BFAM - Earnings call transcript Q2 2019 | Bright Horizons Family Solutions Inc.

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Operator

Greetings, and welcome to the Bright Horizons' Family Solutions Second Quarter 2019 earnings conference call. At this time all participants are in a listen-only mode. [Operator instructions]

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Elizabeth Boland, Chief Financial Officer. Elizabeth. you, Thank

begin. You may

Elizabeth Boland

And and investor call With hello our the Ashley, recording available over Executive everybody Executive I'll be administrative turn will the Section being to on the webcast of today. call our Chair. our me Lissy, Kramer, Stephen. and call my call website few Officer; matters, Relations Today's Thanks, brighthorizons.com. to Dave on the after is is Chief a under Stephen and

statements Harbor forward-looking regarding release. any on in participants, this are those to reminder a earnings including made future subject call, As our to statement performance financial the Safe included

XXXX Forward-looking statements XX-K. operating materially actual to inherently cause differ risks our involve and they that in Form may financial described results uncertainties and are and in detail

of statements date and update speaks it's made obligation as undertake statements. any forward-looking forward-looking which only we on no to the Any

today refer IR GAAP also detailed their which measures, to is We under reconciled which our non-GAAP and website. to release, of our available in are counterparts financial earnings section the

So, us Stephen? through business. update the on take will now review and Stephen

Stephen Kramer

to and have Thanks, joined thanks evening. Elizabeth, you of us all this who

our for past I'll always, results plans this As financial you quarter growth XXXX. outlook on and and call, our and for update operating on review today's

follow we a Elizabeth open will questions. then of before review with it more your the numbers detailed up to

XXXX, performance. to be continue our consistent half very we and As of we second to move with strong the pleased

sixth lease business, and Penn EPS centers XX X% a of of for including $X.XX this we University $XXX XX% area. Greater second quarter are full-service consortium adjusted Seattle State three Mindbody, centers top for locations, In growth For in we growth our added share. the our client-sponsored to the center reporting line million and year, of to

advisory with and expanded portfolios addition, launches care BJC Nestle, Telecon back-up client recent WeWork. for Healthcare, and ed In we our

efforts past this cross quarter. also yield to and cross-selling promotion Our continued good results

service third clients include Freddie who this Southern Bright Mac, Allstate, or added of A the a second of Horizons' existing Vertex. University past few examples quarter and California

prior clients only a on services. more shared existing about we've than of our quarter purchase As calls, one of our currently

opportunity is area the still So, significant. this addressable in

Tracking the operating the of adjusted growth, XX XX% XX.X% In line and continue second and across operating results top our basis to we points consistent business. income strong quarter, deliver revenue. solid grew also expanded to

In gains from our mature our operating leverage newer enrollment and are and mature to full-service centers that from segment, continue we consortium lease levels. solid to client centers our ramping both

reflects strong to segment, back-up performance key components. growth operating Turning our the and three top line

which we're care back-up position extend first acquired Care, First, to the good of market UK. about feel opportunity the our in the My in quarter with the XXXX, in the integration leadership we far Family really thus pleased and emerging

clients. strong client Second, solid with existing by launches, new use coupled

entire on has care and our to feedback progress the to the While of strong, always speed our takes back-up satisfaction related a been pride team the lot of experience, service including the end-user confirmation. enhancements in

drive and ultimately, partners. these by the the our of and Third, employees new use more initiatives registrations, marketing targeted personalized campaigns, client reservations,

mobile leverage. our also web on made operating and drive being reservations to shift growth increasing and The platforms

date, Given the we'll and continue our and expectations needs meet the invest in to strategies going innovative results the to technological future. tools client's to into

clients. of new continues our client through three and First, the strategy touch remained sells strategic existing focused relationships in our and new each Now growth across interest with organic be we're of use services. both to The I'll clients briefly on sales and industries on: services cross strong additional cultivating areas and focused our existing pipeline expanding current growth with on

lease Next, our consortium centers.

limited locations. of the needs in client with supply our settings, of where a these urban last two, child these one, we our XX opened a focus now centers population and the have a partners meet three, see: select to strong of opportunities over high-quality on of concentrated years six target care; We demographic;

progress We this significant operating creation the optimistic positive from and are strategy. centers about as encouraged ramp levels of they value by contribution are opportunity of and the this to mature group

Finally, continue geographies, with a thresholds. a of regard our centers of of that in mix we meet our single good to to and prospects cultivate three performance M&A, and solid pipeline each primary acquisition including networks high-quality

opportunities that to In this the three acquired we also back-up segments. Netherlands second and to time, like educational enables in in leadership the Family solidify further Over Care us My fit our that advising acquire quarter, centers we businesses our position profile. have

we that families for scope into acquisitions, in I'm our service entered that back-up employers pleased have a we innovative partnership relationships Germany. providers offerings for actively Familienservice, leading with PME regarded like-minded of share our clients. Today, geographic deepen an and with highly can provider and and care full-service Beyond seek and to

year, and abroad. personally a magical many evenings, take attended markets across number to I reflects been by of where want we've arrangement opportunity globe. on have clients around colleagues. Horizons recognition teams that expanding key and events individual This This reflect employees record the success our U.S. also impact nominations commitment we multinational have I to Bright across our the the have months. few employee last over of in the celebrated award with to this the occurring had our we and clients, great families

the to day all appreciation children, families, workplaces. each out and make of in difference heartfelt learners to our My XX,XXX employees who lives tirelessly of a goes work

with continued are range the year. We the in we momentum strong believe the to positioned full that to we performance positive and So, have X% XX% the for in of we continue growth operating years. agility closing, over revenue well anticipate demonstrated

of numbers will adjusted I'll the to share can you drive earnings per Q&A. in back review that operating $X.XX project With be We Elizabeth range in $X.XX. and that, detail, continued leverage more during to the

Elizabeth Boland

you, Thank Stephen.

full-service center the contributions and was rate centers, or from revenue, in enrollment recapping growth again $XX X% which Overall million from quarter. by revenue increases, including million up was The once the new quarter. $XX.X was the gains for X% about So acquisitions. in headlines driven X.X%

exchange quarter. the foreign headwind rates XXX growth basis full-service for points the Also, created approximately of to

segment common expanded a X.X%. on this currency So, basis,

well, Our back-up the to also quarter. growth generating operations XX% in top continue line perform

In to strong revenue UK on utilization expanded Family clients addition in launched existing My new from the from clients. and contributions Care on service, who

Ed basis from to $XX.X Stephen grew XX.X% XX.X% and XX% income quarter the and revenue, new million advisory by of of use or existing on to services of client revenue, million second gross QX launches increased which In $XXX operating points mentioned up XX or of base. adjusted increased $XX XXXX. is on profit as expanded XXXX, million

income our on XX.X% tuition XX enrollment gains leveraging management. and the basis points our our operating ramping strong centers mature new expanded on increases on growth basis, from On and a segment and to acquired cost contributions from full-service in on adjusted centers,

Our and utilization the back-up generated we Care improving complete business. back-up in of addition of in headwind on operations opportunity income back-up of and generated the UK to operating execute we levels embedded service The delivery. My the quarter growth on scale segment build margins the XX.X% integration efficiency solid the Family as therein as some and

million XXXX average revolver over QX $XX lower year of of slightly expense borrowings. was on down Interest in last

of million interest current with rate Our $XXX fixed X% swap. approximates term with our borrowing cost loans an

of X.XX net the to quarter EBITDA. ended debt at We turns

XXXX. as we XXX well, operating first As we continue of past, million in to half in commented the generate cash the strong

million our allocation our in this new of priority followed be to centers our in deploying the that the and terms repurchases cash $XX business support functions. by growth In strategy, first existing Through we've continues invested share into have capital existing reinvested year, of million our and flow acquisitions and authorization. of investments XX and operations under June

XX, with of service more Lastly, at children. than we we partner centers operated to with XXX,XXX the XXXX June clients. serve across And lines, X,XXX all our capacity

that range Now on said, adding headlines as we top XXXX continue X% of in XX%. earlier, growth Stephen project to to he the the guidance line for to touched

are back-up XX% the will Care. the coming of division My including full and year, We Family that addition X% our XX% from for grow approximately projecting between

project full-service points the top projecting includes percentage segment, and remainder euro the growth X.X%. XX growth exchange And six We on line line ed X.X headwind we're lower of XX%. in top services of a of range foreign projected in in rates to continue half a our to pound Again, our the for to about and range of XXXX. advisory in this

X% On and half three centers in the add X% operating to across in side approximately top X% center to network. for average to full-service the our a line price range to the from enrollment XXXX, the we of to expect and mature continue and to P&L ramping increases realize

XX that centers, close openings including to centers, our And we over will time expect acquisitions. new between anticipate strategy add locations. consistent XX and XX approximately We we with to prune underperforming and disciplined also organic

it XX and in across service management of operating cost XXX for margin drives all to basis key XXXX million XXXX, improvement points. the to basis segments points Top our $XX and of efficiency XX range line disciplined On estimate of metrics of range improved growth, XX and delivery performance contribute some for the to compensation XX million million. other amortization to stock we in depreciation million, of million the XX full-year

of XX million. interest now the to estimates Based XX% we rates for million the project on expense we're the projecting rate to and our tax for year, tax the And structural the borrowings approximate of that rest outstanding will interest XX front, approximate on year.

XX approximate the year. shares average are weighted million Lastly, to for projected

XXX of to of cash ongoing free investment million growth We from XXX capital, estimate million of of XXX in million generate flow million and to flow $XX million maintenance have XXX yielding available we'll for approximately business. operations the the total cash

of center consistent projection are all of a and this in combination these adjusted XX a adjusted The to million EPS have the $X.XX in to million to factors a low years. last to couple of share income in lead year and digits capital XXX circled million double new range fairly of net that XXXX, early $X.XX XX We to for the up our share. XXX of centers with opening

we QX to this in sustain the XX% XXXX, drivers, growth range projecting to reported top specifically to X of we Looking expect the quarter. as line we're of past growth

range income projecting million the the bottom to adjusted to of and adjusted On a in $X.XX X.XX in we're million EPS line, XX range XX of the share. net

that, So, with Q&A. we're to to Ashley, ready go

Operator

today Please Morgan. Steinerman ahead. instructions] comes Your first from JP from Andrew question go [Operator

Andrew Steinerman

more for? see about in Hi, partnership what to as of this Andrew, partner is care. a paid with you your the child this dissimilar and little child similar terms back-up that's you care or a bit well? German German is current in Tell mentioned how And market in us partner markets a market

Stephen Kramer

Thank Sure. Andrew. you,

to admired they within offer mentioned, as the set the partner a team is we of the So, PME, services care as going child as at and that be extensive PME well have and we long clients market.

have also back-up a centers a business on-site they So, at directed the for same at robust they series operate and of employers time, care.

so, in same and serve multinational extend at And our really look German as perspective, way at it a clients we that time, and the in the capabilities UK great from U.S. market to way. our the

In does the the area world a addition to get is it child of a to governmental care. way economies one as that, well from largest of in strategic a wonderful for and from the focus, what as explore us an both is employer to understand in that strong perspective, have perspective,

both as as you employer certainly there governmental the and at are support within support, always where know from And form as well know, others of from some third-party qualifies is and we support markets market. looking Germany the

and clients here back-up markets Germany. a we each of our really child well to services UK, in in both in extension that the it full-service Germany, of into an from we the see care So, U.S. as do two serve the as those perspective

Andrew Steinerman

Bright them partnership, direct Horizons there now, And any PME the as refer work? is to benefit monetary you Stephen, right from

Elizabeth Boland

So, it's we interest the a do have company, in state. but small minority a

client value relationships capitalizing how I the is building knowledge is and near of in it of that days early unfolds. we the term, will these think the that we arrangements and see and both market in but see it the on

Andrew Steinerman

Okay, thank you very much.

Elizabeth Boland

you. Thank

Operator

Your Please Goldman ahead. comes Sachs. go from question with George Tong next

George Tong

good thanks, afternoon. Hi,

how how range, can is X% quarter investments specifically, coming of enrollment enrollment to elaborate growth. the growth revenue growth on Within cycle? macro growth X that to trending; broader and is enrollment your you mentioned this from the in responding your recent You technology is

Elizabeth Boland

the My service of like, ability in particular, both the speaking centers. So, enrollment And to I centers, sort it's Bright delivery tools in in full-service our range now, investment they our is that in back-up and end-user enrollment consistent very in principally Day is our experiences the that own the the that we class serve mature primary portfolio mature, a good classroom, that. the our certainly an view in think, care parents growth technology continue of feel with market. Right think on element across really situation the current of have full-service I about our and that and to

traction So, we good there. certainly seeing are some

think enrollment X indicator the performance X% the strong group. But to across good gain of a is we very

George Tong

helpful. Got it. That's

drive You've expect you the to in pair may to recently to account in velocity progress expand on how And a decision your your Can specialists from benefits quarter? higher this made with of product cross-selling. see we growth there rates? managers the

Stephen Kramer

Yes.

a partners client the into the as the So were that Certainly, indicate, marketplace be the on or we we we're some investing services investing second you enable in gave service. deliver and who certainly, of continue in what few nice third seeing ease that to quality are service. examples the moving very second and and cross-selling our of and we really a us a to third focused is feel a client of wins have trust

In view growth of in it any we really have we that general. in terms bake velocity, overall for

family, And And we important well about our growth be currently in think continue new Bright to services I continue way we to from service. demand Horizons the at as the as prospects will believe base chip so, strong who will to an it client those to the that and continue a for of see invest going forward. away would source that is

George Tong

That's helpful. Thank you.

Operator

from go Manav Barclays. comes ahead. question from next Your Patnaik Please

Ryan Leonard

on is Ryan for This Manav.

And enter with then guess, you on guess, thoughts Germany? walk of, thoughts acquisition? And you Just now? how partnership specifically, the your a, more versus that the market? curious why could on, if just think just, kind I about And through why I new

Stephen Kramer

think And strategy in important that an impact element partners. to and like-minded and can we, we is the of look, other we so Yes, support. we the scan continue third-party for globe on some have form that have countries all ingredient finding of

and directly get but can the add partnership, answer market has interested not long-term the possibility in elements. the interested partnership. that, market gives it We'll, represents a through trappings question has partner current was the all acquired, at market while this of your become for found to we a who is, believe think we we to in better the so a that a right opportunity And Germany us very represents market think around that a of value like-minded that and each learn it the even rather creating to on many surface, us also know closely.Germany to but and an other more of attributes

complex relatively of local a has also set It approaches.

they and So, operates Germany, window how within unique have states each and different how a us the states regulation think different the into of individual I and so gives operate. really within funding Germany this

that do think we well-understood to opportunity a high So, that with this in player is a quality, market. great

Ryan Leonard

kind that's rate? of an think of tech you your Got Or about it. in you some in run in And comments, the do then, especially that's already just do the you're incremental think really talked doing? investment already is to you investing that what side, ongoing

Elizabeth Boland

in largely, the we when I to technology with the continue to innovate. on results And just to we're innovate. that Ryan, not those be them, continuing solutions, think run rate, themselves, but we're that it's that I sure grow want we capitalizing have we think the and but of investments success

growth our expand way see rest don't a in we the future. So, largely the the rate, we'll certainly of is and see track the it it because it. modestly to And run but at continue of

support results about headwind. continue to invest seeing an We years we this incremental the mindful stage, drive projecting. but we're and stepped-up talked and be We're to spending not of a that level that invest of to to a appropriately couple to ago want at being

Ryan Leonard

Got you. it. Thank

Elizabeth Boland

you. Thank Yeah.

Operator

America with comes Please Lynch. next Gary go ahead. of from Your question Bisbee Bank Merrill

Gary Bisbee

outside lot of Paris, Dublin about lately send worth a that's good that shifting businesses and of How two Hey, about I lot of and ago, sure afternoon. Brexit Bank more years the back A There's places. thinking asked but going and question around I any it's it you to I'm probably know them like are to. press UK? a feels employees been you America coming risks UK on

Do demand are you any business? thinking that's you customers? any And updated a have from heard about thoughts. for service? the feedback if impacting they the just And Have corporate sense how

Stephen Kramer

it's Yes. a I know great question.

and in continue large, and by continue as client UK to enrollment, interest see we services. So to strong we the other in back-up see opportunity our nice as nice well and

some about looks large, But some that think that could we area, reality relates in to it small out care. portfolio again supply that centers, highlight just and that there pockets, be relates I'll our by or majority in believe I good we Brexit. still feel as that is demand individuals gotten we is And do of may have like. the have is attributed imbalance really the that southeast, something to the the have so headwind area. the greater transferred still what child it opportunity a concentrated London really as to individual

see client-side And as services. good to particular. to we the demand particular, back-up continue relates in see take for it then, our continue services, our to on so, And we in

Gary Bisbee

it And Okay. think and vast UK to your mix is there's that you an it to can on give I right it but us in drive going are? toward the back-up And here? take majority know is revenue of the just business where business? the update is where guess, of what acquisition the Is whatnot, you the what's I U.S.? to

Stephen Kramer

Yes.

majority of in back-up So, our is revenue here it is the definitely still vast U.S. the

likewise, cross we sell to UK, of and in where ability the continue the step up see through U.S. Care likewise to acquisition function position nice our a that was we leadership And nicely growing the We obviously, have My that Family a from were. business

in as step leader, the market us increased with again real the clients, as being a interest well multinational forward. category, as see positive

So are that to think continue the should the the to we grow market. the there overall, of in in early in relates UK, indications really is in that are development innings base it good it It's that nicely the we opportunity in client UK where but as all back-up

Gary Bisbee

And Did one then, repurchases. the or one. just quick in didn't about up quarter I any share you not? do clean anything hear

Elizabeth Boland

Minor.

Gary Bisbee

Thanks, right. guys. All Okay.

Operator

question next go instructions] [Operator Jeff Please Meuler, Baird. Your comes ahead. from

Jeff Meuler

Thank you.

the driving Or the marketing you? growth it those of driven being care I are accelerating and new you're some better experiencing, usage more where organic or factor, terms all is signing targeted up campaigns clients? back-up other that by also the, In guess, you're personalized component for

Stephen Kramer

Yes, so I nice a adoption in certainly seeing that the marketplace. think our are we of service

new as sales But important within and we that focused So cross to the sells and service we an really is you out, through a certainly line more the ingredient back-up is much making a sure rightly as point additional would making as of are are well marketing the reservations velocity. then personalized more on we that I have is working third approach. experience. create driving seamless personalized to improvements nice some highlight that been registrations, thing certainly And

are which we so, seeing that our of the allows web are instantly. also both book, and secure driving platforms instant nice And mobile care adoption end-user to

that confirmed two, And instantaneously. service; fewer in the that then it more so, our know have of ability they context, users, gotten care. have And one, therefore, individual within they've have and feel people, seeing because cancellations are care we to confident

nice driving three think are success combination the it's service. of really seeing back-up we're I our elements those of a line So, in that that

Jeff Meuler

think can is could family with Just equity-owned? long-term so capital is Is options, roughly of you And it us anything this we maybe private of allocation there. help just owned? Okay. terms PME centers? in how of And big number then

Elizabeth Boland

a order Yes, revenue, $XX of long-established. Their business, so so magnitude business. it's it's but modest million a family owned

years this it's in So, for XX-plus at operation point. been

characterize this and is a a, So, as that. it we modest is it investment

And free our think allocation, a not absorbing cash something so, it's flow. that's I from capital much of

Jeff Meuler

it. what and And capital, last between on then employer-sponsored consortium? roughly Got split new just lease the the center is

Elizabeth Boland

capital centers. client-sponsored our centers. don't consortium basically in really put is lease that We So all

preopening to be So, And of would the there for for is year we captured spend X.X we that the also have any extent that average of we that centers, would million following to X.X range the investment new capital. to be between opening, open. million

Jeff Meuler

Thank you.

Elizabeth Boland

Thank you.

Operator

comes Jeff go Markets. Your from ahead. next question with Please Silber BMO Capital

Jeff Silberr

through minimum to wages? floor issues to but kind know wanted We of wage pay you effective clients? about so going of to getting And municipalities more much, you many some minimum labor that July Thanks wage, lifted see and seeing I the difficult more I states are pressuring is X. your those being raise it ask on. than pass

Stephen Kramer

for as continue that we minimum the marketplace floor so but to we as a sure tuitions us increases, Yes, as those increases thoughtful se, be market making they wage to very to per That payer ability typical on we said, been to the a certainly relates say, I certainly, have may you responsive we larger to the always planful that wage and than are is see are always that along lead as about not and and the think reality we even to to wages. strong continue in where still continue have be those places tuitions. pass in it

so, good our to fee to increases by to increases really outpace the we feel And we we are wage ability along that are tuition families. that passing the continue paying about

Jeff Silberr

us color quarter $X.XX I've the how you. you estimate adjusted to Elizabeth, go And got more Is for a give for it possible next bit quarter? EPS Great. the current little X.XX, or Okay. X to

Elizabeth Boland

I'm not mean sure by how there. we you understand I got what

Jeff Silberr

items can some if line possible. give on and the you If of us below some guidance margins

Elizabeth Boland

typically allocate It's have guidance. that. the earnings don't in by We out reconciliation line the item to release. like a We it do GAAP

you guidance with performance broad the consistent operating and rate. what I tax interest be would first So, on and part margin we've in seen I think the framing the of gave year around

in So, much pretty are they I there. think

Jeff Silberr

it. Thanks. Appreciate Okay.

Elizabeth Boland

you. Thank

Operator

floor to back time. like There questions further at over for turn no this closing Elizabeth to are I'd comments. now the

Stephen Kramer

care. the now good you very Thank on right. appreciate wishing We questions. joining And everyone All Thank the you everyone Take thoughtful evening. much. call. a for

Elizabeth Boland

down you the See road.

Bright Horizons Family Solutions (BFAM) 2 Aug 192019 Q2 Earnings call transcript