Bright Horizons Family Solutions Inc. · NYSE:BFAM
Bright Horizons Family Solutions — Investor Presentation (February 2013)
34 slides from Bright Horizons Family Solutions's investor presentation, Feb 27, 2013
Slide 1: Investor Presentation
Exhibit 99.1 Investor Presentation February 2013
Slide 2: Forward Looking Statements | Disclaimer
Forward Looking Statements | Disclaimer Certain information contained in this presentation constitutes forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Information regarding future economic performance, financia
Slide 3: Bright Horizons at a Glance
Bright Horizons at a Glance Key Figures (Q3 2012 LTM) Highlights $1,046m in sales 10+ years of sales growth and margin expansion Long-term contracts with blue chip corporate $171m in Adjusted EBITDA clients who co-fund capital investment 97% employer-sponsored center client retention 16% Adjusted EB
Slide 4: Diversified Portfolio of Opportunity
Diversified Portfolio of Opportunity Diversified End Market Fast Growing New Services International Expansion (Q3 2012 U.S. Centers) (LTM 9/30/12 Revenue) (LTM 9/30/12 Revenue) Back-Up Care, Europe Technology Professional College Coach, EdAssist 15% Services and Other Financial 5% 14% 7.5% Services
Slide 5: Employer-Sponsored Childcare and Services is a Large Market Supported by Secular Growth Trends
Employer-Sponsored Childcare and Services is a Large Market Supported by Secular Growth Trends Key Drivers Our Market Increasing Workforce Participation by Families in the United States spent ~$43 Women and Two Working Parent Families billion on licensed group child care in 2007 Drives — 64% of moth
Slide 6: Bright Horizons Has Delivered 10+ Years of Uninterrupted Sales Growth and Margin Expansion
Bright Horizons Has Delivered 10+ Years of Uninterrupted Sales Growth and Margin Expansion Revenue Growth Adjusted EBITDA Growth y/y% 19% 18% 16% 17% 13% 12% 11% 5% 5% 3% 11% 10%¹ y/y % 25% 20% 28% 28% 27% 25% 15% 6% 11% 4% 13% 18%¹ Note: See appendix for reconciliation of Adjusted EBITDA 1 y/y% gro
Slide 7: Significant Growth and Investment in Recent Years
Significant Growth and Investment in Recent Years Select Investment Initiatives Revenue ($ in millions) Sustained growth through challenging economic conditions Expanded international footprint: a market leader in the UK with established presence in Netherlands and India Rapidly grew back-up depende
Slide 8: Key Performance Drivers
Key Performance Drivers 1 Market Leading Provider with Significant Scale in Employer-Sponsored Child Care Client Funding for New Centers Drives Attractive ROI Model for Bright Horizons 2 Stable and Growing Core Business With High Degree of Visibility on Near Term 3 Growth 4 Pricing Power and Operati
Slide 9: Bright Horizons Has Significant Scale and Capabilities
1 Bright Horizons Has Significant Scale and Capabilities Leading Position With Consistent Quality Built Over 25 Years 1 More than 850 client relationships Includes more than 130 Fortune 500 companies Partner of 776 centers with capacity for 87,700 children Choice Multi-year contracts with employer-s
Slide 10: Partner of Choice for Many Blue Chip Clients
1 Partner of Choice for Many Blue Chip Clients #1 Provider of For-Profit Employer Sponsored Child Care in North America >850 client relationships, 97% client retention rate for employer-sponsored centers Market Leading Provider with Significant Scale in Employer-Sponsored Child Care 10
Slide 11: Key Performance Drivers
Key Performance Drivers 1 Market Leading Provider with Significant Scale in Employer-Sponsored Child Care 2 Client Funding for New Centers Drives Attractive ROI Model for Bright Horizons Stable and Growing Core Business With High Degree of Visibility on Near Term 3 Growth 4 Pricing Power and Operati
Slide 12: Characteristics of the Employer Sponsorship Model
2 Characteristics of the Employer Sponsorship Model Work-site locations / built-in enrollment partner High Quality Industry leading teacher compensation and benefits More intensive ratios Higher quality facilities Employer / Developer Sponsorship and NAEYC accreditation Capital Investment Parent and
Slide 13: Client Funding Drives High Return on Investment
2 Client Funding Drives High Return on Investment Operating Models Offer Attractive Returns on Investment ($ in ‘000s) Cost Plus Single Sponsor Consortium Lease % of Total Centers 30% 30% 40% Revenue / Center (U.S.) $1,600 $1,300 $1,400 Revenue / Center (Europe) $750 $650 $1,000 Gross Margin 15-20%
Slide 14: Key Performance Drivers
Key Performance Drivers 1 Market Leading Provider with Significant Scale in Employer-Sponsored Child Care 2 Client Funding for New Centers Drives Attractive ROI Model for Bright Horizons Stable and Growing Core Business With High Degree of Visibility on Near Term 3 Growth 4 Pricing Power and Operati
Slide 15: "Sticky" Relationships Create Stable Base Business
3 “Sticky” Relationships Create Stable Base Business Growing Established Base of Core Centers Cost-Plus contracts with defined management fee income not directly driven by enrollment Visibility in Long-Term contracts for P+L centers Full-Service Annual price increases typically specified in contract
Slide 16: Virtuous Circle Sustains Market Leading Position
3 Virtuous Circle Sustains Market Leading Position Building and Maintaining Strong Client Relationships with Employers 1 Provider of choice to Top 5 U.S. Employer-Sponsor diverse Providers corporate client base (By Total # of Centers) 7 2 Clients Very co-fund capex and enter 1 few direct alternative
Slide 17: Key Performance Drivers
Key Performance Drivers Market Leading Provider with Significant Scale in Employer-Sponsored Child Care Client Funding for New Centers Drives Attractive ROI Model for Bright Horizons Stable and Growing Core Business With High Degree of Visibility on Near Term Growth Pricing Power and Operating Lever
Slide 18: Business Model Operating Leverage Has Delivered Consistent Adjusted EBITDA and Margin Growth
4 Business Model Operating Leverage Has Delivered Consistent Adjusted EBITDA and Margin Growth Increase in Bright Horizons Revenue, Adjusted EBITDA and Annual Adjusted EBITDA Margin Various Drivers of Operating Leverage Tuition rate increases Efficient labor and other cost management Enrollment grow
Slide 19: Sources of Operating Leverage
4 Sources of Operating Leverage Drivers of Margin Expansion Growth in Higher Margin Services 2009 – LTM 9/30/2012 Sales CAGR Gross Margin Profile 32.9% Full-Service Center-Based Care 15 - 25% 13.0% 6.8% Back-Up Dependent Care 30 - 40% Full-Service Center- Back-Up Educational Educational Advisory Ser
Slide 20: Key Performance Drivers
Key Performance Drivers 1 Market Leading Provider with Significant Scale in Employer-Sponsored Child Care 2 Client Funding for New Centers Drives Attractive ROI Model for Bright Horizons 3 Stable and Growing Core Business With High Degree of Visibility on Near Term Growth 4 Pricing Power and Operati
Slide 21: Multiple Drivers of Organic Growth
5 Multiple Drivers of Organic Growth Cross-Selling / Select New Consortium / New Client Relationships Existing Clients Lease Locations Opportunity exists within 850 existing clients; 130 Track record of 6-12 new every industry sector Fortune 500 / Leading locations per year Hospitals / Universities
Slide 22: Significant Whitespace for International Expansion
5 Significant Whitespace for International Expansion Significant International Opportunity for Bright Horizons Europe / India North America Centers: 177 Centers: 599 Capacity: 12,200 Capacity: 75,500 Entered market in: 1986 2000 2000 2001 2011 2011 Note: As of 30-September-2012 Multiple and Diversif
Slide 23: Center Growth from New Developments and M&A
5 Center Growth from New Developments and M&A Since 2001, 55% of Annual New Center Openings Have Been Organic 87 72 60 60 64 56 57 49 48 39 38 31 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 9/30/2012 Track Record of Executing and Integrating Acquisitions – Average of 24 Centers Acquired A
Slide 24: Strong Financial Performance through 9/30/12
Strong Financial Performance through 9/30/12 Q1 – Q3 2011 Q1 – Q3 2012 % Change Full-Service Center-Based Care $ 630.6 $ 689.7 9.4% Back-Up Dependent Care Services 83.7 94.8 13.2% Other Educational Advisory Service 10.5 13.1 24.6% Total Revenue $ 724.8 $ 797.5 +10.0% Gross Profit $ 153.8 $ 182.7 +18
Slide 25: Rapid Deleveraging Since Buyout in 2008
Rapid Deleveraging Since Buyout in 2008 Significant Reduction in Total Debt / Adj. EBITDA Driven by Adj. EBITDA Growth Completed refinancing Jan 2013: 6.6 x New $790mm Term Loan B 6.3 x Interest Rate: L + 300bps with 1% floor 5.6 x 4.6 x 2008 2009 2010 2011 LTM 9/30 Adj. EBITDA $127 $132 $149 $171 T
Slide 26: Illustrative Effects of Refinancing on LTM Net Income
Illustrative Effects of Refinancing on LTM Net Income LTM - 9/2012 From LTM - 9/2012 Pro Actual Refinancing Forma Income from operations $ 90.3 $ 90.3 Net interest expense and other (80.7) 45.3 (35.4) (Loss) income before income taxes $ 9.6 $ 45.3 $ 54.9 Income tax expense (1.4) (18.1) (19.5) Effect
Slide 27: Appendix A: Supplemental Materials
Appendix A: Supplemental Materials Bright Horizons Presentation 27
Slide 28: Full-Service Center-Based Care
Full-Service Center-Based Care Revenue Operating Models Cost Plus (30% centers) $ 904 Employer-funded capex $ 845 No margin risk for Bright Horizons $ 755 $ 769 Enrollment not a direct revenue driver Profit and Loss (70% centers) Client-funded start-up for single sponsors (30% centers) Higher margin
Slide 29: Back-Up Dependent Care
Back-Up Dependent Care Revenue Center-Based Back-Up Care Bright Horizons is the leading provider of dedicated back-up care centers and pioneered the industry $ 126 Increases workforce productivity $ 115 Enhances employee retention rates Reduces absenteeism $ 99 99% satisfaction rate by users $ 90 Ba
Slide 30: Educational Advisory Services
Educational Advisory Services Adding breadth and depth to work / life services Revenue EdAssist Employers spend $17 billion annually on tuition assistance Largely an unmanaged spend $ 17 Educational Advising eliminates wasteful tuition spending Also expedites degree completion, saving time and money
Slide 31: Consolidated Historical Financial Performance
Consolidated Historical Financial Performance Fiscal Year Ended December 31, 2009 2010 2011 LTM – 9/2012 ($m) Revenue: Full-Service Center-Based Care $ 754.8 $ 769.2 $ 844.6 $ 903.6 Back-up Dependent Care 89.7 99.1 114.5 125.6 Other Educational Advisory 7.9 9.8 14.6 17.2 Total Revenue $ 852.3 $ 878.
Slide 32: Summary of Adjustments to EBITDA and Net Income
Summary of Adjustments to EBITDA and Net Income Fiscal Year Ended December 31, 2009 2010 2011 LTM – 9/2012 Adjustments to EBITDA ($m) EBITDA $ 120.1 $ 122.0 $ 143.1 $ 150.0 Straight Line Rent Expense 2.0 5.4 1.7 1.7 Stock Compensation Expense 2.3 2.4 1.2 17.0 Sponsor Management Fee 2.5 2.5 2.5 2.5 T
Slide 33: Estimated Pro Forma Capitalization of Bright Horizons
Estimated Pro Forma Capitalization of Bright Horizons As of September 30, 2012 Current Pro Forma Maturity Call Date Call Price Cash & Equivalents $ 45 $ 65 - - - Tranche B Term Loans 346 - May-2015 - - Series C New Term Loans 85 - May-2017 - 101.00 Senior Subordinated Notes 300 - May-2018 May-2013 1
Slide 34: A Family of Solutions at Work
A Family of Solutions at Work Bright Horizons Presentation 34
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