Bright Horizons Family Solutions (BFAM) 2 May 242024 Q1 Earnings call transcript

Greetings, and welcome to the Bright Horizons Family Solutions First Quarter 2024 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michael Flanagan, Vice President, Investor Relations. Please go ahead.

Thank you, Stephanie. welcome Horizon's and call. quarter Stacy, you, to first Bright earnings Thank

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

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

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

obligation speaks Any statements. on of forward-looking is to only date no the update as forward-looking any made, statement which undertake and we

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

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

who the call. everyone joined has welcome to Thanks, Mike, and

trends than tracking the and performance our earnings on up really XXXX are use start quarter. XX% greater pleased outperformed our in With XXXX in year-over-year increased its first expectations. guidance. solid back-up segment full deliver occupancy are double We with globally ticking growth continuing solid year-over-year, our we the Revenue to our to and service digits and to

$X.XX some the Rockefeller including XX% million adjusted increased XX%. centers and of high rate to So see of at client center first increased and mid-single-digit share. have $XXX the that to million. by U.S. service child revenue centers occupancy in income the XX% specifics. X than increased performance the In double-digit in younger more continues We opened in driven our X mid-single-digit $XXX segment, transitions year than strongest quarter care and quarter, in to for adjusted full net single-digit enrollment of in Aflac with EPS million per in for launched our the QX averaged to University. Revenue The more age preschool age $XX groups the into get quarter in and Enrollment a growth group. been growth growth with

our led U.K. growth U.S. outside The the

in centers of our the While the enrollment have U.K. sustained stepped Netherlands Occupancy occupancy over higher-than-average in couple in had more on given they expansion years. growth. the levels Australia up sequentially and limited mid-single-digit enrollment, last

encouraged have challenging, specifically employee and by by to Horizons staff. reliance I'm operating to and agency our the reducing the of efficiency environment made retaining recent teachers hiring our Bright on continues we progress Although improve be the center operations more

to our U.K. I by see trends fundamentals continued full the the profitability, the headwind expect encouraged gains. am a and to and remains While performance overall service

Let me quarter, to delivered care on to growing million which strong XX% utilization. now $XXX back-up solid another turn revenue

Bright to the largest QX client controlled to with National, supply. in strong Horizons few. for Semiconductors with our and remains We name use launches United and also owned network expand continue NXP Lincoln Traditional Therapeutics growth base our a

a care, use as and look positive their a serves back-up is QX utilizing as higher we solid was seasonally of for the period in While ahead indicator employees to benefit months. the use lower care QX summer number

to continue portfolio of combined XXXX employees, sites, use expanding participation track to this with goals. With client our broader we by growth eligible our

quarter year. delivered business flat Notable Danaher, included quarter, Photonics prior the IPG $XX R. in the over the Grace. in Advisory million W. and launches revenue of Education new Our client

we year. to used segment be last stable relatively levels in quarter, this this and participant As discussed expect we

strategic product and marketing team, offering investments We the experience. are in suite making the and to service both the transform service

a we and greater investments are XXXX I is will the client ultimately beyond. participation drive business, today use-driven advisory making and employee and believe client Ed in adoption

Before to up, are annual want Index next I week. Modern releasing that of results share I Family wrap the our we

decade their of have explored their we last employers. responsibilities. the For well over What family as balance the parents parent's as seen decade, confidence family work supports new in we as increasing advocating expectations working last the and of change is sentiments working have for they their

are benefits would employees, This of top the list flexibility. work balance increase wish new and parents in For particular, support work-life remote Childcare trumping a employer nonnegotiable. XX% of was at even of invest in family view supports. a employees it warning health and and vital of and the employers not employers is for employers clear for relationship the families between who signal is do

who are partner of are already so ahead many employers very be the We for to proud curve. leading of the choice

pleased executed strong I'm to in XXXX. positioned well the In set to to the operating continue the we foundation a in closing, momentum accomplish we results goals XXXX. well QX. for are for and We the positive and quarter, believe us with discipline the solid start set I

we such, are our full As reaffirming XXXX guidance. year

and to the billion per $X.XX XX% in approximately of of growth to to EPS range billion $X.X adjusted revenue $X share. Specifically, $X.X

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

pricing. closing break with bit tuition and of our XX the increased of X% $XXX the centers, while quarter, adding call you, quarter or revenue $XX at the Thank the revenue joining of quarter. of increased revenue recap and the X% XX% a million and income centers Service over We was first or To EBITDA who's to QX prior new X hello of of overall X,XXX XX% Full increased XX% further, year. on $XXX in down revenue X% $XX the million ended up adjusted adjusted high To Stephen, million in operating today. 'XX, first QX expectations everyone enrollment million, to increased this over of end

in Enrollment portfolio. increased mid-single for than more the X centers digits our opened year, across

center seasonality up given high In occupancy cohorts to saw. our in we continued of increased the enrollment of centers year. international XX% of digits sequentially normal previously, we've Stephen cohort, discussed the was the In As growth single and XX% up QX QX the QX enrollment levels from low occupancy to enrollment show from and in over U.S. as period. in of top-performing centers the XX% 'XX. 'XX improvement our mentioned, XX% over single our prior averaged the QX, stepping we year above prior defined digits over improved

million cohort Service occupancy centers of as in teens of the to XX% represents million now bottom ARPA in of In the received the under in XXXX. prior Adjusted increases those XX% in period. government compared enrollment segment leverage program our from Full over income tuition increased the improved prior Higher funding operating support centers and the $XX more the operating than year. QX high $XX million year reduction $XX offset of

while staffing, rationalization. the Service As we our are business to headwind U.S. improved Stephen reducing gains continues ongoing progress losses enrollment to a be overall with seeing center and in the continued Full portfolio discussed, the good segment profitability,

first quarter of revenue. of earnout, or resulted high back-up to in of the to expectations in closeout the a operating million $X.X $XXX quarter end touch quarterly quarter affected margins $XX of adjusted which by overhead our Kate's Adjusted were XX% the ahead grew Steve XX% the the in & and onetime timing with the spending allocations. in by of Camp income Turning charge of care. the million, a operating Revenue million

the overhead half see the estimates higher phasing second Our the reflected the costs with a half segment of full overhead more expected the these lower unchanged, as to of relatively compared costs to is XXXX. year, in the the a support the ratably occurs, for as prior allocation in relatively as is for allocation of but spending first compared back-up year resulting year to

price Lastly, expense large prior Educational and Interest million segment income suite. with tax rate XX.X%, margin of $XX the to was operating in driven Advising by net The year, in in The making investments the product QX we the operating structural part the quarter discussed. delivered million of million $XX previously the XXXX $X.X million accretion consistent we've deferred 'XX. excluding of adjusted on effective interest of $X.X revenue increased per and roughly contracted purchase reported team QX, in margins over are XX%. that

made to to ratio been period. And cash $XX success cash EBITDA. operations net $XX ended the early due $XX in Turning acquisition compared We the and from investments and in for the flow. that QX prior with for million with in deferred balance the sheet We $XXX $XXX.X the cash of quarter had consistent generated Oak in January, to debt year million, million our XX months. in reduced leverage We 'XX. paid million of in first quarter million adjusted remaining X.Xx to the

Now outlook. moving on to our 'XX

share. full the and single As grow full to to we to $X At our grow the a a are adjusted $X.X for segment XX% billion preview, roughly revenue maintaining back-up billion XX% to in to in to digits. care range advisory $X.X X% of level, ed guidance of in year EPS expect $X.XX low we range service XX%, grow to the XXXX and

our X and As margins we earnings XXXX. there are growth outlined last discrete reported affecting in items quarter, rates

reflecting $X.XX lapping expense XXXX headwind in approximately to items approximately interest of increase $XX that those ARPA in expect for million million $XX $X year. an year and estimated growth to we for funding Specifically, to an the P&L to full received we account centers for of of the million for $X.XX

our ed line XX% XX% look with single X% in the full is of digits. range X% outlook and XX% QX, to specifically we XX%, in top of for of back-up low to to the As service in to advisory total growth

earnings, range to be share. of adjusted QX in expect terms In $X.XX the EPS of to a we $X.XX

as than interest expect I million $X we ARPA items discrete the received QX approximately mentioned above, last have in headwind 'XX year. of support well in the million to Regarding from million we $X expense as more $X a

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

JPMorgan. Your Andrew [Operator Instructions] Steinerman first comes from with question

margin I was really wanted sustainable there of of in that kind I it And that that kind should service. was just anything full from one-off-ish improve encouraged and make by here? sure wasn't it to the was about

Andrew. Thanks, Yes.

U.K. early U.S. encouraged better than the well bit that. We The in the as year. we are expected quarter, the in in had by this a both the in and performance

that U.K. improving have that in ramping 'XX, have in we 'XX the year. the would it's expected during -- to be and against previewed been We

sustained performance is back out overhead, call are there is there. the what recurring One we seeing from you're that or being the to a So headwind as There's that benefit we portion and by a go think better I a service Same see up. mentioned that as I the improvement in bit there's would of segment, a solid little quarter full fairly along. year, I is But so. distributing as but benefited but bit for something we the a performance thing X.X% U.K. overall back-up, expense small ratably first gain. It's slight of to the that

Sachs. with Tong Goldman George question, Next

rates You account mentioned the you how to by? course that hope you views occupancy over out occupancy latest where the end your taking into provide and over play of on year your XX%. are seasonality now trends to you Can expect year, the

Yes.

as year for George, stronger service question, full half portion year the So maybe your a of the is in alluded enrollment. first of the

and with expect the quarter, improving some QX in gain on QX. that seasonality in the So some QX then second to and enrollment we in see tapering into would

So year year we to close the but the XX% to for at the likely are range, ending expect where stage. to being this in XX% --

in a first level QX back growing tapering -- the then where a bit tapering see to we similar quarter. So in and

improve and And helpful. you've the occupancy talk then look headwinds. seeing try That's you what timing when in to that's can improve? you to about in some the there U.K. mentioned undertaken latest would the it. Got Can U.K. like still for of the and business, some enrollment initiatives performance

Sure.

bit of that a making. we to the So year we actions to we to as number in XXXX Elizabeth going season put and were particularly was in we of time and trying just international are alluded take progress for had that the pleased were that efforts the that was place candidate ensuring a Certainly, to, U.K., challenging really seamless focused candidate bit really recruiting that on and to seamless experience then and something finally our more that enlarging move doing a that to quicker a recruiting. some in. with Examples we're start obviously said a apprenticeship program,

and retain staff. is attract needed that had and we in and first the certain to I And think the to actions in we ability to extent what really starting those a saw benefit the our to our some agency that quarter that then staff have reduce starting of we reliance certainly

at the continue is the So And then is time, ease what macro those we're efforts. the labor little on there, bit. we side to same a especially environment finding starting

think continue XXXX to things and I combination that of us see to we're those so give going the improvement confidence And it's XXXX. through into X that good

Chan question, Next Josh UBS. with

customers, you you on talk conversations has shifted just center prospective kind closing your tone of whether And much? front? Could shifted about that have the also year with for the targets has the openings and whether

Sure.

along centers. clients shared been reality the that, as with elongated side in an last the the specifically an elevated on continue with sales certainly So conversations current of I to specifically be that, we've perspective the there think of level in process. been is few positive, the certainly has center interest, business, And our has and our quarters,

employer while management. about and saw of even that point interest is to bright I'd we being coming interest form deliberative certainly in the is are of more transitions So in a we've say elevated some elevated in of certainly, first the decision. clients quarter, that a this seen that,

today centers self-operated. X are that So currently

in the We and of are ed least today are centers outsourcing. often outsourcing exist the higher considering that possibility in interest care seeing, examining at and self-managed, again, health

on we say in as would the to we relates positive, overall, them the with base historically. see current delivering the enjoyed are rates that but which as our client see that that will hand, certainly of kind I believe well, deliberative to So And for and retention timing. is continue clients current other it we're our we have that pleased really certainly services

Next question Manav Patnaik with Barclays.

in thing the talk similar First Can of question seasonality the maybe the maybe remind just course the And typically? the you conversations, back-up the underlying a side. just through of just just maybe terms us year on pipeline? back-up on usage health, about

Sure.

the So we touch performance really a first were is first, It with pleased I'll the of end observation, which was estimate. high the make the quarter. natural of above our

positive really to year. a way the that's So start

stronger larger As you the year of the alluded so revenue smallest half terms certainly, this and to, are quarter and of second Manav, it and is off comps a the base. in in use of

think terms pipeline What interest very committed to continues the I it services for see delivering would so our the again, the that we base say working I existing strong to a guidance continue of we us pipeline, client parents. And to and good and prudent in existing are stick size. and their that And be client think large for that with side, is had then in place. among we industries of base cross-section our on to I the employer

the was see to earn-out year, expenses, get some maybe pulled you same And that thing was just repeat? on the I [indiscernible] it Just the basically that you side. said on still Okay. just maybe -- bit but whether impacted. was margin like forward a comfort just There will for you like so you sounded -- the guess? know Or onetime said payment then you that wanted I

The Yes. payment. the of earn-out onetime settlement a was

so there to It was So with structured is a wanted business of of had deal, Steve the with Kate's was that's a in that performing that. acquisition the and settlement on the all earn-out. we have it we deal early & made an COVID, XXXX alignment phases on the

it settle place that. a so And to came where to was appropriate

us. So that's behind

have operating teens QX so to And up we from use say, bit range, What more mid- XX% have where the would to toward see summer to as a ratable in up we pick QX the this year. for the margin over well up stepping would then the the begins in with stepping to the the affect XX% seen barring margins that, forward. higher won't it we would otherwise use overhead the aligned and range, of then growth margins with going the, in in the level QX and alignment of expect

back-up what in with in you've aligned the and aligned where year margins So just that's reported the still are we margins for to see what looking more 'XX. the seen that you'll at past

Next question, Meuler with Jeff Baird.

I'm know any more segments? each and you the for some the can sorry, overhead changes of on just by kind quarterly but of of you quarter gave this, just I quantification alignment or be specific impacts the allocation

the a the overhead not but into we view XX% that in and QX the we to in reverses that now QX, of pretty basis second of essentially, of is amplified the is QX ratable than even the per It's back-up the sort -- have or to it's a So quarter, points it's ratably then a the much points is so that do year. closer basis QX -- likely in QX. where on perfect outsized partially a throughout the revenue XXX quarter, in it so It's effect a hundred with fairly back incurred we compared seasonality basis couple kind basis most more where and of particularly effect in half year.

amount for allocated in So that's again, reporting quarters amount, obviously, actuals. differently the same overall same year. It's the a quarter -- same that just to the the we're

then for be serviceable interested have is you them the how you, a And is I you market meaning center Bright view of would in big that opportunity? what self-managed that percentage addressable Horizons roughly if what market the potentially -- And of Okay. guess, the, to managing good for fit that market? as just you'd

Sure.

significance. a of market number center and where thousands, sort focus be addressable have would for of been themselves I And employer would programs is, quite of center, we So the of existence and in but the the say, appropriate the of us on years. typically, have for these size what identified, is an quality low we the

fact because, care these decisions that much of operated very years. highlighted higher are deliberative many or for call as institution terms by, XX And so in in been the XX, as the XX, why health that's end centers have these I really institution the cases, it, even

hand, an other on, operators COVID think difficult operating number what in and of I going opportunity certainly the has a like pre-COVID, project are forward what been we the general, it environment in is that terms for saw in transitions On that given fact we focused of certainly years. we that a

makes for And with is working like of not at more childcare open-mindedness center so is core possibility running examine employers among It experts there least I that where for a their the employees. ourselves. them think their business to sense

of that then are at a how Got it. And the But cohorts. enrollment higher kind -- I much hear you towards than how age it perspective of cohorts through dynamic mix cohorts younger shifted it the year? the this out pre-COVID what today, kind we from versus as growing just of later is rate stands think older an as kind older your just was the

groups So at mean slightly, we're group toddler overweight hundred in by group. age the couple moment basis weighted points older actually the age of younger the X slightly toward I the and a versus infant

Kaplan from Morgan Next Toni question comes with Stanley.

I of I the sure was from perspective third benefited what deal, second quarter. sort little last comp to the is and camps. year of year make did just of second 'XX? reason the could bit up to guided tough, Steve up had on the you quarter, what remind And know of the more I a huge 'XX of and to I marketing quarter a and dynamics this to normal but there? only you back know it from just in asking growth remember ramp in next in ramp wanted a range that And last for Camps, went believe remember the for wasn't regard I'm the being you with third you I back it was -- us, the & But and and seems like Kate's earlier

Yes.

in in Steve I'll So they ours statistics of days Kate's I check where they of just us, we acquisition, typically provide start, or or middle and & brought children break particular color. some times school prior me can -- let Toni, camp throughout partner arrangements school for and program maybe in age a older for and and a -- the been to the school. summer a younger pop-up can have my various to off then addition here. kindergarten add Stephen some type specific But programs double in through deploy

to children. camps a So age in that of to broader for And timeframe. that type then expand up school had the both the they provider additional and programming operated way to able them more capacity case than camp been it a of being opened provide an venues expansion that and We've in in opportunity the just a case. with us with more use besides kind summer other as having an use expansion able serve from opening

it's the concentrated was So opportunity in we that an with maturity, coming after did programs second you way. see but summer, their the third there year into the with to -- if families to those acquisition more will, serve

We also, other We XXXX. part as care types the from pet more had care of in last had well. year, introduced latter use

uptake good case. of type new intermittent the seeing also it was may a have that used as care who new users so back-up clients many door ever our introduced before. an who opened to from use a also use It's not And that number

parents had virtual access both who tutoring in-person continue be agers opportunity introduced for And tutoring. an and to also school to then academic also we

of were by were some year X-year the a stacking robust cases terms which we're sure you rate deliver of back kind that year, of about. maybe replenishing the on the say, in But a We've of the robust back-up pretty we're available back-up that drove back-up, stacking year, there network, cetera, the in use of cases, as use of we've et we return, making got but number know provider, the last users got lot cognizant a more we we're fashion this of up talking So incremental happy -- use. something growth use. each who growth it's we're the that we're in to

the M&A to now? small starting pipeline. your ask and us from the And sell to ARPAs any then M&A? behind sense. more on Yes. looks see Are Any just about commentary wanted the providers for given how just to willingness pipeline you Makes appetite

Sure. Thanks, Toni.

-- that in I So of XXXX. that ARPA are ended still curve. we think September early

have a decisions XX the making that really of forecasted I this that before say end in would always ARPA months I acquisition decisions those we to of cultivate XX relationships. either they We continue being sort sort different than otherwise would specific would started or from have of to about of really be terms owners made. would the pipeline, say

We continue to look at some smaller opportunities densify especially where high-performing near we are looking centers. to

overall, so And growth part the of algorithm. it's definitely a

Although point, within very existing this to and on that our moving to continue ahead focused at again, front. continuing we enroll be centers on

Next Capital with BMO Silber question, Markets. Jeff

a little a from bit supply the U.K. inflation? terms U.S. I'm in going if in just what's labor in talked doing you labor what can about the of on availability perspective curious and You wage address you're

Yes.

So start we U.S. the pleased that would are I by here saying with achieving really retention we're in rates the

and the challenge depths at what the real COVID, was to enjoyed is of even our Horizons to that new continue to attract therefore, in staff a level in that so in XXXX. Bright we we still retain terms So again, need ability a of stronger than more

and that So starts perspective. talent from around with good feel conversation where we really about for any retention are me,

would pockets pockets in have. sort recruit that In to like of complement market, terms there country of of -- we it challenging is the to still staff of still heat the the where are labor full

in It seen really as wage expect paying we continue hand, feels I again basis then now in competitively be in a point, more to really to line we in significant And what depths way. wages we of we the in wage that make we in we about other the differently needed feel significant more accelerate opposed COVID. and we feel U.S. the progress we stepped-up here the we previously depths incurred good rates, of like will to terms that with the broadly, when think therefore, this that COVID a where in that had felt than On are at place of are increases much

for missed me Okay. That's was closures question helpful. earlier your if I year. forgive question the about but goal There an I center about the think this closures answer, was and center

previously geography? in you be Is are And year. last specific will the if is same? said And skewed still it the had there that to U.S., think region? any same I specific they the they're as any more

Yes.

So of range. XX what the still we we XXXX. that last year, centers closed in closed still be We range to in would expect so in

Some skewed the U.S. disproportionate looking is could certainly in about way still in the the our they be U.K. that there underperformers some U.K. we've -- those we of be to overall rationalizing But addressing business, of talked not portfolio closures. the XX% the U.K. XX%, but XX% are could are at that in same the

we're So seeing geographies where more closures. those are outsized the the X

And no XX that -- there's particular -- closed we this quarter.

can all exit overall performance are leases we of timing that up, and So there's that the when a cadence that what gets the following we're prepared.

all time. Well, much very right. it, seeing to and thank We you All your Excellent. soon. appreciate forward for look you

Thanks, everyone. Have night. good a

teleconference. This today's concludes

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