 1, 2022, we entered into foreign currency forward contracts with a total notional value of approximately AUD$320 million, which included the expected payments for the purchase price and for letters of credit used to guarantee certain lease arrangements, to mitigate the impact of foreign currency fluctuations between signing of the definitive purchase agreement on May 3, 2022 and closing.
During the years ended December 31, 2022 and 2021, we participated in government support programs that were enacted in response to the economic impact of the COVID-19 pandemic, including certain tax deferrals, tax credits and Federal block grant funding in the United States.
During the years ended December 31, 2023 and 2022, we participated in government support programs that were enacted in response to the economic impact of the pandemic, including certain tax deferrals, tax credits and Federal block grant funding in the United States.
Operations outside of North America accounted for 26% of our consolidated revenue for the years ended December 31, 2022 and 2021. The net impact on our liquidity from changes in foreign currency exchange rates was not material for the years ended December 31, 2022 and 2021.
Operations outside of North America accounted for 27% and 26% of our consolidated revenue for the years ended December 31, 2023 and 2022, respectively. The net impact on our liquidity from changes in foreign currency exchange rates was not material for the years ended December 31, 2023 and 2022.
These arrangements generally have a contractual term of three to ten years with varying terms and renewal and cancellation options, and may also include operating subsidies paid either in lieu of or to supplement parent tuition.
These arrangements generally have a contractual term of 3 to 10 years with varying terms and renewal and cancellation options, and may also include operating subsidies paid either in lieu of or to supplement parent tuition.
However, actual interest paid may be different from these estimates based on changes in the market. 43 Table of Contents The term loan A and the revolving credit facility require Bright Horizons Family Solutions LLC, the borrower, and its restricted subsidiaries to comply with a maximum first lien net leverage ratio.
However, actual interest paid may be different from these estimates based on changes in interest rates and borrowings outstanding. 44 Table of Contents The term loan A and the revolving credit facility require Bright Horizons Family Solutions LLC, the borrower, and its restricted subsidiaries to comply with a maximum first lien net leverage ratio.
As noted above, a portion of the funding received from government support programs reduced the operating costs in certain employer-sponsored centers, which in turn reduced the operating subsidy revenue due from employers for the related child care centers by $31.7 million and $16.0 million in the years ended December 31, 2022 and 2021, respectively.
As noted above, a portion of the funding received from government support programs reduced the operating costs in certain employer-sponsored centers, which in turn reduced the operating subsidy revenue due from employers for the related child care centers by $17.5 million and $31.7 million in the years ended December 31, 2023 and 2022, respectively.
Interest rate cap agreements for $300 million notional value have an effective date of June 30, 2020 and expire on October 31, 2023, while interest rate cap agreements for another $500 million notional amount have an effective date of October 29, 2021 and expire on October 31, 2023.
Interest rate cap agreements for $300 million notional value had an effective date of June 30, 2020 and expired on October 31, 2023, while interest rate cap agreements for another $500 million notional amount had an effective date of October 29, 2021 and expired on October 31, 2023.
Adjusted net income increased $30.8 million, or 25%, for the year ended December 31, 2022 when compared to the same period in 2021 primarily due to the increase in income from operations, partially offset by a higher effective tax rate. 38 Table of Contents Non-GAAP Financial Measures and Reconciliation In our quarterly and annual reports, earnings press releases and conference calls, we discuss key financial measures that are not calculated in accordance with GAAP to supplement our consolidated financial statements presented on a GAAP basis.
Adjusted net income increased $12.1 million, or 8%, for the year ended December 31, 2023 when compared to the same period in 2022, primarily due to the increase in adjusted income from operations, partially offset by higher interest expense and a higher effective tax rate. 39 Table of Contents Non-GAAP Financial Measures and Reconciliation In our quarterly and annual reports, earnings press releases and conference calls, we discuss key financial measures that are not calculated in accordance with GAAP to supplement our consolidated financial statements presented on a GAAP basis.
As we focus on the enrollment and ramping of centers, we continue to prioritize investments that support current operations and strategic opportunities, as well as the principal and interest payments on our debt.
As we focus on the enrollment and ramping of centers, we expect to continue to prioritize our capital allocation on investments that support current operations and strategic opportunities, as well as the principal and interest payments on our debt and revolver.
Revenue generated by educational advisory and other services in the year ended December 31, 2022 increased by $10.2 million, or 10%, when compared to the prior year. Revenue growth in this segment was primarily attributable to contributions from sales to new clients and increased utilization from existing clients. Cost of Services.
Revenue generated by educational advisory and other services in the year ended December 31, 2023 increased by $4.1 million, or 4%, when compared to the prior year. Revenue growth in this segment was primarily attributable to contributions from sales to new clients and increased utilization from existing clients. Cost of Services.
Cost of services in 2022 included higher care provider fees generated by the increase in utilization levels of center-based and in-home back-up care over the prior year, and continued investment in personnel, marketing and technology to support our customer user experience and service delivery.
The increase in cost of services is primarily associated with higher care provider fees generated by the increase in utilization levels of center-based and in-home back-up care over the prior year, and continued investment in personnel, marketing and technology to support our customer user experience and service delivery.
Amortization expense on intangible assets was $31.9 million for the year ended December 31, 2022, an increase from $29.2 million in the prior year, due to increases from intangible assets acquired in relation to acquisitions completed in 2021 and 2022, partially offset by the use of the accelerated method of amortization for certain intangibles and decreases from intangible assets becoming fully amortized during the period.
Amortization expense on intangible assets was $33.4 million for the year ended December 31, 2023, an increase from $31.9 million in the prior year, due to increases from intangible assets acquired in relation to acquisitions completed in 2022 and 2023, partially offset by the use of the accelerated method of amortization for certain intangible assets and decreases from intangible assets becoming fully amortized during the period.
Customer relationships are considered to be finite-lived assets, with estimated lives typically ranging from two to seventeen years. Certain trade names acquired as part of our strategy to expand by completing strategic acquisitions are considered to be finite-lived assets, with estimated lives typically ranging from two to ten years. Goodwill and certain trade names are considered to be indefinite-lived assets.
Customer relationships are considered to be finite-lived assets, with estimated lives typically ranging from 2 to 17 years. Certain trade names acquired as part of our strategy to expand by completing strategic acquisitions are considered to be finite-lived assets, with estimated lives typically ranging from 2 to 10 years. Goodwill and certain trade names are considered to be indefinite-lived assets.
However, if we were to experience continued or renewed disruption from the COVID-19 pandemic or if we were to undertake any significant acquisitions or make investments in the purchase of facilities for new or existing centers, we could require financing beyond our existing cash and borrowing capacity, and it could be necessary for us to obtain additional debt or equity financing.
However, if we were to experience renewed disruption from the pandemic or other similar global health crisis or if we were to undertake any significant acquisitions or make investments in the purchase of facilities for new or existing centers, we could require financing beyond our existing cash and borrowing capacity, and it could be necessary for us to obtain additional debt or equity financing.
(d) Other costs in the year ended December 31, 2022 consist of transaction costs incurred in connection with acquisitions of $9.2 million and costs incurred in relation to a cyber incident of $1.9 million. Other costs in the year ended December 31, 2021 represent transaction costs incurred in connection with acquisitions.
Other costs in the year ended December 31, 2022 consist of transaction costs incurred in connection with acquisitions of $9.2 million and costs incurred in relation to a cybersecurity incident of $1.9 million.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following Management’s Discussion and Analysis of Financial Condition and Results of Operations generally discusses our results of operations for Fiscal 2022 and Fiscal 2021 and provides comparisons between such fiscal years.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following Management’s Discussion and Analysis of Financial Condition and Results of Operations generally discusses our results of operations for the fiscal years ended December 31, 2023 and 2022 and provides comparisons between such fiscal years.
The weighted average interest rate for the term loans and revolving credit facility was 3.02%, and 2.98% for the years ended December 31, 2022 and 2021, respectively, including the impact of the cash flow hedges. Based on our current interest rate projections, we estimate that our overall weighted average interest rate will approximate 4.25% for 2023.
The blended weighted average interest rate for the term loans and revolving credit facility was 4.11%, and 3.02% for the years ended December 31, 2023 and 2022, respectively, including the impact of the cash flow hedges. Based on our current interest rate projections, we estimate that our overall weighted average interest rate will approximate 5.25% to 5.50% for 2024.
As we continue to recover from the impact of the pandemic, we remain committed to serving the needs of families, clients and our employees. We are confident in our value proposition, business model, the strength of our client partnerships, the strength of our balance sheet and liquidity position, and our ability to continue to respond to changing market conditions.
As we continue to navigate this post-pandemic recovery period, we remain committed to serving the needs of families, clients and our employees. We are confident in our value proposition, business model, the strength of our client partnerships, the strength of our balance sheet and liquidity position, and our ability to continue to respond to changing market conditions.
Refer to “Non-GAAP Financial Measures and Reconciliation” below for a reconciliation of these non-GAAP financial measures to their respective measures determined under GAAP and for information regarding our use of non-GAAP financial measures. Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 Revenue.
Refer to “Non-GAAP Financial Measures and Reconciliation” below for a reconciliation of these non-GAAP financial measures to their most directly comparable financial measure determined under GAAP and for information regarding our use of non-GAAP financial measures. Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 Revenue.
Cost of services in the educational advisory and other services segment increased by $1.6 million, or 3%, to $51.2 million in the year ended December 31, 2022, when compared to the prior year due to increased personnel costs related to delivering services to the expanding customer base. Gross Profit.
Cost of services in the educational advisory and other services segment increased by $1.4 million, or 3%, to $52.6 million in the year ended December 31, 2023, when compared to the prior year due to increased personnel costs related to delivering services to the expanding customer base.
Refer to Note 6, Goodwill and Intangible Assets , to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for additional details. Income from Operations. Income from operations increased by $28.6 million, or 22%, to $157.6 million for the year ended December 31, 2022 when compared to the prior year.
Refer to Note 6, Goodwill and Intangible Assets , to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for additional details. Income from Operations. Income from operations increased by $13.7 million, or 9%, to $171.2 million for the year ended December 31, 2023 when compared to the prior year.
During the years ended December 31, 2022 and 2021, $86.8 million and $50.9 million, respectively, was recorded as a reduction to cost of services in relation to these benefits, of which $31.7 million and $16.0 million, respectively, reduced the operating subsidy revenue from employers for the related child care centers.
During the years ended December 31, 2023 and 2022, $49.4 million and $86.8 million, respectively, was recorded as a reduction to cost of services in relation to these benefits, of which $17.5 million and $31.7 million, respectively, reduced the operating subsidy revenue from employers for the related child care centers.
During the year ended December 31, 2022, we recognized realized losses of $5.9 million in relation to these forward contracts due to fluctuations in the Australian dollar. Loss on Extinguishment of Debt.
During the year ended December 31, 2022, we recognized realized losses of $5.9 million in relation to these forward contracts due to fluctuations in the Australian dollar. Net Interest Expense.
For discussion and comparison of Fiscal 2021 and Fiscal 2020, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for Fiscal 2021, filed with the SEC on February 25, 2022.
For discussion and comparison for the fiscal years ended December 31, 2022 and 2021, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 28, 2023.
At December 31, 2022, we operated 1,078 early education and child care centers, consisting of 643 centers in North America and 435 centers internationally. We have the capacity to serve approximately 120,000 children and their families in the United States, the United Kingdom, the Netherlands, Australia and India.
At December 31, 2023, we operated 1,049 early education and child care centers, consisting of 618 centers in North America and 431 centers internationally. We have the capacity to serve approximately 120,000 children in the United States, the United Kingdom, the Netherlands, Australia and India.
Including the effects of cash flow hedges, the weighted average interest rates for the term loans and revolving credit facility were 3.02% and 2.98% for the years ended December 31, 2022 and 2021, respectively.
The weighted average interest rates for the term loans and revolving credit facility were 4.11% and 3.02% for the years ended December 31, 2023 and 2022, respectively, inclusive of the effects of cash flow hedges.
Net excess tax benefits reduced income tax expense by $2.0 million in 2022, compared to $7.8 million in 2021, due to lower volume of equity transactions and lower excess tax benefits realized on each transaction in 2022.
Net shortfall tax expense increased tax expense by $2.9 million in 2023, compared to excess tax benefits that reduced income tax expense by $2.0 million in 2022, due to lower volume of equity transactions and lower excess tax benefits realized on each transaction in 2023.
During the year ended December 31, 2022, we recorded impairment charges for long-lived assets of $14.1 million related to fixed assets and operating lease right-of-use assets. 46 Table of Contents
During the year ended December 31, 2023, we recorded impairment charges for long-lived assets of $35.9 million related to fixed assets and operating lease right-of-use assets. 47 Table of Contents
All repurchased shares have been retired. 41 Table of Contents We believe that funds provided by operations, our existing cash balances and borrowings available under our revolving credit facility will be adequate to fund all obligations and liquidity requirements for at least the next twelve months.
We believe that funds provided by operations, our existing cash balances and borrowings available under our revolving credit facility will be adequate to fund all obligations and liquidity requirements for at least the next 12 months.
On December 21, 2022, the Company amended its existing interest rate cap agreements in conjunction with the amendment to its senior secured credit facilities, and replaced the one-month LIBOR rate with the one-month term SOFR rate.
Borrowings under the credit agreement are subject to variable interest. We mitigate our interest rate exposure with interest rate cap agreements. On December 21, 2022, the Company amended its existing interest rate cap agreements in conjunction with the amendment to its senior secured credit facilities and replaced the one-month LIBOR rate with the one-month term SOFR rate.
Our ability to fully return to the operating income levels at which we operated prior to COVID-19, and to continue to increase operating income in the future, will depend upon our ability to continue to regain and sustain the following characteristics of our business and our strategic growth priorities: • maintenance and incremental growth of enrollment in our mature and ramping centers, and cost management in response to changes in enrollment in our centers; • attraction and retention of qualified early childhood educators to meet the enrollment demand; • effective pricing strategies, including tuition increases that correlate with expected increases in personnel costs, including wages and benefits, and additional pricing actions to accommodate higher operating costs and the impact of persistent inflation; • additional growth in expanded service offerings and cross-selling of services to clients; • additional growth in the number of back-up care uses and care use types; • successful identification and integration of acquisitions and transitions of management of centers; and, • successful management and improvement of underperforming centers. 34 Table of Contents Results of Operations The following table sets forth statement of income data as a percentage of revenue for the years ended December 31, 2022 and 2021: Years Ended December 31, 2022 2021 (In thousands, except percentages) 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 % Adjusted EBITDA (1) $ 316,994 15.7 % $ 272,068 15.5 % Adjusted income from operations (1) $ 182,741 9.0 % $ 140,178 8.0 % Adjusted net income (1) $ 152,199 7.5 % $ 121,396 6.9 % (1) Adjusted EBITDA, adjusted income from operations and adjusted net income are non-GAAP financial measures and are not determined in accordance with accounting principles generally accepted in the United States (“GAAP”).
Our ability to fully return to the operating income levels at which we operated prior to COVID-19, and to continue to increase operating income in the future, will depend upon our ability to continue to regain and sustain the following characteristics of our business and our strategic growth priorities: • maintenance and incremental growth of enrollment in our mature and ramping centers, and cost management in response to changes in enrollment and demand in our centers; • attraction and retention of qualified early childhood educators to meet the enrollment demand; • effective pricing strategies, including tuition increases that correlate with expected increases in personnel costs, including wages and benefits, and additional pricing actions to accommodate higher operating costs and the impact of persistent inflation; • maintenance and incremental growth of client relationships, additional growth in expanded service offerings and cross-selling of services to clients; • additional growth in the number of back-up care uses, care use types and supply of service providers; • successful identification and integration of acquisitions and transitions of management of centers; and, • successful management of underperforming centers, through improved enrollment or exit and management of costs. 35 Table of Contents Results of Operations The following table sets forth statement of income data as a percentage of revenue for the years ended December 31, 2023 and 2022: Years Ended December 31, 2023 2022 (In thousands, except percentages) Revenue $ 2,418,257 100.0 % $ 2,020,487 100.0 % Cost of services 1,886,533 78.0 % 1,541,834 76.3 % Gross profit 531,724 22.0 % 478,653 23.7 % Selling, general and administrative expenses 327,068 13.5 % 289,156 14.3 % Amortization of intangible assets 33,415 1.4 % 31,912 1.6 % Income from operations 171,241 7.1 % 157,585 7.8 % Loss on foreign currency forward contracts — — % (5,917) (0.3) % Interest expense — net (51,609) (2.2) % (39,486) (1.9) % Income before income tax 119,632 4.9 % 112,182 5.6 % Income tax expense (45,409) (1.8) % (31,541) (1.6) % Net income $ 74,223 3.1 % $ 80,641 4.0 % Adjusted EBITDA (1) $ 352,117 14.6 % $ 316,994 15.7 % Adjusted income from operations (1) $ 212,602 8.8 % $ 182,741 9.0 % Adjusted net income (1) $ 164,263 6.8 % $ 152,199 7.5 % (1) Adjusted EBITDA, adjusted income from operations and adjusted net income are non-GAAP financial measures and are not determined in accordance with accounting principles generally accepted in the United States (“GAAP”).
We seek to cluster centers in geographic areas to enhance operating efficiencies and to create a leading market presence. At December 31, 2022, 99% of our early education and child care centers were open. At December 31, 2022, we had more than 1,400 client relationships with employers across a diverse array of industries, including more than 215 Fortune 500 companies.
We seek to cluster centers in geographic areas to enhance operating efficiencies and to create a leading market presence. At December 31, 2023, we had more than 1,450 client relationships with employers across a diverse array of industries, including more than 220 Fortune 500 companies.
The difference between the effective income tax rates as compared to the statutory income tax rates was primarily due to the effects of excess tax benefits associated with the exercise or expiration of stock options and vesting of restricted stock.
The difference between the effective income tax rates as compared to the statutory income tax rates was primarily due to the impact of unbenefited losses in certain foreign jurisdictions and the effects of excess (shortfall) tax benefit (expense) associated with the exercise or expiration of stock options and vesting of restricted stock.
Revenue increased by $265.2 million, or 15%, to $2.0 billion for the year ended December 31, 2022 from $1.8 billion for the prior year.
Revenue increased by $397.8 million, or 20%, to $2.4 billion for the year ended December 31, 2023 from $2.0 billion for the prior year.
Cost of services increased $201.5 million, or 15%, to $1.5 billion for the year ended December 31, 2022 from $1.3 billion for the prior year. Cost of services in the full service center-based child care segment increased by $148.8 million, or 13%, to $1.3 billion in the year ended December 31, 2022, when compared to the prior year.
Cost of services increased $344.7 million, or 22%, to $1.9 billion for the year ended December 31, 2023 from $1.5 billion for the prior year. Cost of services in the full service center-based child care segment increased by $272.9 million, or 22%, to $1.5 billion in the year ended December 31, 2023, when compared to the prior year.
We recorded an income tax expense of $31.5 million during the year ended December 31, 2022, at an effective income tax rate of 28.1%, compared to income tax expense of $19.9 million, at an effective income tax rate of 22.0%, during the prior year.
We recorded an income tax expense of $45.4 million during the year ended December 31, 2023, at an effective income tax rate of 38%, compared to income tax expense of $31.5 million, at an effective income tax rate of 28%, during the prior year.
Specifically, adjusted EBITDA allows for an assessment of our operating performance and of our ability to service or incur indebtedness without the effect of non-cash charges, such as 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 and any insurance recoveries received in relation to a cyber incident.
Specifically, adjusted EBITDA allows for an assessment of our operating performance and of our ability to service or incur indebtedness without the effect of non-cash charges, such as interest, taxes, depreciation, amortization, stock-based compensation expense, and at times, non-recurring costs, such as impairment losses, value-added tax expense related to prior periods, transaction costs, loss on foreign currency forward contracts, and net costs incurred in relation to a cybersecurity incident.
Cost of services in the back-up care segment increased by $51.1 million, or 30%, to $221.1 million in the year ended December 31, 2022, when compared to the prior year.
Cost of services in the back-up care segment increased by $70.4 million, or 32%, to $291.4 million in the year ended December 31, 2023, when compared to the prior year.
Refer to Note 4, Leases , to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for additional information on leases, including the maturity of the contractual obligations related to our lease liabilities.
As of December 31, 2023, we had $897.1 million in lease liabilities, $100.4 million of which is short term in nature. Refer to Note 4, Leases , to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for additional information on leases, including the maturity of the contractual obligations related to our lease liabilities.
Back-Up Care Services Back-up care services consist of center-based back-up child care, in-home child and adult/elder dependent care, school-age camps, virtual tutoring, pet care and self-sourced reimbursed care. We provide back-up care services through our early education and child care centers, school-age camps and in-home caregivers, as well as through the back-up care network and through other providers.
We provide back-up care services through our early education and child care centers, school-age camps and in-home caregivers, including elder care providers, as well as through the back-up care network and through other providers.
The effective income tax rate would have approximated 28% and 29% for the years ended December 31, 2022 and 2021, respectively, prior to the inclusion of the net excess tax benefit from stock-based compensation and other discrete items. Adjusted EBITDA and Adjusted Income from Operations.
The effective income tax rate would have approximated 28% for the years ended December 31, 2023 and 2022 prior to the inclusion of the excess (shortfall) tax benefit (expense), other discrete items, and unbenefited losses in certain foreign jurisdictions. Adjusted EBITDA and Adjusted Income from Operations.
We had $36.2 million in cash ($51.9 million including restricted cash) at December 31, 2022, of which $22.4 million was held in foreign jurisdictions, compared to $261.0 million in cash ($265.3 million including restricted cash) at December 31, 2021, of which $25.8 million was held in foreign jurisdictions.
We had $71.6 million in cash ($89.5 million including restricted cash) at December 31, 2023, of which $32.1 million was held in foreign jurisdictions, compared to $36.2 million in cash ($51.9 million including restricted cash) at December 31, 2022, of which $22.4 million was held in foreign jurisdictions.
Adjusted EBITDA and adjusted income from operations increased $44.9 million, or 17%, and $42.6 million, or 30%, respectively, for the year ended December 31, 2022 over the comparable period in 2021 primarily as a result of the increase in gross profit in the full service center-based child care segment. Adjusted Net Income.
Adjusted EBITDA and adjusted income from operations increased $35.1 million, or 11%, and $29.9 million, or 16%, respectively, for the year ended December 31, 2023 over the comparable period in 2022 primarily as a result of the increase in gross profit in the back-up care segment. Adjusted Net Income.
Based on our current interest rate projections, we estimate that our overall weighted average interest rate will approximate 4.25% for 2023. 37 Table of Contents Income Tax Expense.
Based on our current interest rate projections, we estimate that our overall weighted average interest rate will approximate 5.25% to 5.50% for 2024 inclusive of the effects of cash flow hedges. 38 Table of Contents Income Tax Expense.
We continue to monitor and respond to the changing conditions, challenges and disruptions resulting from the COVID-19 pandemic, and the changing needs of clients, families and children. We remain focused on our strategic priorities to deliver high quality education and care services, connect across our service lines, extend our impact on new customers and clients, and preserve our strong culture.
We remain focused on our strategic priorities to deliver high quality education and care services, connect across our service lines, extend our impact on new customers and clients, and preserve our strong culture.
The following table summarizes the revenue and percentage of total revenue for each of our segments for the years ended December 31, 2022 and 2021: Years Ended December 31, 2022 2021 Change 2022 vs 2021 (in thousands, except percentages) Full service center-based child care $ 1,493,758 73.9 % $ 1,297,208 73.9 % $ 196,550 15.2 % Tuition 1,345,599 90.1 % 1,145,723 88.3 % 199,876 17.4 % Management fees and operating subsidies 148,159 9.9 % 151,485 11.7 % (3,326) (2.2) % Back-up care 409,554 20.3 % 351,103 20.0 % 58,451 16.6 % Educational advisory and other services 117,175 5.8 % 106,996 6.1 % 10,179 9.5 % Total revenue $ 2,020,487 100.0 % $ 1,755,307 100.0 % $ 265,180 15.1 % 35 Table of Contents Revenue generated by the full service center-based child care segment in the year ended December 31, 2022 increased by $196.6 million, or 15%, when compared to the prior year.
The following table summarizes the revenue and percentage of total revenue for each of our segments for the years ended December 31, 2023 and 2022: Years Ended December 31, 2023 2022 Change 2023 vs 2022 (in thousands, except percentages) Full service center-based child care $ 1,780,615 73.6 % $ 1,493,758 73.9 % $ 286,857 19.2 % Tuition 1,614,685 90.7 % 1,345,599 90.1 % 269,086 20.0 % Management fees and operating subsidies 165,930 9.3 % 148,159 9.9 % 17,771 12.0 % Back-up care 516,408 21.4 % 409,554 20.3 % 106,854 26.1 % Educational advisory and other services 121,234 5.0 % 117,175 5.8 % 4,059 3.5 % Total revenue $ 2,418,257 100.0 % $ 2,020,487 100.0 % $ 397,770 19.7 % Revenue generated by the full service center-based child care segment in the year ended December 31, 2023 increased by $286.9 million, or 19%, when compared to the prior year.
The following table summarizes income from operations and percentage of revenue for each of our segments for the years ended December 31, 2022 and 2021: Years Ended December 31, 2022 2021 Change 2022 vs 2021 (In thousands, except percentages) Full service center-based child care $ 12,937 0.9 % $ (8,431) (0.6) % $ 21,368 253.4 % Back-up care 118,788 29.0 % 115,173 32.8 % 3,615 3.1 % Educational advisory and other services 25,860 22.1 % 22,276 20.8 % 3,584 16.1 % Income from operations $ 157,585 7.8 % $ 129,018 7.4 % $ 28,567 22.1 % The increase in income from operations was due to the following: • Income from operations for the full service center-based child care segment increased $21.4 million, or 253%, for the year ended December 31, 2022, when compared to the same period in 2021 primarily due to increases in tuition revenue from enrollment growth in our open centers and the re-opening of temporarily closed centers, as well as incremental net contributions of $25.7 million from government support programs that primarily reduced certain operating expenses, partially offset by transaction-related costs of $9.2 million incurred in conjunction with the acquisition of OAC, and incremental impairment losses of $3.5 million related to long-lived assets.
The following table summarizes income from operations and percentage of revenue for each of our segments for the years ended December 31, 2023 and 2022: Years Ended December 31, 2023 2022 Change 2023 vs 2022 (In thousands, except percentages) Full service center-based child care $ 9,396 0.5 % $ 12,937 0.9 % $ (3,541) 27.4 % Back-up care 133,391 25.8 % 118,788 29.0 % 14,603 12.3 % Educational advisory and other services 28,454 23.5 % 25,860 22.1 % 2,594 10.0 % Income from operations $ 171,241 7.1 % $ 157,585 7.8 % $ 13,656 8.7 % The change in income from operations was due to the following: • Income from operations for the full service center-based child care segment decreased $3.5 million, or 27%, for the year ended December 31, 2023, when compared to the same period in 2022 primarily due to incremental impairment losses of $17.9 million related to long-lived assets, increased labor costs, and a decrease of approximately $27 million in net contributions from pandemic-related government support, partially offset by increases in tuition revenue from enrollment growth and annual tuition rate increases.
The board of directors authorized a share repurchase program of up to $400 million of our outstanding common stock, effective December 16, 2021. The share repurchase program has no expiration date and replaced the prior June 2018 authorization, of which $0.2 million remained available thereunder.
The board of directors authorized a share repurchase program of up to $400 million of our outstanding common stock, effective December 16, 2021. The share repurchase program has no expiration date and at December 31, 2023, $198.3 million remains available for future repurchases.
These non-GAAP financial measures of adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per common share are reconciled from their respective measures determined under GAAP as follows: Years Ended December 31, 2022 2021 (In thousands, except share data) Net income $ 80,641 $ 70,459 Interest expense — net 39,486 36,099 Income tax expense 31,541 19,889 Depreciation 74,230 79,658 Amortization of intangible assets (a) 31,912 29,172 EBITDA 257,810 235,277 Additional adjustments: COVID-19 related costs and impairments (b) 14,061 10,582 Stock-based compensation expense (c) 28,111 23,060 Other costs (d) 11,095 578 Loss on foreign currency forward contracts (e) 5,917 — Loss on extinguishment of debt — 2,571 Total adjustments 59,184 36,791 Adjusted EBITDA $ 316,994 $ 272,068 Income from operations $ 157,585 $ 129,018 COVID-19 related costs and impairments (b) 14,061 10,582 Other costs (d) 11,095 578 Adjusted income from operations $ 182,741 $ 140,178 Net income $ 80,641 $ 70,459 Income tax expense 31,541 19,889 Income before income tax 112,182 90,348 Amortization of intangible assets (a) 31,912 29,172 COVID-19 related costs and impairments (b) 14,061 10,582 Stock-based compensation expense (c) 28,111 23,060 Other costs (d) 11,095 578 Loss on foreign currency forward contracts (e) 5,917 — Loss on extinguishment of debt — 2,571 Interest on deferred consideration (f) 2,957 — Adjusted income before income tax 206,235 156,311 Adjusted income tax expense (g) (54,036) (34,915) Adjusted net income $ 152,199 $ 121,396 Weighted average common shares outstanding — diluted 58,490,652 60,871,399 Diluted adjusted earnings per common share $ 2.60 $ 1.99 (a) Amortization of intangible assets represents amortization expense, including annual amortization expense of approximately $20.0 million associated with intangible assets recorded in connection with our going private transaction in May 2008.
These non-GAAP financial measures of adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per common share are reconciled to their most directly comparable financial measures determined and presented in accordance with GAAP as follows: Years Ended December 31, 2023 2022 (In thousands, except share data) Net income $ 74,223 $ 80,641 Interest expense — net 51,609 39,486 Income tax expense 45,409 31,541 Depreciation 77,266 74,230 Amortization of intangible assets (a) 33,415 31,912 EBITDA 281,922 257,810 Additional adjustments: Impairment losses (b) 35,903 14,061 Stock-based compensation expense (c) 28,834 28,111 Other costs (d) 5,458 11,095 Loss on foreign currency forward contracts (e) — 5,917 Total adjustments 70,195 59,184 Adjusted EBITDA $ 352,117 $ 316,994 Income from operations $ 171,241 $ 157,585 Impairment losses (b) 35,903 14,061 Other costs (d) 5,458 11,095 Adjusted income from operations $ 212,602 $ 182,741 Net income $ 74,223 $ 80,641 Income tax expense 45,409 31,541 Income before income tax 119,632 112,182 Amortization of intangible assets (a) 33,415 31,912 Impairment losses (b) 35,903 14,061 Stock-based compensation expense (c) 28,834 28,111 Other costs (d) 5,458 11,095 Loss on foreign currency forward contracts (e) — 5,917 Interest on deferred consideration (f) 5,890 2,957 Adjusted income before income tax 229,132 206,235 Adjusted income tax expense (g) (64,869) (54,036) Adjusted net income $ 164,263 $ 152,199 Weighted average common shares outstanding — diluted 57,932,574 58,490,652 Diluted adjusted earnings per common share $ 2.84 $ 2.60 (a) Amortization of intangible assets represents amortization expense, including annual amortization expense of approximately $20 million associated with intangible assets recorded in connection with our going private transaction in May 2008.
Additional segment information is included in Note 18, Segment and Geographic Information , to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K. Since March 2020, our global operations have been significantly impacted by the COVID-19 pandemic and the measures undertaken in response thereto.
Additional segment information is included in Note 18, Segment and Geographic Information , to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K.
Cash Used in Investing Activities Cash used in investing activities was $278.0 million for the year ended December 31, 2022 compared to $117.4 million for the prior year, an increase of $160.6 million. The increase in cash used in investing activities was primarily related to acquisitions when compared to the prior year.
Cash Used in Investing Activities Cash used in investing activities was $126.9 million for the year ended December 31, 2023 compared to $278.0 million for the prior year, a decrease of $151.1 million. The decrease in cash used in investing activities was primarily related to a decrease in payments for acquisitions.
Based on the interest rates in effect as of December 31, 2022, interest payments on the outstanding principal balance of the term loans, including commitment fees on the revolving credit facility, are estimated at $57 million annually.
Based on the interest rates in effect as of December 31, 2023, interest payments on the outstanding principal balance of the term loans, including commitment fees on the revolving credit facility, are expected to range between $40 million and $70 million annually over the remaining term, prior to the inclusion of the effects of cash flow hedges.
Additionally, we had $31.3 million less in share repurchases during the year ended December 31, 2022 compared to the prior year, offset by a decrease in proceeds from the exercise of stock options and the issuance and sale of restricted stock, and amounts paid for contingent consideration. 42 Table of Contents Debt Our senior secured credit facilities consist of a $600 million term loan B facility (“term loan B”), a $400 million term loan A facility (“term loan A”), and a $400 million multi-currency revolving credit facility.
Additionally, proceeds received from the exercise of stock options were $11.2 million in the year ended December 31, 2023, compared to $13.2 million in 2022, a net decrease of $2.0 million due to a lower volume of transactions. 43 Table of Contents Debt Our senior secured credit facilities consist of a $600 million term loan B facility (“term loan B”), a $400 million term loan A facility (“term loan A”), and a $400 million multi-currency revolving credit facility.
The decrease in cash provided by operations relates to lower cash provided by working capital arising from the timing of billings and payments when compared to the prior year and the payment of $5.4 million in contingent consideration during the year ended December 31, 2022, partially offset by the increase in net income of $10.2 million.
The increase in cash provided by operations relates to higher cash provided by working capital arising from the timing of billings and payments when compared to the prior year and an increase in net income after adjustment for incremental non-cash impairment losses of $21.8 million during the year ended December 31, 2023.
(e) During 2022, we 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. A loss of $5.9 million resulting from fluctuations in foreign currency rates was recognized in 2022 in relation to these contracts.
(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.
For the years ended December 31, 2022 and 2021, impairment costs totaled $14.1 million and $10.6 million, respectively, related to the full service center-based child care segment. 39 Table of Contents (c) Stock-based compensation expense represents non-cash stock-based compensation expense in accordance with Accounting Standards Codification Topic 718, Compensation-Stock Compensation.
(c) Stock-based compensation expense represents non-cash stock-based compensation expense in accordance with Accounting Standards Codification Topic 718, Compensation-Stock Compensation. 40 Table of Contents (d) Other costs in the year ended December 31, 2023 consist of value-added tax expense of $5.5 million related to prior periods, of which $4.0 million was associated with the back-up care segment and $1.5 million was associated with the full service center-based child care segment.
(f) Interest on deferred consideration represents the imputed interest on the deferred consideration issued in connection with the July 1, 2022 acquisition of OAC. (g) Adjusted income tax expense represents income tax expense calculated on adjusted income before income tax at an effective tax rate of approximately 26% and 22% for the years ended December 31, 2022 and 2021, respectively.
(g) Adjusted income tax expense represents income tax expense calculated on adjusted income before income tax at an effective tax rate of approximately 28% for the year ended December 31, 2023, and of approximately 26% for the year ended December 31, 2022.
Cash Flows Years Ended December 31, 2022 2021 (In thousands) Net cash provided by operating activities $ 188,471 $ 227,253 Net cash used in investing activities $ (278,049) $ (117,389) Net cash used in financing activities $ (121,338) $ (230,030) 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 Cash Provided by Operating Activities Cash provided by operating activities was $188.5 million for the year ended December 31, 2022, compared to $227.3 million for 2021.
We may not be able to obtain such financing on reasonable terms, or at all. 42 Table of Contents Cash Flows Years Ended December 31, 2023 2022 (In thousands) Net cash provided by operating activities $ 256,140 $ 188,471 Net cash used in investing activities $ (126,936) $ (278,049) Net cash used in financing activities $ (91,633) $ (121,338) Cash, cash equivalents and restricted cash — beginning of year $ 51,894 $ 265,281 Cash, cash equivalents and restricted cash — end of year $ 89,451 $ 51,894 Cash Provided by Operating Activities Cash provided by operating activities was $256.1 million for the year ended December 31, 2023, compared to $188.5 million for 2022.
SGA was 14% of revenue for the year ended December 31, 2022, consistent with 2021. 36 Table of Contents Amortization of Intangible Assets.
SGA for the year ended December 31, 2022 included transaction costs of $9.2 million incurred in conjunction with the acquisition of Only About Children. SGA was 14% of revenue for the year ended December 31, 2023, consistent with 2022. 37 Table of Contents Amortization of Intangible Assets.
Our working capital deficit in 2022 has primarily arisen from using cash to make long-term investments in fixed assets and acquisitions, deferred consideration issued in relation to an acquisition and from share repurchases. We anticipate that our cash flows from operating activities will continue to be impacted while our center operating performance ramps enrollment.
We had a working capital deficit of $352.5 million and $438.6 million at December 31, 2023 and December 31, 2022, respectively. Our working capital deficit has primarily arisen from using cash to make long-term investments in fixed assets and acquisitions, deferred consideration issued in relation to an acquisition and from share repurchases.
(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.
(b) Impairment losses represent impairment costs for long-lived assets as a result of center closures and reduced operating performance at certain centers due to the impact of a challenging labor market and current macroeconomic conditions on our operations.
Additionally, during the year ended December 31, 2022, amounts received for tuition support of $5.5 million were recorded to revenue. As of December 31, 2022 and 2021, $1.2 million and $3.3 million, respectively, was recorded in prepaid expenses and other current assets on the consolidated balance sheet for amounts due from government support programs.
As of December 31, 2022, $1.2 million was recorded in prepaid expenses and other current assets for amounts due from government support programs and $4.6 million was recorded to other current liabilities related to government support received for future periods. Amounts outstanding as of December 31, 2023 were not material.
Cash Used in Financing Activities Cash used in financing activities was $121.3 million for the year ended December 31, 2022 compared to cash used in financing activities of $230.0 million in 2021.
As part of our growth strategy, we also expect to continue to make selective acquisitions. Cash Used in Financing Activities Cash used in financing activities was $91.6 million for the year ended December 31, 2023 compared to $121.3 million in 2022.
SGA increased $32.3 million, or 13%, to $289.2 million for the year ended December 31, 2022 from $256.8 million for the year ended December 31, 2021, in order to support the business as it continues to re-ramp, including overhead associated with the acquired OAC operations, and associated with the transaction-related costs of $9.2 million incurred in conjunction with the acquisition of OAC.
SGA increased $37.9 million, or 13%, to $327.1 million for the year ended December 31, 2023 from $289.2 million for the year ended December 31, 2022, due to incremental spending to support the business as it continues to re-ramp post-pandemic, incremental overhead associated with the Only About Children operations acquired July 1, 2022, and higher labor costs.
Net interest expense increased to $39.5 million for the year ended December 31, 2022 from $36.1 million for the year ended December 31, 2021, due to increased borrowings under our revolving credit facility, as well as higher interest rates applicable to those borrowings.
Net interest expense increased to $51.6 million for the year ended December 31, 2023 from $39.5 million for the year ended December 31, 2022, due to increased borrowings under our revolving credit facility, higher interest rates applicable to our debt, and incremental interest associated with a deferred payment for the Only About Children acquisition, which was paid in January 2024.
We expect to receive less government support in 2023 as most of these programs are currently expected to end by September 30, 2023.
We received less pandemic-related government support in 2023 as most of the programs for which we are eligible for ended by September 30, 2023.
While center enrollment continues to improve, our centers are operating below pre-COVID-19 enrollment levels as the ongoing labor market challenges have constrained enrollment and slowed the recovery in both the U.S. and International markets. We expect continued revenue improvement throughout 2023.
While center enrollment continues to improve, the ongoing labor market challenges and current economic conditions have constrained enrollment and slowed the recovery in both the U.S. and international markets. We expect continued occupancy improvement in relation to the same prior periods in 2024, with more modest improvement in the U.K. as that geography remains more impacted.
During the year ended December 31, 2022, we used $210.4 million to acquire the outstanding shares of OAC, an operator of approximately 75 child care centers in Australia, and to acquire three additional centers.
During the same period in 2022, we invested $210.4 million to acquire the outstanding shares of Only About Children, an operator of approximately 75 child care centers in Australia, and to acquire 3 additional centers. Partially offsetting this decrease in cash used in investing activities is an increase in purchases of fixed assets in 2023 compared with the prior year.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Treasury and U.S. government agency securities that carry a fixed coupon rate, as well as certificate of deposits, and treasury bills with maturities greater than three months. As of December 31, 2022, a hypothetical increase in interest rates of 100 basis points would not have a material adverse impact on the fair value of our investment portfolio.
Treasury and U.S. government agency securities that carry a fixed coupon rate, as well as certificate of deposits, and treasury bills with maturities greater than three months. As of December 31, 2023, a hypothetical increase in interest rates of 100 basis points would not have a material adverse impact on the fair value of our investment portfolio.
Interest rate cap agreements for $300 million, which have a forward starting effective date of October 31, 2023 and expire on October 31, 2026, provide us with interest rate protection in the event the one-month LIBOR rate increases above 3.0% (effective December 30, 2022, one-month term SOFR rate increases above 2.9%).
Interest rate cap agreements for $300 million, which had a forward starting effective date of October 31, 2023 and expire on October 31, 2026, provide us with interest rate protection in the event the one-month LIBOR rate increases above 3.0% (effective December 30, 2022, one-month term SOFR rate increases above 2.9%).
Interest rate cap agreements for $600 million, which have a forward starting effective date of October 31, 2023 and expire on October 31, 2025, provide us with interest rate protection in the event the one-month LIBOR rate increases above 2.5% (effective December 30, 2022, one-month term SOFR rate increases above 2.4%).
Interest rate cap agreements for $600 million, which had a forward starting effective date of October 31, 2023 and expire on October 31, 2025, provide us with interest rate protection in the event the one-month LIBOR rate increases above 2.5% (effective December 30, 2022, one-month term SOFR rate increases above 2.4%).
Refer to Note 12, Credit Arrangements and Debt Obligations, to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for additional information on derivative financial instruments. 48 Table of Contents
Refer to Note 12, Credit Arrangements and Debt Obligations, to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for additional information on derivative financial instruments. 49 Table of Contents
Based on the borrowings outstanding under the senior secured credit facilities during 2022, we estimate that had the average interest rate on our borrowings increased by 100 basis points in 2022, our interest expense for the year would have increased by approximately $4.1 million, including the impact of the interest rate hedge agreements.
Based on the borrowings outstanding under the senior secured credit facilities during 2023, we estimate that had the average interest rate on our borrowings increased by 100 basis points in 2023, our interest expense for the year would have increased by approximately $1.9 million, including the impact of the interest rate hedge agreements.
These estimates assume the interest rate of each variable rate borrowing is raised by 100 basis points. The impact on future interest expense as a result of future changes in interest rates will depend largely on the gross amount of our borrowings subject to variable interest rates at that time.
These estimates assume the interest rate of each variable rate borrowing is raised by 100 basis points. The impact on future interest expense as a result of future changes in interest rates will depend largely on the gross amount of our borrowings subject to variable interest rates and the interest rate cap agreements in place at that time.
Interest rate cap agreements for $300 million notional value have an effective date of June 30, 2020 and expire on October 31, 2023, while interest rate cap agreements for another $500 million notional amount have a forward starting effective date of October 29, 2021 and expire on October 31, 2023.
Interest rate cap agreements for $300 million notional value had an effective date of June 30, 2020 and expired on October 31, 2023, while interest rate cap agreements for another $500 million notional amount had a forward starting effective date of October 29, 2021 and expired on October 31, 2023.
We estimate that had the exchange rate in each country unfavorably changed by 10% relative to the U.S. dollar, our consolidated income before income tax would have decreased by approximately $1.9 million for 2022.
We estimate that had the exchange rate in each country unfavorably changed by 10% relative to the U.S. dollar, our consolidated income before income tax would have decreased by approximately $4.4 million for 2023.
At December 31, 2022, we had borrowings outstanding of $984.0 million under our term loan facilities and of $84.0 million under our revolving credit facility, which were subject to a weighted average interest rate of 3.02% during the year then ended December 31, 2022, including the impact of the interest rate cap agreements.
At December 31, 2023, we had borrowings outstanding of $968.0 million under our term loan facilities and no borrowings outstanding under our revolving credit facility, which were subject to a weighted average interest rate of 4.11% during the year ended December 31, 2023, including the impact of the interest rate cap agreements.
As of December 31, 2022, the fair value of the available-for-sale debt securities was $29.6 million, with $17.7 million included in prepaid expenses and other current assets and $11.9 million in other assets on the consolidated balance sheet. Our investments in debt securities primarily consist of U.S.
As of December 31, 2023, the fair value of the available-for-sale debt securities was $23.9 million, with $22.0 million included in prepaid expenses and other current assets and $1.9 million in other assets on the consolidated balance sheet. Our investments in debt securities primarily consist of U.S.
As of December 31, 2022, the fair value of our interest rate cap agreements was an asset of $54.1 million, with $25.5 million included in prepaid expenses and other current assets and $28.6 million in other assets on the consolidated balance sheet. 47 Table of Contents During the year ended December 31, 2022, our wholly-owned captive insurance entity purchased and sold marketable debt securities, which were classified as available-for-sale.
As of December 31, 2023, the fair value of our interest rate cap agreements was an asset of $29.0 million, included in other assets on the consolidated balance sheet. 48 Table of Contents During the year ended December 31, 2023, our wholly-owned captive insurance entity purchased and sold marketable debt securities, which were classified as available-for-sale.

Other BFAM 10-K year-over-year comparisons