UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended ~~September~~June 30, ~~2021~~2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from to

Commission File Number: 001-35780

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

(Exact name of registrant as specified in its charter)

Delaware

80-0188269

(State or other jurisdiction
of incorporation)

(I.R.S. Employer
Identification Number)

2 Wells Avenue

Newton, Massachusetts

02459

(Address of principal executive offices)

(Zip code)

Registrant’s telephone number, including area code: (617) 673-8000

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value per share

BFAM

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the ~~Registrant~~registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~October 22, 2021,~~July 26, 2022, there were ~~60,369,166~~57,810,875 shares of common stock outstanding.

Table of Contents

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

FORM 10-Q

For the quarterly period ended ~~September~~June 30, ~~2021~~2022

TABLE OF CONTENTS

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


		September 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021

		(In thousands, except share data)					(In thousands, except share data)
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	412,402	$	384,344	Cash and cash equivalents	$	270,425	$	260,980
Accounts receivable — net of allowance for credit losses of $2,831 and $2,357 at September 30, 2021 and December 31, 2020, respectively		160,316		176,617
Accounts receivable — net of allowance for credit losses of $2,790 and $3,006 at June 30, 2022 and December 31, 2021, respectively						Accounts receivable — net of allowance for credit losses of $2,790 and $3,006 at June 30, 2022 and December 31, 2021, respectively	171,114		210,971
Prepaid expenses and other current assets	Prepaid expenses and other current assets	63,273		62,902		Prepaid expenses and other current assets	75,370		68,320
Prepaid income taxes		12,636		322

Total current assets	Total current assets	648,627		624,185		Total current assets	516,909		540,271
Fixed assets — net	Fixed assets — net	609,491		628,757		Fixed assets — net	558,143		598,134
Goodwill	Goodwill	1,446,321		1,431,967		Goodwill	1,441,185		1,481,725
Other intangible assets — net	Other intangible assets — net	253,529		274,620		Other intangible assets — net	235,769		251,032
Operating lease right-of-use assets	Operating lease right-of-use assets	695,829		717,821		Operating lease right-of-use assets	678,809		696,425
Other assets	Other assets	58,069		49,298		Other assets	94,578		72,460
Total assets	Total assets	$	3,711,866	$	3,726,648	Total assets	$	3,525,393	$	3,640,047
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Current portion of long-term debt	Current portion of long-term debt	$	10,750	$	10,750	Current portion of long-term debt	$	16,000	$	16,000

Accounts payable and accrued expenses	Accounts payable and accrued expenses	199,649		194,551		Accounts payable and accrued expenses	208,458		197,366
Current portion of operating lease liabilities	Current portion of operating lease liabilities	87,066		87,181		Current portion of operating lease liabilities	87,130		87,341
Deferred revenue	Deferred revenue	212,459		197,939		Deferred revenue	212,955		258,438
Other current liabilities	Other current liabilities	53,414		40,393		Other current liabilities	74,815		63,030
Total current liabilities	Total current liabilities	563,338		530,814		Total current liabilities	599,358		622,175
Long-term debt — net	Long-term debt — net	1,013,080		1,020,137		Long-term debt — net	968,989		976,396
Operating lease liabilities	Operating lease liabilities	704,643		729,754		Operating lease liabilities	686,971		703,911
Other long-term liabilities	Other long-term liabilities	112,683		105,980		Other long-term liabilities	89,952		100,091
Deferred revenue	Deferred revenue	10,107		10,215		Deferred revenue	9,320		9,689
Deferred income taxes	Deferred income taxes	48,786		45,951		Deferred income taxes	51,817		48,509
Total liabilities	Total liabilities	2,452,637		2,442,851		Total liabilities	2,406,407		2,460,771
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock, $0.001 par value; 25,000,000 shares authorized; no shares issued or outstanding at September 30, 2021 and December 31, 2020		—		—
Common stock, $0.001 par value; 475,000,000 shares authorized; 60,092,105 and 60,466,168 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		60		60
Preferred stock, $0.001 par value; 25,000,000 shares authorized; no shares issued or outstanding at June 30, 2022 and December 31, 2021						Preferred stock, $0.001 par value; 25,000,000 shares authorized; no shares issued or outstanding at June 30, 2022 and December 31, 2021	—		—
Common stock, $0.001 par value; 475,000,000 shares authorized; 58,622,868 and 59,305,160 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively						Common stock, $0.001 par value; 475,000,000 shares authorized; 58,622,868 and 59,305,160 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively	59		59
Additional paid-in capital	Additional paid-in capital	843,265		910,304		Additional paid-in capital	680,618		745,615
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(37,364)		(27,069)		Accumulated other comprehensive loss	(77,003)		(37,359)
Retained earnings	Retained earnings	453,268		400,502		Retained earnings	515,312		470,961
Total stockholders’ equity	Total stockholders’ equity	1,259,229		1,283,797		Total stockholders’ equity	1,118,986		1,179,276
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	3,711,866	$	3,726,648	Total liabilities and stockholders’ equity	$	3,525,393	$	3,640,047

See accompanying notes to condensed consolidated financial statements.

Table of Contents

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME ~~(LOSS)~~

(Unaudited)


		Three months ended September 30,				Nine months ended September 30,					Three months ended June 30,				Six months ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021

		(In thousands, except share data)									(In thousands, except share data)
Revenue	Revenue	$	460,333	$	337,920	$	1,292,651	$	1,138,015	Revenue	$	490,341	$	441,478	$	950,750	$	832,318
Cost of services	Cost of services	340,068		282,749		985,046		908,749		Cost of services	361,816		335,496		712,166		644,978
Gross profit	Gross profit	120,265		55,171		307,605		229,266		Gross profit	128,525		105,982		238,584		187,340
Selling, general and administrative expenses	Selling, general and administrative expenses	67,135		53,301		191,703		159,917		Selling, general and administrative expenses	73,673		64,458		145,419		124,568
Amortization of intangible assets	Amortization of intangible assets	7,140		7,797		22,192		23,881		Amortization of intangible assets	7,030		7,512		14,179		15,052

Income (loss) from operations		45,990		(5,927)		93,710		45,468
Income from operations										Income from operations	47,822		34,012		78,986		47,720
Loss on foreign currency forward contracts										Loss on foreign currency forward contracts	(5,917)		—		(5,917)		—
Interest expense — net	Interest expense — net	(9,153)		(9,186)		(27,749)		(28,521)		Interest expense — net	(7,942)		(9,580)		(14,988)		(18,596)
Income (loss) before income tax		36,837		(15,113)		65,961		16,947
Income tax benefit (expense)		(10,018)		8,459		(13,195)		7,490
Net income (loss)		$	26,819	$	(6,654)	$	52,766	$	24,437
Income before income tax										Income before income tax	33,963		24,432		58,081		29,124
Income tax expense										Income tax expense	(9,018)		(5,617)		(13,730)		(3,177)
Net income										Net income	$	24,945	$	18,815	$	44,351	$	25,947

Earnings (loss) per common share:
Earnings per common share:										Earnings per common share:
Common stock — basic	Common stock — basic	$	0.44	$	(0.11)	$	0.87	$	0.41	Common stock — basic	$	0.42	$	0.31	$	0.75	$	0.43
Common stock — diluted	Common stock — diluted	$	0.44	$	(0.11)	$	0.86	$	0.41	Common stock — diluted	$	0.42	$	0.31	$	0.74	$	0.42

Weighted average common shares outstanding:	Weighted average common shares outstanding:									Weighted average common shares outstanding:
Common stock — basic	Common stock — basic	60,218,090		60,196,795		60,454,855		59,253,044		Common stock — basic	59,113,044		60,551,528		59,103,884		60,573,237
Common stock — diluted	Common stock — diluted	60,743,765		60,196,795		61,058,843		60,001,730		Common stock — diluted	59,252,869		61,106,792		59,334,107		61,216,383

See accompanying notes to condensed consolidated financial statements.

Table of Contents

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


		Three months ended September 30,				Nine months ended September 30,					Three months ended June 30,				Six months ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021

		(In thousands)									(In thousands)
Net income (loss)		$	26,819	$	(6,654)	$	52,766	$	24,437
Net income										Net income	$	24,945	$	18,815	$	44,351	$	25,947
Other comprehensive income (loss):	Other comprehensive income (loss):									Other comprehensive income (loss):
Foreign currency translation adjustments	Foreign currency translation adjustments	(14,634)		24,632		(13,935)		(13,319)		Foreign currency translation adjustments	(46,345)		1,213		(63,351)		699
Unrealized gain (loss) on cash flow hedges and investments, net of tax		924		267		3,640		(3,210)
Unrealized gain on cash flow hedges and investments, net of tax										Unrealized gain on cash flow hedges and investments, net of tax	5,007		964		23,707		2,716
Total other comprehensive income (loss)	Total other comprehensive income (loss)	(13,710)		24,899		(10,295)		(16,529)		Total other comprehensive income (loss)	(41,338)		2,177		(39,644)		3,415
Comprehensive income		$	13,109	$	18,245	$	42,471	$	7,908
Comprehensive income (loss)										Comprehensive income (loss)	$	(16,393)	$	20,992	$	4,707	$	29,362

See accompanying notes to condensed consolidated financial statements.

Table of Contents

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Unaudited)


		Three months ended September 30, 2021														Three months ended June 30, 2022
		Common Stock			Additional Paid-in Capital		Treasury Stock, at Cost		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders’ Equity			Common Stock			Additional Paid-in Capital		Treasury Stock, at Cost		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders’ Equity
		Shares	Amount													Shares	Amount

		(In thousands, except share data)														(In thousands, except share data)
Balance at July 1, 2021		60,278,756	$	60	$	868,289	$	—	$	(23,654)	$	426,449	$	1,271,144
Balance at April 1, 2022															Balance at April 1, 2022	59,133,183	$	59	$	717,745	$	—	$	(35,665)	$	490,367	$	1,172,506

Stock-based compensation expense	Stock-based compensation expense				5,600								5,600		Stock-based compensation expense				7,672								7,672
Issuance of common stock under the Equity Incentive Plan	Issuance of common stock under the Equity Incentive Plan	51,895	—		3,640								3,640		Issuance of common stock under the Equity Incentive Plan	50,437	—		1,730								1,730
Shares received in net share settlement of stock option exercises and vesting of restricted stock	Shares received in net share settlement of stock option exercises and vesting of restricted stock	(2,036)	—		(287)								(287)		Shares received in net share settlement of stock option exercises and vesting of restricted stock	(18,718)	—		(1,979)								(1,979)
Purchase of treasury stock	Purchase of treasury stock						(33,977)						(33,977)		Purchase of treasury stock						(44,550)						(44,550)
Retirement of treasury stock	Retirement of treasury stock	(236,510)	—		(33,977)		33,977						—		Retirement of treasury stock	(542,034)	—		(44,550)		44,550						—
Other comprehensive loss	Other comprehensive loss								(13,710)				(13,710)		Other comprehensive loss								(41,338)				(41,338)
Net income	Net income										26,819		26,819		Net income										24,945		24,945
Balance at September 30, 2021		60,092,105	$	60	$	843,265	$	—	$	(37,364)	$	453,268	$	1,259,229
Balance at June 30, 2022															Balance at June 30, 2022	58,622,868	$	59	$	680,618	$	—	$	(77,003)	$	515,312	$	1,118,986


		Three months ended September 30, 2020														Three months ended June 30, 2021
		Common Stock			Additional Paid-in Capital		Treasury Stock, at Cost		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders’ Equity			Common Stock			Additional Paid-in Capital		Treasury Stock, at Cost		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders’ Equity
		Shares	Amount													Shares	Amount

		(In thousands, except share data)														(In thousands, except share data)
Balance at July 1, 2020		60,152,187	$	60	$	885,373	$	—	$	(91,759)	$	404,601	$	1,198,275
Balance at April 1, 2021															Balance at April 1, 2021	60,726,701	$	61	$	928,761	$	—	$	(25,831)	$	407,634	$	1,310,625

Stock-based compensation expense	Stock-based compensation expense				5,700								5,700		Stock-based compensation expense				5,829								5,829
Issuance of common stock under the Equity Incentive Plan	Issuance of common stock under the Equity Incentive Plan	119,778	—		6,074								6,074		Issuance of common stock under the Equity Incentive Plan	75,169	—		5,341								5,341
Shares received in net share settlement of stock option exercises and vesting of restricted stock	Shares received in net share settlement of stock option exercises and vesting of restricted stock	(8,796)	—		(1,181)								(1,181)		Shares received in net share settlement of stock option exercises and vesting of restricted stock	(8,114)	—		(1,297)								(1,297)

Purchase of treasury stock															Purchase of treasury stock						(70,346)						(70,346)
Retirement of treasury stock															Retirement of treasury stock	(515,000)	(1)		(70,345)		70,346						—
Other comprehensive income	Other comprehensive income								24,899				24,899		Other comprehensive income								2,177				2,177
Net loss											(6,654)		(6,654)
Balance at September 30, 2020		60,263,169	$	60	$	895,966	$	—	$	(66,860)	$	397,947	$	1,227,113
Net income															Net income										18,815		18,815
Balance at June 30, 2021															Balance at June 30, 2021	60,278,756	$	60	$	868,289	$	—	$	(23,654)	$	426,449	$	1,271,144

See accompanying notes to condensed consolidated financial statements.

Table of Contents

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Unaudited)


		Nine months ended September 30, 2021														Six months ended June 30, 2022
		Common Stock			Additional Paid-in Capital		Treasury Stock, at Cost		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders’ Equity			Common Stock			Additional Paid-in Capital		Treasury Stock, at Cost		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders’ Equity
		Shares	Amount													Shares	Amount

		(In thousands, except share data)														(In thousands, except share data)
Balance at January 1, 2021		60,466,168	$	60	$	910,304	$	—	$	(27,069)	$	400,502	$	1,283,797
Balance at January 1, 2022															Balance at January 1, 2022	59,305,160	$	59	$	745,615	$	—	$	(37,359)	$	470,961	$	1,179,276

Stock-based compensation expense	Stock-based compensation expense				16,735								16,735		Stock-based compensation expense				13,768								13,768
Issuance of common stock under the Equity Incentive Plan	Issuance of common stock under the Equity Incentive Plan	423,456	1		27,977								27,978		Issuance of common stock under the Equity Incentive Plan	215,954	1		10,624								10,625
Shares received in net share settlement of stock option exercises and vesting of restricted stock	Shares received in net share settlement of stock option exercises and vesting of restricted stock	(46,009)	—		(7,429)								(7,429)		Shares received in net share settlement of stock option exercises and vesting of restricted stock	(44,312)	—		(5,154)								(5,154)
Purchase of treasury stock	Purchase of treasury stock						(104,323)						(104,323)		Purchase of treasury stock						(84,236)						(84,236)
Retirement of treasury stock	Retirement of treasury stock	(751,510)	(1)		(104,322)		104,323						—		Retirement of treasury stock	(853,934)	(1)		(84,235)		84,236						—
Other comprehensive loss	Other comprehensive loss								(10,295)				(10,295)		Other comprehensive loss								(39,644)				(39,644)
Net income	Net income										52,766		52,766		Net income										44,351		44,351
Balance at September 30, 2021		60,092,105	$	60	$	843,265	$	—	$	(37,364)	$	453,268	$	1,259,229
Balance at June 30, 2022															Balance at June 30, 2022	58,622,868	$	59	$	680,618	$	—	$	(77,003)	$	515,312	$	1,118,986


		Nine months ended September 30, 2020														Six months ended June 30, 2021
		Common Stock			Additional Paid-in Capital		Treasury Stock, at Cost		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders’ Equity			Common Stock			Additional Paid-in Capital		Treasury Stock, at Cost		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders’ Equity
		Shares	Amount													Shares	Amount

		(In thousands, except share data)														(In thousands, except share data)
Balance at January 1, 2020		57,884,020	$	58	$	648,031	$	—	$	(50,331)	$	373,510	$	971,268
Issuance of common stock		2,138,580	2		249,788								249,790
Balance at January 1, 2021															Balance at January 1, 2021	60,466,168	$	60	$	910,304	$	—	$	(27,069)	$	400,502	$	1,283,797

Stock-based compensation expense	Stock-based compensation expense				15,138								15,138		Stock-based compensation expense				11,135								11,135
Issuance of common stock under the Equity Incentive Plan	Issuance of common stock under the Equity Incentive Plan	535,930	1		24,112								24,113		Issuance of common stock under the Equity Incentive Plan	371,561	1		24,337								24,338
Shares received in net share settlement of stock option exercises and vesting of restricted stock	Shares received in net share settlement of stock option exercises and vesting of restricted stock	(64,048)	—		(8,896)								(8,896)		Shares received in net share settlement of stock option exercises and vesting of restricted stock	(43,973)	—		(7,142)								(7,142)
Purchase of treasury stock	Purchase of treasury stock						(32,208)						(32,208)		Purchase of treasury stock						(70,346)						(70,346)
Retirement of treasury stock	Retirement of treasury stock	(231,313)	(1)		(32,207)		32,208						—		Retirement of treasury stock	(515,000)	(1)		(70,345)		70,346						—
Other comprehensive loss									(16,529)				(16,529)
Other comprehensive income															Other comprehensive income								3,415				3,415
Net income	Net income										24,437		24,437		Net income										25,947		25,947
Balance at September 30, 2020		60,263,169	$	60	$	895,966	$	—	$	(66,860)	$	397,947	$	1,227,113
Balance at June 30, 2021															Balance at June 30, 2021	60,278,756	$	60	$	868,289	$	—	$	(23,654)	$	426,449	$	1,271,144

See accompanying notes to condensed consolidated financial statements.

Table of Contents

BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		Nine months ended September 30,					Six months ended June 30,
		2021		2020			2022		2021

		(In thousands)					(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	Net income	$	52,766	$	24,437	Net income	$	44,351	$	25,947
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	82,858		83,173		Depreciation and amortization	50,661		55,392
Impairment losses on long-lived assets		—		18,609
Impairment losses on equity investment		—		2,128

Stock-based compensation expense	Stock-based compensation expense	16,735		15,138		Stock-based compensation expense	13,768		11,135
Loss on foreign currency forward contracts						Loss on foreign currency forward contracts	5,917		—
Deferred income taxes	Deferred income taxes	1,573		8,408		Deferred income taxes	(4,269)		2,238
Other non-cash adjustments — net	Other non-cash adjustments — net	3,369		(206)		Other non-cash adjustments — net	(451)		513
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Accounts receivable	Accounts receivable	15,836		(1,385)		Accounts receivable	38,255		35,338
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(4,095)		(28,599)		Prepaid expenses and other current assets	(5,813)		(10,612)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	8,911		11,921		Accounts payable and accrued expenses	16,636		(1,818)
Income taxes	Income taxes	(11,269)		(18,830)		Income taxes	(10,899)		(19,908)
Deferred revenue	Deferred revenue	15,360		(14,956)		Deferred revenue	(43,000)		28,117
Leases	Leases	(3,378)		30,434		Leases	734		(2,143)
Other assets	Other assets	3,233		4,192		Other assets	12,087		3,101
Other current and long-term liabilities	Other current and long-term liabilities	3,348		35,389		Other current and long-term liabilities	7,793		8,425
Net cash provided by operating activities	Net cash provided by operating activities	185,247		169,853		Net cash provided by operating activities	125,770		135,725

CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:					CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets	Purchases of fixed assets	(47,350)		(54,494)		Purchases of fixed assets	(26,186)		(33,953)
Proceeds from the disposal of fixed assets	Proceeds from the disposal of fixed assets	5,840		9,997		Proceeds from the disposal of fixed assets	6,940		5,490
Purchases of debt securities and other investments	Purchases of debt securities and other investments	(20,032)		(6,106)		Purchases of debt securities and other investments	(7,030)		(10,611)
Proceeds from the maturity of debt securities and sale of other investments	Proceeds from the maturity of debt securities and sale of other investments	17,730		10,247		Proceeds from the maturity of debt securities and sale of other investments	11,009		10,500
Settlement of foreign currency forward contracts						Settlement of foreign currency forward contracts	(4,591)		—

Payments and settlements for acquisitions — net of cash acquired	Payments and settlements for acquisitions — net of cash acquired	(18,914)		(8,101)		Payments and settlements for acquisitions — net of cash acquired	(3,282)		(9,082)
Net cash used in investing activities	Net cash used in investing activities	(62,726)		(48,457)		Net cash used in investing activities	(23,140)		(37,656)

CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock issuance — net of issuance costs		—		249,808
Borrowings under revolving credit facility		—		43,200
Payments under revolving credit facility		—		(43,200)

Principal payments of long-term debt	Principal payments of long-term debt	(8,063)		(8,063)		Principal payments of long-term debt	(8,000)		(5,375)
Payments of debt issuance costs	Payments of debt issuance costs	(2,057)		(2,818)		Payments of debt issuance costs	—		(2,057)
Purchase of treasury stock	Purchase of treasury stock	(102,184)		(32,658)		Purchase of treasury stock	(72,554)		(70,346)
Proceeds from issuance of common stock upon exercise of options and restricted stock upon purchase	Proceeds from issuance of common stock upon exercise of options and restricted stock upon purchase	31,820		27,087		Proceeds from issuance of common stock upon exercise of options and restricted stock upon purchase	10,554		28,180
Taxes paid related to the net share settlement of stock options and restricted stock	Taxes paid related to the net share settlement of stock options and restricted stock	(7,429)		(8,896)		Taxes paid related to the net share settlement of stock options and restricted stock	(5,154)		(7,142)

Payments of contingent consideration for acquisitions	Payments of contingent consideration for acquisitions	(196)		(1,088)		Payments of contingent consideration for acquisitions	(13,865)		—
Net cash provided by (used in) financing activities		(88,109)		223,372
Net cash used in financing activities						Net cash used in financing activities	(89,019)		(56,740)
Effect of exchange rates on cash, cash equivalents and restricted cash	Effect of exchange rates on cash, cash equivalents and restricted cash	(2,120)		286		Effect of exchange rates on cash, cash equivalents and restricted cash	(2,215)		(675)
Net increase in cash, cash equivalents and restricted cash	Net increase in cash, cash equivalents and restricted cash	32,292		345,054		Net increase in cash, cash equivalents and restricted cash	11,396		40,654
Cash, cash equivalents and restricted cash — beginning of period	Cash, cash equivalents and restricted cash — beginning of period	388,465		31,192		Cash, cash equivalents and restricted cash — beginning of period	265,281		388,465
Cash, cash equivalents and restricted cash — end of period	Cash, cash equivalents and restricted cash — end of period	$	420,757	$	376,246	Cash, cash equivalents and restricted cash — end of period	$	276,677	$	429,119

See accompanying notes to condensed consolidated financial statements.

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BRIGHT HORIZONS FAMILY SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Unaudited)


		Nine months ended September 30,					Six months ended June 30,
		2021		2020			2022		2021

		(In thousands)					(In thousands)
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONSOLIDATED BALANCE SHEETS:	RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONSOLIDATED BALANCE SHEETS:					RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONSOLIDATED BALANCE SHEETS:
Cash and cash equivalents	Cash and cash equivalents	$	412,402	$	365,300	Cash and cash equivalents	$	270,425	$	418,638
Restricted cash and cash equivalents, included in prepaid expenses and other current assets	Restricted cash and cash equivalents, included in prepaid expenses and other current assets	8,355		10,946		Restricted cash and cash equivalents, included in prepaid expenses and other current assets	6,252		10,481

Total cash, cash equivalents and restricted cash — end of period	Total cash, cash equivalents and restricted cash — end of period	$	420,757	$	376,246	Total cash, cash equivalents and restricted cash — end of period	$	276,677	$	429,119

SUPPLEMENTAL CASH FLOW INFORMATION:	SUPPLEMENTAL CASH FLOW INFORMATION:					SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments of interest	Cash payments of interest	$	25,193	$	26,741	Cash payments of interest	$	13,458	$	16,815
Cash payments of income taxes	Cash payments of income taxes	$	23,427	$	8,329	Cash payments of income taxes	$	29,187	$	21,200
Cash paid for amounts included in the measurement of lease liabilities	Cash paid for amounts included in the measurement of lease liabilities	$	106,878	$	83,874	Cash paid for amounts included in the measurement of lease liabilities	$	64,887	$	72,496

NON-CASH TRANSACTIONS:	NON-CASH TRANSACTIONS:					NON-CASH TRANSACTIONS:
Fixed asset purchases recorded in accounts payable and accrued expenses	Fixed asset purchases recorded in accounts payable and accrued expenses	$	2,402	$	3,377	Fixed asset purchases recorded in accounts payable and accrued expenses	$	1,999	$	2,849
Contingent consideration issued for acquisitions	Contingent consideration issued for acquisitions	$	7,337	$	—	Contingent consideration issued for acquisitions	$	—	$	7,337

Operating right-of-use assets obtained in exchange for operating lease liabilities — net	Operating right-of-use assets obtained in exchange for operating lease liabilities — net	$	46,653	$	88,850	Operating right-of-use assets obtained in exchange for operating lease liabilities — net	$	29,280	$	28,147
Restricted stock reclassified from other current liabilities to equity upon vesting	Restricted stock reclassified from other current liabilities to equity upon vesting	$	4,178	$	4,445	Restricted stock reclassified from other current liabilities to equity upon vesting	$	3,160	$	4,178
Treasury stock purchases in other current liabilities	Treasury stock purchases in other current liabilities	$	2,139	$	—	Treasury stock purchases in other current liabilities	$	11,909	$	—

See accompanying notes to condensed consolidated financial statements.

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BRIGHT HORIZONS FAMILY SOLUTIONS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION

Organization — Bright Horizons Family Solutions Inc. (“Bright Horizons” or the “Company”) provides center-based early education and child care, back-up child and adult/elder care, tuition assistance and student loan repayment program administration, educational advisory services, and other support services for employers and families in the United States, the United Kingdom, the Netherlands, Puerto Rico and India. The Company provides services designed to help families, employers and their employees better integrate work and family life, primarily under multi-year contracts with employers who offer ~~early education and~~ child care, ~~family~~dependent care, ~~solutions,~~ and workforce education services, as part of their employee benefits packages in an effort to support employees across life and career stages and improve employee engagement. On July 1, 2022, the Company, through wholly-owned subsidiaries, completed the acquisition of the outstanding shares of Only About Children, a child care operator in Australia. See Note 12, Subsequent Event, for additional information.

Basis of Presentation — The accompanying unaudited condensed consolidated balance sheet as of ~~September~~June 30, ~~2021~~2022 and the condensed consolidated statements of income, ~~(loss),~~ comprehensive income (loss), changes in stockholders’ equity, and cash flows for the interim periods ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP” or “GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required in accordance with U.S. GAAP for complete financial statements and should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. The consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications have been made to prior period amounts within the condensed consolidated balance sheet and supplemental statement of cash flows information to conform to the current period presentation.

In the opinion of the Company’s management, the Company’s unaudited condensed consolidated balance sheet as of ~~September~~June 30, ~~2021~~2022 and the condensed consolidated statements of income, ~~(loss),~~ comprehensive income (loss), changes in stockholders’ equity, and cash flows for the interim periods ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, reflect all adjustments (consisting only of normal and recurring adjustments) necessary to present fairly the results of the interim periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year.

Stockholders’ Equity — The board of directors of the Company authorized a share repurchase program of up to ~~$300~~$400 million of the Company’s outstanding common stock effective ~~June 12, 2018.~~December 16, 2021. The share repurchase program has no expiration ~~date.~~date and replaced the prior June 2018 authorization. The shares may be repurchased from time to time in open market transactions at prevailing market prices, in privately negotiated transactions, under Rule 10b5-1 plans, or by other means in accordance with federal securities laws. During the ~~nine~~six months ended ~~September~~June 30, ~~2021, 0.8~~2022, the Company repurchased 0.9 million shares ~~were repurchased~~ for ~~$104.3 million under this authorization, and at September~~$84.2 million. At June 30, ~~2021, $90.5~~2022, $296.4 million remained available under the repurchase program.

~~On April 21, 2020,~~ During the ~~Company completed the issuance and sale of 2,138,580~~six months ended June 30, 2021, 0.5 million shares ~~of common stock, par value $0.001 per share, to Durable Capital Master Fund LP at a price of $116.90 per share. The Company subsequently filed a registration statement to register the resale of these~~were repurchased for $70.3 million. All repurchased shares ~~in accordance with the terms of the purchase agreement. The Company received net proceeds from the offering of $249.8 million.~~

~~COVID-19 Pandemic~~ ~~— Since March 2020, the Company's global operations~~ have been significantly impacted by the COVID-19 pandemic. As of September 30, 2021, the Company operated 1,011 early education and child care centers, of which 949 early education and child care centers were open. The Company remains focused on the re-enrollment of its centers and the phased re-opening of the limited number of centers that remain temporarily closed, which the Company expects will continue throughout 2021 and into 2022. The broad and long-term effects of COVID-19 and its variants, its duration and the scope of ongoing and related disruptions cannot be predicted and the Company currently expects the effects of COVID-19 to continue to adversely impact the results of its operations for the remainder of 2021 and into 2022.retired.

~~Table of Contents~~

Government Support — ~~The Coronavirus Aid, Relief,~~During the six months ended June 30, 2022 and ~~Economic Security Act (“CARES Act”),~~2021, the ~~Consolidated Appropriations Act, 2021 (“CAA”), and the American Rescue Plan Act of 2021 (“ARPA”)~~Company participated in government support programs that were enacted in the United States on March 27, 2020, January 1, 2021, and March 11, 2021, respectively; all are economic aid packages to help mitigate the impact of the pandemic. Additionally, other foreign governmental legislation that provided relief provisions was enacted in response to the economic impact of ~~COVID-19. The Company has participated in certain government support programs,~~the COVID-19 pandemic, including availing itself of certain tax deferrals, tax credits and federal block grant funding in the United States, as well as ~~certain tax deferrals, tax credits, and~~ employee wage support in the United Kingdom. On December 27, 2020, the employee retention tax credit, originally enacted under the CARES Act in the United States, was expanded and extended under the CAA to wages paid through the first two quarters of 2021, among other changes. Additionally, on March 11, 2021, the employee retention tax credit was expanded and extended under the ARPA through December 31, 2021, among other changes. Governmental support received is recorded on the consolidated statement of income as a reduction to the related expenses that the assistance is intended to defray.

During the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021, ~~and 2020, $32.2~~$46.7 million and ~~$61.5~~$17.0 million, respectively, was recorded as a reduction to cost of services in relation to these benefits, of which ~~$9.3~~$16.0 million and ~~$3.3~~$5.7 million, respectively, reduced the operating ~~subsidies paid by~~subsidy revenue due from employers for the related child care centers. Additionally during the six months ended June 30, 2022, amounts received for tuition support of $3.4 million were recorded to revenue. As of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020, $3.9~~2021, $1.6 million and ~~$8.4~~$3.3 million, respectively, was recorded in prepaid expenses and other current assets on the consolidated balance sheet for amounts due from government support programs. As of ~~September~~June 30, 2022 and December 31, 2021, $7.0 million and $3.9 million was recorded to other current liabilities related to government support received related to future periods, and as of June 30, 2022 and December 31, 2021, payroll tax deferrals of ~~$10.2~~$7.0 million were ~~recorded in other long-term liabilities on the consolidated balance sheet and as of December 31, 2020, payroll tax deferrals were $20.4 million, of which $10.2 million was~~ recorded in accounts payable and accrued expenses ~~and $10.2 million was included in other long-term liabilities.~~

~~Recently Adopted Pronouncement~~ ~~— In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12,~~ ~~Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes~~. The standard removes certain exceptions to the general principles in Topic 740 and improves the consistent application of U.S. GAAP by clarifying and amending certain areas of the existing guidance. The Company adopted the new guidance on January 1, 2021. The adoption of this standard did not have a material impact on the ~~Company’s~~ consolidated ~~financial statements and related disclosures.~~balance sheet.

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2. REVENUE RECOGNITION

Disaggregation of Revenue

The Company disaggregates revenue from contracts with customers into segments and geographical regions. Revenue disaggregated by segment and geographical region was as follows:


		Full service center-based child care		Back-up care		Educational advisory and other services		Total			Full service center-based child care		Back-up care		Educational advisory and other services		Total

		(In thousands)									(In thousands)
Three months ended September 30, 2021
Three months ended June 30, 2022										Three months ended June 30, 2022
North America	North America	$	221,297	$	91,237	$	27,253	$	339,787	North America	$	257,822	$	85,096	$	27,311	$	370,229
Europe	Europe	112,586		7,960		—		120,546		Europe	113,494		6,618		—		120,112
		$	333,883	$	99,197	$	27,253	$	460,333		$	371,316	$	91,714	$	27,311	$	490,341
Three months ended September 30, 2020
Three months ended June 30, 2021										Three months ended June 30, 2021
North America	North America	$	137,112	$	89,271	$	24,734	$	251,117	North America	$	216,327	$	76,660	$	25,567	$	318,554
Europe	Europe	83,024		3,779		—		86,803		Europe	118,100		4,824		—		122,924
		$	220,136	$	93,050	$	24,734	$	337,920		$	334,427	$	81,484	$	25,567	$	441,478

~~Table of Contents~~


		Full service center-based child care		Back-up care		Educational advisory and other services		Total			Full service center-based child care		Back-up care		Educational advisory and other services		Total

		(In thousands)									(In thousands)
Nine months ended September 30, 2021
Six months ended June 30, 2022										Six months ended June 30, 2022
North America	North America	$	630,078	$	239,079	$	76,986	$	946,143	North America	$	501,059	$	161,025	$	52,944	$	715,028
Europe	Europe	328,551		17,957		—		346,508		Europe	224,189		11,533		—		235,722
		$	958,629	$	257,036	$	76,986	$	1,292,651		$	725,248	$	172,558	$	52,944	$	950,750
Nine months ended September 30, 2020
Six months ended June 30, 2021										Six months ended June 30, 2021
North America	North America	$	527,751	$	292,934	$	66,061	$	886,746	North America	$	408,781	$	147,842	$	49,733	$	606,356
Europe	Europe	241,082		10,187		—		251,269		Europe	215,965		9,997		—		225,962
		$	768,833	$	303,121	$	66,061	$	1,138,015		$	624,746	$	157,839	$	49,733	$	832,318

The classification “North America” is comprised of the Company’s United States and Puerto Rico ~~and Canada~~ operations and the classification “Europe” includes the Company’s United Kingdom, Netherlands, and India operations. ~~During the third quarter of fiscal 2020, the Company divested its child care center business in Canada and ceased to operate its 2 centers in that geography.~~

Deferred Revenue

The Company records deferred revenue when payments are received in advance of the Company’s performance under the contract, which is recognized as revenue as the performance obligation is satisfied. During the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021, ~~$169.2~~$181.0 million and $146.7 million was recognized as revenue related to the deferred revenue balance recorded at December 31, ~~2020. During the nine months ended September 30, 2020, $170.0 million was recognized as revenue related to the deferred revenue balance recorded at~~2021 and December 31, ~~2019.~~2020, respectively.

Remaining Performance Obligations

The Company does not disclose the value of unsatisfied performance obligations for contracts with an original contract term of one year or less, or for variable consideration allocated to the unsatisfied performance obligation of a series of services. The transaction price allocated to the remaining performance obligations relates to services that are paid or invoiced in advance. The Company’s remaining performance obligations not subject to the practical expedients were not material.

3. LEASES

The Company has operating leases for certain of its full service and back-up early education and child care centers, corporate offices, call centers, and to a lesser extent, various office equipment, in the United States, the United Kingdom, and the Netherlands. Most of the leases expire within 10 to 15 years and many contain renewal options and/or termination provisions. ~~The Company does not have any~~As of June 30, 2022 and December 31, 2021, there were no material finance ~~leases as~~leases.

Table of ~~September 30, 2021.~~Contents

Lease Expense

The components of lease expense were as follows:


		Three months ended September 30,				Nine months ended September 30,					Three months ended June 30,				Six months ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021

		(In thousands)									(In thousands)
Operating lease expense (1)	Operating lease expense (1)	$	33,358	$	33,436	$	100,635	$	105,964	Operating lease expense (1)	$	32,359	$	33,652	$	64,887	$	67,277
Variable lease expense (1)	Variable lease expense (1)	9,399		6,419		23,076		21,772		Variable lease expense (1)	9,768		6,735		19,712		13,677
Total lease expense	Total lease expense	$	42,757	$	39,855	$	123,711	$	127,736	Total lease expense	$	42,127	$	40,387	$	84,599	$	80,954

(1) Excludes short-term lease expense and sublease income, which were immaterial for the periods presented.

Operating lease expense for the three and nine months ended September 30, 2020 includes an impairment loss on operating lease right-of-use assets of $0.3 million and $5.5 million, respectively. Refer to Note 9, ~~Fair Value Measurements, for additional information.~~

~~Table of Contents~~

Other Information

The weighted average remaining lease term and the weighted average discount rate were as follows:


		September 30, 2021	December 31, 2020		June 30, 2022	December 31, 2021

Weighted average remaining lease term (in years)	Weighted average remaining lease term (in years)	10	10	Weighted average remaining lease term (in years)	10	10
Weighted average discount rate	Weighted average discount rate	5.9%	6.0%	Weighted average discount rate	5.8%	5.8%

Maturity of Lease Liabilities

The following table summarizes the maturity of lease liabilities as of ~~September~~June 30, ~~2021:~~2022:


		Operating Leases			Operating Leases

		(In thousands)			(In thousands)
Remainder of 2021		$	20,246
2022		134,267
Remainder of 2022				Remainder of 2022	$	53,830
2023	2023	126,966		2023	129,356
2024	2024	116,221		2024	120,547
2025	2025	102,167		2025	109,078
2026				2026	100,861
Thereafter	Thereafter	552,043		Thereafter	508,251
Total lease payments	Total lease payments	1,051,910		Total lease payments	1,021,923
Less imputed interest	Less imputed interest	(260,201)		Less imputed interest	(247,822)
Present value of lease liabilities	Present value of lease liabilities	791,709		Present value of lease liabilities	774,101
Less current portion of operating lease liabilities	Less current portion of operating lease liabilities	(87,066)		Less current portion of operating lease liabilities	(87,130)
Long-term operating lease liabilities	Long-term operating lease liabilities	$	704,643	Long-term operating lease liabilities	$	686,971

As of ~~September~~June 30, ~~2021,~~2022, the Company had entered into additional operating leases that have not yet commenced with total fixed payment obligations of ~~$26.9~~$27.5 million. The leases are expected to commence between the ~~fourth~~third quarter of ~~fiscal 2021~~2022 and the ~~fourth~~first quarter of ~~fiscal 2022 with~~2023 and have initial lease terms of approximately 10 to 15 years.

~~Lease Modifications~~

As of September 30, 2021, the Company had deferred lease payments of $1.4 million. The majority of these lease payments are payable over the next year. As of December 31, 2020, the Company had deferred lease payments of $7.7 million.

4. ACQUISITIONS

The Company’s growth strategy includes expansion through strategic and synergistic acquisitions. The goodwill resulting from these acquisitions arises largely from synergies expected from combining the operations of the businesses acquired with the ~~Company's~~Company’s existing operations, including cost efficiencies and leveraging existing client relationships, as well as from benefits derived from gaining the related assembled workforce.

~~2021~~2022 Acquisitions

During the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, the Company acquired ~~2 centers as well as a camp and back-up care provider in the United States,~~ 1 center in the ~~United Kingdom, and 3 centers in the~~ Netherlands, ~~in 4 separate business acquisitions,~~ which ~~were each~~was accounted for as a business combination. ~~These businesses were~~This business was acquired for aggregate cash consideration of ~~$18.3 million, net of cash acquired of $0.6~~$3.3 million and consideration payable of ~~$0.5~~$0.2 million. Additionally, the Company is subject to contingent consideration payments for 2 of these acquisitions, and recorded a preliminary fair value estimate of $7.3 million in relation to these contingent consideration arrangements at acquisition. Contingent consideration of up to $1.2 million may be payable within one year if certain performance targets are met for one of the acquisitions, and contingent consideration is payable in 2026 based on certain financial metrics for the other acquisition. The Company recorded goodwill of ~~$14.6 million related to the back-up care segment and $8.0~~$3.1 million related to the full service center-based child care segment ofin relation to this acquisition, which ~~$18.0 million~~ will not be deductible for tax purposes. In addition, the Company recorded intangible assets of ~~$1.3~~$0.5 million that will be amortized over ~~five years, as well as fixed assets of $7.0 million in relation to these acquisitions.~~four years.

1312

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The determination and allocation of purchase price consideration is based on preliminary estimates of fair value; such estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). As of ~~September~~June 30, ~~2021,~~2022, the purchase price ~~allocations~~allocation for ~~these acquisitions remain~~this acquisition remains open as the Company gathers additional information regarding the assets acquired and the liabilities ~~assumed, and finalizes its determination of the estimated fair value of the contingent consideration at the date of acquisition.~~assumed. The operating results for the acquired businesses are included in the consolidated results of operations from the date of acquisition, and were not material to the Company’s financial results.

~~2020~~During the six months ended June 30, 2022, the Company paid contingent consideration of $19.1 million related to an acquisition completed in 2019 and contingent consideration of $0.2 million related to an acquisition completed in 2021. Of the total amounts paid of $19.3 million, $13.9 million had been recorded as a liability at the date of acquisition and presented as cash used in financing activities in the consolidated statement of cash flows with remaining amounts reflected as cash used in operating activities.

2021 Acquisitions

During the year ended December 31, ~~2020,~~2021, the Company acquired 2 ~~child care~~ centers ~~and the Sittercity business, an online marketplace for families and caregivers,~~as well as a school-age camp provider in the United States, 13 centers in the United Kingdom, and 3 centers in the Netherlands, in 5 separate business acquisitions, which were each accounted for as a business combination. These businesses were acquired for aggregate cash consideration of ~~$8.1~~$53.2 million, net of cash acquired of ~~$1.3~~$2.2 million, and consideration payable of ~~$0.1~~$0.6 million. Additionally, the Company is subject to contingent consideration payments for 2 of these acquisitions, and recorded a fair value estimate of $7.3 million ~~and included fixed assets and technology~~in relation to these contingent consideration arrangements at acquisition. Contingent consideration of ~~$4.1~~up to $1.2 million ~~as well as a trade name~~was payable within one year from the date of ~~$0.7~~acquisition if certain performance targets were met for 1 of the acquisitions, of which $0.8 million ~~that will be amortized over five years.~~was paid in 2021 based on the performance targets met. Contingent consideration is payable in 2026 based on certain financial metrics for the other acquisition. The Company recorded goodwill of ~~$2.0~~$39.5 million related to the ~~educational advisory~~full service center-based child care segment, of which $3.4 million will be deductible for tax purposes, and ~~other services segment and $2.1~~$14.6 million related to the ~~full-service center-based child~~back-up care segment, all of which will be deductible for tax purposes. In addition, the Company recorded intangible assets of $5.7 million that will be amortized over five years, as well as fixed assets of $10.1 million in relation to these acquisitions.

The allocation of purchase price consideration is based on preliminary estimates of fair value; such estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). As of June 30, 2022, the purchase price allocations for 3 of the acquisitions remain open as the Company gathers additional information regarding the assets acquired and the liabilities assumed.

During the year ended December 31, ~~2020,~~2021, the Company paid ~~$1.2~~$0.6 million for contingent consideration related to acquisitions completed in ~~2018 and 2019,~~2021, which had been recorded as a liability at the date of acquisition.

5. GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying amount of goodwill were as follows:

Full service
center-based
child care Back-up care Educational
advisory and
other services Total
(In thousands)
Balance at January 1, 2021 $ 1,197,658 $ 194,616 $ 39,693 $ 1,431,967
Additions from acquisitions 7,997 14,557 — 22,554
Adjustments to prior year acquisitions — — 150 150
Effect of foreign currency translation (7,963) (387) — (8,350)
Balance at September 30, 2021 $ 1,197,692 $ 208,786 $ 39,843 $ 1,446,321


	Full service center-based child care		Back-up care		Educational advisory and other services		Total

	(In thousands)




Balance at January 1, 2022	$	1,233,096	$	208,786	$	39,843	$	1,481,725
Additions from acquisitions	3,130		—		—		3,130

Effect of foreign currency translation	(41,052)		(2,618)		—		(43,670)
Balance at June 30, 2022	$	1,195,174	$	206,168	$	39,843	$	1,441,185

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The Company also has intangible assets, which consisted of the following at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


September 30, 2021		Weighted average amortization period	Cost		Accumulated amortization		Net carrying amount
June 30, 2022									June 30, 2022	Weighted average amortization period	Cost		Accumulated amortization		Net carrying amount

			(In thousands)								(In thousands)
Definite-lived intangible assets:	Definite-lived intangible assets:								Definite-lived intangible assets:
Customer relationships	Customer relationships	14 years	$	401,907	$	(331,454)	$	70,453	Customer relationships	14 years	$	396,569	$	(342,659)	$	53,910
Trade names	Trade names	6 years	12,090		(10,010)		2,080		Trade names	6 years	11,463		(9,888)		1,575
			413,997		(341,464)		72,533				408,032		(352,547)		55,485
Indefinite-lived intangible assets:	Indefinite-lived intangible assets:								Indefinite-lived intangible assets:
Trade names	Trade names	N/A	180,996		—		180,996		Trade names	N/A	180,284		—		180,284
			$	594,993	$	(341,464)	$	253,529			$	588,316	$	(352,547)	$	235,769


December 31, 2021	Weighted average amortization period	Cost		Accumulated amortization		Net carrying amount

		(In thousands)
Definite-lived intangible assets:
Customer relationships	14 years	$	400,399	$	(332,571)	$	67,828
Trade names	6 years	12,358		(10,150)		2,208
		412,757		(342,721)		70,036
Indefinite-lived intangible assets:
Trade names	N/A	180,996		—		180,996
		$	593,753	$	(342,721)	$	251,032

The Company estimates that it will record amortization expense related to intangible assets existing as of June 30, 2022 as follows over the next five years:


	Estimated amortization expense
	(In thousands)
Remainder of 2022	$	14,079
2023	$	26,601
2024	$	12,174
2025	$	1,974
2026	$	971

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December 31, 2020 Weighted average
amortization period Cost Accumulated
amortization Net carrying
amount
(In thousands)
Definite-lived intangible assets:
Customer relationships 14 years $ 402,319 $ (310,587) $ 91,732
Trade names 6 years 11,219 (9,633) 1,586
413,538 (320,220) 93,318
Indefinite-lived intangible assets:
Trade names N/A 181,302 — 181,302
$ 594,840 $ (320,220) $ 274,620

6. CREDIT ARRANGEMENTS AND DEBT OBLIGATIONS

Senior Secured Credit Facilities

The ~~Company’s~~Company's senior secured credit facilities consist of a ~~secured~~ term loan B facility of $600 million (“term loan ~~facility”~~B”) and a term loan A facility of $400 million (“term loan A”), collectively the “term loan facilities” or “term loans,” as well as a $400 million multi-currency revolving credit facility (“revolving credit facility”). ~~The term loan matures on November 7, 2023 and requires quarterly principal payments of $2.7 million, with the remaining principal balance due on November 7, 2023.~~

~~Outstanding term loan borrowings~~Long-term debt obligations were as follows:

September 30, 2021 December 31, 2020
(In thousands)
Term loan $ 1,026,625 $ 1,034,688
Deferred financing costs and original issue discount (2,795) (3,801)
Total debt 1,023,830 1,030,887
Less current maturities (10,750) (10,750)
Long-term debt $ 1,013,080 $ 1,020,137

On May 26, 2021, the Company amended its existing senior secured credit facilities to, among other changes, extend the revolving credit facility maturity date from July 31, 2022 to May 26, 2026 (subject to a springing maturity to August 8, 2023 if more than $25 million of the term loan has not been repaid, refinanced or extended), and reduce the interest rates applicable to borrowings outstanding on the revolving credit facility. In conjunction with this credit amendment, the Company incurred $2.1 million in fees that have been capitalized in other assets on the consolidated balance sheet and are amortized over the contractual life of the revolving credit facility. There were no borrowings outstanding on the revolving credit facility at September 30, 2021 and December 31, 2020.

In April and May 2020, the Company amended its existing senior secured credit facilities to, among other things, increase the borrowing capacity of the revolving credit facility from $225 million to $400 million, modify the interest rates applicable to borrowings outstanding on the revolving credit facility, and modify the terms of the applicable covenants. In conjunction with these credit amendments, the Company incurred $2.8 million in fees that have been capitalized in other assets on the consolidated balance sheet and were being amortized over the contractual life of the revolving credit facility prior to the May 26, 2021 amendment.


	June 30, 2022		December 31, 2021
	(In thousands)
Term loan B	$	597,000	$	600,000
Term loan A	395,000		400,000
Deferred financing costs and original issue discount	(7,011)		(7,604)
Total debt	984,989		992,396
Less current maturities	(16,000)		(16,000)
Long-term debt	$	968,989	$	976,396

All borrowings under the credit ~~agreement~~facilities are subject to variable interest. The effective interest rate for the term ~~loan~~loans was ~~2.50%~~3.62% and 2.29% at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, and the weighted average interest rate was ~~2.50%~~2.56% and ~~2.83%~~2.50% for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, prior to the effects of any interest rate hedge arrangements. ~~Effective as~~The weighted average interest rate for the revolving credit facility was 5.25% and 4.00% for the six months ended June 30, 2022 and 2021, respectively.

Term Loan B Facility

The seven-year term loan B matures on November 23, 2028 and requires quarterly principal payments equal to 1% per annum of the original aggregate principal amount of the term loan B, with the remaining principal balance due at maturity. Borrowings under the term loan B facility bear interest at a rate per annum of 1.25% over the base rate, or 2.25% over the eurocurrency rate. The eurocurrency rate is the one, three or six month LIBOR rate or, with applicable lender approval, the nine or twelve month or less than one month LIBOR rate, subject to an interest rate floor of 0.50%. The base rate is subject to an interest rate floor of 1.50%.

Term Loan A Facility

The five-year term loan A matures on November 23, 2026 and requires quarterly principal payments equal to 2.5% per annum of the original aggregate principal amount of the term loan A in each of the first three years, 5.0% in the fourth year, and 7.5% in the fifth year. The remaining principal balance is due at maturity. Borrowings under the term loan A facility bear interest at a rate per annum ranging from 0.50% to 0.75% over the base rate, subject to an interest rate floor of 1.00%, or 1.50% to 1.75% over the eurocurrency rate. The eurocurrency rate is the one, three or six month LIBOR rate or, with applicable lender approval, the nine or twelve month or less than one month LIBOR rate.

Revolving Credit Facility

The $400 million multi-currency revolving credit facility matures on May 26, ~~2021,~~2026. There were no borrowings outstanding on the revolving credit facility at both June 30, 2022 and December 31, 2021.

Borrowings under the revolving credit facility bear interest at a rate per annum ranging from 0.50% to 0.75% over the base rate, subject to an interest rate floor of 1.00%, or 1.50% to 1.75% over the eurocurrency rate. ~~The weighted average interest rate for the revolving credit facility was 4.00% and 4.49% for the nine months ended September 30, 2021 and 2020, respectively.~~

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Debt Covenants

All obligations under the senior secured credit facilities are secured by substantially all the assets of the Company’s material U.S. subsidiaries. The senior secured credit facilities contain a number of covenants that, among other things and subject to certain exceptions, may restrict the ability of Bright Horizons Family Solutions LLC, the Company’s wholly-owned subsidiary, and its restricted subsidiaries, to: incur ~~certain~~ liens; make investments, loans, advances and acquisitions; incur additional indebtedness or guarantees; pay dividends on capital stock or redeem, repurchase or retire capital stock or subordinated indebtedness; engage in transactions with affiliates; sell assets, including capital stock of the Company’s subsidiaries; alter the business conducted; enter into agreements restricting the Company’s subsidiaries’ ability to pay dividends; and consolidate or merge.

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In addition, the credit agreement governing the senior secured credit facilities requires Bright Horizons Capital Corp., the Company’s direct subsidiary, to be a passive holding company, subject to certain exceptions. The term loan A and the revolving credit facility ~~requires~~require Bright Horizons Family Solutions LLC, the borrower, and its restricted subsidiaries, to comply with a maximum first lien net leverage ratio ofnot to exceed 4.25 to ~~1.00 beginning June 30, 2021.~~1.00. A breach of the applicable covenant is subject to certain equity cure rights.

Future principal payments of long-term debt are as follows for the years ending December 31:


		Term Loan			Long-term debt

		(In thousands)			(In thousands)
Remainder of 2021		$	2,687
2022		10,750
Remainder of 2022				Remainder of 2022	$	8,000
2023	2023	1,013,188		2023	16,000

2024				2024	18,500
2025				2025	28,500
2026				2026	351,000
Thereafter				Thereafter	570,000
Total future principal payments	Total future principal payments	$	1,026,625	Total future principal payments	$	992,000

Derivative Financial Instruments

The Company is subject to interest rate risk as all borrowings under the senior secured credit facilities are subject to variable interest rates. ~~In October 2017, the Company entered into variable-to-fixed~~The Company’s risk management policy permits using derivative instruments to manage interest rate ~~swap agreements~~and other risks. The Company uses interest rate swaps and caps to ~~mitigate the exposure to variable interest arrangements on $500 million notional amount~~manage a portion of the ~~outstanding term loan borrowings. These swap agreements, designated and accounted for as~~risk related to changes in cash ~~flow hedges~~flows from ~~inception, matured on October 31, 2021. The Company was required to make monthly payments on the notional amount at a fixed average~~ interest rate plus the applicable rate for eurocurrency loans. Effective as of May 31, 2018, the notional amount was subject to a total interest rate of approximately 3.65%. In exchange, the Company received interest on the notional amount at a variable rate based on the one-month LIBOR rate, subject to a 0.75% floor.

movements. In June 2020, the Company entered into interest rate cap agreements with a total notional value of $800 million, designated and accounted for as cash flow hedges from inception, to provide the Company with interest rate protection in the event the one-month LIBOR rate increases above 1%. Interest rate cap agreements for $300 million notional value have an effective date of June 30, 2020 and expire on October 31, 2023, while interest rate cap agreements for another $500 million notional amount have an effective date of October 29, 2021 and expire on October 31, 2023.

In December 2021, the Company entered into additional interest rate cap agreements with a total notional value of $900 million designated and accounted for as cash flow hedges from inception. Interest rate cap agreements for $600 million, which have a forward starting effective date of October ~~29, 2021, which coincides with the maturity of the interest rate swap agreements discussed above,~~31, 2023 and expire on October 31, ~~2023.~~

~~The~~2025, provide the Company with interest rate ~~swaps~~protection in the event the one-month LIBOR rate increases above 2.5%. Interest rate cap agreements for $300 million, which have a forward starting effective date of October 31, 2023 and expire on October 31, 2026, provide the Company with interest rate ~~caps~~protection in the event the one-month LIBOR rate increases above 3.0%.

During the six months ended June 30, 2022, the Company entered into foreign currency forward contracts in connection with an acquisition in Australia completed in July 2022. The Company entered into the foreign currency forwards to lock the purchase price in US dollars at closing and mitigate the impact of foreign currency fluctuations between signing of the definitive purchase agreement on May 3, 2022 and closing. The forward contracts have a total notional value of approximately AUD$320 million, which included the expected payments for the purchase price and for letters of credit used to guarantee certain lease arrangements. The cash flows associated with the business combination do not meet the criteria to be designated and accounted for as a cash flow hedge and, as such, foreign currency gains and losses on these forwards are recorded on the Company’s consolidated balance sheet at fair value and classified based on the instruments’ maturity dates. The Company records gains and losses resulting from changes in the fair value of the interest rate swaps and interest rate caps to accumulated other comprehensive income or loss. These gains and losses are subsequently reclassified into earnings and recognized to interest expense in the Company’s consolidated statement of income in the period that the hedged interest expense on the term loan facility is recognized. The premium paid for the interest rate cap was recorded as an asset and will be allocated to each of the individual hedged interest payments on the basis of their relative fair values. The change in each respective allocated fair value amount will be reclassified out of accumulated other comprehensive income when each of the hedged forecasted transactions impacts earnings and recognized to interest expense in the Company's consolidated statement of income. During the six months ended June 30, 2022, the Company recognized realized losses of $4.6 million and unrealized losses of $1.3 million in relation to these forwards due to fluctuations in the Australian dollar.

The fair value of the derivative financial instruments was as follows for the periods presented:


Derivative financial instruments	Derivative financial instruments	Consolidated balance sheet classification	September 30, 2021		December 31, 2020		Derivative financial instruments	Consolidated balance sheet classification	June 30, 2022		December 31, 2021

			(In thousands)						(In thousands)
Interest rate swaps - liability		Other current liabilities	$	446	$	4,775
Interest rate caps - asset	Interest rate caps - asset	Other assets	$	923	$	277	Interest rate caps - asset	Other assets	$	40,514	$	8,809
Foreign currency forward contracts - liability							Foreign currency forward contracts - liability	Other current liabilities	$	(1,326)	$	—

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The effect of the derivative financial instruments on other comprehensive income (loss) was as follows:


Derivatives designated as cash flow hedging instruments	Derivatives designated as cash flow hedging instruments	Amount of gain (loss) recognized in other comprehensive income (loss)		Consolidated statement of income classification	Amount of net gain (loss) reclassified into earnings		Total effect on other comprehensive income (loss)		Derivatives designated as cash flow hedging instruments	Amount of gain (loss) recognized in other comprehensive income (loss)		Consolidated statement of income classification	Amount of net gain (loss) reclassified into earnings		Total effect on other comprehensive income (loss)

		(In thousands)			(In thousands)					(In thousands)			(In thousands)
Three months ended September 30, 2021
Three months ended June 30, 2022									Three months ended June 30, 2022
Cash flow hedges	Cash flow hedges	$	(222)	Interest expense — net	$	(1,493)	$	1,271	Cash flow hedges	$	6,847	Interest expense — net	$	(68)	$	6,915
Income tax effect	Income tax effect	59		Income tax expense	399		(340)		Income tax effect	(1,828)		Income tax expense	18		(1,846)
Net of income taxes	Net of income taxes	$	(163)		$	(1,094)	$	931	Net of income taxes	$	5,019		$	(50)	$	5,069

Three months ended September 30, 2020
Three months ended June 30, 2021									Three months ended June 30, 2021
Cash flow hedges	Cash flow hedges	$	(1,015)	Interest expense — net	$	(1,468)	$	453	Cash flow hedges	$	(138)	Interest expense — net	$	(1,471)	$	1,333
Income tax effect	Income tax effect	273		Income tax expense	395		(122)		Income tax effect	37		Income tax expense	393		(356)
Net of income taxes	Net of income taxes	$	(742)		$	(1,073)	$	331	Net of income taxes	$	(101)		$	(1,078)	$	977


Derivatives designated as cash flow hedging instruments	Derivatives designated as cash flow hedging instruments	Amount of gain (loss) recognized in other comprehensive income (loss)		Consolidated statement of income classification	Amount of net gain (loss) reclassified into earnings		Total effect on other comprehensive income (loss)		Derivatives designated as cash flow hedging instruments	Amount of gain (loss) recognized in other comprehensive income (loss)		Consolidated statement of income classification	Amount of net gain (loss) reclassified into earnings		Total effect on other comprehensive income (loss)

		(In thousands)			(In thousands)					(In thousands)			(In thousands)
Nine months ended September 30, 2021
Six months ended June 30, 2022									Six months ended June 30, 2022
Cash flow hedges	Cash flow hedges	$	618	Interest expense — net	$	(4,414)	$	5,032	Cash flow hedges	$	31,760	Interest expense — net	$	(171)	$	31,931
Income tax effect	Income tax effect	(165)		Income tax expense	1,179		(1,344)		Income tax effect	(8,480)		Income tax expense	(431)		(8,049)
Net of income taxes	Net of income taxes	$	453		$	(3,235)	$	3,688	Net of income taxes	$	23,280		$	(602)	$	23,882

Nine months ended September 30, 2020
Six months ended June 30, 2021									Six months ended June 30, 2021
Cash flow hedges	Cash flow hedges	$	(7,536)	Interest expense — net	$	(3,109)	$	(4,427)	Cash flow hedges	$	840	Interest expense — net	$	(2,921)	$	3,761
Income tax effect	Income tax effect	2,027		Income tax expense	837		1,190		Income tax effect	(224)		Income tax expense	780		(1,004)
Net of income taxes	Net of income taxes	$	(5,509)		$	(2,272)	$	(3,237)	Net of income taxes	$	616		$	(2,141)	$	2,757

During the next twelve months, the Company estimates that a net ~~loss~~gain of ~~$0.9~~$16.2 million, pre-tax, will be reclassified from accumulated other comprehensive income (loss) and recorded as a reduction to interest expense related to these derivative financial instruments.

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7. EARNINGS PER SHARE

The following tables set forth the computation of basic and diluted earnings per share using the two-class method:


		Three months ended September 30,				Nine months ended September 30,					Three months ended June 30,				Six months ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021

		(In thousands, except share data)									(In thousands, except share data)
Basic earnings (loss) per share:
Net income (loss)		$	26,819	$	(6,654)	$	52,766	$	24,437
Allocation of net income (loss) to common stockholders:
Basic earnings per share:										Basic earnings per share:
Net income										Net income	$	24,945	$	18,815	$	44,351	$	25,947
Allocation of net income to common stockholders:										Allocation of net income to common stockholders:
Common stock	Common stock	$	26,700	$	(6,654)	$	52,538	$	24,331	Common stock	$	24,840	$	18,733	$	44,164	$	25,838
Unvested participating shares	Unvested participating shares	119		—		228		106		Unvested participating shares	105		82		187		109
Net income (loss)		$	26,819	$	(6,654)	$	52,766	$	24,437
Net income										Net income	$	24,945	$	18,815	$	44,351	$	25,947

Weighted average common shares outstanding:	Weighted average common shares outstanding:									Weighted average common shares outstanding:
Common stock	Common stock	60,218,090		60,196,795		60,454,855		59,253,044		Common stock	59,113,044		60,551,528		59,103,884		60,573,237
Unvested participating shares	Unvested participating shares	266,331		249,567		255,157		258,265		Unvested participating shares	248,969		263,957		249,684		249,571
Earnings (loss) per common share:
Earnings per common share:										Earnings per common share:
Common stock	Common stock	$	0.44	$	(0.11)	$	0.87	$	0.41	Common stock	$	0.42	$	0.31	$	0.75	$	0.43


		Three months ended September 30,				Nine months ended September 30,					Three months ended June 30,				Six months ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021

		(In thousands, except share data)									(In thousands, except share data)
Diluted earnings (loss) per share:
Earnings (loss) allocated to common stock		$	26,700	$	(6,654)	$	52,538	$	24,331
Diluted earnings per share:										Diluted earnings per share:
Earnings allocated to common stock										Earnings allocated to common stock	$	24,840	$	18,733	$	44,164	$	25,838
Plus: earnings allocated to unvested participating shares	Plus: earnings allocated to unvested participating shares	119		—		228		106		Plus: earnings allocated to unvested participating shares	105		82		187		109
Less: adjusted earnings allocated to unvested participating shares	Less: adjusted earnings allocated to unvested participating shares	(117)		—		(225)		(105)		Less: adjusted earnings allocated to unvested participating shares	(104)		(81)		(186)		(108)
Earnings (loss) allocated to common stock		$	26,702	$	(6,654)	$	52,541	$	24,332
Earnings allocated to common stock										Earnings allocated to common stock	$	24,841	$	18,734	$	44,165	$	25,839

Weighted average common shares outstanding:	Weighted average common shares outstanding:									Weighted average common shares outstanding:
Common stock	Common stock	60,218,090		60,196,795		60,454,855		59,253,044		Common stock	59,113,044		60,551,528		59,103,884		60,573,237
Effect of dilutive securities	Effect of dilutive securities	525,675		—		603,988		748,686		Effect of dilutive securities	139,825		555,264		230,223		643,146
Weighted average common shares outstanding — diluted	Weighted average common shares outstanding — diluted	60,743,765		60,196,795		61,058,843		60,001,730		Weighted average common shares outstanding — diluted	59,252,869		61,106,792		59,334,107		61,216,383
Earnings (loss) per common share:
Earnings per common share:										Earnings per common share:
Common stock	Common stock	$	0.44	$	(0.11)	$	0.86	$	0.41	Common stock	$	0.42	$	0.31	$	0.74	$	0.42

Options outstanding to purchase ~~1.0~~2.0 million and ~~2.8~~1.0 million shares of common stock were excluded from diluted earnings per share for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~0.9~~1.6 million and ~~1.0~~0.9 million shares of common stock were excluded for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, since their effect was anti-dilutive. These options may become dilutive in the future.

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8. INCOME TAXES

The Company’s effective income tax rates were ~~27.2%~~26.6% and ~~56.0%~~23.0% for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively and ~~20.0%~~23.6% and ~~(44.2)%~~10.9% for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The effective income tax rate may fluctuate from quarter to quarter for various reasons, including changes to income ~~(loss)~~ before income tax, jurisdictional mix of income ~~(loss)~~ before income tax, valuation allowances, jurisdictional income tax rate changes, as well as discrete items such as the settlement of foreign, federal and state tax issues and the effects of excess tax benefits associated with the exercise of stock options and vesting of restricted stock, which is included as a reduction of tax expense. During the three and ~~nine~~six months ended ~~September~~June 30, 2022, the excess tax benefit from stock-based compensation expense decreased tax expense by $0.7 million and $2.7 million, respectively. During the three and six months ended June 30, 2021, the excess tax benefit from stock-based compensation expense decreased tax expense by ~~$0.8~~$1.2 million and ~~$5.9 million, respectively. During the three and nine months ended September 30, 2020, the excess tax benefit from stock-based compensation expense decreased tax expense by $2.0 million and $10.6~~$5.1 million, respectively. For the three and ~~nine~~six months ended ~~September~~June 30, 2022 and 2021, prior to the inclusion of the excess tax benefit and other discrete items, the effective income tax rate approximated ~~29% and~~ 28%~~, respectively. For the three and nine months ended September 30, 2020, prior to the inclusion of the excess tax benefit and other discrete items, the effective income tax rate approximated 38%~~.

The Company’s unrecognized tax benefits were ~~$3.8~~$4.2 million at ~~September~~June 30, ~~2021~~2022 and ~~$4.0~~$3.9 million at December 31, ~~2020,~~2021, inclusive of interest. During the nine months ended September 30, 2021, the value of unrecognized tax benefits decreased due to the settlement of tax audits and release for lapse of statute of limitations, partially offset by an increase for an unrecognized tax benefit for a prior year state tax position. The Company expects the unrecognized tax benefits to change over the next twelve months if certain tax matters settle with the applicable taxing jurisdiction during this time frame, or, if the applicable statute of limitations lapses. The impact of the amount of such changes to previously recorded uncertain tax positions could range from zero to ~~$3.3~~$0.5 million.

The Company and its domestic subsidiaries are subject to ~~audit for~~ U.S. federal income tax as well as tax in multiple state jurisdictions. U.S. federal income tax returns are typically subject to examination by the Internal Revenue Service (“IRS”) and the statute of limitations for federal tax returns is three years. The Company’s filings for the tax years ~~2017~~2018 through 2020 are subject to audit based upon the federal statute of limitations.

State income tax returns are generally subject to examination for a period of three to four years after filing of the respective return. The state impact of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states. As of ~~September~~June 30, ~~2021,~~2022, there ~~were 2~~was 1 income tax ~~audits~~audit in process and the tax years from 2017 to 2020 are subject to audit.

The Company is also subject to corporate income tax for its subsidiaries located in the United Kingdom, the Netherlands, India, Ireland, and Puerto Rico. The tax returns for the Company’s subsidiaries located in foreign jurisdictions are subject to examination for periods ranging from one to five years.

9. FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are classified using a three-level hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement. The hierarchy gives the highest priority to observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The Company uses observable inputs where relevant and whenever possible. The three levels of the hierarchy are defined as follows:

Level 1 — Fair value is derived using quoted prices from active markets for identical instruments.

Level 2 — Fair value is derived using quoted prices for similar instruments from active markets or for identical or similar instruments in markets that are not active; or, fair value is based on model-derived valuations in which all significant inputs and significant value drivers are observable from active markets.

Level 3 — Fair value is derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The carrying value of cash and cash equivalents, restricted cash, accounts receivable, and accounts payable and accrued expenses approximates their fair value because of their short-term nature.

Financial instruments that potentially expose the Company to concentrations of credit risk consisted mainly of cash and accounts receivable. The Company mitigates its exposure by maintaining its cash in financial institutions of high credit standing. The Company’s accounts receivable is derived primarily from the services it provides, and the related credit risk is dispersed across many clients in various industries with no single client accounting for more than 10% of the Company's net revenue or accounts receivable. No significant credit concentration risk existed at ~~September~~June 30, ~~2021.~~

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2022.

Long-term Debt — The Company’s long-term debt is recorded at adjusted cost, net of original issue discounts and deferred financing costs. The fair value of the Company’s long-term debt is based on current bid prices ~~which approximates carrying value.~~or prices for similar instruments from active markets. As such, the Company’s long-term debt was classified as Level ~~1. The~~2. As of June 30, 2022, the carrying value and estimated fair value of long-term debt ~~were $1.03 billion~~was $992.0 million and ~~$1.02 billion, respectively, as~~$963.6 million, respectively. As of ~~September 30, 2021 and~~ December 31, ~~2020.~~2021, the estimated fair value approximated the carrying value of long-term debt.

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Derivative Financial Instruments — The Company’s interest rate ~~swap agreements and interest rate~~ cap agreements are recorded at fair value ~~which were~~and estimated using market-standard valuation models. Such models project future cash flows and discount the future amounts to a present value using market-based observable inputs. Additionally, the fair value of the ~~interest rate swaps and~~ interest rate caps included consideration of credit risk. The Company used a potential future exposure model to estimate this credit valuation adjustment (“CVA”). The inputs to the CVA were largely based on observable market data, with the exception of certain assumptions regarding credit worthiness. As the magnitude of the CVA was not a significant component of the fair value of the interest rate ~~swaps and interest rate~~ caps, it was not considered a significant input. The fair value of the interest rate ~~swaps and interest rate~~ caps are classified as Level 2. As of ~~September~~June 30, ~~2021~~2022 and December 31, 2020, the fair value of the interest rate swap agreements was $0.4 million and $4.8 million, respectively, which were recorded in other current liabilities on the consolidated balance sheet. As of September 30, 2021, ~~and December 31, 2020,~~ the fair value of the interest rate cap agreements was ~~$0.9~~$40.5 million and ~~$0.3~~$8.8 million, respectively, which ~~were~~was recorded in other assets on the consolidated balance sheet.

The Company's foreign currency forward contracts are recorded at fair value based on the foreign currency exchange rates in effect at the end of the reporting period. During the six months ended June 30, 2022, the Company recognized realized losses of $4.6 million and unrealized losses of $1.3 million in relation to these forwards due to fluctuations in the Australian dollar.

Debt Securities — The Company’s investments in debt securities, which are classified as available-for-sale, consist of U.S. Treasury and U.S. government agency securities and certificates of deposit. These securities are held in escrow by the Company’s wholly-owned captive insurance company and were purchased with restricted cash. As such, these securities are not available to fund the Company’s operations. These securities are recorded at fair value using quoted prices available in active markets and are classified as Level 1. As of ~~September~~June 30, ~~2021,~~2022, the fair value of the available-for-sale debt securities was ~~$27.3~~$26.6 million and was classified based on the instruments’ maturity dates, with ~~$20.9~~$22.9 million included in prepaid expenses and other current assets and ~~$6.4~~$3.7 million in other assets on the consolidated balance sheet. As of December 31, ~~2020,~~2021, the fair value of the available-for-sale debt securities was ~~$27.9~~$29.9 million, with ~~$21.5~~$22.7 million included in prepaid expenses and other current assets and ~~$6.4~~$7.2 million in other assets on the consolidated balance sheet. At ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the amortized cost was ~~$27.3~~$26.9 million and ~~$27.9~~$30.0 million, respectively. The debt securities held at ~~September~~June 30, ~~2021~~2022 had remaining maturities ranging from less than one year to approximately 1.5 years. Unrealized gains and losses, net of tax, on available-for-sale debt securities were immaterial for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021.

Liabilities for Contingent Consideration — The Company is subject to contingent consideration arrangements in connection with certain business combinations. Liabilities for contingent consideration are measured at fair value each reporting period, with the acquisition-date fair value included as part of the consideration payable for the related business combination and subsequent changes in fair value recorded to selling, general and administrative expenses on the Company’s consolidated statement of income. The fair value of contingent consideration was generally calculated using customary valuation models based on probability-weighted outcomes of meeting certain future performance targets and forecasted results. The key inputs to the valuations are the projections of future financial results in relation to the businesses and the company-specific discount rates. The Company classified the contingent consideration liabilities as a Level 3 fair value measurement due to the lack of observable inputs used in the model. During the six months ended June 30, 2022, contingent consideration liabilities of $19.3 million were paid related to acquisitions completed in 2019 and 2021. The contingent consideration liabilities outstanding as of ~~September~~June 30, ~~2021~~2022 related to ~~2019 and~~ 2021 acquisitions. See Note 4, Acquisitions, for additional information.

The following table provides a roll forward of the recurring Level 3 fair value measurements:


	~~Nine~~Six months ended ~~September~~June 30, ~~2021~~2022

	(In thousands)
Balance at January 1, ~~2021~~2022	$	~~13,721~~27,474
~~Issuance of contingent consideration in connection with acquisitions~~	~~7,337~~
Settlement of contingent consideration liabilities	~~(196)~~(19,250)

Changes in fair value	~~2,718~~523
Foreign currency translation	~~(246)~~(532)
Balance at ~~September~~June 30, ~~2021~~2022	$	~~23,334~~8,215

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~~Nonrecurring Fair Value Estimate~~s — During the three and nine months ended September 30, 2020, the Company recognized impairment losses of $1.7 million and $18.6 million, respectively, on fixed assets and operating lease right-of-use assets for certain centers. The impairment losses were included in cost of services on the consolidated statement of income, which have been allocated to the full service center-based child care segment. The estimated fair value of the applicable center long-lived assets was based on the fair value of the asset groups, calculated using a discounted cash flow model, with unobservable inputs. The fair value of the fixed assets was insignificant given the current and expected cash flows of these centers and the valuation of the lease right-of-use-assets considered the amount a market participant would pay for use of the asset. The Company classified the center long-lived assets as a Level 3 fair value measurement due to the lack of observable inputs used in the model.

During the nine months ended September 30, 2020, the Company recognized a $2.1 million impairment loss on an equity investment. The impairment loss was included in cost of services on the consolidated statement of income, which has been allocated to the back-up care segment. The estimated fair value of the equity investment was based on a qualitative assessment, that considered the current economic environment, business prospects and transaction information in the entity's securities, among other factors considered. The Company classified the equity investment as a Level 3 fair value measurement due to the lack of observable inputs.

10. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Accumulated other comprehensive income (loss), which is included as a component of stockholders’ equity, is comprised of foreign currency translation adjustments and unrealized gains (losses) on cash flow hedges and investments, net of tax.

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The changes in accumulated other comprehensive income (loss) by component were as follows:


		Nine months ended September 30, 2021									Six months ended June 30, 2022
		Foreign currency translation adjustments (1)		Unrealized gain (loss) on cash flow hedges		Unrealized gain (loss) on investments		Total			Foreign currency translation adjustments (1)		Unrealized gain (loss) on cash flow hedges		Unrealized gain (loss) on investments		Total

		(In thousands)									(In thousands)
Balance at January 1, 2021		$	(22,332)	$	(4,785)	$	48	$	(27,069)
Balance at January 1, 2022										Balance at January 1, 2022	$	(38,073)	$	738	$	(24)	$	(37,359)
Other comprehensive income (loss) before reclassifications — net of tax	Other comprehensive income (loss) before reclassifications — net of tax	(13,548)		453		(48)		(13,143)		Other comprehensive income (loss) before reclassifications — net of tax	(63,351)		23,280		(175)		(40,246)
Less: amounts reclassified from accumulated other comprehensive income (loss) — net of tax	Less: amounts reclassified from accumulated other comprehensive income (loss) — net of tax	387		(3,235)		—		(2,848)		Less: amounts reclassified from accumulated other comprehensive income (loss) — net of tax	—		(602)		—		(602)
Net other comprehensive income (loss)	Net other comprehensive income (loss)	(13,935)		3,688		(48)		(10,295)		Net other comprehensive income (loss)	(63,351)		23,882		(175)		(39,644)
Balance at September 30, 2021		$	(36,267)	$	(1,097)	$	—	$	(37,364)
Balance at June 30, 2022										Balance at June 30, 2022	$	(101,424)	$	24,620	$	(199)	$	(77,003)


		Nine months ended September 30, 2020									Six months ended June 30, 2021
		Foreign currency translation adjustments (1)		Unrealized gain (loss) on cash flow hedges		Unrealized gain (loss) on investments		Total			Foreign currency translation adjustments (1)		Unrealized gain (loss) on cash flow hedges		Unrealized gain (loss) on investments		Total

		(In thousands)									(In thousands)
Balance at January 1, 2020		$	(47,835)	$	(2,566)	$	70	$	(50,331)
Balance at January 1, 2021										Balance at January 1, 2021	$	(22,332)	$	(4,785)	$	48	$	(27,069)
Other comprehensive income (loss) before reclassifications — net of tax	Other comprehensive income (loss) before reclassifications — net of tax	(13,319)		(5,509)		27		(18,801)		Other comprehensive income (loss) before reclassifications — net of tax	1,086		616		(41)		1,661
Less: amounts reclassified from accumulated other comprehensive income (loss) — net of tax	Less: amounts reclassified from accumulated other comprehensive income (loss) — net of tax	—		(2,272)		—		(2,272)		Less: amounts reclassified from accumulated other comprehensive income (loss) — net of tax	387		(2,141)		—		(1,754)
Net other comprehensive income (loss)	Net other comprehensive income (loss)	(13,319)		(3,237)		27		(16,529)		Net other comprehensive income (loss)	699		2,757		(41)		3,415
Balance at September 30, 2020		$	(61,154)	$	(5,803)	$	97	$	(66,860)
Balance at June 30, 2021										Balance at June 30, 2021	$	(21,633)	$	(2,028)	$	7	$	(23,654)

(1)Taxes are not provided for the currency translation adjustments related to the undistributed earnings of foreign subsidiaries that are intended to be indefinitely reinvested.

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11. SEGMENT INFORMATION

The Company’s reportable segments are comprised of (1) full service center-based child care, (2) back-up care, and (3) educational advisory and other services. The full service center-based child care segment includes the traditional center-based early education and child care, preschool, and elementary education. The Company’s back-up care segment consists of center-based back-up child care, in-home ~~child~~care for children and adult/elder ~~care,~~dependents, school-age camps, virtual tutoring, and self-sourced reimbursed care. The Company’s educational advisory and other services segment consists of tuition assistance and student loan repayment program administration, workforce education, ~~and~~ related educational advising, college admissions advisory services, and an online marketplace for families and caregivers, which have been ~~aggregated as they do not meet the thresholds for separate disclosure.~~aggregated. The Company and its chief operating decision maker evaluate performance based on ~~revenues~~revenue and income from operations. Intercompany activity is eliminated in the segment results. The assets and liabilities of the Company are managed centrally and are reported internally in the same manner as the consolidated financial statements; therefore, no segment asset information is produced or included herein.

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Revenue and income (loss) from operations by reportable segment were as follows:


		Full service center-based child care		Back-up care		Educational advisory and other services		Total			Full service center-based child care		Back-up care		Educational advisory and other services		Total

		(In thousands)									(In thousands)
Three months ended September 30, 2021
Three months ended June 30, 2022										Three months ended June 30, 2022
Revenue	Revenue	$	333,883	$	99,197	$	27,253	$	460,333	Revenue	$	371,316	$	91,714	$	27,311	$	490,341
Income from operations(1)	Income from operations(1)	10,070		31,823		4,097		45,990		Income from operations(1)	19,722		25,119		2,981		47,822

Three months ended September 30, 2020
Three months ended June 30, 2021										Three months ended June 30, 2021
Revenue	Revenue	$	220,136	$	93,050	$	24,734	$	337,920	Revenue	$	334,427	$	81,484	$	25,567	$	441,478
Income (loss) from operations (1)		(60,389)		46,464		7,998		(5,927)
Income from operations										Income from operations	4,062		24,769		5,181		34,012

(1)For the three months ended ~~September~~June 30, ~~2020, loss~~2022, income from operations ~~for~~included $2.5 million of transaction costs related to acquisitions which was allocated to the full service center-based child care ~~segment~~segment.


	Full service center-based child care		Back-up care		Educational advisory and other services		Total

	(In thousands)
Six months ended June 30, 2022
Revenue	$	725,248	$	172,558	$	52,944	$	950,750
Income from operations (1)	26,883		45,577		6,526		78,986

Six months ended June 30, 2021
Revenue	$	624,746	$	157,839	$	49,733	$	832,318
Income (loss) from operations	(13,905)		51,959		9,666		47,720

(1) For the six months ended June 30, 2022, income from operations included ~~impairment costs of $1.7~~$2.5 million of ~~which $1.4 million~~transaction costs related to ~~fixed assets and $0.3 million related~~acquisitions which was allocated to ~~operating lease right-of-use assets. Additionally, loss from operations in~~ the full service center-based child care ~~segment included $0.7~~segment.

12. SUBSEQUENT EVENT

On July 1, 2022, the Company, through wholly-owned subsidiaries, completed the acquisition of the outstanding shares of Only About Children, a child care operator in Australia, for aggregate consideration of AUD$450 million. The Company paid approximately AUD$300 million ~~in costs primarily associated~~(USD$207 million), net of cash acquired, and subject to customary purchase price adjustments, and will pay an additional USD$106.5 million 18 months after closing. The initial purchase price was financed with cash on hand. The Company is the ~~closure~~process of ~~centers, including related severance~~completing its preliminary purchase accounting and ~~facilities costs.~~

Full service
center-based
child care Back-up care Educational
advisory and
other services Total
(In thousands)
Nine months ended September 30, 2021
Revenue $ 958,629 $ 257,036 $ 76,986 $ 1,292,651
Income (loss) from operations (3,835) 83,782 13,763 93,710
Nine months ended September 30, 2020
Revenue $ 768,833 $ 303,121 $ 66,061 $ 1,138,015
Income (loss) from operations (1)
(115,484) 143,824 17,128 45,468

~~(1)For~~ the ~~nine months ended September 30, 2020, income (loss) from operations included impairment costs~~allocation of ~~$20.7 million, of which $13.1 million related~~the consideration paid to ~~fixed~~the acquired assets and ~~$5.5 million related to operating lease right-of-use assets~~assumed liabilities and therefore no additional information is available. Only About Children operates approximately 75 centers in the full service center-based child care segment, and $2.1 million related to an equity investment in the back-up care segment. Additionally, loss from operations in the full service center-based child care segment included $5.1 million in costs primarily associated with the closure of centers, including related severance and facilities costs.Australia.

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~~12. CONTINGENCIES~~

~~Litigation~~

The Company is a defendant in certain legal matters in the ordinary course of business and records accruals for outstanding legal matters when the Company believes it is probable that a loss has been incurred, and the amount can be reasonably estimated. The Company may be subject to one or more health and safety charges in the United Kingdom. The Company accrued liabilities with respect to these matters, which are reflected in the consolidated financial statements, but are not considered material. While the outcome is inherently uncertain and may be subject to liability in excess of the accruals, the Company does not expect these matters to have a material adverse effect on the Company’s consolidated financial position. The Company's accruals for outstanding legal matters are not material, individually or in the aggregate, to the Company's consolidated financial position. Management believes the resolution of such pending legal matters will not have a material adverse effect on the Company’s financial condition, results of operations or cash flows, although the Company cannot predict the ultimate outcome of any such actions.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”). The following cautionary statements are being made pursuant to the provisions of the Act and with the intention of obtaining the benefits of the “safe harbor” provisions of the Act. These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “expects,” “may,” “will,” “should,” “seeks,” “projects,” “approximately,” “intends,” “plans,” “estimates” or “anticipates,” or, in each case, their negatives or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this Quarterly Report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of ~~operations,~~operations; financial condition and ~~liquidity,~~liquidity; the impact of the ongoing COVID-19 pandemic and ~~its variants~~government responses thereto on our ~~near and long- term operations, our expectations around the timing to open temporarily closed centers, permanent center closures,~~operations; the continued operation of currently open centers, timing to re-enroll and re-ramp centers as well as certain back-up care services and use types; enrollment recovery and occupancy improvement; our cost management and capital ~~spending,~~spending; labor costs and investments in employees and wages; future labor rates and labor ~~market~~markets for teachers and ~~staff, impact of government mandates, vaccine adoption and availability,~~staff; continued ~~performance and~~ contributions from our back-up care ~~segment, use of back-up care solutions,~~segment; access to and impact of government relief and support ~~programs, leases, lease deferrals and timing for payment,~~programs; pricing strategies; leases; ability to respond to changing market ~~conditions,~~conditions; our growth; our strategies; ability to regain and sustain business and strategic growth ~~our strategies,~~priorities; demand for ~~services,~~services; our value proposition, client relations and partnerships; macroeconomic ~~trends,~~trends; investments in user experience and service ~~delivery,~~delivery; the impact of accounting principles, pronouncements and ~~policies,~~policies; impact of the Only About Children acquisition; acquisitions and expected ~~synergies,~~synergies; our fair value ~~estimates,~~estimates; impairment ~~losses,~~losses; goodwill from business ~~combinations,~~combinations; estimates and impact of equity ~~transactions,~~transactions; unrecognized tax benefits and the impact of uncertain tax ~~positions,~~positions; our effective tax ~~rate,~~rate; the outcome of tax audits, settlements and tax ~~liabilities,~~liabilities; future impact of excess tax ~~benefits, estimates and adjustments, amortization expense,~~benefits; the impact of foreign currency exchange ~~rates, our credit risk,~~rates; our share repurchase ~~program,~~program; the outcome of litigation, legal proceedings and our insurance ~~coverage,~~coverage; debt securities, our interest rate ~~swaps and~~ caps, interest rates and ~~projections,~~projections; interest expense, the use of derivatives or other market risk sensitive instruments, our ~~indebtedness,~~indebtedness; borrowings under our senior secured credit facilities, the need for additional debt or equity ~~financings~~financing, and our ability to obtain such ~~financing,~~financing; our sources and uses of cash ~~flow,~~flow; our ability to fund operations and make capital expenditures and payments with cash and cash equivalents and ~~borrowings,~~borrowings; and our ability to meet financial obligations and comply with covenants of our senior secured credit facilities.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We believe that these risks and uncertainties include, but are not limited to, those disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, including with respect to the ongoing impacts from the ~~ongoing~~ COVID-19 pandemic, as well as ~~the risks listed in Part II, Item 1A, “Risk Factors,” of this Quarterly Report, and~~ other factors disclosed from time to time in our other filings with the SEC.

Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Quarterly Report. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate, are consistent with the forward-looking statements contained in this Quarterly Report, those results or developments may not be indicative of results or developments in subsequent periods.

Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. Any forward-looking statement that we make in this Quarterly Report speaks only as of the date of such statement, and we undertake no obligation to update any forward-looking statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments, except as required by law.

Overview

The following is a discussion of the significant factors affecting the consolidated operating results, financial condition, liquidity and cash flows of Bright Horizons Family Solutions Inc. (“we” or the “Company”) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, as compared to the three and ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. This discussion should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and Notes thereto included in our Annual Report on Form 10-K for the ~~fiscal~~ year ended December 31, ~~2020.~~2021.

2423

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We are a leading provider of high-quality education and care, including early education and child care, back-up and family care solutions, and workforce education services that are designed to help ~~client~~families, employers and their employees ~~better integrate work~~solve the challenges of the modern workforce and ~~family life, as well as grow their careers.~~thrive personally and professionally. We provide 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 in an effort to support employees across life and career stages and to improve ~~employee~~ recruitment, employee engagement, productivity, retention and career advancement. As of ~~September~~June 30, ~~2021,~~2022, we had more than ~~1,300~~1,350 client relationships with employers across a diverse array of industries, including more than ~~190~~200 Fortune 500 companies and more than 80 of Working Mother magazine’s ~~2020~~2021 “100 Best Companies.”

At ~~September~~June 30, ~~2021,~~2022, we operated ~~1,011~~1,014 early education and child care centers ~~compared to 1,026 centers at September 30, 2020,~~ and had the capacity to serve approximately ~~113,000~~114,000 children and their families in the United States, the United Kingdom, the Netherlands, and India. At ~~September~~June 30, ~~2021, 949,~~2022, 992, or ~~94%~~98%, of our child care centers were open.

Our reportable segments are comprised of (1) full service center-based child care, (2) back-up care, and (3) educational advisory and other services. Full service center-based child care includes the traditional center-based early education and child care, preschool, and elementary education. Back-up care consists of center-based back-up child care, in-home care for children and adult/elder dependents, school-age camps, virtual tutoring, and self-sourced reimbursed care. Educational advisory and other services ~~which~~ includes tuition assistance and student loan repayment program administration, workforce education, ~~and~~ related educational advising, college admissions advisory services, and an online marketplace for families and caregivers.

Since March 2020, our global operations have been significantly impacted by the COVID-19 pandemic and the measures undertaken in response thereto. During the early stages of the pandemic, most of our child care centers were temporarily closed. We responded by quickly adapting to ~~prevent its spread, such as periodically reinstated lockdowns~~the changing environment and ~~required business~~focusing on health and ~~school closures~~safety, supporting clients and ~~restrictions. We remain focused on~~their essential frontline workers and pivoting to expand back-up care solutions for clients and employees to meet the ~~re-enrollment~~surge in need and demand. While nearly all of our centers ~~and~~have subsequently re-opened, we continue to be impacted by the ~~phased re-opening of the limited number of centers that remain temporarily closed, which we expect will continue throughout 2021 and into 2022. The broad and long-term~~ongoing effects of COVID-19, including the resurgence of infections and ~~its~~ variants ~~its duration~~of the virus, which have impacted center enrollment, back-up care use and the scope of ongoing and related disruptions cannot be predicted and are affected by many interdependent variables and decisions by government authorities and our client partners, as well as demand, economic, workforce and labor market trends, the availability, adoption and effectiveness of vaccines among the public, teachers and young children, and developments in the persistence and treatment of COVID-19 and its variants. Further, delays in client and business return-to-office and increased competition for labor, particularly for teachers and staff, may slow the re-rampingspeed of our ~~business or impact enrollment~~recovery, and by the challenges of managing precautionary and preventative measures such as vaccination and masking mandates, virus exposures affecting our ~~recovery. We cannot anticipate how long it will take for re-opened~~staff and families who attend our centers, ~~to reach typical enrollment levels~~ and there is no assurance that centers currently open will continue to operate. Additionally, as we continue to analyze the current environment, certain centers in locations where demand, economic and workforce trends have shifted, may not re-open. We currently expect the effects of COVID-19 to continue to adversely impact our results of operations for the remainder of 2021 and into 2022.disrupted staff availability.

We will continue to monitor and respond to the changing conditions, challenges and disruptions resulting from the COVID-19 pandemic, and the changing needs of clients, families and children, while remaining focused on our strategic priorities to deliver high quality education and care services, connect across our service lines, extend our impact on new customers and clients, and preserve our strong culture. ~~These challenging times~~We have ~~demonstrated our crisis management abilities, our critical role in the business continuity plans~~executed a number of strategic actions to strengthen our client ~~partners,~~partnerships and our ~~leadership~~employee value proposition to better position us as the service provider and employer of choice in ~~developing~~our industry. As the early education industry continues to be impacted by a challenging labor market, we continue to invest, and ~~implementing~~expect to make future investments, in our employees and build on what makes us an employer of choice. We have enhanced compensation and expanded employee benefits, increased the child care tuition subsidy, enhanced our mental health and ~~safety protocols,~~wellness resources, and continue to champion for early educators through our Horizons Teacher Degree Program, where our employees can earn an associate or bachelor's degree in early childhood education at no-cost.

It remains difficult to predict the ~~value that~~full impact of the pandemic and eventual recovery, but we remain committed to families, clients and our ~~unique service offering provides to the families and clients we serve.~~employees. We remain confident in our value proposition, business model, the strength of our client partnerships, the strength of our balance sheet and liquidity position, and our ability to continue to respond to changing market conditions. Our ability to fully return to the operating income levels at which we operated prior to COVID-19, and to continue to increase operating income in the future will depend upon our ability to continue to regain and sustain the following characteristics of our business and our strategic growth priorities:

• maintenance and incremental growth of enrollment in our mature and ramping centers, and cost management in response to changes in enrollment in our centers;

• effective pricing strategies, including tuition increases that correlate with expected increases in personnel costs, including wages and benefits, and additional pricing actions to accommodate higher operating costs and the impact of persistent inflation;

• additional growth in expanded service offerings and cross-selling of services to clients;

• successful identification and integration of acquisitions and transitions of management of centers; and

• successful management and improvement of underperforming centers.

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On July 1, 2022, we completed the acquisition of the outstanding shares of Only About Children (“OAC”), a high-quality operator of early education and child care centers in Australia, for aggregate consideration of AUD$450 million. We paid approximately AUD$300 million (USD$207 million), net of cash acquired, and will pay an additional USD$106.5 million 18 months after closing. The initial purchase price was financed with cash on hand. OAC operates approximately 75 centers in Australia.

Results of Operations

The following table sets forth statement of income data as a percentage of revenue for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:

Three Months Ended September 30,
2021 % 2020 %
(In thousands, except percentages)
Revenue $ 460,333 100.0 % $ 337,920 100.0 %
Cost of services 340,068 73.9 % 282,749 83.7 %
Gross profit 120,265 26.1 % 55,171 16.3 %
Selling, general and administrative expenses 67,135 14.6 % 53,301 15.8 %
Amortization of intangible assets 7,140 1.5 % 7,797 2.3 %
Income (loss) from operations 45,990 10.0 % (5,927) (1.8) %
Interest expense — net (9,153) (2.0) % (9,186) (2.7) %
Income (loss) before income tax 36,837 8.0 % (15,113) (4.5) %
Income tax benefit (expense) (10,018) (2.2) % 8,459 2.5 %
Net income (loss) $ 26,819 5.8 % $ (6,654) (2.0) %
Adjusted EBITDA (1)
$ 79,056 17.2 % $ 30,113 8.9 %
Adjusted income (loss) from operations (1)
$ 45,990 10.0 % $ (2,880) (0.9) %
Adjusted net income (1)
$ 38,670 8.4 % $ 1,259 0.4 %

~~The following table sets forth statement of income data as a percentage of revenue for the nine months ended September 30, 2021 and 2020:~~


		Nine Months Ended September 30,									Three Months Ended June 30,
		2021		%		2020		%			2022		%		2021		%

		(In thousands, except percentages)									(In thousands, except percentages)
Revenue	Revenue	$	1,292,651	100.0	%	$	1,138,015	100.0	%	Revenue	$	490,341	100.0	%	$	441,478	100.0	%
Cost of services	Cost of services	985,046		76.2	%	908,749		79.9	%	Cost of services	361,816		73.8	%	335,496		76.0	%
Gross profit	Gross profit	307,605		23.8	%	229,266		20.1	%	Gross profit	128,525		26.2	%	105,982		24.0	%
Selling, general and administrative expenses	Selling, general and administrative expenses	191,703		14.8	%	159,917		14.1	%	Selling, general and administrative expenses	73,673		15.0	%	64,458		14.6	%
Amortization of intangible assets	Amortization of intangible assets	22,192		1.8	%	23,881		2.0	%	Amortization of intangible assets	7,030		1.4	%	7,512		1.7	%
Income from operations	Income from operations	93,710		7.2	%	45,468		4.0	%	Income from operations	47,822		9.8	%	34,012		7.7	%
Loss on foreign currency forward contracts										Loss on foreign currency forward contracts	(5,917)		(1.2)	%	—		—	%
Interest expense — net	Interest expense — net	(27,749)		(2.1)	%	(28,521)		(2.5)	%	Interest expense — net	(7,942)		(1.7)	%	(9,580)		(2.2)	%
Income before income tax	Income before income tax	65,961		5.1	%	16,947		1.5	%	Income before income tax	33,963		6.9	%	24,432		5.5	%
Income tax benefit (expense)		(13,195)		(1.0)	%	7,490		0.6	%
Income tax expense										Income tax expense	(9,018)		(1.8)	%	(5,617)		(1.2)	%
Net income	Net income	$	52,766	4.1	%	$	24,437	2.1	%	Net income	$	24,945	5.1	%	$	18,815	4.3	%

Adjusted EBITDA (1)	Adjusted EBITDA (1)	$	193,303	15.0	%	$	171,596	15.1	%	Adjusted EBITDA (1)	$	83,076	16.9	%	$	67,951	15.4	%
Adjusted income from operations (1)	Adjusted income from operations (1)	$	93,710	7.2	%	$	73,285	6.4	%	Adjusted income from operations (1)	$	50,319	10.3	%	$	34,012	7.7	%
Adjusted net income (1)	Adjusted net income (1)	$	82,366	6.4	%	$	71,350	6.3	%	Adjusted net income (1)	$	42,113	8.6	%	$	29,841	6.8	%

(1)Adjusted EBITDA, adjusted income from operations and adjusted net income are non-GAAP financial measures and are not determined in accordance with accounting principles generally accepted in the United States (“GAAP”). Refer to “Non-GAAP Financial Measures and Reconciliation” below for a reconciliation of these non-GAAP financial measures to their respective measures determined under GAAP and for information regarding our use of non-GAAP financial measures.

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The following table sets forth statement of income data as a percentage of revenue for the six months ended June 30, 2022 and 2021:


	Six Months Ended June 30,
	2022		%		2021		%

	(In thousands, except percentages)
Revenue	$	950,750	100.0	%	$	832,318	100.0	%
Cost of services	712,166		74.9	%	644,978		77.5	%
Gross profit	238,584		25.1	%	187,340		22.5	%
Selling, general and administrative expenses	145,419		15.3	%	124,568		15.0	%
Amortization of intangible assets	14,179		1.5	%	15,052		1.8	%
Income from operations	78,986		8.3	%	47,720		5.7	%
Loss on foreign currency forward contracts	(5,917)		(0.6)	%	—		—	%
Interest expense — net	(14,988)		(1.6)	%	(18,596)		(2.2)	%
Income before income tax	58,081		6.1	%	29,124		3.5	%
Income tax expense	(13,730)		(1.4)	%	(3,177)		(0.4)	%
Net income	$	44,351	4.7	%	$	25,947	3.1	%

Adjusted EBITDA (1)	$	145,912	15.3	%	$	114,247	13.7	%
Adjusted income from operations (1)	$	81,483	8.6	%	$	47,720	5.7	%
Adjusted net income (1)	$	69,836	7.3	%	$	43,696	5.2	%

Three Months Ended ~~September~~June 30, ~~2021~~2022 Compared to the Three Months Ended ~~September~~June 30, ~~2020~~2021

Revenue. Revenue increased by ~~$122.4~~$48.9 million, or ~~36%~~11%, to ~~$460.3~~$490.3 million for the three months ended ~~September~~June 30, ~~2021~~2022 from ~~$337.9~~$441.5 million for the same period in ~~2020.~~2021. The following table summarizes the revenue and percentage of total revenue for each of our segments for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended September 30,													Three Months Ended June 30,
		2021				2020				Change 2021 vs 2020					2022				2021				Change 2022 vs 2021

		(In thousands, except percentages)													(In thousands, except percentages)
Full-service center-based child care	Full-service center-based child care	$	333,883	72.6	%	$	220,136	65.2	%	$	113,747	51.7	%	Full-service center-based child care	$	371,316	75.7	%	$	334,427	75.7	%	$	36,889	11.0	%
Tuition	Tuition	296,765		88.9	%	175,122		79.6	%	121,643		69.5	%	Tuition	336,884		90.7	%	298,065		89.1	%	38,819		13.0	%
Management fees and operating subsidies	Management fees and operating subsidies	37,118		11.1	%	45,014		20.4	%	(7,896)		(17.5)	%	Management fees and operating subsidies	34,432		9.3	%	36,362		10.9	%	(1,930)		(5.3)	%
Back-up care	Back-up care	99,197		21.5	%	93,050		27.5	%	6,147		6.6	%	Back-up care	91,714		18.7	%	81,484		18.5	%	10,230		12.6	%
Educational advisory and other services	Educational advisory and other services	27,253		5.9	%	24,734		7.3	%	2,519		10.2	%	Educational advisory and other services	27,311		5.6	%	25,567		5.8	%	1,744		6.8	%
Total revenue	Total revenue	$	460,333	100.0	%	$	337,920	100.0	%	$	122,413	36.2	%	Total revenue	$	490,341	100.0	%	$	441,478	100.0	%	$	48,863	11.1	%

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Revenue generated by the full service center-based child care segment in the three months ended ~~September~~June 30, ~~2021~~2022 increased by ~~$113.7~~$36.9 million, or ~~52%~~11%, when compared to the same period in ~~2020.~~2021. Revenue growth in this segment was primarily attributable to enrollment increases in our open child care centers and from the re-opening of our temporarily closed centers. Tuition revenue increased by ~~$121.6~~$38.8 million, or ~~70%~~13%, when compared to the prior year, on a ~~66%~~16% increase in enrollment. While enrollment in our ~~child care~~ centers ~~improved during the quarter,~~continues to improve, our centers continue to operate below pre-COVID-19 enrollment levels ~~during this re-ramping phase.~~as the ongoing disruption of the pandemic and labor market challenges have slowed the recovery and impacted occupancy levels. We expect ~~enrollment recovery to continue~~continued occupancy improvement throughout ~~2021~~2022 and into ~~2022. Higher~~2023. Additionally, during the three months ended June 30, 2022, $1.4 million was received from government programs related to tuition support and was recorded to revenue. Lower foreign currency exchange rates for our United Kingdom and Netherlands operations ~~also contributed to~~partially offset our revenue growth, which ~~increased 2021~~decreased 2022 tuition revenue by approximately 2%4%, or ~~$4.1~~$12.6 million. Management fees and operating subsidies from employer sponsors decreased ~~$7.9~~by $1.9 million, or ~~18%~~5%, ~~due to reduced operating subsidies received to support center operations as a result of the increase in enrollment and the associated tuition revenue, and~~primarily due to funding received from government support programs that reduced certain center operating costs, which impacted the related operating subsidies. During the three months ended June 30, 2022 and 2021, funding received from government support programs of $6.5 million and $2.8 million, respectively, reduced the operating subsidy revenue due from employers.

Revenue generated by back-up care services in the three months ended ~~September~~June 30, ~~2021~~2022 increased by ~~$6.1~~$10.2 million, or 7%13%, when compared to the same period in ~~2020.~~2021. Revenue growth in the back-up care segment was primarily attributable to expanded sales ~~and~~to new clients, increased utilization of ~~traditional in-center~~center-based and in-home back-up care byfrom new and existing clients, during the quarter as these continue to ramp, as well as an acquisition completed in 2021 that contributed $8.2 million to the growth of this segment. These gains were partially offset by a decrease in self-sourced reimbursed care revenue when compared to the prior year, which benefitedand contributions from ~~higher levels of self-sourced reimbursed care revenue during the early stages of the pandemic.~~our various back-up use types.

Revenue generated by educational advisory and other services in the three months ended ~~September~~June 30, ~~2021~~2022 increased by ~~$2.5~~$1.7 million, or ~~10%~~7%, when compared to the same period in the prior year. Revenue growth in this segment was primarily attributable to contributions from sales to new clients and increased utilization from existing clients. ~~An acquisition completed in 2020 contributed $1.6 million to the growth of this segment in 2021.~~

Cost of Services. Cost of services increased by ~~$57.3~~$26.3 million, or ~~20%~~8%, to ~~$340.1~~$361.8 million for the three months ended ~~September~~June 30, ~~2021~~2022 from ~~$282.7~~$335.5 million for the same period in ~~2020.~~2021.

Cost of services in the full service center-based child care segment increased ~~$35.2~~by $16.8 million, or ~~14%~~6%, to ~~$279.0~~$297.3 million in the three months ended ~~September~~June 30, ~~2021~~2022 when compared to the same period in ~~2020.~~2021. The increase in cost of services was primarily associated with ~~a 20%~~the enrollment increase in ~~personnel~~our centers and the re-opening of our temporarily closed centers. Personnel costs, which generally represent 70% of the costs for this segment, increased 8% primarily in connection with the enrollment growth at our ~~centers and higher labor rates due to increased competition for a~~centers. Funding received from government support programs reduced ~~supply of labor and as we continue to invest in personnel. The increased competition for labor may increase labor rates further~~center operating expenses by $21.4 million in the ~~future. Program supplies, materials, and facility costs, which generally represent~~second quarter of 2022, compared to $7.4 million in government funding received in the ~~remaining 30%~~second quarter of ~~costs for this segment, increased by 4% due to~~2021. As noted above, a portion of the ~~enrollment growth, and were partially offset by~~ funding received from government support programs reduced the operating costs in certain employer-sponsored centers, which in turn reduced ~~other~~the operating ~~expenses~~subsidy revenue due from employers for the related child care centers by ~~$15.2~~$6.5 million and $2.8 million in the ~~third quarter of 2021. The third quarter of 2020 included a reduction in certain payroll~~three months ended June 30, 2022 and other operating expenses of $20.3 million from funding received from government support programs, which was partially offset by impairment costs of $1.7 million and center closure costs of $0.7 million that did not occur in 2021.2021, respectively.

Cost of services in the back-up care segment increased by ~~$19.3~~$8.2 million, or ~~66%~~19%, to ~~$48.5~~$50.7 million in the three months ended ~~September~~June 30, ~~2021,~~2022, when compared to the prior year. The increase in cost of services is associated with the effects of a change in the revenue mix ~~with~~and the return to higher levels of ~~traditional in-center~~center-based and in-home back-up care use in ~~the current period~~2022 compared to more significant self-sourced reimbursed care in the prior year period. The increase in ~~traditional~~cost of services included increased care provider fees generated by the increase in utilization levels of center-based and in-home back-up care over the prior year, ~~generated increased care provider fees in the three months ended September 30, 2021,~~ and ~~we continue to invest~~continued investment in personnel, marketing and technology to support our customer user experience and service delivery.

~~Table of Contents~~

Cost of services in the educational advisory and other services segment increased by ~~$2.8~~$1.3 million, or ~~29%~~10%, to ~~$12.6~~$13.8 million in the three months ended ~~September~~June 30, ~~2021~~2022 when compared to the prior year, which is broadly consistent with the revenue growth. The increase was primarily due to personnel costs related to delivering services to the expanding customer ~~base and continued investments in personnel, marketing and technology.~~base.

Gross Profit. Gross profit increased by ~~$65.1~~$22.5 million, or ~~118%~~21%, to ~~$120.3~~$128.5 million for the three months ended ~~September~~June 30, ~~2021~~2022 from ~~$55.2~~$106.0 million for the same period in ~~2020.~~2021. Gross profit margin was 26% of revenue for the three months ended ~~September~~June 30, ~~2021,~~2022, an increase of approximately 2% compared to ~~16% for~~ the three months ended ~~September~~June 30, ~~2020.~~2021. The increase was primarily due to improved margins in the full service center-based child care segment from enrollment increases at open child care centers and from the re-opening of temporarily closed centers, partially offset by reduced contributions from our back-up care services as a result of the shift in the service delivery mix back towards pre-COVID-19 levels, with increasing utilization of traditional in-home and center-based care and a decrease in self-sourced reimbursed care.centers.

Selling, General and Administrative Expenses (“SGA”). SGA increased by ~~$13.8~~$9.2 million, or ~~26%~~14%, to ~~$67.1~~$73.7 million for the three months ended ~~September~~June 30, ~~2021~~2022 from ~~$53.3~~$64.5 million for the same period in ~~2020,~~2021, in order to support the business ~~throughout the pandemic and~~ as it ~~re-ramps, and due~~continues to ~~incremental overhead associated with acquired businesses.~~re-ramp. SGA was ~~15%~~15.0% of revenue for the three months ended ~~September~~June 30, ~~2021, compared to 16% for~~2022, generally consistent with the same period in ~~2020.~~2021.

Amortization of Intangible Assets. Amortization expense on intangible assets was ~~$7.1~~$7.0 million for the three months ended ~~September~~June 30, ~~2021,~~2022, a decrease from ~~$7.8~~$7.5 million for the three months ended ~~September~~June 30, ~~2020,~~2021, due to the use of the accelerated method of amortization for certain intangible assets and decreases from ~~certain~~ intangible assets becoming fully amortized during the period, partially offset by increases from the acquisitions completed in ~~2020 and~~ 2021.

Table of Contents

Income ~~(loss)~~ from Operations. Income from operations increased by ~~$51.9~~$13.8 million, or 41%, to ~~$46.0~~$47.8 million for the three months ended ~~September~~June 30, ~~2021~~2022 when compared to the prior year. The following table summarizes income ~~(loss)~~ from operations and percentage of revenue for each of our segments for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended September 30,													Three Months Ended June 30,
		2021				2020				Change 2021 vs 2020					2022				2021				Change 2022 vs 2021

		(In thousands, except percentages)													(In thousands, except percentages)
Full-service center-based child care	Full-service center-based child care	$	10,070	3.0	%	$	(60,389)	(27.4)	%	$	70,459	116.7	%	Full-service center-based child care	$	19,722	5.3	%	$	4,062	1.2	%	$	15,660	385.5	%
Back-up care	Back-up care	31,823		32.1	%	46,464		49.9	%	(14,641)		(31.5)	%	Back-up care	25,119		27.4	%	24,769		30.4	%	350		1.4	%
Educational advisory and other services	Educational advisory and other services	4,097		15.0	%	7,998		32.3	%	(3,901)		(48.8)	%	Educational advisory and other services	2,981		10.9	%	5,181		20.3	%	(2,200)		(42.5)	%
Income (loss) from operations		$	45,990	10.0	%	$	(5,927)	(1.8)	%	$	51,917	875.9	%
Income from operations														Income from operations	$	47,822	9.8	%	$	34,012	7.7	%	$	13,810	40.6	%

The increase in income from operations was due to the following:

•Income from operations for the full service center-based child care segment increased ~~$70.5~~$15.7 million, or ~~117%~~386%, in the three months ended ~~September~~June 30, ~~2021~~2022 when compared to the same period in ~~2020~~2021 primarily due to increases in tuition revenue from enrollment growth in our open centers and the re-opening of temporarily closed centers, as well as incremental net contributions of approximately $12 million from government support programs that primarily reduced certain operating ~~expenses during the quarter.~~expenses.

•Income from operations for the back-up care segment ~~decreased $14.6~~increased $0.4 million, or ~~32%~~1%, in the three months ended ~~September~~June 30, ~~2021~~2022 when compared to the same period in ~~2020,~~2021, as the service delivery mix continues to shift back towards pre-COVID-19 levels, with increasing utilization of traditional in-home and center-based back-up care and a decrease in self-sourced reimbursed care compared to the prior year.

•Income from operations for the educational advisory and other services segment decreased ~~$3.9~~$2.2 million, or ~~49%~~42%, in the three months ended ~~September~~June 30, ~~2021~~2022 when compared to the same period in ~~2020~~2021 due to investments in personnel, marketing and ~~technology.~~technology to support the growth of the segment.

Loss on Foreign Currency Forward Contracts. During thethree months ended June 30, 2022, in connection with the acquisition in Australia completed in July 2022, we entered into foreign currency forward contracts with a total notional value of approximately AUD$320 million, which included the expected payments for the purchase price and for letters of credit used to guarantee certain lease arrangements, to mitigate the impact of foreign currency fluctuations between signing of the definitive purchase agreement on May 3, 2022 and closing. The cash flows associated with the business combination do not meet the criteria to be designated and accounted for as cash flow hedges and as such, foreign currency gains and losses are recorded on the consolidated statement of income. During the three months ended June 30, 2022, we recognized realized and unrealized losses of $5.9 million in relation to these forward contracts due to fluctuations in the Australian dollar.

Net Interest Expense. Net interest expense ~~was $9.2~~decreased to $7.9 million for the three months ended ~~September~~June 30, ~~2021, which is consistent with~~2022 from $9.6 million for the same period in ~~2020. Including~~2021 due to decreases in the outstanding debt as a result of the November 2021 debt refinance as well as a decrease in the interest rates applicable to our debt. The weighted average interest rate for the term loans and revolving credit facility was 2.76% for three months ended June 30, 2022 and 3.06% for the three months ended June 30, 2021, inclusive of the effects of the interest rate swap arrangements ~~the weighted average interest rates for the term loan and revolving credit facility were 3.1% for both the three months ended September 30, 2021 and 2020.~~prior to their maturity on October 31, 2021. Based on our current interest rate projections, we estimate that our overall weighted average interest rate will approximate ~~2.7%~~3.5% for the remainder of ~~2021.~~2022.

~~Table of Contents~~

Income Tax ~~Expense (Benefit).~~Expense. We recorded income tax expense of ~~$10.0~~$9.0 million during the three months ended ~~September~~June 30, ~~2021,~~2022, at an effective income tax rate of 27%, compared to an income tax ~~benefit~~expense of ~~$8.5~~$5.6 million during the three months ended ~~September~~June 30, ~~2020,~~2021, at an effective income tax rate of ~~56%~~23%. The difference between the effective income tax rate as compared to the statutory income tax rate was primarily due to the effects of excess tax benefits associated with the exercise of stock options and vesting of restricted stock, which had a more significant impact to the effective tax rate for ~~2020~~2021 due to the lower income before income ~~tax.~~tax and higher excess tax benefits. The effective income tax rate may fluctuate from quarter to quarter for various reasons, including changes to income before income tax, jurisdictional mix of income before income tax, valuation allowances, jurisdictional income tax rate changes, as well as discrete items such as the settlement of foreign, federal and state tax matters and the effects of excess tax benefits associated with the exercise of stock options and vesting of restricted stock. During the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, the excess tax benefits reduced income tax expense by ~~$0.8~~$0.7 million and ~~$2.0~~$1.2 million, respectively. The effective income tax rate prior to the inclusion of the excess tax benefits from stock-based compensation and other discrete items was approximately ~~29% and 38%~~28% for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020, respectively.~~2021.

Adjusted EBITDA and Adjusted Income from Operations. Adjusted EBITDA and adjusted income from operations ~~each~~ increased ~~$48.9~~$15.1 million, or 22%, and $16.3 million, or 48%, respectively, for the three months ended ~~September~~June 30, ~~2021~~2022 over the comparable period in ~~2020~~2021 primarily as a result of the increase in gross profit in the full service center-based child care ~~segment, partially offset by reduced contributions in the back-up care~~ segment.

Table of Contents

Adjusted Net Income. Adjusted net income increased ~~$37.4~~$12.3 million, or 41%, for the three months ended ~~September~~June 30, ~~2021~~2022 when compared to the same period in ~~2020,~~2021, primarily due to the increase in income from operations, partially offset by a higher effective tax rate.

~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022 Compared to the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021

Revenue. Revenue increased ~~$154.6~~by $118.4 million, or 14%, to ~~$1.3~~$1.0 billion for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 from ~~$1.1~~$0.8 billion for the same period in ~~2020.~~2021. The following table summarizes the revenue and percentage of total revenue for each of our segments for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:


		Nine Months Ended September 30,													Six Months Ended June 30,
		2021				2020				Change 2021 vs 2020					2022				2021				Change 2022 vs 2021

		(In thousands, except percentages)													(In thousands, except percentages)
Full-service center-based child care	Full-service center-based child care	$	958,629	74.1	%	$	768,833	67.6	%	$	189,796	24.7	%	Full-service center-based child care	$	725,248	76.3	%	$	624,746	75.0	%	$	100,502	16.1	%
Tuition	Tuition	845,081		88.2	%	624,835		81.3	%	220,246		35.2	%	Tuition	657,106		90.6	%	548,317		87.8	%	108,789		19.8	%
Management fees and operating subsidies	Management fees and operating subsidies	113,548		11.8	%	143,998		18.7	%	(30,450)		(21.1)	%	Management fees and operating subsidies	68,142		9.4	%	76,429		12.2	%	(8,287)		(10.8)	%
Back-up care	Back-up care	257,036		19.9	%	303,121		26.6	%	(46,085)		(15.2)	%	Back-up care	172,558		18.1	%	157,839		19.0	%	14,719		9.3	%
Educational advisory and other services	Educational advisory and other services	76,986		6.0	%	66,061		5.8	%	10,925		16.5	%	Educational advisory and other services	52,944		5.6	%	49,733		6.0	%	3,211		6.5	%
Total revenue	Total revenue	$	1,292,651	100.0	%	$	1,138,015	100.0	%	$	154,636	13.6	%	Total revenue	$	950,750	100.0	%	$	832,318	100.0	%	$	118,432	14.2	%

Revenue generated by the full service center-based child care segment in the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 increased by ~~$189.8~~$100.5 million, or ~~25%~~16%, when compared to the same period in ~~2020.~~2021. Revenue growth in this segment was attributable to enrollment increases in our open centers and the re-opening of our temporarily closed centers. Tuition revenue increased by ~~$220.2~~$108.8 million, or ~~35%~~19.8%, when compared to the prior year, on a ~~27%~~22% increase in enrollment. As noted above, while enrollment in our ~~child care~~ centers ~~has improved,~~continues to improve, our centers continue to operate below pre-COVID-19 enrollment levels ~~during this re-ramping phase~~as the ongoing disruption of the pandemic, infection resurgences and welabor market challenges have slowed the recovery and impacted occupancy levels. We expect ~~enrollment recovery to continue~~continued occupancy improvement throughout ~~2021~~2022 and into ~~2022. Higher~~2023. Additionally, during the six months ended June 30, 2022, $3.4 million was received from government programs related to tuition support and was recorded to revenue. Lower foreign currency exchange rates for our United Kingdom and Netherlands operations ~~also contributed to~~partially offset our revenue growth, which ~~increased 2021~~decreased 2022 tuition revenue by approximately 2%3%, or ~~$16.5~~$16.7 million. Management fees and operating subsidies from employer sponsors decreased ~~$30.5~~by $8.3 million, or ~~21%~~11%, primarily due to ~~reduced operating subsidies received to support center operations as a result of the increase in enrollment and the associated tuition revenue, and due to the~~ funding received from government support programs that reduced certain center operating costs, which impacted the related operating subsidies. During the six months ended June 30, 2022 and 2021, funding received from government support programs of $16.0 million and $5.7 million, respectively, reduced the operating subsidy revenue due from employers.

Revenue generated by back-up care services in the ~~nine~~six months ended ~~September~~June 30, ~~2021 decreased~~2022 increased by ~~$46.1~~$14.7 million, or ~~15%~~9%, when compared to the same period in ~~2020. While we had gains from~~2021. Revenue growth in the back-up care segment was primarily attributable to expanded sales to new ~~clients,~~client, increased utilization of center-based and in-home back-up care from new and existing clients, and ~~increases in traditional in-center and in-home~~contributions from our various back-up use in the 2021 year to date period, back-up care revenue decreased compared to the prior year as the same period in 2020 benefited from significant demand for back-up care services (primarily for self-sourced reimbursed care) during the early stages of the pandemic when other care alternatives were not available. An acquisition completed in 2021 contributed $10.1 million to this segment in 2021.types.

Revenue generated by educational advisory and other services in the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 increased by ~~$10.9~~$3.2 million, or ~~17%~~6%, when compared to the same period in the prior year. Revenue growth in this segment was primarily attributable to contributions from sales to new clients and increased utilization from existing clients. ~~An acquisition completed in 2020 contributed $5.9 million to the growth of this segment in 2021.~~

~~Table of Contents~~

Cost of Services. Cost of services increased ~~$76.3~~$67.2 million, or 8%10%, to ~~$985.0~~$712.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 from ~~$908.7~~$645.0 million for the same period in ~~2020.~~2021.

Cost of services in the full service center-based child care segment increased ~~$55.4~~$49.8 million, or 7%9%, to ~~$820.7~~$591.5 million in the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 when compared to the same period in ~~2020.~~2021. The increase in cost of services was primarily associated with the ~~revenue increase.~~enrollment increase in our centers and the re-opening of our temporarily closed centers. Personnel costs increased 13% primarily in connection with the enrollment growth at our centers. Funding received from government support programs reduced ~~certain~~center operating expenses by ~~$32.2~~$46.7 million in 2022, compared to $17.0 million in government funding received in 2021. ~~Cost~~As noted above, a portion of ~~services in 2020 included a reduction in certain payroll and operating expenses of $61.5 million from~~the funding received from government support programs ~~partially offset~~reduced the operating costs in certain employer-sponsored centers, which in turn reduced the operating subsidy revenue due from employers for the related child care centers by ~~impairment costs of $18.6~~$16.0 million and ~~center closure costs~~$5.7 million in the six months ended June 30, 2022 and 2021, respectively.

Table of ~~$5.1 million that did not occur in 2021.~~Contents

Cost of services in the back-up care segment increased ~~$14.7~~$16.4 million, or ~~13%~~21%, to ~~$127.2~~$95.2 million in the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, when compared to the prior year. ~~Cost of services for the nine months ended September 30, 2020 included impairment costs of $2.1 million related to an equity investment. After taking these charges into account,~~The increase in cost of services ~~increased $16.9 million, or 15%, in the nine months ended September 30, 2021,~~is associated with ~~the revenue decrease, partially offset by~~ the effects of a change in the revenue mix ~~with~~and the return to higher levels of ~~traditional in-center~~center-based and in-home back-up care use in ~~the current period~~2022 compared to more significant self-sourced reimbursed care in the prior year period. The increase in ~~traditional~~cost of services included increased care provider fees generated by the increase in utilization levels of center-based and in-home back-up care over the prior year, ~~generated increased care provider fees in the nine months ended September 30, 2021,~~ and ~~we continue to invest~~continued investment in personnel, marketing and technology to support our customer user experience and service delivery.

Cost of services in the educational advisory and other services segment increased by ~~$6.2~~$1.0 million, or ~~20%~~4%, to ~~$37.1~~$25.5 million in the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 when compared to the prior year, which is broadly consistent with the revenue growth. The increase was primarily due to personnel costs related to delivering services to the expanding customer ~~base and continued investments in personnel, marketing and technology.~~base.

Gross Profit. Gross profit increased ~~$78.3~~$51.2 million, or ~~34%~~27%, to ~~$307.6~~$238.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 from ~~$229.3~~$187.3 million for the same period in ~~2020.~~2021. Gross profit margin was ~~24%~~25% of revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022 an increase of approximately 2% compared to ~~20% for~~ the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. The increase was primarily due to improved margins in the full service center-based child care segment from enrollment increases at open child care centers and from the re-opening of temporarily closed centers, partially offset by reduced contributions from our back-up care services as a result of the shift in the service delivery mix back towards pre-COVID-19 levels, with increasing utilization of traditional in-home and center-based care and a decrease in self-sourced reimbursed care.centers.

Selling, General and Administrative Expenses. SGA increased ~~$31.8~~$20.9 million, or ~~20%~~17%, to ~~$191.7~~$145.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 from ~~$159.9~~$124.6 million for the same period in ~~2020,~~2021, in order to support the business ~~throughout the pandemic and~~ as it ~~re-ramps. and due~~continues to ~~incremental overhead associated with acquired businesses.~~re-ramp. SGA was 15% of revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2021, compared to 14% for~~2022, generally consistent with the same period in ~~2020.~~2021.

Amortization of Intangible Assets. Amortization expense on intangible assets was ~~$22.2~~$14.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, a decrease from ~~$23.9~~$15.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 due to decreases from certain intangible assets becoming fully amortized during the period, partially offset by increases from the acquisitions completed in ~~2020 and~~ 2021.

Income from Operations. Income from operations increased by ~~$48.2~~$31.3 million, or ~~106%~~66%, to ~~$93.7~~$79.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 when compared to the same period in ~~2020.~~2021. The following table summarizes income from operations and percentage of revenue for each of our segments for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:


		Nine Months Ended September 30,													Six Months Ended June 30,
		2021				2020				Change 2021 vs 2020					2022				2021				Change 2022 vs 2021

		(In thousands, except percentages)													(In thousands, except percentages)
Full-service center-based child care	Full-service center-based child care	$	(3,835)	(0.4)	%	$	(115,484)	(15.0)	%	$	111,649	96.7	%	Full-service center-based child care	$	26,883	3.7	%	$	(13,905)	(2.2)	%	$	40,788	293.3	%
Back-up care	Back-up care	83,782		32.6	%	143,824		47.4	%	(60,042)		(41.7)	%	Back-up care	45,577		26.4	%	51,959		32.9	%	(6,382)		(12.3)	%
Educational advisory and other services	Educational advisory and other services	13,763		17.9	%	17,128		25.9	%	(3,365)		(19.6)	%	Educational advisory and other services	6,526		12.3	%	9,666		19.4	%	(3,140)		(32.5)	%
Income from operations	Income from operations	$	93,710	7.2	%	$	45,468	4.0	%	$	48,242	106.1	%	Income from operations	$	78,986	8.3	%	$	47,720	5.7	%	$	31,266	65.5	%

The increase in income from operations was due to the following:

•Income from operations for the full service center-based child care segment increased ~~$111.6~~$40.8 million, or ~~97%~~293%, in the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 when compared to the same period in ~~2020~~2021 primarily due to increases in tuition revenue from enrollment growth in our open centers and the re-opening of temporarily closed centers, as well as incremental net contributions of approximately $23 million from government support programs that primarily reduced certain ~~payroll and~~ operating ~~expenses in 2021.~~expenses.

~~Table of Contents~~

•Income from operations for the back-up care segment decreased ~~$60.0~~$6.4 million, or ~~42%~~12%, in the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 when compared to the same period in ~~2020,~~2021, as the service delivery mix continues to shift back towards pre-COVID-19 levels, with increasing utilization of traditional in-home and center-based back-up care and a decrease in self-sourced reimbursed care compared to the prior ~~year, which benefited from increased demand during the early stages of the pandemic.~~year.

•Income from operations for the educational advisory and other services segment decreased ~~$3.4~~$3.1 million, or ~~20%~~32%, in the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 when compared to the same period in ~~2020~~2021 due to investments in personnel, marketing and technology to support the growth of the segment.

Loss on Foreign Currency Forward Contracts. During the six months ended June 30, 2022,in connection with the acquisition in Australia completed in July 2022, we entered into foreign currency forward contracts with a total notional value of approximately AUD$320 million, which included the expected payments for the purchase price and for letters of credit used to guarantee certain lease arrangements, to mitigate the impact of foreign currency fluctuations between signing of the definitive purchase agreement on May 3, 2022 and closing. The cash flows associated with the business combination do not meet the criteria to be designated and accounted for as cash flow hedges and as such, foreign currency gains and losses are recorded on the consolidated statement of income. During the six months ended June 30, 2022, we recognized realized and unrealized losses of $5.9 million in relation to these forward contracts due to fluctuations in the Australian dollar.

Table of Contents

Net Interest Expense. Net interest expense decreased to ~~$27.7~~$15.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 from ~~$28.5~~$18.6 million for the same period in ~~2020,~~2021, due to decreased borrowings under our revolving credit facility as well as decreases in the interest rates applicable to our debt. Including the effects of the interest rate swap arrangements, the weighted average interest rates for the term loan and revolving credit facility were ~~3.1%~~2.55% and ~~3.2%~~3.06% for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

Income Tax ~~Expense (Benefit).~~Expense. We recorded income tax expense of ~~$13.2~~$13.7 million for the ~~nine~~six months ended ~~September~~June 30, 2022 at an effective income tax rate of 24%, compared to an income tax expense of $3.2 million during the six months ended June 30, 2021, at an effective income tax rate of ~~20%, compared to an income tax benefit of $7.5 million during the nine months ended September 30, 2020, at an effective income tax rate of (44)%~~11%. The difference between the effective income tax rates as compared to the statutory income tax rates was primarily due to the effects of excess tax benefits associated with the exercise of stock options and vesting of restricted stock. During the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, the excess tax benefit decreased income tax expense by ~~$5.9~~$2.7 million and ~~$10.6~~$5.1 million, respectively. The effective income tax rate may fluctuate from quarter to quarter for various reasons, including changes to income before income tax, jurisdictional mix of income before income tax, valuation allowances, jurisdictional income tax rate changes, as well as discrete items such as the settlement of foreign, federal and state tax issues, and the effects of excess tax benefits associated with the exercise of stock options and vesting of restricted stock. The effective income tax rate would have approximated 28% ~~and 38%~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020, respectively,~~2021, prior to the inclusion of the excess tax benefit from stock-based compensation and other discrete items.

Adjusted EBITDA and Adjusted Income from Operations. Adjusted EBITDA and adjusted income from operations increased ~~$21.7 million, or 13%, and $20.4~~$31.7 million, or 28%, and $33.8 million, or 71%, respectively, for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 over the comparable period in ~~2020~~2021 primarily as a result of the increase in gross profit in the full service center-based child care ~~segment, partially offset by reduced contributions from back-up care services.~~segment.

Adjusted Net Income. Adjusted net income increased ~~$11.0~~$26.1 million, or ~~15%~~60%, for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 when compared to the same period in ~~2020,~~2021, primarily due to the increase in income from operations, partially offset by a higher effective tax rate.

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Non-GAAP Financial Measures and Reconciliation

In our quarterly and annual reports, earnings press releases and conference calls, we discuss key financial measures that are not calculated in accordance with GAAP to supplement our consolidated financial statements presented on a GAAP basis. These non-GAAP financial measures of adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per common share are reconciled from their respective measures determined under GAAP as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021

		(In thousands, except share data)									(In thousands, except share data)
Net income (loss)		$	26,819	$	(6,654)	$	52,766	$	24,437
Net income										Net income	$	24,945	$	18,815	$	44,351	$	25,947
Interest expense — net	Interest expense — net	9,153		9,186		27,749		28,521		Interest expense — net	7,942		9,580		14,988		18,596
Income tax expense (benefit)		10,018		(8,459)		13,195		(7,490)
Income tax expense										Income tax expense	9,018		5,617		13,730		3,177
Depreciation	Depreciation	20,326		19,496		60,666		59,292		Depreciation	18,055		20,598		36,482		40,340
Amortization of intangible assets (a)	Amortization of intangible assets (a)	7,140		7,797		22,192		23,881		Amortization of intangible assets (a)	7,030		7,512		14,179		15,052
EBITDA	EBITDA	73,456		21,366		176,568		128,641		EBITDA	66,990		62,122		123,730		103,112
Additional adjustments:	Additional adjustments:									Additional adjustments:
COVID-19 related costs (b)		—		2,362		—		25,768
Stock-based compensation expense (c)		5,600		5,700		16,735		15,138

Stock-based compensation expense (b)										Stock-based compensation expense (b)	7,672		5,829		13,768		11,135
Loss on foreign currency forward contracts (c)										Loss on foreign currency forward contracts (c)	5,917		—		5,917		—
Other costs (d)	Other costs (d)	—		685		—		2,049		Other costs (d)	2,497		—		2,497		—

Total adjustments	Total adjustments	5,600		8,747		16,735		42,955		Total adjustments	16,086		5,829		22,182		11,135
Adjusted EBITDA	Adjusted EBITDA	$	79,056	$	30,113	$	193,303	$	171,596	Adjusted EBITDA	$	83,076	$	67,951	$	145,912	$	114,247

Income (loss) from operations		$	45,990	$	(5,927)	$	93,710	$	45,468
COVID-19 related costs (b)		—		2,362		—		25,768
Income from operations										Income from operations	$	47,822	$	34,012	$	78,986	$	47,720

Other costs (d)	Other costs (d)	—		685		—		2,049		Other costs (d)	2,497		—		2,497		—
Adjusted income (loss) from operations		$	45,990	$	(2,880)	$	93,710	$	73,285
Adjusted income from operations										Adjusted income from operations	$	50,319	$	34,012	$	81,483	$	47,720

Net income (loss)		$	26,819	$	(6,654)	$	52,766	$	24,437
Income tax expense (benefit)		10,018		(8,459)		13,195		(7,490)
Income (loss) before income tax		36,837		(15,113)		65,961		16,947
Net income										Net income	$	24,945	$	18,815	$	44,351	$	25,947
Income tax expense										Income tax expense	9,018		5,617		13,730		3,177
Income before income tax										Income before income tax	33,963		24,432		58,081		29,124
Amortization of intangible assets (a)	Amortization of intangible assets (a)	7,140		7,797		22,192		23,881		Amortization of intangible assets (a)	7,030		7,512		14,179		15,052
COVID-19 related costs (b)		—		2,362		—		25,768
Stock-based compensation expense (c)		5,600		5,700		16,735		15,138

Stock-based compensation expense (b)										Stock-based compensation expense (b)	7,672		5,829		13,768		11,135
Loss on foreign currency forward contracts (c)										Loss on foreign currency forward contracts (c)	5,917		—		5,917		—
Other costs (d)	Other costs (d)	—		685		—		2,049		Other costs (d)	2,497		—		2,497		—
Adjusted income before income tax	Adjusted income before income tax	49,577		1,431		104,888		83,783		Adjusted income before income tax	57,079		37,773		94,442		55,311
Adjusted income tax expense (e)	Adjusted income tax expense (e)	(10,907)		(172)		(22,522)		(12,433)		Adjusted income tax expense (e)	(14,966)		(7,932)		(24,606)		(11,615)
Adjusted net income	Adjusted net income	$	38,670	$	1,259	$	82,366	$	71,350	Adjusted net income	$	42,113	$	29,841	$	69,836	$	43,696

Weighted average common shares outstanding — diluted	Weighted average common shares outstanding — diluted	60,743,765		60,196,795		61,058,843		60,001,730		Weighted average common shares outstanding — diluted	59,252,869		61,106,792		59,334,107		61,216,383
Diluted adjusted earnings per common share	Diluted adjusted earnings per common share	$	0.64	$	0.02	$	1.35	$	1.19	Diluted adjusted earnings per common share	$	0.71	$	0.49	$	1.18	$	0.71

(a)~~Represents amortization~~Amortization of intangible assets represents amortization expense, including quarterly amortization expense of $5.0 million associated with intangible assets recorded in connection with our going private transaction in May 2008.

(b)COVID-19 related costs in 2020 represent impairment costs for investments and long-lived assets primarily as a result of center closures and decreases in the fair values for certain centers that were open or temporarily closed, and other costs incurred as a result of the impact of COVID-19 on our operations and related management actions. For the three months ended September 30, 2020, impairment costs totaled $1.7 million related to the full service center-based child care segment, and for the nine months ended September 30, 2020, impairment costs totaled $20.7 million, of which $18.6 million related to the full service center-based child care segment, and $2.1 million related to the back-up care segment. Other COVID-19 related costs totaled $0.7 million and $5.1 million for the three and nine months ended September 30, 2020, respectively, and were primarily associated with the closure of centers, including severance and facilities costs.

~~Table of Contents~~

~~(c)Represents~~Stock-based compensation expense represents non-cash stock-based compensation expense in accordance with Accounting Standards Codification Topic 718, Compensation-Stock Compensation.

(c)During the three months ended June 30, 2022, we entered into foreign currency forward contracts for the purchase of Australian dollars to satisfy the purchase price of an acquisition completed in July 2022. A loss of $5.9 million resulting from fluctuations in foreign currency rates was recognized during the three months ended June 30, 2022 in relation to these contracts.

(d)Other costs ~~in 2020 relate to occupancy~~represents transaction costs incurred ~~for our new corporate headquarters during the construction period, which represented duplicative office costs while we also continued to carry the costs for our previous corporate headquarters.~~in connection with acquisitions.

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(e)Represents income tax expense calculated on adjusted income before income tax at an effective tax rate of approximately ~~22% for 2021~~26% and ~~12% and 15%~~21% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2022 and 2021, respectively. The tax rate for ~~2021~~2022 represents a tax rate of approximately 27% applied to the expected adjusted income before income tax, less the estimated effect of excess tax benefits related to equity transactions. However, the jurisdictional mix of the expected adjusted income before income tax for the full year, and the timing and volume of the tax benefits associated with future equity activity will affect these estimates and the estimated effective tax rate for the year.

Adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per common share (collectively referred to as the “non-GAAP financial measures”) are not presentations made in accordance with GAAP, and the use of the terms adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per common share may differ from similar measures reported by other companies and may not be comparable to other similarly titled measures. We believe the non-GAAP financial measures provide investors with useful information with respect to our historical operations. We present the non-GAAP financial measures as supplemental performance measures because we believe they facilitate a comparative assessment of our operating performance relative to our performance based on our results under GAAP, while isolating the effects of some items that vary from period to period. Specifically, adjusted EBITDA allows for an assessment of our operating performance and of our ability to service or incur indebtedness without the effect of non-cash charges, such as depreciation, amortization, stock-based compensation expense, ~~impairment~~and at times, non-recurring costs, such as loss on foreign currency forward contracts and ~~other costs incurred due to the impact of COVID-19, including center closing costs, and duplicative corporate office~~transaction costs. In addition, adjusted income from operations, adjusted net income and diluted adjusted earnings per common share allow us to assess our performance without the impact of the specifically identified items that we believe do not directly reflect our core operations. These non-GAAP financial measures also function as key performance indicators used to evaluate our operating performance internally, and they are used in connection with the determination of incentive compensation for management, including executive officers. Adjusted EBITDA is also used in connection with the determination of certain ratio requirements under our credit agreement.

Adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per common share are not measurements of our financial performance under GAAP and should not be considered in isolation or as an alternative to income before taxes, net income, diluted earnings per common share, net cash provided by (used in) operating, investing or financing activities or any other financial statement data presented as indicators of financial performance or liquidity, each as presented in accordance with GAAP. Consequently, our non-GAAP financial measures should be considered together with our consolidated financial statements, which are prepared in accordance with GAAP and included in Part I, Item 1 of this Quarterly Report on Form 10-Q. We understand that although adjusted EBITDA, adjusted income from operations, adjusted net income and diluted adjusted earnings per common share are frequently used by securities analysts, lenders and others in their evaluation of companies, they have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

•adjusted EBITDA, adjusted income from operations and adjusted net income do not fully reflect our cash expenditures, future requirements for capital expenditures or contractual commitments;

•adjusted EBITDA, adjusted income from operations and adjusted net income do not reflect changes in, or cash requirements for, our working capital needs;

•adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on debt; and

•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the ~~future;~~future, and adjusted EBITDA, adjusted income from operations and adjusted net income do not reflect any cash requirements for such replacements.

Because of these limitations, adjusted EBITDA, adjusted income from operations and adjusted net income should not be considered as discretionary cash available to us to reinvest in the growth of our business or as measures of cash that will be available to us to meet our obligations.

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Liquidity and Capital Resources

Our primary cash requirements are for the ongoing operations of our existing early education and child care centers, back-up care, educational advisory and other services, the addition of new centers through development or acquisitions, and debt financing obligations. Our primary sources of liquidity are our existing cash, cash flows from operations, and borrowings available under our revolving credit facility. We had ~~$412.4~~$270.4 million in cash ($~~420.8~~276.7 million including restricted cash) at ~~September~~June 30, ~~2021,~~2022, of which ~~$62.7~~$19.5 million was held in foreign jurisdictions, compared to ~~$384.3~~$261.0 million in cash ($~~388.5~~265.3 million including restricted cash) at December 31, ~~2020,~~2021, of which ~~$43.6~~$25.8 million was held in foreign jurisdictions. Operations outside of North America accounted for ~~27%~~25% and ~~22%~~27% of our consolidated revenue in the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The net impact on our liquidity from changes in foreign currency exchange rates was not material for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, and we do not currently expect that the effects of changes in foreign currency exchange rates will have a material net impact on our liquidity, capital resources or results from operations for the remainder of ~~2021.~~2022.

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On ~~April 21, 2020,~~July 1, 2022, we completed the ~~issuance and sale~~acquisition of ~~2,138,580~~the outstanding shares of ~~common stock to Durable Capital Master Fund LP at~~OAC, a child care operator in Australia, for aggregate consideration of AUD$450 million. We paid approximately AUD$300 million (USD$207 million), net of cash acquired, and will pay an additional USD$106.5 million 18 months after closing. The initial purchase price ~~of $116.90 per share. We raised net proceeds from the offering of $249.8~~was financed with cash on hand. In addition, we funded AUD$14.1 million ~~which further strengthened~~(USD$9.7 million) for cash-backed guarantees for leases that will be recorded as restricted cash on our ~~liquidity and financial position and increased our cash and cash equivalents.~~consolidated balance sheet.

Our revolving credit facility is part of our senior secured credit facilities, which consist of ~~a secured~~ term ~~loan facility~~loans and a $400 million revolving credit facility. There were no borrowings outstanding on our revolving credit facility at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020.~~2021. We expect to draw on the revolving credit facility following the closing of the acquisition of OAC.

We had a working capital deficit of ~~$85.3~~$82.4 million and ~~$93.4~~$81.9 million at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. Our working capital deficit has primarily arisen from using cash to make long-term investments in fixed assets and acquisitions, and from share repurchases. We anticipate that our cash flows from operating activities will continue to be impacted while our re-opened centers ramp enrollment and while certain centers remain temporarily closed. During this re-enrollment and re-opening phase, cash flows from operating activities will be supplemented with our existing cash, as well as borrowings available under our revolving credit facility, as needed.center performance continues to ramp. As we focus on the ~~re-enrollment~~enrollment and ramping of ~~re-opened~~ centers, ~~as well as re-opening the limited number of centers that remain temporarily closed,~~ we ~~will~~ continue to prioritize investments that support current operations and strategic opportunities, as well as the principal and interest payments on our debt.

~~We have~~During the six months ended June 30, 2022 and 2021, we participated in ~~certain~~ government support programs that were enacted in response to the economic impact of the COVID-19 pandemic, including certain tax deferrals, ~~and~~ tax credits ~~allowed pursuant to the CARES Act, the CAA~~ and ~~ARPA~~federal block grant funding in the United States, as well as ~~certain tax deferrals, tax credits, and~~ employee wage support in the United ~~Kingdom, and may continue to do so in the future.~~Kingdom. During the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021, ~~and 2020, $32.2~~$46.7 million and ~~$61.5~~$17.0 million, respectively, was recorded as a reduction to cost of services in relation to these benefits, of which ~~$9.3~~$16.0 million and ~~$3.3~~$5.7 million, respectively, reduced the operating ~~subsidies paid by~~subsidy revenue due from employers for the related child care centers. Additionally, during the six months ended June 30, 2022, amounts received for tuition support of $3.4 million were recorded to revenue. As of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020, $3.9~~2021, $1.6 million and ~~$8.4~~$3.3 million, respectively, was recorded in prepaid expenses and other current assets on the consolidated balance sheet for amounts ~~receivable~~due from government support programs. ~~Additionally, the Company had~~As of June 30, 2022 and December 31, 2021, $7.0 million and $3.9 million was recorded to other current liabilities related to government support received related to future periods, and as of June 30, 2022 and December 31, 2021, payroll tax deferrals of ~~$10.2~~$7.0 million ~~as of September 30, 2021, which~~ were ~~included in other long-term liabilities, and of $20.4 million as of December 31, 2020, of which $10.2 million was included~~recorded in accounts payable and accrued expenses ~~and $10.2 million was included in other long-term liabilities. There is no assurance that these government support programs will continue in~~on the ~~future at current levels, or at all.~~

In response to the broad effects of COVID-19, we have re-negotiated certain payment terms with lessors to mitigate the impact on our financial position and operations. As of September 30, 2021 and December 31, 2020, we had $1.4 million and $7.7 million, respectively, in lease payment deferrals of which the majority are payable over the next year.consolidated balance sheet.

The board of directors authorized a share repurchase program of up to ~~$300~~$400 million of our outstanding common stock, effective December 16, 2021. The share repurchase program has no expiration date and replaced the prior June ~~12, 2018.~~2018 authorization, of which $0.2 million remained available thereunder. During the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, we repurchased ~~0.8~~0.9 million shares for ~~$104.3~~$84.2 million, and ~~$90.5~~at June 30, 2022, $296.4 million remained available under the repurchase program. During the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, we repurchased ~~0.2~~0.5 million shares for ~~$32.2~~$70.3 million. All repurchased shares have been retired.

We believe that funds provided by operations, our existing cash balances, and borrowings available under our revolving credit facility will be adequate to fund all obligations and liquidity requirements for at least the next ~~twelve~~12 months. However, ~~prolonged disruptions~~if we were to ~~our operations, including as a result of periodically reinstated lockdowns, required school, child care and business closures and restrictions, and government mandates in response to~~experience continued or renewed disruption from the COVID-19 pandemic ~~may~~or if we were to undertake any significant acquisitions or make investments in the purchase of facilities for new or existing centers, we could require financing beyond our existing cash and borrowing capacity, and it ~~may~~could be necessary for us to obtain additional debt or equity financing. We may not be able to obtain such financing on reasonable terms, if at all.

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Cash Flows	Cash Flows	Nine Months Ended September 30,				Cash Flows	Six Months Ended June 30,
		2021		2020			2022		2021

		(In thousands)					(In thousands)
Net cash provided by operating activities	Net cash provided by operating activities	$	185,247	$	169,853	Net cash provided by operating activities	$	125,770	$	135,725
Net cash used in investing activities	Net cash used in investing activities	$	(62,726)	$	(48,457)	Net cash used in investing activities	$	(23,140)	$	(37,656)
Net cash provided by (used in) financing activities		$	(88,109)	$	223,372
Net cash used in financing activities						Net cash used in financing activities	$	(89,019)	$	(56,740)
Cash, cash equivalents and restricted cash — beginning of period	Cash, cash equivalents and restricted cash — beginning of period	$	388,465	$	31,192	Cash, cash equivalents and restricted cash — beginning of period	$	265,281	$	388,465
Cash, cash equivalents and restricted cash — end of period	Cash, cash equivalents and restricted cash — end of period	$	420,757	$	376,246	Cash, cash equivalents and restricted cash — end of period	$	276,677	$	429,119

Cash Provided by Operating Activities

Cash provided by operating activities was ~~$185.2~~$125.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, compared to ~~$169.9~~$135.7 million for the same period in ~~2020.~~2021. The ~~increase~~decrease in cash provided by ~~operating activities resulted from the increase in net income of $28.3 million, as well as changes in~~operations relates to lower cash provided by working capital arising from the timing of billings and payments when compared to the prior year ~~including increases associated with growth in the full service center-based child care segment~~ and the ~~related increase~~payment of $5.4 million in ~~tuition fees collected in advance as children re-enroll at our centers. These increases in cash provided by operating activities were~~contingent consideration during the six months ended June 30, 2022, partially offset by the ~~$22.7 million decrease~~increase in ~~non-cash items, primarily related to impairment charges that did not occur in 2021.~~net income of $18.4 million.

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Cash Used in Investing Activities

Cash used in investing activities was ~~$62.7~~$23.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022 compared to ~~$48.5~~$37.7 million for the same period in ~~2020, and was related to fixed asset additions, acquisitions, and other investments.~~2021. The ~~increase~~decrease in cash used in investing activities was primarily related to ~~acquisitions, as we invested $18.9 million to acquire six centers as well as~~ a ~~camp~~lower volume of fixed asset additions and ~~back-up care provider, and to a lesser extent, for settlements of prior year~~ acquisitions in ~~the nine months ended September 30, 2021,~~2022, and a higher level of proceeds received from investments in 2022 when compared to ~~$8.1 million used for acquisitions in the prior year. Net investments in fixed assets were broadly consistent with~~ the prior year. During the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, we invested ~~$47.4~~$19.2 million, net of proceeds from the sale of fixed assets, in fixed asset purchases for new child care centers, and maintenance and refurbishments in our existing centers, compared to a ~~$54.5~~net investment of $28.5 million ~~investment~~during the same period in the prior ~~year, which were partially offset by proceeds from the sale of fixed assets of $5.8~~year. We used $3.3 million ~~and $10.0 million~~to acquire one center in the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022, compared to $9.1 million used to acquire two centers as well as a camp and ~~2020, respectively. In addition,~~back-up care provider during the same period in ~~the nine months ended September 30, 2021, we made net investments of $2.3 million in~~2021. Net proceeds received from debt securities and other investments were $4.0 million in the six months ended June 30, 2022, compared to net ~~proceeds received~~cash used in investments of ~~$4.1~~$0.1 million in the prior year. Additionally, during the six months ended June 30, 2022 we used $4.6 million in cash to settle foreign currency arrangements, which did not occur in the prior year. We entered into foreign currency forward contracts in the second quarter of 2022 in advance of the acquisition completed in July 2022 in Australia.

Cash ~~Provided by (Used in)~~Used in Financing Activities

Cash used in financing activities was ~~$88.1~~$89.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to ~~cash provided by financing activities of $223.4~~$56.7 million for the same period in ~~2020.~~2021. The ~~change~~increase in cash used in financing activities in 2022 was primarily related to ~~capital raised~~payments of contingent consideration for acquisitions of $13.9 million, which did not occur in 2021, and a decrease of $17.6 million in proceeds received from the ~~nine months ended September 30, 2020~~exercise of ~~$249.8 million from~~stock options and the issuance and sale of ~~common~~restricted stock compared to the prior year due to lower volume of transactions. Proceeds from the exercise of stock options and ~~an increase in share repurchases in 2021, which~~the issuance and sale of restricted stock were ~~$102.2~~$10.6 million and $28.2 million in the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021, ~~compared to $32.7 million in the prior year.~~respectively.

Debt

Our senior secured credit facilities consist of a ~~secured~~$600 million term loan B facility (“term loan B”), a $400 million term loan A facility (“term loan A”) and a $400 million multi-currency revolving credit facility.

Long term debt obligations were as follows:


	June 30, 2022		December 31, 2021
	(In thousands)
Term loan B	$	597,000	$	600,000
Term loan A	395,000		400,000
Deferred financing costs and original issue discount	(7,011)		(7,604)
Total debt	984,989		992,396
Less current maturities	(16,000)		(16,000)
Long-term debt	$	968,989	$	976,396

The seven year term loan B matures on November ~~7, 2023~~23, 2028 and requires quarterly principal payments equal to 1% per annum of ~~$2.7 million,~~the original aggregate principal amount of the term loan B, with the remaining principal balance due at maturity. The five year term loan A matures on November ~~7, 2023.~~

~~Outstanding term loan borrowings were as follows:~~

~~Table~~23, 2026 and requires quarterly principal payments equal to 2.5% per annum of ~~Contents~~

~~On May 26, 2021,~~ the Company amended its existing senior secured credit facilities to, among other changes, extend the revolving credit facility maturity date from July 31, 2022 to May 26, 2026 (subject to a springing maturity to August 8, 2023 if more than $25 millionoriginal aggregate principal amount of the term loan ~~has not been repaid, refinanced or extended),~~A in each of the first three years, 5.0% in the fourth year, and ~~reduce~~7.5% in the ~~interest rates applicable to borrowings outstanding on the~~fifth year. The remaining principal balance is due at maturity.

The revolving credit ~~facility.~~facility matures on May 26, 2026. There were no borrowings outstanding on the revolving credit facility at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, with $400 million available for borrowing.

In April and May 2020, we amended our existing senior secured credit facilities to, among other things, increase the borrowing capacity of our revolving credit facility from $225 million to $400 million, modify the interest rates applicable to borrowings outstanding on the revolving credit facility, and modify the terms of the applicable covenants.

Borrowings under the credit ~~agreement~~facilities are subject to variable interest. We mitigate our interest rate exposure with ~~variable-to-fixed~~ interest rate ~~swap~~cap agreements. In December 2021, the Company entered into interest rate cap agreements with ~~an underlying fixed~~a total notional value of ~~$500~~$900 million designated and accounted for as cash flow ~~hedges from inception,~~hedges. Interest rate cap agreements for $600 million, which ~~matured~~have a forward starting effective date of October 31, 2023 and expire on October 31, ~~2021. The weighted average~~2025, provide the Company with interest rate protection in the event the one-month LIBOR rate increases above 2.5%. Interest rate cap agreements for $300 million, which have a forward starting effective date of October 31, 2023 and expire on October 31, 2026, provide the ~~term loan was 3.06% and 3.22% for the nine months ended September 30, 2021 and 2020, respectively, including the impact of the~~Company with interest rate ~~swap agreements. We have~~protection in the event the one-month LIBOR rate increases above 3.0%.

In June 2020, the Company entered into interest rate cap agreements with a total notional value of $800 ~~million,~~million. These interest rate cap agreements, designated and accounted for as cash flow hedges, ~~from inception, that~~ provide us with interest rate protection in the event the one-month LIBOR rate increases above 1%. Interest rate cap agreements for $300 million notional value have an effective date of June 30, 2020 and expire on October 31, 2023, while interest rate cap agreements for another $500 million notional amount have a forward starting effective date of October 29, 2021, ~~which coincides with the maturity of our existing interest rate swap agreements,~~ and expire on October 31, 2023.

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The weighted average interest rate for the term loans was 2.55% and 3.06% for the six months ended June 30, 2022 and 2021, respectively, including the impact of the cash flow hedges.

The term loan A and the revolving credit facility ~~requires~~require Bright Horizons Family Solutions LLC, the borrower, and its restricted subsidiaries, to comply with a ~~quarterly maintenance based financial covenant.~~maximum first lien net leverage ratio. A breach of this covenant is subject to certain equity cure rights. The credit agreement governing the senior secured credit facilities contains certain customary affirmative covenants and events of default. We were in compliance with our financial covenant at ~~September~~June 30, ~~2021.~~2022. Refer to Note 6, Credit Arrangements and Debt Obligations, in our condensed consolidated financial statements for additional information on our debt and credit arrangements, and covenant requirements.

~~Off-Balance Sheet Arrangements~~

~~As of September 30, 2021, we had no off-balance sheet arrangements.~~

Critical Accounting Policies

For a discussion of our “Critical Accounting Policies,” refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. There have been no material changes to our critical accounting policies since December 31, ~~2020.~~2021.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk from changes in interest rates and fluctuations in foreign currency exchange rates. ~~Other than the broad effects of the COVID-19 pandemic and its negative impact on the global economy and major financial markets,~~We do not believe there have been no material changes in our exposure to interest rate or foreign currency exchange rate fluctuations since December 31, ~~2020.~~2021. See Part II, Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 for further information regarding market risk.

During the three months ended June 30, 2022, in connection with an acquisition in Australia completed in July 2022, we entered into foreign currency forward contracts with a total notional value of approximately AUD$320 million to mitigate the impact of foreign currency fluctuations between signing of the definitive purchase agreement on May 3, 2022 and closing. During the three months ended June 30, 2022, we recognized realized and unrealized losses of $5.9 million in relation to these forward contracts due to fluctuations in the Australian dollar. See Note 6, Credit Arrangements and Debt Obligations—Derivative Financial Instruments, for additional information.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of ~~September~~June 30, ~~2021,~~2022, we conducted an evaluation under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), regarding the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”). The term “disclosure controls and procedures” means controls and other procedures that are designed to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the requisite time periods and that such disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) were effective as of ~~September~~June 30, ~~2021.~~2022.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended ~~September~~June 30, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are, from time to time, subject to claims, suits, and matters arising in the ordinary course of business. Such claims have in the past generally been covered by insurance, but there can be no assurance that our insurance will be adequate to cover all liabilities that may arise out of claims or matters brought against us. We believe the resolution of such legal matters will not have a material adverse effect on our financial position, results of operations, or cash flows, although we cannot predict the ultimate outcome of any such actions. ~~Refer to Note 12,~~ ~~Contingencies, to the consolidated financial statements in Part I, Item 1, of this Quarterly Report on Form 10-Q for additional information.~~

Item 1A. Risk Factors

Our operations and financial results are subject to various risks and uncertainties, which could adversely affect our business, financial condition and operating results. We believe that these risks and uncertainties include, but are not limited to, those disclosed in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the ~~fiscal~~ year ended December 31, ~~2020,~~2021, including with respect to the ongoing impacts from the ~~ongoing~~ COVID-19 pandemic. The risks described in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties, not presently known to us or that we currently deem immaterial, ~~may also~~could materially impair our business, financial condition or results of operations. There have been no material changes to our risk factors ~~since~~as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2020 with the exception of the addition of the following risk factor:~~2021.

~~Business and Operational Risks~~

Vaccine mandates proposed or implemented by federal, state or local governments, or by clients, could disrupt the Company’s operations, increase costs and adversely affect its business, financial condition, or results of operations.

On September 9, 2021, President Biden issued an executive order requiring all federal agencies to implement COVID-19 workplace safety guidance across numerous categories of federal contractors and contracts. These requirements include vaccinations, masking and physical distancing requirements. On November 4, 2021, the Occupational Safety and Health Administration issued an emergency temporary standard applicable to employers of 100 or more employees requiring employees to be fully vaccinated by January 4, 2022 or to participate in weekly testing for COVID-19 in lieu of vaccination. Further vaccine mandates or other requirements may be announced in jurisdictions in which our businesses operate, by state or local governments or by the clients we serve.

Complying with vaccine mandates may be costly and operationally complex. Additionally, competing and potentially conflicting laws and regulations regarding vaccine mandates and testing requirements could further complicate compliance. Such vaccination requirements may result in incremental employee turnover, recruiting challenges or additional costs, which could have a material adverse effect on our business, financial condition, and results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The table below sets forth information regarding purchases of our common stock during the three months ended ~~September~~June 30, ~~2021:~~2022:

Period Total Number of Shares Purchased
(a) Average Price Paid
per Share
(b) Total Number of Shares Purchased as Part of Publicly Announced
Plans or Programs (1)
(c) Approximate Dollar Value of Shares that May Yet Be Purchased Under
the Plans or Programs
(In thousands) (1)
(d)
July 1, 2021 to July 31, 2021 — $ — — $ 124,515
August 1, 2021 to August 31, 2021 133,612 $ 143.51 133,612 $ 105,340
September 1, 2021 to September 30, 2021 102,898 $ 143.80 102,898 $ 90,543
236,510 236,510


Period	Total Number of Shares Purchased (a)	Average Price Paid per Share (b)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) (c)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (In thousands) (1) (d)

April 1, 2022 to April 30, 2022	—	$	—	—	$	340,914
May 1, 2022 to May 31, 2022	—	$	—	—	$	340,914
June 1, 2022 to June 30, 2022	542,034	$	82.17	542,034	$	296,374
	542,034			542,034

(1) The board of directors of the Company authorized a share repurchase program of up to ~~$300~~$400 million of ~~our~~the Company’s outstanding common stock effective ~~June 12, 2018.~~December 16, 2021. The share repurchase program has no expiration date. All repurchased shares have been retired.

Item 3. Defaults Upon Senior Securities

None.

~~Table of Contents~~

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

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Item 6. Exhibits

(a) Exhibits:


Exhibit Number						Exhibit Title
10.1*						Share Sale Agreement by and among Nemo (BC) Cayman, LP, BlueTang OpCo Pty Ltd and Bright Horizons Family Solutions LLC, dated May 3, 2022. (1)
31.1*						Principal Executive Officer Certification Pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Principal Financial Officer Certification Pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**						Principal Executive Officer Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**						Principal Financial Officer Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*						Inline XBRL Instance Document - the instance document does not appear in Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*						Inline XBRL Taxonomy Extension Schema Document.
101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104						Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101).


*			Exhibits filed herewith.
**			Exhibits furnished herewith.
(1)			Schedules (or similar attachments) have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The registrant hereby undertakes to furnish supplemental copies of any of the omitted schedules (or similar attachments) upon request by the SEC.

4038

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


BRIGHT HORIZONS FAMILY SOLUTIONS INC.
Date:	~~November~~August 5, ~~2021~~2022	By:	/s/ Elizabeth Boland
			Elizabeth Boland
			Chief Financial Officer
			(Duly Authorized Officer)

4139


PART I. FINANCIAL INFORMATION		Page
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2423
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	3736
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	3837
Item 1A.	Risk Factors	3837
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3837
Item 3.	Defaults Upon Senior Securities	3837
Item 4.	Mine Safety Disclosures	3937
Item 5.	Other Information	3937
Item 6.	Exhibits	4038
Signatures		4139