BFAM - Earnings call transcript Q1 2018 | Bright Horizons Family Solutions Inc.

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Operator

Greetings and welcome to Bright Horizons Family Solutions’ First Quarter 2018 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Stephen Kramer, Chief Executive Officer. you. Thank

begin. may You

Stephen Kramer

go hello the on Executive call our the who Elizabeth and before administrative With kick I Chair; call me Boland, off will Officer, Financial on are Elizabeth? Chief a to Sherry, few the items everyone call. today. and through Thanks, Dave Lissy,

Elizabeth Boland

me thanks Hi, joining today. everybody from and us for too

recording are closed For we issued that will reference, earnings today, well under Relations the as release the this call, call website section and is of as available be of a the or at being market the webcast Investor after brighthorizons.com. our

of growth, and strategy incorporates expense, forward-looking and and operating adjusted contributions, acquisitions, margins, Some our center the statements, operating for providing rates, net outlook income XXXX, our and business and interest QX segment addressing information investments, the plans, closures, capital financial full FX flow. growth we're revenue including additions tax for today rates, EPS year those expectations cash

and may it's in other the and risks Any of risks those speaks we filings. described and update are involve These of statement inherently XX-K obligation date as and that the our uncertainties no only uncertainties materially. forward-looking operating statements statements. cause and risk which results differ to that SEC Forward-looking include to financial on in actual undertake factors made, any forward-looking

filed be the and be Relations also once detailed to will have that their reconciled the will Investor discuss in GAAP XX-Q and non-GAAP our SEC. our the section are that in press measures with website in Lastly, release, we financial our we available counterparts of which included Form

the update for I'll turn now it So Stephen over to business. the and review on back

Stephen Kramer

contributions will for quarter from the follow it review with today’s the more quarter more grew solid each segment, of from $X.XX questions. Elizabeth to operating and or grew XX% our provide update Service growth center Center detailed with a XX million, more XXXX. pleased outlook the three On earnings lines all start Revenue up XX% strong to & we business. million centers, including and tuck-in call, an the last premier of of we Houston our financial than our centers for firm along Swaine and and year, than review Methodist in Elizabeth. our acquisitions. of year. on Thanks for per Full our your X% then with first before for open client added adjusted revenue law and numbers, I’ll with really We're of multi two new $XX Cravath, In share Moore, increased $XXXX results Hospital

New client and in include quarter. Recent in Back-Up Emory Sprint, Santander. Group, and utilization, expanded division X% new for revenue XX% rate drove these of segment Advisory for our Educational and Volkswagen launches, Healthcare, launches our segments the increases, client increases

growth targets discussed As to approximately to timing we for utilization on contribute new as XXXX the each of quarter service, growth said, we prior the against calls, Advisory to be well Back-Up, topline as are to our of levels, for well variability in have when some That tracking and their Services. pleased our clients rates. XX% quarter Ed XX% launch can XX%

business, operating efficiency. to topline from and and growth important continue operating solid Following further we while support deliver across results also to strong this consistent on investments the growth, making

strong in basis technology leverage services. update marketing We take the User of give a on the mobile about user in efficient deliver the let these to to over are of automated our our delivery for been and that time topic, experience build to more are customers’ within systems to to full and to system especially an our and year therefore track and goal margin operating Back-Up services minute Care people points you that we've of service support clients' and XXXX. making. XXX app. investments range on utilization XX enhance been me our to On feedback The regain operating enhancements workforces, investments has

Advisory first our rave engaging the mobile marketing business, Ed our users launched had focused industry for success to of of in side the Care. sessions Back-Up app also good book to journeys Back-Up we reviews. On users registered piloting on We’ve additional

backbone in Back-Up there segments, our While an and we're to in Ed the all operating respective making IT delivery Advisory service systems. impact more of technology investment of of is their due three

concentrated where Turning we of child to the opened opportunities a of strategy, XX these of these and needs select see supply care, our our newer a client population targeted have now demographic, locations. partners quality strong our to we settings lease/consortium of limited in in urban meet center centers high

While we open ramped to another are mature cohort centers that fully contributing at operating are set of levels.

contributor we to As a more the slight centers to modest contributing, maturity. a these from shift to diminish result, to collectively in naturally a and is as year, headwind expect to XXXX as the margin ramp continue first whole, a part beginning of the in classes the headwind

the opportunity very and have be in resources deliver to marketing excited group of creation operating to about significant dedicated results. these continue value and this We centers,

As XXXX, business. so momentum we approach across good midpoint our all of we aspects do with the of

services. cross growth of as value continues sell acquisition Our our to organic, to additional be existing growth strategy client leveraging base well as and added our breadth focused the on

Our across in new each clients. services remained industries existing interest our and with and sales both pipeline of with strong,

in solid this plan achieve position to of growth in puts us organic All our XXXX. a

the one On we the are Netherlands. one the and two to have acquisition tuck-in the in pleased front, in acquisitions in quarter, completed first US

we've scale, and that deals strategy that US the and in reflect both to abroad, As range in opportunities recently the continue in action. completed pursue about, here talked we

plan. center growth forward here a strong, visibility remains we And with to now, a pipeline Europe. Our with and acquisitions mix we US in expect the to of and have to single networks be good in contributor smaller opportunities, both continue key the our

want up, Horizons my and the I wrap I each Bright to member to Family. congratulations of extend Before every

three Massachusetts well in as recognized our as in US as been two Netherlands. recently the to a in UK locations great specifically great Colorado, a support our in to and the and work place major of work, the geographies have We place offices,

So on the outlook now to of for the remainder year. our update you

We range full growth are range and the you in $X.XX share. or to and more the to back of reiterating I'll X% in EPS With the during in growth numbers guidance be XX% leveraged XXXX, revenue over targeting per can adjusted Q&A. detail, that, XX% with XXXX review year $X.XX to operating performance drive Elizabeth of

Elizabeth Boland

you, Thank Stephen.

previously primarily basis, On the revenue timing Services topline in near $XX technology the new million the just million the utilization effects Back-Up XX% So enrolment levels. million we more continue for launches user service our and vary enrollment million slightly of XX% delivery. in as from quarter. in And the past was mature centers, and and of ramping in revenue expand operating and a were rate by Ed overall contributions Full to centers, in $XX.X and was portfolio. efficiency expanded lower XX%, of to In discussed, increases, revenue. ultimate of from this the or that positive operating growth in Center $X this partially existing and as as margins which our investments The $XXX in the million, well X%, of Division approximately based We driven translated was quarter, up gains and million headlines Advisory launches segment service newer and and Overall Service, the Also, $XX increase Service Full from or by and the our and margins people client in Ed client client Full our quarter. Back-Up our or revenue. million Service the to million reflected on up up operating new can Also acquired absorb QX, segment, And mix of is XX% quarter. was in $X adjusted to and generated experience price the to XX.X% new recapping offset centers increased to the Advisory In on to by income expanded services, margin both quarter. in consumption centers, gains, base. term than Back-Up the XX%, also FX. from increases, from contributions utilization enhance profit of $X gross increase quarter $X Ed Advisory operating

the quarter As overhead we on points XXXX, discussing. incremental that lower of we're able in ’XX, Asquith acquisition to operating able move partially and gradually regain Asquith was of to we've the of share QX to from we've incremental XX down by generate of first integration interest this XXXX, particularly, arena improvement that is rates. up the modest we million basis as through and lap starting the Interest bps to and And year. expect spending leverage were the XX overhead over approximately to of now acquisition revenue, XXXX, regain the financed margin $XXX,XXX In offset be been complete. XXX for repurchases was been In XXXX. the marketing expense $XX.X to of borrowings that XX.X% leverage technology

loans, quarter at costs is with $XXX We about borrowing of rate EBITDA. approximates ended our fixed debt term half, X.X net current an million which X%, interest Our with swap. to times

exercises ‘XX. offset operating to effects the reported for by income the federal benefit generated also approximates QX lower million, XX%. on stock what cash we $XXX adjusted of for of in we option This tax of net QX In than flow we estimate XXXX. of realized favorable rate XXXX Our rate includes from less structural the ’XX, similar

payments, Our variability quarter, some improved capital trends. working income including taxes, in operating the certain relation in performance the generated in capital historical to offset working prepaids in by was which timing

quarter our including headlines, gains Division, Stephen to in In March as touched growth XX, Ed in continued of Back-Up As roughly capacity We’ve shares Adding acquired to than continue centers more new serve to invest as have acquired in Services. now Full outlook our add revenue XX% Ed investments a including over children. share Stephen the operated part strategy, XXX,XXX we Full and growth we anticipates approximately the Service, service clients in our to center our digit new Service through to centers. Back-Up of our XXXX. XXXX, earlier, serve capital topline with of year, total growth XXXX discussed, new full and all XXX,XXX on the Advisory XX over double low organic XX also to we our X,XXX lines, planning across first for also range allocation to in centers and X,XXX acquisitions, for XXXX, and repurchase XX% Advisory. our X% we're And of XX% segment, in of and guidance program. XX% At the

years. closing discipline Our we the centers, established approximately the also several maintaining XX outlook contemplates XX last have over to

while projecting the mitigating for to the of $XX $XX XXX we’re side across our operating million, and XXXX, of $XX bps interest XXXX full centers, maintaining On of to estimate the estimates to Center we X% course approximately margin these on to year. performance. our expansion outstanding to additional X% around depreciation million. estimate price in we for and improved in $XX.X for from network, we the range cost continue the interest and expect in amortization borrowings approximately and On the enrolment metrics XX project averaging center P&L we stock of operating other of $XX to XXXX to our some price compensation year increases. million key to spread elements diminish Based And of increases ramping leverage a of X% X% mature expense contribute gain between rate and the XXXX, in the as mentioned, over of factors we've million, increases operating million in as All $XX X.X% XXXX, million year.

in previously in $XX million million center As of side, that of these of also approximate cash are year the XX% is We're estimated that projecting cash new are flow XXXX. opening $XX all for $XXX factors this Weighted be million approximately outstanding operations, million of projection shares structural will cash The $XXX capital $XXX in and, million to XXXX, $X.XX adjusted to to maintenance that EPS in centers capital from to early to expect million of expected with XX% rate flow, million $XXX applied or to $XXX lead we'll average that so share. offset the a rate same QX. growth million and tax invest our adjusted projected free we shares flow income $XXX the to to we the to million for of to spending. combination On net or million generate in reviewed, $XX XX% XXXX, we $X.XX by year generate approximately XX

projecting we're And a the of adjusted of specifically million, $X.XX QX for $XX to to Looking million net adjusted EPS $XX our X% is with outlook of topline in range income XX% growth. to the share. to in $X.XX range ’XX,

So to we are go ready with to that, Sherry, Q&A.

Operator

[Operator question. with is Steinerman from Please with JPMorgan. Instructions] Andrew question Our first your proceed

Andrew Steinerman

it. do It’s … a could I wonderful really

Operator

Hi Steinerman? you ask to Andrew. your Are Mr. ready question?

Elizabeth Boland

Sherry, we may to … want go

Operator

the question. on Meuler Company. next with to Robert Baird move proceed. W. would Jeff We’ll be Please That &

Nick Nikitas

favorable conditions? Nick characterize thanks. there similar situation a kind Jeff. Yes, your you selling mentioned as any tax improvement is what post the with Is kind of you Nikitas new business or would you guys Stephen, remarks are pretty change reform? on of solid for corporate in largely Or are pipeline that still seeing.

Stephen Kramer

the it's what Yes. I is, more say latter. I mean would

the what their do So margin, contemplated to tax reform have dollars. with on obviously organizations

and segment has be area, shown find more stated there on want conditions invest currently best from that come would if that the in so we just in ourselves. environments Advisory have That their see benefit said, we And overall assistance employers economic we programs. certain see were they it based out our where selling Educational employers, that the favorable that, tuition that any to

So would where is economic the reform. around opposed conditions, really very current as more much focus around that's attention the to the specifically I tax

have Nice that started experience on other investments you usage areas positive guys been that Okay, or where to IT increase the or a are to just guys sense. through? makes the see in customer see To feedback date, it's perspective, in any flowed making. has rates largely you

Stephen Kramer

Yes.

users individual survey we So after use. each

when most so And we've to able that's been feedback. really up pick the

Advisory, receiving, seen to improvement relates say side a in we've rates, we’re small it Back-Up the again user and is both terms the reuse feedback of think on really would some experience. is majority Ed as the what but of I I

not should it's us, We expect just And can more our into a again projected client longer partners, to term positive today translate to is longer use, only but only experience. very experience on term experience be also focusing positive. positive that which that user clearly being really but

Nick Nikitas

Makes sense. Thanks. Yes.

last one Elizabeth. Just one,

components? you growth, Service Full the FX break could On the QX out M&A and

Elizabeth Boland

Sure.

bear just second. me So one with

the acquisitions So contributions X.X%. little was from over X.X%. about a FX was

Nick Nikitas

great. Okay, guys. Thanks

Operator

Please with with Our next question is Sachs. from your proceed Tong George Goldman question.

George Tong

you lease overall of be afternoon. centers the to Can group accretive consortium the some of Good Hi, margin mature? discuss thanks. successive you as margin centers progress your newer when and expect classes

Elizabeth Boland

Sure.

on So of just to sort reset the table bit this. a

in revenue. lease/consortium generating to as have, $XXX now since of Stephen in this XX of we’ve of and centers, the We centers newer year, beginning neighborhood others of grouping are we That million, open with cohort of along million centers mentioned, that expect XXXX. we $XXX opened have the the this

We expect in it was XXXX million last - $XXX year.

were got These in we’ve good centers so positive cohorts. of And growth the XXXX. each in

a to because of as margin headwind of relative that of but mentioned, you revenue scale So margin the whole margin in dollars. amount are, the to as they’re class, a positive the they improvement

same end would the to or that’s the talked contribution of the positive expect high digits, slight basis basis points points mid-year somewhat number, - year, mid of so. to first to to about, continue sort point. XX, positive to range of overall that XX and a of to a headwind that this had by part margin we in year so, the similar or bit but single inflection XX to from gain becoming So XX, the But that it’s in see be on we to margin what continue a what is improve

George Tong

Got it. helpful. Very

building update selling pipeline bit performance. on elaborate on existing how little and new a you sales cross Can provide both your your is your and your clients on touched you an from pipeline Secondly, initiatives?

Stephen Kramer

to. Happy Absolutely.

So mentioned, if and pipeline, agnostic and what's have geographies. is we industries it's And take good exciting we clients. new I a to the about from a it as step back, pipeline relates existing as both that really

country, the percentage the the is across the pipeline When to pleased think industries. selling strong existing all good well a pipeline cross in we've of overall think efforts, about as the into accounts. see our we been see growing we particularly So major as of I

when seeing on point, start. fact more despite we offering great aren't to we up, new of So are on at again clients to the XX% in who clients our the about the XX% definitely go are this movement think you one service, of number clients that service seeing one those because continue we than bring purchasing average

of overall momentum the continuing again, to then ultimately growing So good I number that more seen as have of the base we've than think service, well. client grow one clients and

George Tong

Thank you. Very helpful.

Operator

Capital Jeff Markets. from with is proceed. Silber question Please BMO next Our

Henry Chien

calling Hey, acquisition that bit landscape of seeing markets was good wondering to you acquisitions for up, on shaping in Stephen, how Chien afternoon. look if a you? I flow could Henry a just are terms comment - or deal whether Jeff. good you Hey is It’s it's attractive the tuck-in any

Stephen Kramer

Yes.

So acquisition right? groups, in we to as started were year much an Netherlands. in with and here the nice obviously very we that So acquisition good, quality an profiles. the for high relates US make we had had the it well, us small geographic in sense, They financial areas prototypical

the pipeline future We of to look see good of those we continue as deals. into kinds

acquisitions you As lumpy. know, are

as efforts to see our as will good same be the at close did we some visibility future Got here the that the have we’ll to nice some into in we UK in good they come certainly owners, in first into in we so but that groups it. ultimately able US, to way the believe in and small conversations they in, point quarter. reaching out Netherlands, come the good team the And as of and in here proactive well continues having

little anything there's if gross number looks to And curious I was hear. just the like sort came down on going side, it what margins That’s in that. a good and of on the quarter bit. Okay. drove just

Elizabeth Boland

were Which about, you Henry. Sorry, talking margin Service? Full

Henry Chien

overall gross I said - yes, margin.

Elizabeth Boland

margin. Overall gross Yes.

I - some seeing had you're We about of couple year. of in sort areas the all in think factors last we that continuation the of the, is that the talked what happening year spending So incremental had a some - QX. last the wasn't

that a bit the matter lapping there have was just and the investment of probably it's are about centers I cycle, Otherwise, that So be in way we talking and can or Those site Advisory. the the headwind a from in that comes that still just factors. Back-Up lease/consortiums of a in some on Ed Service where we're It minute mix. primary ago. UK versus of from of a initial Full mix revenue the concentration segment contributing

the So are primary drivers. those

Henry Chien

much. Okay, All got it. thanks so right,

Operator

question with proceed with is Manav Please Our from next Barclays. question. Patnaik your

Manav Patnaik

Good evening - my Elizabeth, hey. guys. is first question

So of some maybe. just pieces guidance to first around question is moving the

your back you count. So shares, bought some lowered share

the the full in think tax XX% used said rate of foot release, I year. one notes for press your the in you

think point is said guess so I in I the for I margin, of was But getting year. basis XX what you call that's that, that. clarify to want XX the big I XXX the to range at

get So just out did approach Are offset? you ‘XX see a maybe to pushed wait that into of some here? and taking just

Elizabeth Boland

seeing is net the applied income Yes. to both of on touching adjusted is footnote EPS. think a I GAAP referring is there you're XX% the in that on and adjusted tax it’s The rate The I tax just our clarification rate. the just tax rate mean those.

than a GAAP slightly rate just the it's rate. So higher

the about fruition done in year operating the - the range - So we confusing. need the to and margin in the of feel into parts, lease/consortium improvement, that we've we moving and think as support I to really Back-Up I to and that large year of With on said to just as that come alluded Ed we growth to the for about sort cohort the this, fairly sorry continue continued goes performance feel continue to think Stephen the respect the proximity that's this to And spending Advising. we've have centers, good come along.

we're think into to think for get to and a of range So what possibility just appropriate the it’s the we’ve seeing, put about place. I time year talked and for year last But the having everything we where absorb again is for the the I matter or are what needing so.

Manav Patnaik

guess, think guidance progression the Or maybe? of the either on that to surprised I the in for or rest a was quarter we should got is Full like about anything side that there the delayed Service you there your And year? relative

Elizabeth Boland

on the groups as on any think ramp and I over lease/consortium the No. will into you of acquired the even both centers we - and mean I that couple this we're had indicated we'd year years. - last of we we've - be that come with if sort

on having marching at. that coming we path that ended of XXXX And - same into the we so the be year, we’d sort knew would

So this the ‘XX. that what were we well it lapping of return end expect I think from a that the off are the and just we start that how bit to pieces expect in little be we're year back would the given what weighted really range we to and - contributing

Manav Patnaik

I Okay. the don't in you think, wrong I'm if I because there. one And Netherlands you, me then some one acquisition doing for me recall just time last correct Stephen for for is,

US coming understand With saturated, that UK area in? us kind done, will pipeline more just be an help you we’ll the there? Can the see of

Stephen Kramer

Yes. Sure.

each strong we've in the a acquisition And three well really been geographies. have pipeline about of say track and pipeline I in that good geographies. what executing we of So like how as is, have a our what good the first is each a pipeline we would as really I record

certainly terms is is that a in drying the it So pipeline. assertion good up not US of

to of good again continue in deals We've year. this as the quarter And was see really demonstrated acquired this Netherlands we acquired first last we year. the year. think I

us beyond really out see of taking them. we you'll between geographies the so opportunities see as moving market and the best And I think

three execute you'll each and And in so to should our be I of expectation that see us teams your are think really active all continue across the three.

Manav Patnaik

All a right, lot. thanks

Operator

instructions]. [Operator

Hamzah Mazari Group. proceed from with from next your is Our question. Macquarie question Please

Kayvon Rahbar

forecasts to how is much US business you in current reimbursement filling relevant I’m Rahbar. Kayvon going to is and what directly of for talk spend Hamzah. your This tuition the forward? are your Can Hi.

Elizabeth Boland

the last in adult And learners Ed our have So advising to just on business tuition and Advisory Ed Assist that the is The the we under in side the a actor ended - XX% and about so is share of segment. reimbursement we of both business which year mentioned, business. as Ed lion’s the million. growth advising that $XX

So to I just think if right, XX%. the spend that administration is be by I'm a global we'd sort that substantially fee expecting question growing the understanding grow itself of doing the marketplace is that the in would - It tuition for is take the higher. level. we be we that fee as industry. estimate - market tuition spend. be on of that spending I say, take $XX or range and reimbursement that administrative to of billion $XX in But take in spend so annual to of at the we we general continues billion strong level This the an We

Stephen Kramer

this that a not that clear, for say Yes. market alluding those their majority the incentive, probably the to assistance that out other or important point tuition that are vast dollars employee, are may add, assistance. that to market Elizabeth up of government, for to right? XXXX support tuition driven is just the than dimension only know, administering is may invested, get be not today actually you employers employer is that's I’d And themselves. employers programs per by fact I is the thing obviously to a there So to the is is would tax other dollars, that -

to “self-operate” their outsource ultimately programs skill them to than place a they convincing when us where strategically we and are So can to so ultimately better workforce support manage currently are who we’re to employers self-manage. the get they spent and them up dollars these their employees that more really

Kayvon Rahbar

then income? helpful. notes, how that? net about we free That's cash should And going this forgive you be However free how think unrelated, forward, flow EBITDA cash should it we thinking conversion, is taking about so already me another was flow, define I All question But asked. and right. very and if or

Elizabeth Boland

it we cash cash ops free capital. estimating from were as we so - maintenance flow define So after flow

EBITDA. So $XXX to a we’re continue growth in that to of year. to would And estimating expectation our million our that $XXX similarly million grow rate, this terms

X% So it topline XX% would is mid-teens and so that, a be in flow on our rate growth if to as our well. we're the growth leveraging cash -

Kayvon Rahbar

Okay. Thank you.

Stephen Kramer

you you the this thank Well, afternoon, participating our very all Great. on and forward we'll seeing look for much in out call to road.

Elizabeth Boland

night. a Have everybody. good Thanks

Stephen Kramer

night. Good

Operator

This you. concludes today's conference. Thank

and You may this for time lines your you your thank participation. at disconnect

Bright Horizons Family Solutions (BFAM) 30 Apr 182018 Q1 Earnings call transcript