What changed in this filing

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Item 1A. Risk Factors

2024-02-27 compared with 2023-02-28 · 71 added, 70 removed, 216 unchanged (39% of the section changed)

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The risks described below are not the only risks we face.

Additional risks and uncertainties, not presently known to us or that we currently deem immaterial, may also impair our business, financial condition or results of operations.

Additional risks and uncertainties, not presently known to us or that we currently deem immaterial, may also impair our business, financial condition, results of operations or the trading price of our common stock.

Business and Operational Risks

The global COVID-19 pandemic and recovery therefrom has significantly disrupted our operations and our financial condition and operating results and may continue to adversely impact our business.

The COVID-19 pandemic and the recovery therefrom has substantially disrupted our global operations, and we expect to continue to be impacted as the conditions persist.

Although conditions continue to stabilize, the situation remains subject to rapid and potentially material changes.

As of December 31, 2022, we operated 1,078 early education and child care centers, 99% of which were open.

While we are focused on the enrollment of our centers, the continued or additional disruptions to our business and potential adverse impacts to our financial condition and results of operations resulting from the COVID-19 pandemic and recovery include, but are not limited to:

• significant changes in the conditions of the markets we operate in may limit our ability to provide our services, especially center-based child care and center-based back-up child care, and may result in center closures;

• inability to hire and maintain an adequate level of center staff requiring us to constrain or reduce enrollment, close classrooms or centers in order to comply with mandated ratios, inability to retain teachers, and the impact to our operations if a significant percentage of our workforce is unable to work because of illness, quarantine, government restrictions, or difficulty maintaining or retaining staff, which may have a disproportionate impact on our business compared to other companies that depend less on the in-person provision of services and do not directly provide care and education to young children;

• reduced or shifting demand for our services due to adverse and uncertain economic and demographic conditions, including as a result of clients that have been adversely impacted, and/or increased unemployment, school and business closures, lockdown orders, long-term shift to a remote workforce, and general effects of a broad-based economic recession;

• a reduction or limit on governmental grant funding for COVID-19 relief at the federal, state and local level could adversely impact our results of operations;

• potential asset impairments or write-downs as we review assets impacted by the COVID-19 pandemic.

These factors could place limitations on our ability to operate effectively and could have a material adverse effect on our operations, financial condition and operating results.

The recovery from the COVID-19 pandemic could continue to have a negative impact on our results of operations, the size and duration of which we are currently unable to predict.

Additional impacts may arise of which we are currently not aware, the nature and extent of which will depend on future developments which are highly uncertain and cannot be predicted.

Our business depends largely on our ability to hire and retain qualified teachers and maintain strong employee relations.

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Our business depends on our ability to attract, train, and retain the appropriate mix of qualified employees and on effectively implementing and maintaining strong employee relations, cultivating an atmosphere of trust, and effectively communicating the value proposition of working at Bright Horizons.

Difficulty hiring or retaining appropriately qualified staff may have a disproportionate impact on our business compared to other companies that depend less on the in-person provision of services and do not directly provide care and education to young children.

The early education and child care industry traditionally has experienced high turnover rates.

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We are also required by government regulation to maintain certain prescribed minimum teacher-to-child ratios.

If we are unable to hire and retain qualified teachers at a center, we could be required to reduce enrollment, close classrooms or centers or be prevented from accepting additional enrollment in order to comply with such mandated ratios.

We may continue to experience difficulty in attracting, hiring and retaining qualified teachers due to tight labor pools and we may experience difficulty in attracting and retaining teachers due to changes in the work environment as a result of the COVID-19 pandemic.

If we are unable to hire and retain qualified teachers at a center, we have been, and may in the future be, required to constrain or reduce enrollment, close classrooms or centers or be prevented from accepting additional enrollment in order to comply with such mandated ratios.

We have been and may continue to experience difficulty in attracting, hiring and retaining qualified teachers due to tight labor pools and general labor shortages.

Such market pressures have required us to offer increased salaries, enhanced benefits and institute additional initiatives to maintain strong employee relations, which increase costs, and may further increase costs in the future.

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The number of employers that view such services as cost-effective or beneficial to their workforces may not continue to grow at the levels we anticipate or may diminish.

In addition, changes in demographic trends, including the number of dual working parent or working single parent families in the workforce, may impact the demand for our services.

Further, availability of work-from-home or hybrid work options may shift demand away from locations where we currently offer services.

In addition, changes in demographic trends, including the number of dual working parent or working single parent families in the workforce, and the number of children requiring care, may impact the demand for our services from parents and families.

Further, work-from-home or hybrid work options may shift demand away from locations where we currently offer services resulting in center closures or potential impairments.

Such changes could materially and adversely affect our business and operating results.

Even as employers recognize the value of our services, demand may be adversely affected by general economic conditions or changes in workforce demographics and work-place environments as a result of COVID-19.

Uncertainty or a deterioration in economic conditions, including global inflationary pressures impacting our clients and customers, could lead to reduced demand for our services as employer clients may reduce or eliminate their sponsorship of work and family services, and prospective clients may not commit resources to such services.

In addition, a reduction in the size of an employer’s workforce could negatively impact the demand for our services and result in reduced enrollment or failure of our employer clients to renew their contracts.

Even as employers recognize the value of our services, demand may be adversely affected by general economic conditions or changes in workforce demographics or workplace locations.

Uncertainty or a deterioration in economic conditions, including global inflationary pressures impacting our clients and customers, could lead to reduced demand for our services as employer clients may reduce or eliminate their sponsorship of work and family services, prospective clients may not commit resources to such services or families may seek alternatives to center-based care.

In addition, a reduction in the size of an employer’s workforce or an increase in the cost of employer subsidies could negatively impact the demand for our services and result in reduced enrollment, failure of our employer clients to renew their contracts or center closures.

A deterioration of general economic conditions in both the U.S.

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These incidents may arise from events that are beyond our ability to control, such as instances of abuse or actions taken (or not taken) by one or more center managers, teachers, or caregivers relating to the health, safety or welfare of children in our care.

The proliferation of social media may increase the likelihood, speed, and magnitude of these negative brand and reputation events.

In addition, from time to time, customers and others make claims and take legal action against us.

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Additionally, we maintain other confidential, proprietary, or otherwise sensitive information relating to our business and from third parties.

The information technology networks and systems owned, operated, controlled, or used by us or our third-party vendors may be vulnerable to damage, disruptions or shutdowns, software or hardware vulnerabilities, data breaches, security incidents, failures during the process of upgrading or replacing software or databases or components thereof, power outages, natural disasters, hardware failures, attacks by computer hackers, telecommunication failures, user errors, user malfeasance, computer viruses, unauthorized access, phishing or social engineering attacks, ransomware attacks, distributed denial-of-service attacks, brute force attacks, robocalls, and other real or perceived cyber-attacks or catastrophic events, all of which may not be prevented by our efforts to secure our networks and systems.

The information technology networks and systems owned, operated, controlled, or used by us or our third-party vendors may be vulnerable to, among other things, damage, disruptions or shutdowns, software or hardware vulnerabilities, data breaches, cybersecurity incidents, failures during the process of upgrading or replacing software or databases or components thereof, power outages, natural disasters, hardware failures, attacks by computer hackers, telecommunication failures, user errors, user malfeasance, computer viruses, unauthorized access, phishing or social engineering attacks, ransomware attacks, extortion attempts, distributed denial-of-service attacks, brute force attacks, robocalls, and other real or perceived cybersecurity-attacks or catastrophic events, all of which may not be prevented by our efforts to secure our networks and systems.

Security incidents can also occur as a result of non-technical issues, including intentional or inadvertent actions by our employees, our third-party vendors or their personnel, or other parties.

Security incidents are becoming increasingly prevalent and severe, as well as increasingly difficult to detect.

Any of these incidents could lead to interruptions or shutdowns of our platforms, disruptions in our ability to process service requests, record or analyze the use of our services, loss or corruption of data, or unauthorized access to, or acquisition of, personal information or other sensitive information, such as our intellectual property.

We maintain policies and practices and operational safeguards, measures and controls aimed at reducing our cyber risk, protecting and recovering our data and ensuring business continuity, which include reasonable efforts to ensure that our third-party vendors maintain reasonable security, including encryption and authentication technology, and will notify us promptly if a security incident occurs.

However, none of our or our vendors’ security measures can provide absolute security.

Advances in computer capabilities, increasingly sophisticated tools and methods used by hackers and cyber terrorists, new discoveries in the field of cryptography or other developments may result in our failure or inability, or the failure or inability of our vendors, to adequately protect personal or other sensitive information, and there can be no assurance that we or our vendors will not suffer a cyber-attack, that hackers or other unauthorized parties will not gain access to or exfiltrate personal information or other sensitive data, or that any such data compromise or unauthorized access will be discovered in a timely fashion.

Like many businesses, we, and our third-party vendors, have in the past and will in the future continue to be subject to cyber-attacks, cybersecurity threats and attempts to compromise and penetrate our data security and systems and disrupt our services.

Cyber-attacks against us or our third-party vendors could lead to operational disruptions that could have an adverse effect on our ability to provide services to clients and customers and on our results of operations and financial results.

For example, on December 12, 2022, we determined that a ransomware cyber incident had impacted and disrupted a number of our operational and information technology systems.

Promptly upon detecting and containing the incident, we launched an investigation and engaged the services of cybersecurity experts and advisors, incident response professionals, and external counsel to support the investigation and restored operational and business systems and functionality.

We are continuing to assess all actions that we will take to further improve our existing systems.

Based on the information currently available to us, we do not believe that the December 2022 ransomware attack will have a material impact on our business, results of operations, or financial condition, but no assurances can be given as we continue to assess the full impact from the incident, including costs, expenses, and insurance coverage.

Any of these incidents could lead to interruptions or shutdowns of our platforms, disruptions in our ability to process service requests, limit our ability to access data, result in the loss or corruption of data, or unauthorized access to, or acquisition of, personal information or other sensitive information, such as our intellectual property.

While we and our vendors maintain policies and practices, operational safeguards, as well as measures and controls aimed at reducing our risks related to cybersecurity threats, none of our or our vendors’ security measures can provide absolute security.

We and our vendors may not anticipate, detect, or implement fully effective preventative measures against all cybersecurity threats particularly because the techniques used are increasingly sophisticated tools and constantly evolving.

For example, as artificial intelligence continues to evolve, cyber-attackers could also use artificial intelligence to develop malicious code and sophisticated phishing attempts.

As a result, there can be no assurance that we or our vendors will not suffer a cybersecurity incident, that hackers or other unauthorized parties will not gain access to or exfiltrate personal information or other sensitive data, or that any such data compromise or unauthorized access will be discovered in a timely fashion.

Like many businesses, we, and our third-party vendors, have in the past and will in the future continue to be subject to cybersecurity threats, cybersecurity incidents, and attempts to compromise and penetrate our data security and systems and disrupt our services.

For example, as previously disclosed, on December 12, 2022, we determined that a cybersecurity incident had impacted and disrupted a number of our operational and information technology systems.

Although our operational and business systems and functionality were promptly restored and this incident did not have a material impact on us, similar incidents or other cybersecurity-attacks against us or our third-party vendors could lead to operational disruptions that could have an adverse effect on our ability to provide services to clients and customers and on our results of operations and financial results.

Failure of our systems to operate effectively or a compromise in the security of our systems, or the systems of our affiliates or other third-party that results in unauthorized persons or entities obtaining personal information or other sensitive information, could materially and adversely affect our reputation, operations, operating results, and financial condition.

Actual or anticipated cyber-attacks may cause us to incur costs, including costs to deploy additional personnel and protection technologies, train employees, pay higher insurance premiums, and engage third-party specialists for additional services.

Actual or anticipated cybersecurity threats and attacks may cause us to incur costs, including costs to deploy additional personnel and protection technologies, train employees, pay higher insurance premiums, and engage third-party specialists for additional services.

Breaches in our data security, those of our affiliates or other third-parties, could expose us to risks of data loss, inappropriate disclosure of confidential or proprietary information, potential claims, investigations, regulatory proceedings, litigation penalties and liability, could impede our processing of transactions and our financial reporting, and could result in a disruption of our operations.

In addition, we may incur other substantial costs in connection with remediating and otherwise responding to any data security incident, including potential liability for stolen client, customer, or employee data, repairing system damage, or providing credit monitoring or other benefits to clients, customers, or employees affected by the incident.

Additionally, if we or our third-party service providers experience security incidents that result in a decline in marketplace performance, availability problems, or the loss, corruption of, unauthorized access to, or disclosure of personal data or confidential information, people may become unwilling to provide us the information necessary to receive our services, and our reputation and market position could be harmed.

In addition, we may incur other substantial costs in connection with remediating and otherwise responding to any cybersecurity incident, including potential liability for stolen client, customer, or employee data, repairing system damage, or providing credit monitoring or other benefits to clients, customers, or employees affected by the incident.

Additionally, if we or our third-party service providers experience security incidents that result in a decline in the performance of our systems, availability problems, or the loss, corruption of, unauthorized access to, or disclosure of personal data or confidential information, people may become unwilling to provide us the information necessary to receive our services, and our reputation and market position could be harmed.

Existing customers may also decrease their use of our services or cease using our services altogether.

The impact of these security threats, incidents, and other disruptions are difficult to predict.

The impacts of these security threats, incidents, and other disruptions are difficult to predict.

Our insurance coverage for such security threats, incidents, and other disruptions may not be adequate to cover all related costs, and we may not otherwise be fully indemnified for them.

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Any of these results could harm our growth prospects, financial condition, business, and reputation.

For additional information on our cybersecurity risk management, strategy and governance, see Item 1C, “ Cybersecurity,” of this Annual Report on Form 10-K.

Our collection, use, storage, disclosure, transfer and other processing of personal information could give rise to significant costs and liabilities, including as a result of governmental regulations, uncertain or inconsistent interpretation and enforcement of legal requirements or differing views of personal privacy rights, which may have a material adverse effect on our reputation, business, financial condition and results of operation.

A variety of laws, regulations, industry self-regulatory principles, industry standards or codes of conduct and regulatory guidance relating to privacy, data protection, marketing and advertising, and consumer protection apply to the collection, use, retention, protection, disclosure, transfer, and other processing of certain types of data.

As the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and changing requirements applicable to our business, including the European Union’s General Data Protection Regulation and various privacy legislation in the U.S., such as the California Consumer Privacy Act, compliance with such requirements could impose significant limitations, require changes to our business, or restrict our use or storage of personal information, which may increase our compliance expenses and make our business more costly or less efficient to conduct.

As the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and changing requirements applicable to our business, including the European Union’s General Data Protection Regulation and various privacy laws, compliance with such requirements could impose significant limitations, require changes to our business, or restrict our use or storage of personal information, which may increase our compliance expenses and make our business more costly or less efficient to conduct.

For example, we are subject to various state privacy laws, several of which went into effect in 2023 (i.e.

California, Virginia, Colorado, Connecticut, and Utah), all of which give new data privacy rights to their respective residents and impose significant obligations and processors of data.

Failure to comply with such regulations could result in enforcement actions, significant fines, penalties, and damages which could materially and adversely affect our business and financial condition.

We are also subject to evolving privacy laws on the use of “cookies” and other similar technologies.

Many countries have adopted, or are in the process of adopting, regulations governing the use of cookies and similar technologies, and individuals may be required to “opt-in” to the placement of cookies used for purposes of marketing.

In addition, some providers of consumer devices and web browsers have implemented, or announced plans to implement, means to make it easier for internet users to prevent the placement of cookies, to block other tracking technologies or to require new permissions from users for certain activities, which could if widely adopted significantly reduce the effectiveness of such practices and technologies.

The regulation of the use of cookies and other current online tracking and advertising practices or a loss in our ability to make effective use of services that employ such technologies could increase our costs of operations and limit our ability to acquire new customers on cost-effective terms and consequently, materially adversely affect our business, financial condition and operating results.

Our continued profitability depends on our ability to pass on our increased costs, such as labor and related costs, to our customers.

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Because we are primarily a service business, inflationary factors and regulatory changes that contribute to wage and benefits cost increases result in significant increases in the cost of running our business.

We expect to pay employees at rates above the minimum wage, and increases in the statutory minimum wage rates could result in a corresponding increase in the wages and benefits we pay to our employees.

We expect to pay employees above applicable minimum wage rates, and increases in the statutory minimum wage rates or statutory leave requirements could result in a corresponding increase in the wages and benefits we pay to our employees.

Additionally, competition for teachers and staff, and costs associated with hiring, compensating, and retaining employees, and costs of training teachers could result in significant increases in the cost of running our business, including costs to enhance employee compensation and benefit programs as an incentive and retentive tool.

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We derive a significant portion of our business from early education and child care, back-up care, and other workplace solutions associated with employer sponsors for whom we provide these services at single or multiple sites pursuant to contractual arrangements.

Our contracts with employers for full service center-based child care typically have terms of three to ten years, and our contracts related to back-up care and educational advisory services typically have terms of one to three years, with varying terms and renewal and termination options.

Our contracts with employers for full service center-based child care typically have terms of 3 to 10 years, and our contracts related to back-up care and educational advisory services typically have terms of three years, with varying terms and renewal and termination options.

We have a history of consistent contract renewals, but we may not experience similar renewal rates in the future.

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Additionally, our continued success depends on our ability to convert and retain new and existing clients, cross-sell to existing clients, and our ability to develop new consumer-oriented strategies or services to accommodate changing client, learner, or parent expectations and preferences around our services or service delivery.

Our future success depends on our ability to continue to meet the evolving needs and expectations of our customers, including enhancing our existing services.

Obsolete processes and/or skill gaps could impede our ability to meet new or changing customer demand.

Our future success depends on our ability to meet the evolving needs and expectations of our customers, including enhancing our existing services and technology, and building a high-quality experience across all lines of business and geographies.

Obsolete processes and/or skill gaps or a failure to scale innovation could impede our ability to meet new or changing customer demand.

Additionally, client unwillingness to adopt new technology enhancements, including artificial intelligence technology, could impact our return on investment.

Failure to meet these needs may result in client loss and reduced demand and could have a material impact on our financial results.

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The inability of existing child care centers to maintain their current enrollment levels and profitability, the failure of newly opened child care centers to contribute to profitability, and the failure to maintain and grow our other services could result in additional fluctuations in our future operating results on a quarterly or annual basis.

Health pandemics, natural disaster, sociopolitical or other catastrophic event could severely disrupt our business.

A regional or global health pandemic, not unlike the COVID-19 pandemic, depending on its duration and severity, could severely affect our business.

Enrollment in our child care centers could experience sharp declines as families might avoid taking their children out in public or to center-based care in the event of a health pandemic, and local, regional or national governments might limit or ban public interactions to halt or delay the spread of diseases causing business disruptions and the temporary closure of our centers.

Additionally, a health pandemic could also impair our ability to hire and maintain an adequate level of staff and may have a disproportionate impact on our business compared to other companies that depend less on the in-person provision of services.

Other unforeseen events, including acts of violence, war, terrorism and other international, regional or local instability or conflicts (including labor issues), embargoes, natural disasters such as earthquakes, tsunamis, hurricanes, typhoons or other adverse weather and climate conditions, whether occurring in the United States or abroad, could restrict or disrupt our operations.

Our business could be adversely affected by events beyond our control, such as public health crises, pandemics, natural disasters, negative global climate patterns, sociopolitical events, geopolitical tensions, or other catastrophic events.

A regional or global health crisis, not unlike the COVID-19 pandemic, depending on its duration and severity, could severely affect our business.

Enrollment in our child care centers could experience sharp declines as families might avoid taking their children out in public or to center-based care in the event of a health crisis, and local, regional or national governments might limit or ban public interactions to halt or delay the spread of diseases causing business disruptions and the temporary or permanent closure of our centers.

Additionally, a health crisis could also impair our ability to hire and maintain an adequate level of staff and may have a disproportionate impact on our business compared to other companies that depend less on the in-person provision of services.

Other events beyond our control, including acts of violence (including violent acts in the workplace and school settings), war, terrorism and other international, regional, or local instability or conflicts (including labor issues), embargoes, natural disasters such as earthquakes, tsunamis, hurricanes, typhoons or other adverse weather and climate conditions, whether occurring in the United States or abroad, could restrict or disrupt our operations.

Enrollment in our child care centers could experience sharp declines as families might avoid taking their children out in public or to center-based care as a result of one or more of these events.

Further, climate change may increase both the frequency and severity of extreme weather conditions and natural disasters, which may affect our business operations and our clients, either in a particular region or globally.

In addition, changes in regulations brought about by climate change could impact our business, operating results, and financial condition.

In addition, changes in legislation and regulations both in the U.S.

and in other jurisdictions in response to climate change could impose new burdens and costs on us and could impact our business, operating results, and financial condition.

Moreover, even without such legislation or regulation, the perspectives of our clients, stockholders and employees regarding climate change are continuing to evolve and may result in increased costs to our business to meet the sustainability expectations of these stakeholders.

We also face the potential for business disruptions from information technology interruptions associated with natural disasters and other events including power outages, catastrophic events, computer and network failures, inadequate or ineffective redundancy plans, system failures, and flaws in third-party software or services.

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If market interest rates continue to increase, variable rate debt will create higher interest service requirements, which could adversely affect our cash flows and impact future earnings.

While we have entered into interest rate cap agreements to limit our exposure to higher interest rates on a portion of our debt, and may enter into additional agreements in the future, any such agreements may not offer complete protection from this risk posed by interest rate fluctuations and may carry additional risks.

While we have entered into interest rate cap agreements to limit our exposure to higher interest rates on a portion of our debt, and may enter into additional agreements in the future, any such agreements may not offer complete protection from interest rate fluctuations and may carry additional risks.

For information regarding our sensitivity to changes in interest rates, refer to “ Quantitative and Qualitative Disclosures About Market Risk ” in Item 7A of this Annual Report on Form 10-K.

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A permanent shift in workforce demographics and office environments may result in decreased demand for center-based child care and have an adverse effect on our results of operations.

During the COVID-19 pandemic, a substantial portion of the workforce, including parents of children we serve at our centers, transitioned from working in traditional office environments to working in “virtual” or “home” offices, including in our primary markets of the United States, United Kingdom, Australia, and the Netherlands.

While we expect that many employees will continue to return to traditional office environments, some employers may maintain a remote or work-from-home presence or may permanently move all or a portion of their workforce to remote or to a hybrid model.

While working parents continue to need child care regardless of their work location, there are no assurances that parents who work from home will continue to use our centers.

Additionally, we believe that as a result of COVID-19, more women have temporarily stepped back from the workforce and that traditional dual-career households may have temporarily decreased.

A shift in workplace demographics where employees work from home on a part- or full-time basis, or a sustained decrease in the number of women or dual-career households in the workforce, may reduce demand for center-based child care or specific center locations as well as other service offerings.

We may be unable to successfully meet changed client and parent demands and needs, which may have a material adverse effect on our business or results of operations.

During and following the COVID-19 pandemic, a substantial portion of the workforce, including parents of children we serve at our centers, transitioned from working in traditional office environments to working in “virtual” or “home” offices, including in our primary markets of the United States, United Kingdom, Australia, and the Netherlands.

While we believe that many employees have and will continue to return to traditional office environments, this can vary by geography and some employers have maintained a remote or work-from-home presence or have or will permanently transition all or a portion of their workforce to remote or to a hybrid model.

While working parents continue to need child care regardless of their work location, there are no assurances that parents who work from home or in a hybrid model will continue to use our centers or use our centers on a full-time basis.

A shift in workplace demographics where employees work from home on a part- or full-time basis, may reduce demand for center-based child care or specific center locations, and may impact enrollment as well as other service offerings.

We may be unable to successfully meet changed client and parent demands and needs around center locations or center availability on a cost effective basis, which may have a material adverse effect on our business or results of operations and result in future center closures or potential impairments.

The growth of our business may be adversely affected if we do not implement our growth strategies and initiatives successfully or if we are unable to manage our growth or operations effectively.

We have expanded and are continuing to expand our operations, suite of services and client relationships, which has placed, and will continue to place, significant demands on our management and our operational, IT and financial infrastructure.

Additionally, our ability to grow in the future will depend on a number of factors, including the ability to develop and expand new and existing client relationships, to continue to provide and expand the high-quality services we offer, to hire and train qualified personnel, to expand and grow in existing and future markets, to develop and operationalize new service offerings, and to sustain operational excellence and efficiencies across all business lines.

Achieving and sustaining growth requires the successful execution of our growth strategies, which may require the implementation of enhancements to customer-facing, operational and financial systems, expanded sales and marketing capacity, continuous updates to technology and improvements to processes and systems, and additional or new organizational resources.

Achieving and sustaining growth requires the successful execution of our growth strategies, which may require the implementation of enhancements to customer-facing, operational and financial systems, expanded sales and marketing capacity, continuous updates to technology, such as those related to artificial intelligence, and improvements to processes and systems, and additional or new organizational resources.

Given these challenges, we may be unable to manage our expanding operations effectively, or to maintain our growth, which could have a material adverse effect on our business or results of operations.

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If we are unable to maintain our competitive advantage, our growth could be adversely impacted and our future operating results negatively impacted.

Governmental child care benefit programs could reduce the demand for our services.

Governmental child care benefit programs could reduce the demand for our services or impact our revenue and profitability.

National, state or local child care benefit programs comprised primarily of subsidies in the form of tax credits or other direct government financial aid to parents provide us opportunities for expansion in additional markets.

However, a broad-based benefit with governmentally mandated or funded child care or preschool, could reduce the demand for early care services at our existing early education and child care centers due to the availability of lower cost care alternatives, or could place downward pressure on the tuition and fees we charge, which could adversely affect our revenues and results of operations.

Additionally, changes in government support programs in our international jurisdictions, such as the reduction of government-funded tuition subsidies, could reduce the demand for our services in these markets, adversely impacting our results of operations.

However, a broad-based benefit with governmentally mandated or funded child care or preschool, such as universal pre-K, could reduce the demand for early care services at our existing early education and child care centers due to the availability of lower cost care alternatives, or could place downward pressure on the tuition and fees we charge, which could adversely affect our revenues and results of operations.

In response to the economic impact of the COVID-19 pandemic, we received funding from pandemic-related government support programs from various federal, state, and local governments.

While we received less pandemic-related government support in 2023 as funding for most of the programs for which we were eligible ended in September 2023, a further reduction or limit on other government support programs at the federal, state and local level could further impact our results of operations.

Additionally, changes in government support programs in our international jurisdictions, such as the reduction of government-funded tuition subsidies, or legislation aimed at the cost of child care, such as tuition caps, could reduce the demand for our services in these markets or reduce revenue, adversely impacting our results of operations.

Litigation, Insurance, Tax and Regulatory Risks

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incremental taxes upon repatriation of non-U.S.

limitations on the deductibility of interest expense;

adjustments to estimated taxes upon finalization of various tax returns;

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Any significant change in our jurisdictional earnings mix or in the tax laws in those jurisdictions could impact our future tax rates and net income in those periods and any increases in income tax rates or changes in income tax laws could have a material adverse impact on our financial results.

The Organization for Economic Cooperation and Development introduced a framework to implement a global 15% minimum corporate tax (“Pillar Two”).

The European Union issued a directive to its member states to enact the Pillar Two in their local laws effective after December 2023.

A number of other countries are expected to also implement similar legislation with effective dates in the future.

The Company is continuing to evaluate the future impact of Pillar Two in the jurisdictions in which the Company operates.

International Risks

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We are also subject to inherent risks attributed to operating in a global economy.

As of December 31, 2022, we had 435 centers located in four foreign countries - the United Kingdom, the Netherlands, Australia and India.

If the international markets in which we compete are affected by changes in political, social, legal, economic, or other factors, such as the economic and political uncertainty following the United Kingdom’s exit from the European Union (“Brexit”), the global economic impact from the COVID-19 pandemic, and adverse global economic conditions, including slower growth or recession, higher interest rates, and foreign currency exchange rate fluctuations, our business and operating results may be materially and adversely affected.

As of December 31, 2023, we had 431 centers located in 4 foreign countries - the United Kingdom, the Netherlands, Australia and India.

If the international markets in which we compete are affected by changes in political, social, legal, economic, or other factors, such as adverse global economic conditions, including slower growth or recession, higher interest rates, and foreign currency exchange rate fluctuations, our business and operating results may be materially and adversely affected.

Our international operations may subject us to additional risks that differ in each country in which we operate, and such risks may negatively affect our results.

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As a multinational company, we conduct our business in a variety of markets and are therefore subject to market risk for changes in foreign currency exchange rates.

Instability in European financial markets or other events, such as the economic uncertainty resulting from Brexit, the impact from the COVID-19 pandemic, and adverse global economic conditions, including inflation, slower growth or recession, and higher interest rates, could cause fluctuations in exchange rates that may adversely affect our revenues and net earnings.

Instability in European and other financial markets, or other geopolitical events, such as adverse global economic conditions, could cause fluctuations in exchange rates that may adversely affect our revenues and net earnings.

Approximately 27% of our revenue was generated outside the United States in 2023.

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On December 16, 2021, our board of directors authorized a share repurchase program under which up to $400 million of our outstanding common stock may be repurchased, of which $198.3 million remained available as of December 31, 2023.

The share repurchase program replaced and canceled the prior $300 million authorization announced in June 2018, of which approximately $0.2 million remained available as of the termination date.

Although our board of directors has authorized the stock repurchase program, the stock repurchase program does not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares and may be suspended or terminated at any time.

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There can be no assurance that any stock repurchases will enhance stockholder value because the market price of our common stock may decline below the levels at which we determine to repurchase our stock and short-term stock price fluctuations could reduce the program’s effectiveness.

Our stock price could be extremely volatile, and, as a result, you may not be able to resell your shares at or above the price you paid for them.

The price of our common stock could be volatile, and, as a result, you may not be able to resell your shares at or above the price you paid for them.

The price of our common stock could be subject to wide fluctuations in response to a number of factors, including those described elsewhere herein and others such as:

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• our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market;

• additions and departures of key personnel;

• changes in management and key personnel;

• strategic decisions by us or our competitors, such as acquisitions, divestitures, initial public offerings, spin-offs, joint ventures, strategic investments, or changes in business strategy;

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• speculation in the press or investment community;

• changes in accounting principles;

• impairments;

• impact from cyber events;

• changes in business activity or the economy;

• terrorist acts, acts of war, or periods of widespread civil unrest;

• pandemics, natural disasters and other calamities, including the COVID-19 pandemic;

• acts of violence, terrorist acts, acts of war, or periods of widespread civil unrest;

• pandemics, natural disasters and other calamities;

• changes in general market and economic conditions.

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As a result, you may lose your ability to sell your stock for a price in excess of the prevailing market price due to these protective measures, and efforts by stockholders to change our direction or management may be unsuccessful.

Our certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of legal actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our certificate of incorporation provides that, subject to limited exceptions, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation or our bylaws, or (iv) any other action asserting a claim against us that is governed by the internal affairs doctrine.

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The exclusive forum provision in our certificate of incorporation will not relieve us of our duty to comply with the federal securities laws and the rules and regulations thereunder, and stockholders will not be deemed to have waived our compliance with these laws, rules and regulations.

Unresolved Staff Comments

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors