Bright Horizons's (NYSE:BFAM) Q1 Sales Beat Estimates

Kayode Omotosho /
2024/05/02 5:07 pm EDT

Child care and education company Bright Horizons (NYSE:BFAM) reported Q1 CY2024 results topping analysts' expectations, with revenue up 12.5% year on year to $622.7 million. The company expects the full year's revenue to be around $2.65 billion, in line with analysts' estimates. It made a non-GAAP profit of $0.51 per share, improving from its profit of $0.49 per share in the same quarter last year.

Is now the time to buy Bright Horizons? Find out by accessing our full research report, it's free.

Bright Horizons (BFAM) Q1 CY2024 Highlights:

  • Revenue: $622.7 million vs analyst estimates of $615.5 million (1.2% beat)
  • EPS (non-GAAP): $0.51 vs analyst estimates of $0.46 (11.7% beat)
  • The company reconfirmed its revenue guidance for the full year of $2.65 billion at the midpoint
  • Gross Margin (GAAP): 21.7%, up from 18.1% in the same quarter last year
  • Free Cash Flow of $96.93 million, up 50% from the previous quarter
  • Market Capitalization: $6.02 billion

“We had a solid start to 2024, with our team delivering better-than-expected revenue and earnings,” said Stephen Kramer, Chief Executive Officer.

Founded in 1986, Bright Horizons (NYSE:BFAM) is a global provider of child care, early education, and workforce support solutions.

Education Services

A whole industry has emerged to address the problem of rising education costs, offering consumers alternatives to traditional education paths such as four-year colleges. These alternative paths, which may include online courses or flexible schedules, make education more accessible to those with work or child-rearing obligations. However, some have run into issues around the value of the degrees and certifications they provide and whether customers are getting a good deal. Those who don’t prove their value could struggle to retain students, or even worse, invite the heavy hand of regulation.

Sales Growth

A company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one may grow for years. Bright Horizons's annualized revenue growth rate of 5.1% over the last five years was weak for a consumer discretionary business. Bright Horizons Total RevenueWithin consumer discretionary, a long-term historical view may miss a company riding a successful new product or emerging trend. That's why we also follow short-term performance. Bright Horizons's annualized revenue growth of 16.7% over the last two years is above its five-year trend, suggesting some bright spots.

This quarter, Bright Horizons reported robust year-on-year revenue growth of 12.5%, and its $622.7 million of revenue exceeded Wall Street's estimates by 1.2%. Looking ahead, Wall Street expects sales to grow 9.3% over the next 12 months, a deceleration from this quarter.

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Cash Is King

If you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.

Over the last two years, Bright Horizons has shown mediocre cash profitability, putting it in a pinch as it gives the company limited opportunities to reinvest, pay down debt, or return capital to shareholders. Its free cash flow margin has averaged 7.5%, subpar for a consumer discretionary business.

Bright Horizons Free Cash Flow Margin

Bright Horizons's free cash flow came in at $96.93 million in Q1, equivalent to a 15.6% margin and up 102% year on year. Over the next year, analysts predict Bright Horizons's cash profitability will fall. Their consensus estimates imply its LTM free cash flow margin of 8.6% will decrease to 7.2%.

Key Takeaways from Bright Horizons's Q1 Results

It was good to see Bright Horizons beat analysts' EPS and revenue expectations this quarter. On the other hand, its full-year revenue guidance was underwhelming. Zooming out, we think this was still a decent, albeit mixed, quarter, showing that the company is staying on track. The stock is flat after reporting and currently trades at $104.27 per share.

So should you invest in Bright Horizons right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.