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Bright Horizons Has a Sunny IPO

Care provider's shares surge 30% by late Friday


Care provider Bright Horizons (NYSE:BFAM) is booming in its first day of public trading.

Last night, BFAM priced its IPO at $22, which was above the $19 to $21 range, and shares were surging 30% in Friday afternoon trading. The lead underwriters included Goldman Sachs (NYSE:GS), JPMorgan Chase (NYSE:JPM) and Barclays (NYSE:BCS).

Launched more than 25 years ago, Bright Horizons is a top provider of child care, backup care and elder care for employers. It’s the top operator in the industry, at five times the size of its nearest rival, and boasts 850 clients — its roster is full of biggies, including Starbucks (NASDAQ:SBUX), Chevron (NYSE:CVX), Amgen (NASDAQ:AMGN) and Cisco (NASDAQ:CSCO).

The company’s business model involves the employer paying the up-front costs for the development of childcare centers.

“We also have multi-year contracts that last three to 10 years,” CEO David Lissy said in an interview this morning. “Our retention rate is also about 97%. So we create predictable, annuity-like revenue streams.”

Bright Horizons certainly has benefited from some strong trends, such as the growth in participation of two-working parent families and the hefty demand for high-quality care and education. Employers also realize that they can reap higher productivity from their employees.

“The U.S. is not alone,” Lissy said. “There are similar drivers in countries across the world.”

From 2001 to 2011, Bright Horizon’s revenues grew from $345.9 million to $973.7 million, and EBITDA climbed from $29.8 million to $148.5 million. Part of the growth came from acquisitions, but the company also bolstered its sales force, which has resulted in a steady supply of new customers as well as cross-selling opportunities.

Going forward, the market opportunity is huge. In the U.S., the childcare industry is about $43 billion per year. There’s also plenty of potential in global markets — and considering 85% of Bright Horizons’ revenues come from North America, the expansion prospects there look … well, bright.

Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders.” Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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