Bright Horizons Family Solutions LLC

Overview Key strengths Key risks Largest provider of employer-sponsored childcare and back-up care in the U.S. with a smaller but growing presence in Europe. Operating performance is susceptible to economic cyclicity. Premium brand and employer-sponsored model supports modestly higher EBITDA margins compared with retail-based peers. High fixed costs for consortium lease centers could lead to higher overall revenue and EBITDA declines during an economic downturn. Relatively stable revenue from long-term contracts with large, established clients and high client retention rates of over 94%. A delayed recovery due to the spread of coronavirus variants, along with increased acquisition and share buyback spending, could cause leverage to remain elevated. The positive outlook reflects our expectation that the company's operating performance will continue

...We expect Bright Horizon's S&P Global Ratings-adjusted leverage will improve to about 3.5x by the end of the year and to the 3x area in 2023, although its leverage could increase if it undertakes additional acquisitions or share repurchases or faces disruptions from the spread of new coronavirus variants. The positive outlook reflects our expectation that the company's operating performance will continue to improve over the next 12 months, which could reduce its net leverage to the 3.0x-3.5x range. This improvement reflects our forecast for a low- to mid-double digit percent area increase in its EBITDA due to higher enrollment and capacity utilization rates,...

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