Bright Horizons Family Solutions Stock

Bright Horizons Family Solutions Inc. operates as a provider of high-quality early education and child care, family care solutions, and workforce education services that are designed to help working families and client employees thrive personally and professionally.

The company provides 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. The company is committed to providing the highest quality education and care across all of the company's offerings.

The company is organized in three reportable segments, which are aligned with the company's service offerings as follows:

Full service center-based child care (approximately 74% of the company's revenue in 2023);

Back-up care (approximately 21% of the company's revenue in 2023); and

Educational advisory and other services (approximately 5% of the company's revenue in 2023).

As of December 31, 2023, the company had more than 1,450 employer client relationships across a diverse array of industries, including more than 220 Fortune 500 companies. As of December 31, 2023, the company operated 1,049 early education and child care centers with the capacity to serve approximately 120,000 children in the United States, the United Kingdom, the Netherlands, Australia, and India.

Growth Strategy

The company's strategies are to grow its client relationships (secure relationships with new employer clients; cross-sell and expand services to existing employer clients; and continue to expand through the assumption of existing sponsored child care centers and tuition assistance programs); enable continued investments in quality; increase utilization at existing centers and use of back-up care and educational advisory services; and selectively add new lease/consortium centers and expand through acquisitions.

Operations

The company's services are designed to help families, employers, and their employees solve the challenges of the modern workforce across life and career stages. The company's services are consisted of full service center-based child care, back-up care, and educational advisory and other services, which are also the company's reportable segments. Full service center-based child care includes traditional center-based early education and child care, preschool, and elementary education. 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.

Full Service Center-Based Child Care Services

The company provides full service center-based child care at centers located at or near an employer sponsor's worksite, as well as convenient locations within the community. The company operates the company's centers under two principal business models: a profit and loss ('P&L') model and a cost-plus model.

Profit and Loss Model: Approximately 75% of the company's centers operate under the P&L model. Under this model, the company retains the financial outcomes of operating the center and are therefore subject to variability in financial performance due to fluctuations in enrollment levels. The P&L model is further classified into two subcategories:

Sponsor model: Under the sponsor model, the company provides early education and child care on an exclusive or priority enrollment basis for the employees of an employer sponsor, and the employer sponsor generally retains responsibility for the development of the child care center (which is owned or leased by the sponsor), as well as pre-opening capital equipment and ongoing maintenance and repair. Arrangements with employer sponsors generally have initial terms ranging from 3 to 10 years with varying terms, renewal and termination options.

Lease model: Under the lease model, the child care center is typically located near where working parents live and/or work in a property that the company leases, and the company provides early education and child care services to the employees of multiple employers, as well as to families in the surrounding community. The company typically enters into leases with initial terms ranging from 10 to 15 years for these centers, often with renewal options.

When the company opens 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. The company refers 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 the company's 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. Centers that have been open more than three years are referred to as 'mature centers.' In addition, the company routinely reviews its portfolio of centers for opportunities to optimize the company's portfolio and to accommodate changes in demand and demographic shifts in the markets the company serves, including closures of underperforming centers. In the event of a closure, where possible, the company seeks to shift enrollment and teachers to other centers at nearby locations.

Cost Plus Model: Approximately 25% of the company's centers operate under the cost-plus business model. Under this model, the company receives a fee from the employer sponsor for managing and operating their center. Additionally, employer sponsors typically provide operating subsidies to support the ongoing provision of child care services to their employees if center operating costs exceed revenue from tuition paid by parents. The employer sponsor typically retains responsibility for the development of the child care center (which is owned or leased by the sponsor), as well as pre-opening capital equipment and ongoing maintenance and repair, and the center is profitable from the outset. The company's cost-plus contracts typically have initial terms ranging from 3 to 5 years with varying terms, renewal and termination options.

Under all model types, the company retains responsibility for all aspects of operating the child care center, including hiring and paying employees, ongoing training, curriculum, contracting with vendors, purchasing supplies, and collecting tuition.

Tuition paid by families generally represents approximately 90% of the revenue generated by this segment and is determined based on the age and developmental level of the child, the child's attendance schedule (full-time or part-time), the geographic location, and the extent to which an employer sponsor subsidizes tuition.

The company's North American early education and child care centers have an average capacity of 130 children per location, while the company's international centers have an average capacity of 86 children per location.

Back-up Care Services

Back-up care offers family support services for dependents of all ages and provides coverage when regular care breaks down, as well as care coordination tools to assist families with their short and long-term care decisions. The company provides back-up care services for children (primarily 0-12 years old) through the company's 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 the company's proprietary back-up care network of quality child care centers and in-home care providers. In addition, the company provides back-up care services for adults/elders through its proprietary network of quality in-home care providers, and the company offers tutoring for school-age children and adult learners through the company's network of tutoring service providers and pet care through third-party providers. The company also helps to facilitate back-up care services through the company's self-sourced reimbursed care program.

Traditional back-up care offers families access to a contracted network of more than 4,500 in-home care agencies and center-based providers in locations where the company does not otherwise have centers with available capacity or available in-home caregivers. The company's dedicated back-up centers are operated in a similar structure to full service centers and are either exclusive to a single employer or have multiple employer sponsors and are part of the company's back-up care program. Self-sourced reimbursed care is an alternative care program, available to employer sponsors typically when other network care solutions are not available, which provides payments to their employees to assist with the cost of self-sourced dependent care. As the company continues to find innovative solutions to help families with their care needs, the company has expanded its back-up care solutions to include tutoring and broader school-age camp programs which primarily operate during school vacations and the summer months. Care is arranged online or via the company's mobile app, as well as through a 24/7 contact center, allowing users to reserve care in advance or at the last minute. The company operates its own contact center in Broomfield, Colorado and the company contracts with additional contact centers in other geographies to complement the company's ability to handle demand fluctuations, provide business continuity, and deliver seamless service.

Back-up care revenue is consisted of fees paid by employer sponsors and, to a lesser extent, co-payments collected from users at the time of service. These arrangements generally have contractual terms of three years with varying terms, renewal and termination options. Fees for back-up care services are typically determined based on the number of back-up care uses purchased and may be fixed for a specified number of contracted uses or variable for pay-per-use contracts.

Educational Advisory and Other Services

The company's educational advisory services primarily consist of EdAssist and College Coach. Educational advisory services revenue is consisted 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. Contracts are typically three years in length, with varying terms, renewal and termination options, and fees are generally determined based on the services being provided and the number of program participants.

EdAssist. EdAssist provides workforce education, tuition assistance and student loan repayment program management, as well as related educational advising to corporate clients who offer these services as a talent development and workplace benefit to their employees. The company's services help employers better align their workplace education programs with their business goals while supporting employees to upskill, re-skill and improve their careers. Program management services are provided through proprietary software for the processing of tuition reimbursement, loan repayment transactions, and analysis of data. The company provides educational advising to its client's employees on a one-on-one basis through the company's team of advisors who help users make better decisions regarding their education and financial wellness. Clients can also leverage the company's EdAssist Education Network of education providers and benefit from pre-negotiated tuition discounts. Customer service is also provided through the company's contact center in Broomfield, Colorado. EdAssist services derive revenue directly from fees paid by employers.

College Coach. College Coach provides college admissions and college financing advisory services through the company's team of experts, who have experience working in admissions or financial aid at colleges and universities. The company also offers coaching and tools to assist families as they support their children with varying needs across life stages. Advisory services are delivered via live/webinar events with expert presenters, through one-on-one coaching, and through the company's online learning center. The company works with employer clients who offer these services as workplace benefits to their employees, and the company also provides these services directly to families on a retail basis. College Coach derives revenue mainly from employer clients who contract with the company for a specified number of workshops, access to the company's proprietary online learning center, and one-on-one advising.

Other Services. Other services consist of Sittercity, an online marketplace for families and caregivers. Sittercity revenue is generated from subscriptions to a proprietary online search platform and marketplace that helps families find, among other things, child care (child care providers, babysitting/nannies), elder care and pet care services. Effective January 1, 2024, the company realigned its organizational structure to better reflect synergies across certain business lines and, as a result, the Sittercity operations will now be included in the Back-Up Care reportable segment.

Geography

The company operates in two primary regions: (1) North America, which includes the company's operations in the United States (including Puerto Rico); and (2) International, which includes the company's operations in the United Kingdom, the Netherlands, Australia and India.

The company's international business primarily consists of child care centers throughout the United Kingdom, the Netherlands, and Australia, with approximately 95% of the revenue generated related to the full service center-based child care segment. As of December 31, 2023, the company had 618 centers in North America and 431 international centers.

Seasonality

Historically, the company's 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 and families are often on vacation or have alternative child care arrangements. In addition, enrollment at the company's child care centers declines as older children transition to elementary schools. Demand for the company's services generally increases with the beginning of the new school year and remains relatively stable throughout the rest of the school year (year ended December 2023). Use of the company's back-up care services tends to be higher when schools are not in session and during holiday periods. Educational advisory and other services generally have limited seasonal fluctuations.

Marketing

Brand Awareness and Thought Leadership

The company markets its services and builds its 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. The company's senior leaders are involved at the national level with education, work/life and early child care advocacy. The company's proprietary research, events, and the availability of uniquely knowledgeable industry leaders help sustain the company's brand awareness and position Bright Horizons as a thought leader in the markets where the company operates. For employer sponsors and their employees, the company conducts its 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, the company offers webinar series, as well as monthly podcasts that reflect current issues facing families.

Timely Approaches that Evolve with the Workplace

The company strives to meet clients' needs as demonstrated by its capacity to pivot as the marketplace shifts, rolling out and marketing new services to meet evolving work environments. 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 the company's curriculum and extension activities with families at home through the company's online platforms. 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 the company's 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 the company's marketing efforts. The company partners with employer sponsors to promote its early education and child care centers and other workplace solutions as important employee benefits within their organizations. My Bright Horizons is a portal for the company's 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. Other efforts include local digital advertising, partnerships with parent groups, social efforts, direct mail, and webinars.

Competition

The company's principal competitors for employer-sponsored centers include KinderCare Education in the United States and Busy Bees in the United Kingdom. The company also competes for enrollment on a center-by-center basis with these providers, along with many local and national providers, such as Affinity Education Group, Childbase, CompaNanny, G8 Education, Goddard Schools, Goodstart Early Learning, Guardian Childcare & Education, Learning Care Group, Primrose Schools, and KidsFoundation. 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.

Intellectual Property

The company owns and uses various registered and unregistered trademarks covering the names Bright Horizons and Bright Horizons Family Solutions, the company's logo, and a number of other names, slogans and designs in the U.S. and abroad. The company frequently licenses the use of its registered trademarks to the company's clients in connection with the use of its services, subject to customary restrictions. The company protects its 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.

History

The company was founded in 1986. It was incorporated in 2008. The company was formerly known as Bright Horizons Solutions Corp. and changed its name to Bright Horizons Family Solutions Inc. in 2012.