Bright Horizons continues to positively surprise us with the predictability of the business and the machine-like consistency of execution even in a year that saw the company go public and make two major acquisitions in a continuing effort to consolidate the attractive, yet still-fragmented employer-sponsored child care industry.
Our positive view of the near- and long-term opportunity for the employer-sponsored, child care operator was reinforced by Bright Horizons’ strong fourth-quarter results, continued progress toward peak capacity utilization, and consistent commentary from the company’s seasoned management team.
We remain bullish on Bright Horizons’ opportunity to expand domestic and international market share and operating leverage (above consensus) through enhanced scale and capacity utilization. We view the company’s premium valuation as justified in light of the highly recurring, capital-efficient nature of its employer-sponsored, child care operations, and we maintain our Outperform rating.
Revenue of $319.2 million was nicely above consensus of $318 million with particular strength in educational advisory and the core center business.
Adjusted EBITDA of $53.4 million was marginally below consensus of $54 million but near the high end of guidance of $52 million to $54 million, despite continued temporary headwinds from the ramp-up of recently acquired centers and the mix shift toward lease consortium centers (the company opened 17 new lease consortium centers in 2014 and these are higher margin at capacity than the average center but loss-taking during the one- to two-year ramp-up phase).
Center count of 880 (up 15%, or 115 from 2012 year-end total of 765) grew nicely following two significant recent acquisitions, which added 113 centers. We believe the company closed 20-25 centers, of which perhaps 5 to 10 were acquired centers implying organic center growth of 20 or more (3% organic center growth or 1% to 2% net organic center growth, a healthy rate, in our view).
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