BRIGHT HORIZONS FAMILY SOLUTIONS INC

Previous wording

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 on Form 10-Q and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations; financial condition and liquidity; impacts of global health pandemics; labor, workplace and demographic trends; wage rate increases, labor costs and labor markets; future center closures and portfolio optimization and impacts; our United Kingdom and international operations; back-up care services and use types; enrollment recovery and occupancy improvement in the United States and internationally; our center cohort occupancy levels; cost management and capital spending; investments in employees and wages; contributions and growth in our back-up care segment; the impact of government relief and support programs; tuition rate increases and pricing strategies; leases, terms and expirations; ability to respond to changing market conditions; our growth and strategic priorities; ability to regain and sustain our business; demand for services; our value proposition, client relations and partnerships; macroeconomic trends and changing conditions, including inflation; investments in operations and strategic opportunities; investments in technology, marketing and user experience; shared services costs; our opportunities for expansion; acquisitions, contributions and expected synergies; contingent consideration; amortization expense; our fair value estimates; goodwill from business combinations; impairments; fixed assets; estimates and impact of equity transactions; unrecognized tax benefits and the impact of uncertain tax positions; our effective tax rate; the outcome of tax audits, settlements and tax liabilities; impact of tax benefits/expense; fluctuations, impact and estimates of foreign currency exchange rates and interest rates; our capital allocation; share repurchase program; the outcome of litigation, legal proceedings and our insurance coverage; debt securities; our interest rates, expense…

Excerpt shortened here; the source contains the full paragraph.

Current wording

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 on Form 10-Q and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations; financial condition and liquidity; impacts of global health pandemics; labor, workplace and demographic trends; wage rate increases, personnel costs and labor markets; future center closures and portfolio optimization and impacts; our United Kingdom and international operations; back-up care services and use types; enrollment recovery and occupancy improvement in the United States and internationally; our center cohort occupancy levels; cost management and capital spending; investments in employees and wages; contributions and growth in our back-up care segment; the impact of pandemic-related government relief and support programs; tuition rate increases and pricing strategies; leases, terms and expirations; ability to respond to changing market conditions; our growth and strategic priorities; ability to regain and sustain our business; demand for services; our value proposition, client relations and partnerships; seasonality; macroeconomic trends and changing conditions, including inflationary pressures; investments in operations and strategic opportunities; investments in technology, marketing and user experience; shared services costs; our opportunities for expansion; acquisitions, contributions and expected synergies; contingent consideration; amortization expense; our fair value estimates; goodwill from business combinations; impairments; fixed assets; estimates and impact of employee equity transactions; unrecognized tax benefits and the impact of uncertain tax positions; our effective tax rate; the outcome of tax audits, settlements and tax liabilities; impact of tax benefits/expense; fluctuations, impact and estimates of foreign currency exchange rates and interest rates; our capital allocation; share repurchase program and future activity; the outcome of litigation, legal proceedi…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

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 six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023. 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 year ended December 31, 2023.

Current wording

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 months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023. 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 year ended December 31, 2023.

Previous wording

As of June 30, 2024, we operated 1,032 early education and child care centers with the capacity to serve approximately 115,000 children in the United States, the United Kingdom, the Netherlands, Australia and India.

Current wording

As of September 30, 2024, we operated 1,028 early education and child care centers with the capacity to serve approximately 115,000 children in the United States, the United Kingdom, the Netherlands, Australia and India.

Previous wording

During the three months ended June 30, 2024, we saw strong year-over-year revenue growth, with an 11% increase in revenue for our full service center-based child care segment and net enrollment growth of 4% as centers continue to re-ramp post-pandemic. To track our continued progress on the recovery from the pandemic, we monitor occupancy for a cohort of centers that has been operating since the 2021 fall enrollment cycle. Occupancy represents utilization for each respective center and is calculated as the average full-time enrollment divided by the total operating capacity during the period. This cohort of centers totaled 786 centers as of June 30, 2024. For the quarter ended June 30, 2024, 51% of these centers were more than 70% enrolled, 39% were between 40-70% enrolled and 10% were less than 40% enrolled, which reflects improved occupancy when compared to the same period in the prior year and sequentially from the first quarter of 2024. We also saw solid growth in back-up care with a 15% year-over-year increase in revenue as a result of increased utilization.

Current wording

During the three months ended September 30, 2024, we saw solid year-over-year revenue growth, with a 9% increase in revenue for our full service center-based child care segment and net enrollment growth of 3% as centers continue to re-ramp post-pandemic. To track our continued progress on the recovery from the pandemic, we monitor occupancy for a cohort of centers that has been operating since the 2021 fall enrollment cycle. Occupancy represents utilization for each respective center and is calculated as the average full-time enrollment divided by the total operating capacity during the period. This cohort of centers totaled 778 centers as of September 30, 2024. For the quarter ended September 30, 2024, 42% of these centers were more than 70% enrolled, 45% were between 40-70% enrolled and 13% were less than 40% enrolled, which reflects improved occupancy when compared to the same period in the prior year and reflects a decrease when compared to the second quarter of 2024 due to typical seasonal fluctuations. We also saw strong growth in back-up care with an 18% year-over-year increase in revenue as a result of increased utilization.

Previous wording

While we continue to see year-over-year growth and progress, we are still navigating through a dynamic operating environment that is impacted by increased costs, a tight labor market, varying enrollment demands, and shifting work demographics. We continue to monitor and respond to the changing conditions, and the changing needs of clients, families and children, including the closure of underperforming centers in order to optimize our portfolio of centers to accommodate changes in demand and demographic workforce shifts in the markets we serve. As a result of the impact of the pandemic, there has been an elevated number of center closures in recent years in addition to the impairment of certain assets. We expect this trend to continue in 2024 as we execute on the closure of certain underperforming centers identified during our portfolio review process. Where possible, we shift enrollment and teachers to other centers at nearby locations.

Current wording

While we continue to see year-over-year growth and progress, we are still navigating through a dynamic operating environment that is impacted by increased costs, a tight labor market, varying enrollment demands, and shifting work demographics. We continue to monitor and respond to the changing conditions, and the evolving needs of clients, families and children, including through the closure of underperforming centers in order to optimize our portfolio of centers to accommodate such changes in demand and demographic workforce shifts in the markets we serve. As a result of the impact of the pandemic, there has been an elevated number of center closures in recent years in addition to the impairment of certain assets. We expect this trend to continue in 2024 as we execute on the closure of certain underperforming centers identified during our portfolio review process. Where possible, we shift enrollment and teachers to other centers at nearby locations.

Previous wording

We remain 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. And, as we continue to navigate this post-pandemic recovery period, we remain committed to serving the needs of families, clients and our employees. We are 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.

Current wording

We remain 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. As we continue to navigate this post-pandemic recovery period, we remain committed to serving the needs of families, clients and our employees. We are 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.

Previous wording

The following table sets forth statement of income data as a percentage of revenue for the six months ended June 30, 2024 and 2023:

Current wording

The following table sets forth statement of income data as a percentage of revenue for the nine months ended September 30, 2024 and 2023:

Previous wording

Revenue. Revenue for the three months ended June 30, 2024, increased by $66.8 million, or 11%, to $670.1 million from $603.2 million for the same period in 2023. The following table summarizes the revenue and percentage of total revenue for each of our segments for the three months ended June 30, 2024 and 2023:

Current wording

Revenue. Revenue for the three months ended September 30, 2024, increased by $73.3 million, or 11%, to $719.1 million from $645.8 million for the same period in 2023. The following table summarizes the revenue and percentage of total revenue for each of our segments for the three months ended September 30, 2024 and 2023:

Previous wording

Revenue generated by the full service center-based child care segment in the three months ended June 30, 2024 increased by $48.5 million, or 11%, when compared to the same period in 2023. Tuition revenue increased by $43.3 million, or 10%, when compared to the prior year, due to a 4% net increase in enrollment and average tuition rate increases at our child care centers of approximately 5%. While we continue to see enrollment growth at our centers, the ongoing labor market challenges and current economic conditions have impacted the recovery in both the United States and international markets, and we continue to operate below pre-pandemic enrollment levels at certain locations. We expect continued occupancy improvement in relation to the same prior year periods through the remainder of 2024.

Current wording

Revenue generated by the full service center-based child care segment in the three months ended September 30, 2024 increased by $41.8 million, or 9%, when compared to the same period in 2023. Tuition revenue increased by $39.1 million, or 10%, when compared to the prior year, due to a 3% net increase in enrollment and average tuition rate increases at our child care centers of approximately 5%. While we continue to see enrollment growth at our centers, the ongoing labor market challenges and current economic conditions have impacted the recovery in both the United States and international markets, and we continue to operate below pre-pandemic enrollment levels at certain locations. We expect occupancy improvement to continue in relation to the same prior year periods through the remainder of 2024. Fluctuations in foreign currency exchange rates for our United Kingdom, Netherlands and Australia operations also contributed to our revenue growth, increasing 2024 tuition revenue by approximately 1%, or $3.8 million. While we expect to be impacted by fluctuations in the foreign currency exchange rates throughout the year, we do not expect such fluctuations to have a significant impact to the full year results for 2024.

Previous wording

Management fees and operating subsidies from employer sponsors increased by $5.2 million, or 14%, primarily due to higher operating subsidies required to support center operations as enrollment continues to increase, and due to a decrease in funding received from pandemic-related government support programs as most of the programs for which we were eligible for expired in September 2023. Funding received from pandemic-related government support programs reduce certain center operating costs, which impacts the related operating subsidies. During the three months ended June 30, 2023, such funding reduced the operating subsidy revenue due from employers by $4.8 million.

Current wording

Management fees and operating subsidies from employer sponsors increased by $2.8 million, or 6%, primarily due to higher operating subsidies required to support center operations as enrollment continues to increase, and due to a decrease in funding received from pandemic-related government support programs as most of the programs for which we were eligible for expired in September 2023. Funding received from pandemic-related government support programs reduce certain center operating costs, which impacts the related operating subsidies. During the three months ended September 30, 2023, such funding reduced the operating subsidy revenue due from employers by $5.0 million.

Previous wording

Revenue generated by back-up care services in the three months ended June 30, 2024 increased by $17.7 million, or 15%, when compared to the same period in 2023. Revenue growth in the back-up care segment was primarily attributable to increased utilization of center-based, in-home and school age camp back-up care by new and existing clients.

Current wording

Revenue generated by back-up care services in the three months ended September 30, 2024 increased by $30.4 million, or 18%, when compared to the same period in 2023. Revenue growth in the back-up care segment was primarily attributable to increased utilization of center-based, in-home and school age camp back-up care by new and existing clients.

Previous wording

Revenue generated by educational advisory services in the three months ended June 30, 2024 increased by $0.6 million, or 2%, when compared to the same period in 2023 on increased utilization.

Current wording

Revenue generated by educational advisory services in the three months ended September 30, 2024 increased by $1.1 million, or 4%, when compared to the same period in 2023 on increased utilization.

Previous wording

Cost of Services. Cost of services increased by $40.9 million, or 9%, to $507.6 million for the three months ended June 30, 2024 from $466.7 million for the same period in 2023.

Current wording

Cost of Services. Cost of services increased by $49.5 million, or 10%, to $537.6 million for the three months ended September 30, 2024 from $488.1 million for the same period in 2023.

Previous wording

Cost of services in the full service center-based child care segment increased by $31.5 million, or 8%, to $415.9 million in the three months ended June 30, 2024 when compared to the same period in 2023. The increase in cost of services was primarily associated with increased labor costs related to expanded enrollment and wage rate increases. Personnel costs, which generally represent 70% of the costs for this segment, increased 5% during the quarter compared to the same period in the prior year. In addition to the personnel costs for the incremental 4% net enrollment noted above and premiums associated with the deployment of temporary staff to meet enrollment demand, we continue to invest in higher wages for our center staff, resulting in an increase of approximately 4% to the average hourly wage in 2024 compared to 2023. Additionally, most of the pandemic-related government support programs for which we were eligible ended September 2023. Funding received from pandemic-related government support programs reduced center operating expenses by a total of $13.5 million in the second quarter of 2023. As noted above, a portion of the funding received from pandemic-related government support programs 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 $4.8 million in the three months ended June 30, 2023.

Current wording

Cost of services in the full service center-based child care segment increased by $36.3 million, or 9%, to $421.3 million in the three months ended September 30, 2024 when compared to the same period in 2023. The increase in cost of services was primarily associated with increased personnel costs related to expanded enrollment and wage rate increases. Personnel costs, which generally represent 70% of the costs for this segment, increased 6% during the quarter compared to the same period in the prior year. In addition to the personnel costs for the incremental 3% net enrollment noted above and premiums associated with the deployment of temporary staff to meet enrollment demand, we continue to invest in higher wages for our center staff, resulting in an increase of approximately 4% to the average hourly wage in 2024 compared to 2023. Additionally, most of the pandemic-related government support programs for which we were eligible ended September 2023. Funding received from pandemic-related government support programs reduced center operating expenses by a total of $13.2 million in the third quarter of 2023. As noted above, a portion of the funding received from pandemic-related government support programs 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 $5.0 million in the three months ended September 30, 2023.

Previous wording

Cost of services in the back-up care segment increased by $9.1 million, or 13%, to $77.3 million in the three months ended June 30, 2024, when compared to the prior year. The increase in cost of services is in line with the increase in revenue and is primarily associated with higher care provider fees generated by the increase in utilization levels of center-based and in-home back-up care over the prior year, and continued investment in personnel, marketing and technology to support our customer user experience and service offerings.

Current wording

Cost of services in the back-up care segment increased by $12.4 million, or 14%, to $101.3 million in the three months ended September 30, 2024, when compared to the prior year. The increase in cost of services correlates to the increase in revenue and is primarily associated with higher care provider fees generated by the increase in utilization levels of center-based and in-home back-up care over the prior year, and continued investment in personnel, marketing and technology to support our customer user experience and service offerings.

Previous wording

Cost of services in the educational advisory services segment increased by $0.4 million, or 3%, to $14.4 million in the three months ended June 30, 2024 when compared to the prior year, due to the increase in revenue and investments in technology to support customer access and user experience.

Current wording

Cost of services in the educational advisory services segment increased by $0.8 million, or 5%, to $14.9 million in the three months ended September 30, 2024 when compared to the prior year, due to investments in personnel, product suite and technology to support customer access and user experience.

Previous wording

Gross Profit. Gross profit increased by $25.8 million, or 19%, to $162.4 million for the three months ended June 30, 2024 from $136.6 million for the same period in 2023. Incremental gross profit contributions from the full service center-based child care segment, resulting from enrollment growth and the associated operating leverage, and from the back-up care segment, resulting from higher utilization of back-up care services, were partially offset by reduced funding from pandemic-related government support programs. Gross profit margin was 24% of revenue for the three months ended June 30, 2024, an increase of approximately 2% compared to the three months ended June 30, 2023.

Current wording

Gross Profit. Gross profit increased by $23.9 million, or 15%, to $181.5 million for the three months ended September 30, 2024 from $157.6 million for the same period in 2023. Incremental gross profit contributions from the full service center-based child care segment, resulting from enrollment growth and the associated operating leverage, and from the back-up care segment, resulting from higher utilization of back-up care services, were partially offset by reduced funding from pandemic-related government support programs. Gross profit margin was 25% of revenue for the three months ended September 30, 2024, an increase of approximately 1% compared to the three months ended September 30, 2023.

Previous wording

Selling, General and Administrative Expenses (“SGA”). SGA increased by $5.6 million, or 7%, to $87.5 million for the three months ended June 30, 2024 from $81.9 million for the same period in 2023, due to incremental spending to support the business as it continues to re-ramp post-pandemic, and higher labor costs. SGA was 13% of revenue for the three months ended June 30, 2024, generally consistent with the same period in 2023.

Current wording

Selling, General and Administrative Expenses (“SGA”). SGA increased by $6.2 million, or 7%, to $89.5 million for the three months ended September 30, 2024 from $83.3 million for the same period in 2023, due to incremental spending to support the business as it continues to re-ramp post-pandemic, and higher personnel costs. SGA was 12% of revenue for the three months ended September 30, 2024, generally consistent with the same period in 2023.

Previous wording

Amortization of Intangible Assets. Amortization expense on intangible assets was $5.9 million for the three months ended June 30, 2024, a decrease from $9.1 million for the three months ended June 30, 2023, primarily due to decreases from intangible assets becoming fully amortized during the period, partially offset by increases from intangible assets acquired in relation to the acquisitions completed in 2023 and 2024.

Current wording

Amortization of Intangible Assets. Amortization expense on intangible assets was $2.6 million for the three months ended September 30, 2024, a decrease from $7.6 million for the three months ended September 30, 2023, primarily due to decreases from intangible assets becoming fully amortized during the period, partially offset by increases from intangible assets acquired in relation to the acquisitions completed in 2023 and 2024.

Previous wording

Income from Operations. Income from operations increased by $23.5 million, or 52%, to $69.1 million for the three months ended June 30, 2024 when compared to the prior year. The following table summarizes income from operations and percentage of revenue for each of our segments for the three months ended June 30, 2024 and 2023:

Current wording

Income from Operations. Income from operations increased by $22.6 million, or 34%, to $89.4 million for the three months ended September 30, 2024 when compared to the prior year. The following table summarizes income from operations and percentage of revenue for each of our segments for the three months ended September 30, 2024 and 2023:

Previous wording

•Income from operations for the full service center-based child care segment increased $19.6 million, or 150%, in the three months ended June 30, 2024 when compared to the same period in 2023, primarily due to increases in tuition revenue from enrollment growth and annual tuition rate increases, partially offset by increased labor costs and a decrease of approximately $9 million in net contributions from pandemic-related government support programs as most of the programs for which we were eligible ended by September 30, 2023.

Current wording

•Income from operations for the full service center-based child care segment increased $5.5 million, or 78%, in the three months ended September 30, 2024 when compared to the same period in 2023, primarily due to increases in tuition revenue from enrollment growth and annual tuition rate increases, partially offset by increased personnel costs and a decrease of approximately $9 million in net contributions from pandemic-related government support programs as most of the programs for which we were eligible ended by September 30, 2023.

Previous wording

•Income from operations for the back-up care segment increased $4.1 million, or 15%, in the three months ended June 30, 2024 when compared to the same period in 2023. Incremental contributions from expanded utilization of back-up care services were partially offset by higher overhead costs, including an allocation of shared services costs which have historically remained relatively stable throughout the year.

Current wording

•Income from operations for the back-up care segment increased $18.2 million, or 35%, in the three months ended September 30, 2024 when compared to the same period in 2023 due in part to incremental contributions from expanded utilization of back-up care services and lower overhead costs, including an allocation of shared services costs which have historically remained relatively stable throughout the year.

Previous wording

•Income from operations for the educational advisory services segment decreased $0.2 million, or 3%, in the three months ended June 30, 2024 when compared to the same period in 2023 due to product design, technology and marketing investments to support revenue growth.

Current wording

•Income from operations for the educational advisory services segment decreased $1.1 million, or 15%, in the three months ended September 30, 2024 when compared to the same period in 2023 due to personnel, technology platform and product design investments to support revenue growth and business transformation.

Previous wording

Net Interest Expense. Net interest expense of $12.0 million for the three months ended June 30, 2024 remained consistent with the net interest expense for the same period in 2023 of $12.2 million; the higher interest rates applicable to our debt were offset by a decrease in interest expense associated with a deferred payment for the Only About Children acquisition, which was paid January 2024. The weighted average interest rate for the term loans and revolving credit facility was 4.90% for the three months ended June 30, 2024 compared to 3.89% for the three months ended June 30, 2023, inclusive of the effects of the cash flow hedges. Based on our current interest rate projections, we estimate that our overall weighted average interest rate will be between 5.00% and 5.25% for the remainder of 2024 inclusive of the effects of the cash flow hedges.

Current wording

Net Interest Expense. Net interest expense was $11.6 million for the three months ended September 30, 2024, a decrease from $12.2 million for the three months ended September 30, 2023, primarily due to a lack of interest expense in 2024 associated with the deferred payment for the Only About Children acquisition and contingent consideration for a 2021 acquisition, in addition to higher interest income and lower average borrowings, partially offset by higher interest rates applicable to our debt inclusive of the interest rate caps. The weighted average interest rate for the term loans and revolving credit facility was 4.84% for the three months ended September 30, 2024 compared to 3.90% for the three months ended September 30, 2023, inclusive of the effects of the cash flow hedges. Based on our current interest rate projections, we estimate that our overall weighted average interest rate will approximate 5.00% for the remainder of 2024 inclusive of the effects of the cash flow hedges.

Previous wording

Income Tax Expense. We recorded income tax expense of $17.9 million during the three months ended June 30, 2024, at an effective income tax rate of 31%, compared to an income tax expense of $12.7 million during the three months ended June 30, 2023, at an effective income tax rate of 38%. The difference between the effective income tax rate as compared to the statutory income tax rate was primarily due to the impact of unbenefited losses in certain foreign jurisdictions and the effects of net shortfall tax expense associated with the exercise or expiration of stock options and vesting of restricted stock, which had a more significant impact to the effective tax rate for the 2023 period due to a higher tax expense and a lower income before income taxes in 2023. 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, unbenefited losses, valuation allowances, jurisdictional income tax rate changes, as well as discrete items such as non-deductible transaction costs, the settlement of foreign, federal and state tax matters and the effects of excess (shortfall) tax benefit (expense) associated with the exercise or expiration of stock options and vesting of restricted stock.

Current wording

Income Tax Expense. We recorded income tax expense of $22.9 million during the three months ended September 30, 2024, at an effective income tax rate of 29%, compared to an income tax expense of $14.6 million during the three months ended September 30, 2023, at an effective income tax rate of 27%. The difference between the effective income tax rates as compared to the statutory income tax rates was primarily due to the impact of unbenefited losses in certain foreign subsidiaries and the effects of net shortfall tax expense associated with the exercise or expiration of stock options and vesting of restricted stock. 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, unbenefited losses, valuation allowances, jurisdictional income tax rate changes, as well as discrete items such as non-deductible transaction costs, the settlement of foreign, federal and state tax matters and the effects of excess (shortfall) tax benefit (expense) associated with the exercise or expiration of stock options and vesting of restricted stock.

Previous wording

During the three months ended June 30, 2024 and 2023, the net shortfall tax expense from stock-based compensation expense increased tax expense by $0.2 million and $0.8 million, respectively. For the three months ended June 30, 2024 and 2023, prior to the inclusion of the shortfall tax expense, other discrete items and unbenefited losses in certain foreign jurisdictions, the effective tax rate approximated 27% and 28%, respectively.

Current wording

During the three months ended September 30, 2024 and 2023, the net shortfall tax expense from stock-based compensation increased tax expense by $0.2 million and $0.1 million, respectively. For the three months ended September 30, 2024 and 2023, prior to the inclusion of the shortfall tax expense, other discrete items and unbenefited losses in certain foreign jurisdictions, the effective tax rate approximated 27% and 28%, respectively.

Previous wording

Adjusted EBITDA and Adjusted Income from Operations. Adjusted EBITDA increased $20.7 million, or 25%, and adjusted income from operations increased $23.5 million, or 52% for the three months ended June 30, 2024 over the comparable period in 2023 primarily due to the incremental gross profit contributions from the full service center-based child care segment resulting from enrollment growth and tuition price increases.

Current wording

Adjusted EBITDA and Adjusted Income from Operations. Adjusted EBITDA increased $19.8 million, or 20%, and adjusted income from operations increased $22.6 million, or 34%, for the three months ended September 30, 2024 over the comparable period in 2023 primarily due to increased contributions from both the back-up care segment and the full service center-based child care segment.

Previous wording

Adjusted Net Income. Adjusted net income increased $15.8 million, or 24%, for the six months ended June 30, 2024 when compared to the same period in 2023, primarily due to the increase in adjusted income from operations.

Current wording

Adjusted Net Income. Adjusted net income increased $13.8 million, or 27%, for the three months ended September 30, 2024 when compared to the same period in 2023, primarily due to the increase in adjusted income from operations and a lower tax rate.

Previous wording

Revenue. Revenue increased by $135.9 million, or 12%, to $1.3 billion for the six months ended June 30, 2024 from $1.2 billion for the same period in 2023. The following table summarizes the revenue and percentage of total revenue for each of our segments for the six months ended June 30, 2024 and 2023:

Current wording

Revenue. Revenue increased by $209.3 million, or 12%, to $2.0 billion for the nine months ended September 30, 2024 from $1.8 billion for the same period in 2023. The following table summarizes the revenue and percentage of total revenue for each of our segments for the nine months ended September 30, 2024 and 2023:

Previous wording

Revenue generated by the full service center-based child care segment in the six months ended June 30, 2024 increased by $102.0 million, or 11%, when compared to the same period in 2023. Tuition revenue increased by $92.8 million, or 11%, when compared to the prior year, due to a 5% net increase in enrollment and average tuition rate increases at our child care centers of approximately 5%. As noted above, while we continue to see enrollment growth at our centers, the ongoing labor market challenges and current economic conditions have impacted the recovery in both the United States and international markets, and we continue to operate below pre-pandemic enrollment levels at certain locations. We expect continued occupancy improvement in relation to the same prior year periods through the remainder of 2024.

Current wording

Revenue generated by the full service center-based child care segment in the nine months ended September 30, 2024 increased by $143.8 million, or 11%, when compared to the same period in 2023. Tuition revenue increased by $131.9 million, or 11%, when compared to the prior year, due to a 5% net increase in enrollment and average tuition rate increases at our child care centers of approximately 5%. As noted above, while we continue to see enrollment growth at our centers, the ongoing labor market challenges and current economic conditions have impacted the recovery in both the United States and international markets, and we continue to operate below pre-pandemic enrollment levels at certain locations. We expect occupancy improvement to continue in relation to the same prior year periods through the remainder of 2024. Fluctuations in foreign currency exchange rates for our United Kingdom, Netherlands and Australia operations also contributed to our revenue growth, increasing 2024 tuition revenue by approximately $6.4 million.

Previous wording

Management fees and operating subsidies from employer sponsors increased by $9.2 million, or 12%, primarily due to higher operating subsidies required to support center operations as enrollment continues to increase, and due to a decrease in funding received from pandemic-related government support programs as most of the programs for which we were eligible for expired in September 2023. Funding received from pandemic-related government support programs reduced certain center operating costs, which impacts the related operating subsidies. During the six months ended June 30, 2023, such funding reduced the operating subsidy revenue due from employers by $12.2 million.

Current wording

Management fees and operating subsidies from employer sponsors increased by $12.0 million, or 10%, primarily due to higher operating subsidies required to support center operations as enrollment continues to increase, and due to a decrease in funding received from pandemic-related government support programs as most of the programs for which we were eligible for expired in September 2023. Funding received from pandemic-related government support programs reduced certain center operating costs, which impacts the related operating subsidies. During the nine months ended September 30, 2023, such funding reduced the operating subsidy revenue due from employers by $17.2 million.

Previous wording

Revenue generated by back-up care services in the six months ended June 30, 2024 increased by $33.2 million, or 15%, when compared to the same period in 2023. Revenue growth in the back-up care segment was primarily attributable to increased utilization of center-based, in-home and school-age camp back-up care by new and existing clients.

Current wording

Revenue generated by back-up care services in the nine months ended September 30, 2024 increased by $63.6 million, or 16%, when compared to the same period in 2023. Revenue growth in the back-up care segment was primarily attributable to increased utilization of center-based, in-home and school-age camp back-up care by new and existing clients.

Previous wording

Revenue generated by educational advisory services in the six months ended June 30, 2024 increased by $0.8 million, or 2%, when compared to the same period in the prior year. Revenue growth in this segment was primarily attributable to increased utilization.

Current wording

Revenue generated by educational advisory services in the nine months ended September 30, 2024 increased by $1.9 million, or 2%, when compared to the same period in the prior year. Revenue growth in this segment was primarily attributable to increased utilization.

Previous wording

Cost of Services. Cost of services increased $96.6 million, or 11%, to $1.0 billion for the six months ended June 30, 2024 from $0.9 billion for the same period in 2023.

Current wording

Cost of Services. Cost of services increased $146.0 million, or 11%, to $1.5 billion for the nine months ended September 30, 2024 from $1.4 billion for the same period in 2023.

Previous wording

Cost of services in the full service center-based child care segment increased by $76.9 million, or 10%, to $819.9 million in the six months ended June 30, 2024 when compared to the same period in 2023. The increase in cost of services was primarily associated with increased labor costs related to expanded enrollment and wage rate increases. Personnel costs increased 7% during the six months ended June 30, 2024 compared to the same period in the prior year. In addition to the personnel costs for the incremental 5% net enrollment noted above and premiums associated with the deployment of temporary staff to meet enrollment demand, we continue to invest in higher wages for our center staff, resulting in an increase of approximately 4% to the average hourly wage in 2024 compared to 2023. Additionally, most of the pandemic-related government support programs for which we were eligible ended September 2023. Funding received from pandemic-related government support programs reduced center operating expenses by a total of $35.1 million in 2023. As noted above, a portion of the funding received from pandemic-related government support programs 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 $12.2 million in the six months ended June 30, 2023.

Current wording

Cost of services in the full service center-based child care segment increased by $113.1 million, or 10%, to $1.2 billion in the nine months ended September 30, 2024 when compared to the same period in 2023. The increase in cost of services was primarily associated with increased personnel costs related to expanded enrollment and wage rate increases. Personnel costs increased 7% during the nine months ended September 30, 2024 compared to the same period in the prior year. In addition to the personnel costs for the incremental 5% net enrollment noted above and premiums associated with the deployment of temporary staff to meet enrollment demand, we continue to invest in higher wages for our center staff, resulting in an increase of approximately 4% to the average hourly wage in 2024 compared to 2023. Additionally, most of the pandemic-related government support programs for which we were eligible ended September 2023. Funding received from pandemic-related government support programs reduced center operating expenses by a total of $48.3 million in 2023. As noted above, a portion of the funding received from pandemic-related government support programs 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 $17.2 million in the nine months ended September 30, 2023.

Previous wording

Cost of services in the back-up care segment increased $18.2 million, or 14%, to $146.2 million in the six months ended June 30, 2024, when compared to the prior year. The increase in cost of services is in line with the increase in revenue and is primarily associated with higher care provider fees generated by the increase in utilization levels of center-based and in-home back-up care over the prior year, and continued investment in personnel, marketing and technology to support our customer user experience and service offerings. Cost of services for the six months ended June 30, 2023 included $4.3 million in value-added tax related to prior periods.

Current wording

Cost of services in the back-up care segment increased $30.6 million, or 14%, to $247.5 million in the nine months ended September 30, 2024 when compared to the prior year. The increase in cost of services correlates to the increase in revenue and is primarily associated with higher care provider fees generated by the increase in utilization levels of center-based and in-home back-up care over the prior year, and continued investment in personnel, marketing and technology to support our customer user experience and service offerings. Cost of services for the nine months ended September 30, 2023 included $4.3 million in value-added tax related to prior periods.

Previous wording

Cost of services in the educational advisory services segment increased by $1.5 million, or 6%, to $29.2 million in the six months ended June 30, 2024 when compared to the prior year, due to technology platform investments to support customer access and user experience.

Current wording

Cost of services in the educational advisory services segment increased by $2.3 million, or 6%, to $44.1 million in the nine months ended September 30, 2024 when compared to the prior year, due to investments in personnel, product suite and technology to support customer access and user experience.

Previous wording

Gross Profit. Gross profit increased $39.4 million, or 15%, to $297.5 million for the six months ended June 30, 2024 from $258.2 million for the same period in 2023. Incremental gross profit contributions from the full service center-based child care segment, resulting from enrollment growth and the associated operating leverage, and from the back-up care segment, resulting from higher utilization of back-up care services, were partially offset by reduced funding from pandemic-related government support programs. Gross profit margin was 23% of revenue for the six months ended June 30, 2024, an increase of approximately 1% compared to the six months ended June 30, 2023.

Current wording

Gross Profit. Gross profit increased $63.3 million, or 15%, to $479.1 million for the nine months ended September 30, 2024 from $415.8 million for the same period in 2023. Incremental gross profit contributions from the full service center-based child care segment, resulting from enrollment growth and the associated operating leverage, and from the back-up care segment, resulting from higher utilization of back-up care services, were partially offset by reduced funding from pandemic-related government support programs. Gross profit margin was 24% of revenue for the nine months ended September 30, 2024, an increase of approximately 1% compared to the nine months ended September 30, 2023.

Previous wording

Selling, General and Administrative Expenses. SGA increased $10.4 million, or 6%, to $175.0 million for the six months ended June 30, 2024 from $164.7 million for the same period in 2023, due to incremental spending to support the business as it continues to re-ramp post-pandemic, higher labor costs and a $2.3 million charge within the back-up care segment resulting from the early settlement of contingent consideration for a 2021 acquisition. SGA for the six months ended June 30, 2023 included value-added tax expense of $1.7 million related to prior periods. SGA was 14% of revenue for the six months ended June 30, 2024, a decrease of approximately 1% from the same period in 2023.

Current wording

Selling, General and Administrative Expenses. SGA increased $16.6 million, or 7%, to $264.5 million for the nine months ended September 30, 2024 from $247.9 million for the same period in 2023, due to incremental spending to support the business as it continues to re-ramp post-pandemic, higher personnel costs and a $2.3 million charge within the back-up care segment resulting from the early settlement of contingent consideration for a 2021 acquisition. SGA for the nine months ended September 30, 2023 included value-added tax expense of $1.7 million related to prior periods. SGA was 13% of revenue for the nine months ended September 30, 2024, a decrease of approximately 1% from the same period in 2023.

Previous wording

Amortization of Intangible Assets. Amortization expense on intangible assets of $13.5 million for the six months ended June 30, 2024, decreased from $17.3 million for the six months ended June 30, 2023 primarily due to certain intangible assets becoming fully amortized during the period, partially offset by increases from intangible assets acquired in relation to the acquisitions completed in 2023 and 2024.

Current wording

Amortization of Intangible Assets. Amortization expense on intangible assets of $16.1 million for the nine months ended September 30, 2024, decreased from $24.9 million for the nine months ended September 30, 2023 primarily due to certain intangible assets becoming fully amortized during the period, partially offset by increases from intangible assets acquired in relation to the acquisitions completed in 2023 and 2024.