BFAM - Earnings call 3 2023 | Bright Horizons Family Solutions Inc.

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Bright Horizons Family Solutions First Quarter of 2023 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is my pleasure to introduce your host, Michael Flanagan, Vice President, Investor Relations for Bright Horizons Family Solutions.

You may begin, sir.

Michael Flanagan

Thank you, Judith, and welcome to everyone on Bright Horizons third quarter earnings call.

note will call Investor be of website, please and being Relations begin, our recording a available brighthorizons.com. we that is today's webcast section Before under the

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

to the considered risks cause described in actual filings. statements financial and results Forward-looking in are may operating be other should with that statements differ and that in and uncertainties our cautionary XXXX, involve that earnings SEC conjunction materially Form and detail release, XX-K

Any forward-looking the investors.brighthorizons.com. counterparts also in these reconciled is non-GAAP undertake which may no GAAP on statement obligation are which available to under financial to their of measures, website refer date to which section forward-looking speaks detailed may as the update and our made, We we at of is release, our and any IR earnings only statements.

me of Financial Officer, we are Joining business. follow more Chief reviewing Stephen on start will and an and Boland. it our your review before update with Chief Stephen by Kramer; to will provide on detailed questions. the Executive quarter Elizabeth the our results Officer, numbers Elizabeth call third open a today's up

let With the call me turn that, over to Stephen.

Stephen Kramer

our use we types outpacing and Care end long-term of delivered expectations came third with XXXX, We call Service I approach am And and I'm Full performance ahead evening. progress quarter. our this pleased in delivered growth adjusted results expectations. objectives. comparable across high quarter and Back-up Mike, the growth. year-over-year toward as continued EPS with performance who to growth. of well and welcome in our joined Thanks, enrollment our the our XX% with revenue proud near- of revenue the Overall, has an everyone care all with XX% single-digit exceptional strong

full than the dip service and children XX% slightly childcare quarter specifics. driven million. enrollment older In primarily higher-than-projected is QX, the out into growth. discussed The months, third as $XXX XX% top-performing of some our to an to elementary above cohort, over in increased summer from demonstrate segment, up into have performance. better continued seasonal previously cohorts XXXX. driving year-over-year schools center with begin So the aging we by revenue we improved improvement year-over-year our typical The our to of increased XX% enrollment which centers, expected, In in QX defined XX% occupancy

XX% the levels infant XX% ongoing centers averaging growth occupancy life year with year, our as with in represents In in compared groups our in In QX our provide enrollment have rate growth notable the trends, quarter. more in enrollment age to in and across year-over-year for centers that XX% high with strong enrollment the mid-teens more toddler expanded a growth than XX% single-digit XX% U.S., X client increased color under occupancy nearly a bottom lease XX% those on to in and younger of cohort centers models these to opened classrooms. and centers, prior of our momentum both period. in been To bit

expectations. averaged QX. where of enrollment quarter, in most discussed in a be in continue and to macroeconomic Netherlands single-digit increased But line and staffing the sequentially more the rate pandemic. QX, cadence Australia, with to a occupancy challenging QX, enrollment the last at low the U.S., backdrop In over XX%, than recoveries the broadly the environment headwind remains as U.K. our Enrollment QX again compared modestly our improved in the U.K. we and Outside increased as in our growth geography. to

increased increased labor U.S. be a cost staffing the year-over-year, the continue flow to applicant trends. U.K., better levels mixed. and and trends to recruitment more constraint U.S., Outside staffing underpinned Staffing to see overall by the enrollment positive the retention structure. and continues rates. In be retention enrollment, to continued front, accommodating On higher our

continue acquisition to quarter, retain a initiatives and last staff. variety execute discussed undertaken to qualified staff, actions talent reduce reliance have of on we and on our new attract our costly we agency As staff existing

While to optimistic a I profitability the and our improve efficiencies, U.K. that in am drive change material these take costs will will and labor levels centers. operating initiatives these overall staffing of efforts time

to network Back-up Traditional above The growth through Revenue guidance quarter. quarter who centers turn to Let level families for well outstanding me our strongest of a another showing Horizons summer growth outpaced children in on record The from across the grew XX% August with $XXX and continued delivered we use expectations delivered Care, was experienced million. with now our use. which care. July camps, Bright base the robust let children demand, our growth vacation. strongest notably as

from moderated would meet care use another concentration quarter operations in demand, I delighted month was needed of see at the surge use, our September Overall, the remain client this summer. the the the piece to with performance they though this ensuring strong to over team and of am by high the growth execution work. of productive families

and opportunity have we expansion our the the leverage technology, Care been we within year we making segment investments and marketing growth in the backup The products. have services of as illustrates this Back-up broad

Edasu increasing Advisory new business Coach included and Education over million, Medical in Inc. Hubble for revenue quarter year. Fresenius launches of client delivered $XX prior and X% the College the Notable Our

key I always to am deliver take families to thrilled care up, They wrap clients. and we recognize been centered quality opportunity to Horizons peers. again bright incredible our As apart heard sets customer overwhelmingly have teachers that the I early staff received child's they share just of of teams. the our the impact want quality our and highest and education I NPS and families ability from our the education and this and survey. currently the our of work We to to their to results the have parent satisfaction scores from enrolled saw that on impact education excellent teachers

business every serving day. do people, and the Our work about fundamentally is we a recognition to great of people this affirmation

the continued So progress our in I closing, are seeing business. across we like

outlook to full billion our Given year our year-to-date revenue of and to $X.XX. $X.X XX% a XX% $X.XX range or our current growth and guidance to we range for QX, billion adjusted to are results $X.XXX of narrowing an EPS

that, call around With Elizabeth, to will into who detail share I'll more quarterly numbers turn outlook. the and over the our dive

Elizabeth Boland

of on recap $XXX XX% of $XXX Thank million. of the or of million XX% and million adjusted the EBITDA XX% $XX and or everyone quarter, XX% hello income QX operating increased was XX% you, year. up revenue Stephen, the overall To revenue revenue, of third to increased call. to prior Adjusted over 'XX over

Lastly, adjusted XX% EPS in quarter. the grew of $X.XX a share

and $XXX or centers XX% in over ticking X,XXX expected, Enrollment enrollment year, centers given To levels to the of for opened across year, million enrollment the in increased seasonality closed quarter range the break increased X, Occupancy QX ending down in X and new of increased high centers. prior our We by driven than more $XX the down averaged in of a this million revenue with sequentially for XX% XX%, service the added pricing. digits as months. QX, the X to typical summer XX% single full to XX% bit QX ahead further, expectations over our portfolio.

tuition while the enrollment, single $X mentioned, improvement improving enrollment international As million U.S. and business. double segment of $X low driven enrollment prior year increases over by QX. labor of our from digits and the year. enrollment income the the Adjusted was staffing the operating our the year-over-year the in in Stephen higher broader was reduction digits, $XX million in million received cost support inefficient agency offsetting base. full and increased low in in continued prior in funding service grew ARPA operating over increased government growth leverage Partially a the program U.K. across earnings impact the This

XX% Care. the XX% Back-up revenue, was of million. third quarter And ahead operating well growing $XXX Turning to to to income million, of XX% for expectations in grew growth. XX% $XX our to Revenue

in across care school summer choice, higher particularly with As detailed, than anticipated, we use volume age strong Stephen was our use programs.

operating Educational Advising our X% to delivered grew segment by of $XX an margin and Lastly, million revenue XX%.

$XX the to increased Interest quarter modestly expense in million.

quarter about to XX.X%, increased 'XX to our price is million on of of that the purchase of net related the increase children. in and The 'XX. only structural points per basis income both adjusted QX 'XX Excluding an tax acquisition deferred $X.X XXX on rate over

sheet compared to we and balance $XX X.Xx and cash have started last acquisitions flow. the of 'XX. in year. million cash million to of in $XX to year, speaking, comparatively from $XXX We've $XXX Turning Ontime in of assets debt million generated operations million, leverage this had EBITDA, invested children XXXX. quarter third September million We of And XXXX, 'XX. X.XXx the $XXX with we invested in acquisition fixed X of a from cash ended in ratio and this we that including the July year the on of down net debt Through

Moving on outlook. our to updated XXXX

million year. for reflect Stephen As of range revenue months million year we of our the the revenue lower the first end $X.X full the raising of X to guidance outlined, performance are the $X.XXX to through

range we an segment we full On in grow mid-single XX%, to adjusted basis, approximately the digits. to the to advisory terms XX% for service to grow EPS XX% expect care for to narrowing year, grow $X.XX In back-up guidance year. our and now roughly revenue XX% full to are of the to $X.XX an

adjusted outlook range overall range the million, million In and be $X.XX terms XXXX, this of be full of in EPS to to in that the the revenue QX of $X.XX assumes will for $XXX will remainder quarter. of the $XXX year

to Before margins XXXX. quarter and want and I reported this interest growth expense items is each affecting funding, ARPA we've in tax earnings discrete as rates I that X our close, the That rate. are year, done quantify

we caps run XX XXXX be QX September as through those million and centers, effectively XXX in expect million QX, up and step $XX reminder, million in from this for a interest in to ended to new rate account funding for items reflects interest P&L lower will approximately the with expense. month. funding at growth expect $XX centers, approximate which our expense step-up points Two here, headwind higher sequential roughly $XX rate XXXX. government we $X as tax rate ARPA the QX, interest ARPA in year-over-year basis P&L of In in $X.XX Also program 'XX an more to notes million quarterly the less that

the So to this progress excited be continue echoing pleased year we're ahead. opportunities the the in Stephen's about with business closing, continued and comments, across

so And Judith, open can and to go we Q&A. are that, with questions to

Operator

comes from Andrew first JPMorgan. [Operator Steinerman of Our Instructions] question

Andrew Steinerman

together. that able how of kind the to important ask It's Andrew. say, U.K. confidence I serve about the you'll just What it business wanted is improve business. the to and gives U.K. U.K. U.S., to be you and the let's strategically

Stephen Kramer

nice your Andrew, hear evening, voice. to Good

in market So look, know incredibly been and challenge and that that market. but understand we ability well to certainly the out take facing are the how on that other have that our some so facing since and we had within have XXXX, the currently we there been also recognize and as the staffing see We some to it operate to starting progress have. U.K. to continued relates of agency staff to we ability to our hand, are

In we our that, holds continue that leadership quality good as to think stead in addition that build market us in business position back. that to I really

as to in to things like classrooms government as staff, of that relates the the qualifications start very to to are ratios starting reasonable about that, it well funding. the I differently addition seeing in think we proposals as think have

especially from portfolio we represents again, perspective, so U.K. have future. for the U.K. and our believe the we And that the in that our something

very We are being disciplined.

not for look particular going hard think continue So strong. at take time where we are to not we'll prospects to to sense the us, very are that steps locations make closures we will the and over have

in other On have believe to the the we in hand, and term make overall, that to unique a believe progress there. position we market continue U.K. the long

Operator

Sachs. comes question next of from Tong George Goldman Our

Keen Fai Tong

head into play in You mentioned some you're third trends to occupancy in out of levels you with on to Can that XXXX? occupancy averaged quarter. XQ the the trends expect as and you XX% would how elaborate XX% seeing in the of you range

Elizabeth Boland

we trend continue the George. progress are sequential we it's than just of into a steady The Sure. as group about that continues have good compare this months We to XX dip, operating. but year-over-year, a and more of sort improve, even feel the centers there cohort it's to and as enrollment quarter-to-quarter. coming

to the aiming the year, That's lion's quarter are X back next this centers get performing of if year. gotten we XX%. there. next -- bands, ahead will, where achieving group have Looking that had mentioned performance and our the share of They're and are to quarter now. was reported that of that was They we to last top-performing obviously XX% the you we XX% total over already

in band there be next middle progress. enrollment enrollment So the where and would improvement would It's we really band modest year. see the lower

looking And we high the would looking year in have keep XX% centers again at cohorts overall to so now, to next enrollment growing be across the to various XX% single growing be enrollment. opportunity and the that digits that

how that's it. think we about broadly So

Keen Fai Tong

just it. to Got up get pre-COVID When expect And would that. follow levels of to on to rates? back occupancy you

Elizabeth Boland

pre-Covid group, Well, mentioned levels. top we to as in already the are back

So averaging even that for currently those listing quoted, Those centers in and just of range. XX%. enrolled I just between middle group, XX%, what are which be the is they're XX% XX% would that in range

and the the -- opportunity that we is bottom had they is -- broader year the would see to be second expect mix levels growth for half in pre-covid of second half the would very the what we centers those of operated year. to be cohort targeting then centers. next have And getting So most at a

And certainly seeing we're that now. out to be of on the so cadence would XXXX enrollment looking based those

Operator

next of Meuler question Our from Jeff Baird. comes

Jeffrey Meuler

back-up which like a keeps feels I I'm and for asking question outperforming. business same as you the calling the then on it keep guess, care last quarter, deceleration first Just strength, is

all metric you use that why signed year just the like looking stronger outsized help of potentially up percentage Or are years the on a given just repeat. this this any relative factors during point like it's understand because last like other is? any constraining other to otherwise, that out But like on exhausted for with of can quarter the maybe the I growth me at factors you're the So from typically case won't what set growth COVID? couple post-code banks clients of growth of

Elizabeth Boland

have some pointing of So thanks, level us pay-per-use a and number have the over our you're arrangements is our clients use that to threshold. do Jeff. that have -- The a it or come -- minimum are of -- base fee on the for basis clients mix paying I into think factors a overall us then with a essentially

can for back-up much users on constraint, at clients there's utilizing of an individual client so an most more opportunity, for And have But course, if a do part, how a care. to the be will, employee utilize. you

consumed baskets first we given for the uses employees have have primary are those the that first through through so And for that seen the individual X months, the been the largely those users months. X

a gives what across pause continued new some is that us So about just growth cohort. whole

the have of We with use at of more parents the of the whole our school all earlier sort a and X that has ages I week of been pulling a in the bit or users. there time for out will those a year users heavier is new view the and be with concentration those for consumption summertime certainly reaching think of some -- the opportunities. those But to that all of

story that the use growth components quarter. more sort years of think plus consume in negative. been we to But different year opportunity a XX% couple first banks. seasonal numbers outlook of of don't the by of of they that And trajectory the has use have the is to a that's -- are this great It So clients November. is And their have we amplified the our types, make business of growth want a terrific seasoning care who to round. for as sound the the in I third the way now day

Jeffrey Meuler

quarter On besides down Okay. that's shortfall expectations staffing asking U.K. anything a growth margins margins, excess weighing it I again I just be relative that upside. the full revenue we'll incremental enrollment enrollment have. like to there margins, coming And currently would would the I if place because looks I'm in asked was decent think given despite that you service levels. and quarter. else question guess see capacity stronger high the at next

Elizabeth Boland

Yes. fair I callout. certainly a mean it's

than you more to been talked challenged we has certainly last outlook been I which been had we all. challenged had think other and -- U.K., they've slightly time the our than

further infants the other it quarter. how age with for of we've the to that So of story long-term results in higher But coming the a higher enrollment at the think which and groups, quarter's sort the thing note is I'd growth higher the fourth a concentration, positive as the toddler actual and structure cost and see a comes intensity well. ratio only that is we third refined I that

that's component labor other so lay the of terms that cost And out I'd probably element. in the

Operator

of comes question Barclays. next Our Manav Patnaik from

Manav Patnaik

just it, follow-up changed, your a if segments. operating last missed just I X but anything I for I and the us apologize since I the expectations you can quarter? know on if suppose, help with margin don't Elizabeth, that, has

Elizabeth Boland

Not significantly. No.

improvement had what back margins just for And that that there, again, over in business QX, low have And service QX. we've think XX% just also advising still up, through. single the we that's against XX% I still That's start performance expect then again, so quarter. coming a won't this to digits that's operating in similar. I'll range. funding the that in that's XX% to just similar is, The the full would -- notice quarter to ARPA

would I say, consistent. So

Manav Patnaik

seems in around Okay. just comments been missing of portfolio, like It's terms on just been that's Stephen, curious the And at advisory. looking then your decelerating. just expectations. It ad

some expectation the growth for time. there of quite lowered You've

Just whether not? strategically thoughts that's on or important your

Stephen Kramer

Yes. Thank you, Manav.

and we the to is enterprise we with believe So relationships enjoy the strategic advisory that look, business, overall clients. our our

and to forward school upskilling is the XXX to the that and/or and perspective. upon environments environment education education themselves, from depend critical reskilling their current coming an us through in the really through which, dependence employees obviously, back will who about have area in either employees support We advisory going clients

shared the we clients and the we where our that employer continuing the In employer last prospective underway. are that of said thinking to absolutely is and in are of a time that against about terms reposition quarter in needs we service and clients. growth,

We continue clients. there to lean opportunity and have that in new large in these believe is leadership a clients really that to going forward for us new with business and

just So growth, an we get the cadence market as as going well and from in it's a we into from perspective next overall, that we believe year. to participant advantaged and of employer the believe both are yes, perspective strategic need

Operator

Josh from comes of UPS. question next Our Chan

Joshua Chan

question on of first my much try know for to users to you to and the driving get But before? just the like? more. uses So the last care, is I consumer now that users market behavior seems use your the more it about benefits kind year and what you that talk back-Up is year, could always benefit use it especially the that are accelerating why it this than

Elizabeth Boland

start add color. and can can off I Stephen

I service is interesting consider think the care thing is that is thing is benefit full paid mainly for different care the about or that notable that the by from to back-up it a clients.

It's employees source the is copayment So there. in filling need be when much their participation cost to another intended down and/or lower. breaks care the in is

it's pet as And we children opportunity to additional an that in well across with children into care home. virtual younger the provided employee an care, now employer. school learning so and centers lean age solutions from in have as by standpoint, And across that their a benefit is types

have sponsored benefit. at touch as our client of that wider I able array partners a this think employees it's a to

across Bright and of across what network the element, you. an that there's solution it's how Horizons and flexible in centers in-home of it's delivered have So terms

that by -- think is there's discounts, cost consumer is the Full-service base broad a a it. their speaking. but a employees. relatively often So is opportunity subsidized out-of-pocket parent with of employment for the and concentrated modest, the and also concentrated the very to it I very the is cost through more employers has meaningful it's more number still for And tuition benefit facilities -- through

have So the consumer I other behavior, Steven? if you on don't know thoughts

Stephen Kramer

Yes.

-- end I thing investing we have outreach seamless say for through user would Elizabeth. can we be years, investing I the in agree totally interfaces and efforts. marketing think last with several I experience a certainly technology have better add, absolutely been in the would because that only personalized the over been more and I more

I think fruit. again, are so And to those bear efforts starting

case these outreach starting we that of refine refine pay to starting ultimately, fruit. couple growth opportunities investments of many the will And continue really and those for nice that demand to opportunities some service. ongoing and opportunities but on terms to you're continue show growth see what have shared in So to continue top the believe of marketing of last to really are use to Elizabeth the experience and years actual the

Joshua Chan

helpful. That's really

than advantage the opening you full be talk there the is to cadence service next or of you side, into next open could an given given year, about And disruptions market to expecting fairly into demand On enrollment centers year you see more trends seem potential to that healthy usual market? in opportunity any next center just take perhaps that year?

Stephen Kramer

Yes, sure.

look, our and enjoy. saying will So #X by going continue near is in next That be that opportunity the priority. that economics the our have best grow our impact to centers. has enrolling the It that been term we priority. to to It our continues continue into priority year, be our to grow we start I'll to existing certainly

that to centers be is well our expectation of XX centered a growth about, opening centers year. bats it, as be and lease XX acquisition calling combination new opportunities. call that, And our are employer next of We new as clients on for will models will that

when longer-term differently terms do a XX, other operators certain past, September knock-on about there we of to ended ARPA with be geographies, shared their thinking the plans continuing As that is in have their to in centers. see of persist likely we in effect

but that, XXXX. we see aspect that's in And so of the continuing that may another growth we're monitor again, to

Operator

question Markets. of Our comes Jeff BMO from Capital Silber next

Jeffrey Silber

seeing I sales the it's are the I the just environment, current center cycle. long about curious know a are in caution new you wanted more Or I'm to continue clients uncertainty? still the pipeline. given conversation receptive?

Stephen Kramer

are more and interest. But center a the recognize as want still on continue site to is we case. of decision, call so level make Yes. time they They and putting see last definitely are long-term I an that sure on that elevated they decisions. Employers I certainly, make taking to a the shared longer-term those this, client centers. their have again, the it appropriately. about pleased as base thinking are, our really I as their we return office. the growth do And to impact as But that who not deliberating can and they think existing are think on is have it that certainly about mean, to that considering is well on employees again,

again, decisions. And elevated certainly longer taking so but interest, make to those

Jeffrey Silber

All inflation. getting know was increases year I can you're right. maybe frame not in XXXX to guidance we of but you're for I relative just curious And cost terms what thinking next yet, price

Elizabeth Boland

Yes. be finished, is February, but process the process detailed of when XXXX Yes, with budget obviously, so we you are we getting guidance in all will through our we talk providing, after in now.

inflation, from a inflation. wage but inflation broadly and Other persistently And have of more we general cost are occupancy wages although call to little costs but it other the certainly costs businesses the well. personnel businesses increases, is service energy things our full are have given so other looking certainly from likely of costs cost down. technology in But X% a X% have a been speaking, general some primary variable, inflation standpoint, as standpoint. higher, come Other X% at like

X% range. pricing overall X% an our look the is standpoint, likely at From to point this in

and to We center-by-center geography. points by points basis geography do XXX of spread. a basis XXX So review

our go is where we the And the we broad market permits right. average, we will as mindful higher but about. a and also primary enrollment structure goal are of driving that's as So have talked where

business. key in are the X elements the next primary year our full for service structure So on those probably

Operator

Toni Morgan Stanley. of [Operator from Instructions] Our next question Kaplan comes

Toni Kaplan

you for midpoint, the why expect revenue half to shouldn't we million under XQ of about U.K. So through? thinking we the by maybe by weaker just mentioned is at thinking flow the anything guide guess, else there be I that. the it about? XQ? about full Or I $XX is beat the beat was conservatism should you than guide raised but But year expected. know that

Elizabeth Boland

question. the for thanks Toni, Sure.

really for we the I think you lighter the It's that outperformance flowed year. that the midpoint, back-up but in the raised did through similar. that QX bit course, view, at we've necessary roughly little as and of we say, outperform, actually, a

to the is the into translates and rest headwind a revenue rates As really that's are, think we've that where -- difference it revenue, is the the and where relates of to see forward what that we and in I exchange between carrying think then forward foreign the QX, they we driver against firm. it you to business, with FX main where date essentially stay the performed carry

Toni Kaplan

into margins to next quarter next like I'd in ARPA full-service then said And negative which about The Great. it year? the you quarter, I service ex improve to were way. and $X going I this million. ask guess, gets margin question a in was full different think slightly actually What again.

Elizabeth Boland

Yes.

structure in as enrollment for uptick period. into manifests efficient the third maybe turnover we QX more absorbed as through that turnover, cycle and that to but slight enrollment of you how So as itself a quarter QX, if have quarter it's the is a relatively averages the we QX, consistent in in revenue much will, in in

than Australia contributions and steadier that to also level of a through operations, coming We QX have somewhat a tended QX. contribution particularly operate in international to sort from higher Netherlands occupancy better continues of the flow at and have

if the drivers. And transition into business will, of how line, and so and into into coming and as timing are that's QX. the somewhat QX in is seasonal, transition the But those children we teachers primary QX the not evident always you cost service in full classrooms

Operator

of Hoffman question Jefferies. from comes Our next Hans

Hans Hoffman

XXX% in structure? brought current thinking capital from in Not should this, we how on Jefferies. And Hans touched be your expense is but XXXX, interest Hoffman if insight any on in rise interest given you unrest sure you This if the to XQ? on expense about

Elizabeth Boland

Yes.

QX as for So we step translate we rate next just quarter that interest year. up the to guided million $XX in a to to what about overall mentioned, expect is broadly

so that and a caps the debt, variable -- be early have to for interest manage have going Oak, out but contain rate deferred debt, Oak and have have we we do next for therefore, payment floating do But we have year. payment We on will -- a have that cost. able great we that remaining

And so otherwise, the there for good year. the quarter that year. a part measure will early of million borrowings be some in is revolver temporary the a $XX But

Stephen Kramer

thank have Well, great the evening. your all call, very I for you much and Terrific. of joining hope rest you a

Elizabeth Boland

We'll see...

Operator

and today's that you. gentlemen, Ladies Thank concludes event.

disconnect your attending. lines, now you thank may and You for

Bright Horizons Family Solutions (BFAM) 1 Nov 232023 Q3 Earnings call transcript