Q4 2019 Earnings Call
Greetings and welcome to the bright Horizons family solutions fourth quarter 2019 earnings Conference call.
At this time, all participants are any listen only mode.
Question and answer session will follow the formal presentation.
If anyone should require operators assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
Now I'd like to turn the conference over to your host Mr., Michael Flanagan Senior Director Investor Relations. Please go ahead Sir.
Thanks, Victor in order to call.
I guess, even Kramer Chief Executive Officer.
Chief Financial Officer.
During the call over Steven after covering a few administrative matters.
Today's call is being webcast and recording will be available under the Investor Relations section of our website <unk> Dot com.
As a reminder to participants these forward looking statements made on this call, including those regarding future business and financial performance are subject to the Safe Harbor statement included in our earnings release.
These statements inherently involve risks and uncertainties that may cause actual operating and financial results differ materially and are described in detail in October 2018 <unk>.
Any forward looking statements speaks only as a date on which is made and we undertake no obligation to update any forward looking statements.
We also referred to these non-GAAP financial measures, which are detailed in reconciled to GAAP counterpart in earnings release, which is available under the IR section of our website.
Stephen will not take us through to review and update on the business.
Thanks, Mike we are thrilled that you'll join didn't the newly creative role of senior director of Investor Relations are bright horizons welcome.
And thanks to all of you have joined us on the call today.
I'll review, our financial and operating results for this past quarter and the full year 2019, and then update you on our growth plans and outlook for 2020.
Elizabeth will then follow with a more detailed review of the numbers before we open it up for your questions.
We're very pleased to continue our solid performance in the fourth quarter of 2019, and it sets up well to drive continued growth across all of our business segments in 2020 and beyond.
For the quarter revenue grew 9% to 52.25 I'm sorry.
To 521 million and adjusted EPS increased 12% to a dollar one.
We added seven full service centers, this past quarter, including programs for Lehigh University to International These models and a strategic acquisition on the West Coast.
We also continued to expand our backup and educational advisory client base with recent client launches for atrium health de systems WPP group and Wayfair.
As we've shared previously capitalizing on the synergy between our services remains a strategic priority for the company.
We remain pleased with recent cross selling successes as our sales and account management teams worked collaboratively to broaden and deepen our existing client relationships.
We had any milestone has more than 300 up our clients or 25% of our client base now invest in multiple services, including Halliburton Nielsen Company, and Volkswagen, who launched a second or third service with us this past quarter.
With more than 1150 employer partners the cross selling opportunity that exists remains significant.
Tracking our solid topline growth, we continue to deliver strong and consistent operating results across the business as adjusted operating income also expanded 6% in the fourth quarter.
Over the last few years, we've discussed the investments we've been making in technology digital marketing and people.
A few examples illustrate the progress we're making as a result of these initiatives include improved conversion from registration to backup use.
Increased usage of the mobile App and reserve now also known as instant booking.
And higher overall user satisfaction.
All of which together translate to higher utilization.
On the people investment front I'm, especially pleased by the response to our Horizons teacher degree program.
This benefit provides our teachers the ability to earn a high quality certificate associates Bachelors degree in early childhood education complete we paid for by bright horizons with no out of pocket expense for the employee.
We now have more than three quarters of our centers within enrolled Lerner with these participants reporting increased employee engagement scores and significantly enhance retention rates.
These examples along with a host of other initiatives are in various phases of rollout.
We'll continue to invest in these kinds of efforts to continue to drive growth operating leverage and enhanced quality of client experience.
Turning to 2020, we continue to focus on our fourth strategic priorities.
One preserve a strong culture and a great workplace the bright horizons.
To deliver highest quality education and care services three extends our impact through strategic growth and finally connect across functions service lines and geographies.
Our team's efforts continue to align with these pillars and allow us to accelerate the positive momentum we have across all aspects of our business.
Let me touch on a few strategic growth areas.
First our organic growth strategy continues to be focused on cultivating new clients and expanding our existing client partnerships through cross sells and additional use of current services.
After another solid year in these categories I'm really optimistic about the sales and growth momentum across all three business lines in 2020 M. beyond.
The sales pipeline in each of our services remained strong with interest across industries, and with both new and existing clients.
Next our lease consortium centers. We've now opened 100 of these centers over the last seven years, we focus on select urban settings, where we see a concentrated population of our targeted demographics.
Limited supply of high quality, childcare and strong opportunity to meet the needs of our client partners through both full service and backup care solutions.
We continue to be encouraged by the progress into newer in ramping cohorts by the positive enrollment in contribution from the group of centers that have reached mature operating levels and by the opportunities we've been able to tap into with nearby client partners.
Without growing density of centers in major metro areas, we are an increasingly attractive partner to leading employers located across these markets and we therefore continue to see significant long term value creation opportunity in this multifaceted strategy.
Finally, with regard to M&A, we continue to cultivate a solid pipeline of acquisition prospects and we expect acquisitions to continue to be a key element of our growth plan in the years ad.
As you know the timing of acquisitions can be lumpy.
We completed seven center acquisitions in 2019 and based on the activity in process, we anticipate a more typical year of acquisitions in 2020, approximately 15 to 20 centers with a mix of smaller networks and single centers.
In addition to typical center acquisitions, our diversified model also provides us with opportunities to acquire non center businesses from time to time like my family care in the first quarter of 2019.
Strategic conditions like this one enable us to continue to allocate capital with highly attractive returns, while expanding our backup and educational advisory offerings.
Before I wrap up I'd like to comment on our strong values and unique culture.
As many of you know bright horizons Central mission is to make a lasting difference in the lives of our clients families and learners around the globe.
It starts with our employees and we spend a lot of time and resources to attract and retain the best while fostering an environment, where people want to grow and have a sense of belonging.
Diversity inclusion inequality have always been central to the bright horizons culture in history, and our woven into the fabric of all that the company does.
Over the last few months, it's been an honor to be recognized by Bloomberg Forbes Fortune and the human rights campaign at a leader in creating inclusive workplaces. We're all employees can feel a sense of respect and dignity and thrive in a meaningful way.
Being on these less is not our motivation, but it is a great affirmation of the work we do to build a strong culture and a great workplace and ultimately a great business for the long run.
Another element that defines bright horizons as our commitment to working parents, we released our sixth annual modern family Index last week, which illustrates the priorities and challenges facing a modern working family. This year's data continued to show the harsh truth that today's working parents increasingly feel burned out.
Trying to balance both career and family commitments.
Our data reveals that employees are willing to walk out the door. If their work life balance isn't achieved and a significant majority are willing to abandon their professional commitment to manage their burn out.
The survey once again underscores the value and import of employers providing meaningful support to their employees by providing more family friendly services that address the stresses at work.
And at home.
We're very proud to be the partner of choice for so many leading employers looking to address the needs of the water modern workforce and are also excited by the prospect of introducing our services to new employers who are looking to solve these challenges.
So in summary, we believed that we are well positioned to continue the positive momentum and operating agility, we have demonstrated over years.
For 2020, we anticipate continued strong performance with revenue growth in the range of 8% to 10% and operating leverage to drive adjusted earnings per share in the range of $4, an 11 cents to $4 an 18 cents.
With that Elizabeth can review the numbers in more detail and I'll be back with you during Q and <unk>.
Thank you Stephen and Hello, everybody, thanks for joining us today.
Well once again recapping the headlines for the quarter overall revenue was up 42 million or 9% in the quarter.
The 6.1% growth in full service center revenue or 24 million was driven by rate increases enrollment gains and from contributions from new centers.
Strong utilization by existing clients, along with the launches of new clients and contributions from my family care helped drive 24% revenue growth in backup and 13% in Ed advising services in the quarter.
Q4, gross profit increased 11 million to just over 131 million or 25.2% of revenue.
Adjusted operating income increased to 67.4 million or 13% of revenue.
As mentioned in our full service segments the gains from enrollment growth in our mature in ramping centers and contributions from new and acquired centers as well as tuition increases were partially offset by the headwind a preopening and ramping losses in our new lease model centers with a larger cohort pop opening in 2019.
I mean, they were 17 in total compared to 12 in 2018, we incurred higher total losses. This past quarter then in the prior period.
The backup and Ed Advisory segments, both generated solid operating margins in the quarter approximately 31% in 29% respectively.
They're strong continued strong utilization levels and on continued scaling the operations, which broke brought efficiency of service delivery.
Interest expense of 11 million in Q4, 19 was down slightly over 2018, as lower average revolver borrowings and modestly lower average interest rate contributed.
Our current borrowing cost approximate 4% with 500 million of our term loans fixed with an interest rate swap.
We repaid all outstanding borrowings under our revolver during 2019, and we ended the quarter at 2.66 net debt to EBITDA.
The 2019 structural tax rate on adjusted net income came in at 21% lower than our previous estimate due primarily to a higher tax higher level of tax benefit on equity activity.
What our improved operating performance and positive working capital movements. We also continue to be very pleased with our strong cash flow generation.
For 2019 operating cash flow was 330 million of 35 million over 2018.
In terms of deploying that cash flow and our capital allocation strategy. Our first priorities continue to be investments in the growth of the business.
As illustrated by the 100 million plus that we spent in 2019 on new centers and acquisitions as well as the 50 million that we reinvested in our existing operations and support functions.
[noise] share repurchases, our third priority after new business investment in acquisitions and in 2018, we acquired a total of 210000 shares under our share repurchase program.
Lastly at 12 30, 119, we operated 1084 centers with the capacity to serve over 120000 children.
Adding to the guidance headlines that Stephen touched on earlier, we continue to project topline growth for 2020 in the range of 8% to 10%.
Including revenue gains in our backup division in the range of 12% to 13% and topline growth in our advisory services in the range of 15% to 20%.
And our full service segment, we're projecting topline growth in the range of 7% to 8%.
On the operating it's hard for 2020, we expect to continue to add approximately 1% to 2% to the topline from enrollment in a ramping and mature full service centers and to realize average price increases in a range of 3% to 4% across the PML Center network.
We're looking to add approximately 45 to 55, new centers, including organic openings in acquisitions.
And our outlook also anticipates, we will close approximately 25 centers.
Topline growth and increased efficiency in our service delivery contribute to improved operating performance and margin improvement for 2020 in the range of 50 to 100 basis points compared to 2019.
On some other key metrics for the full year 2020, we estimate amortization of 32 to 33 million.
Depreciation and arranger 80 to 84 million and stock compensation of 20 to 22 million.
Based on our outstanding borrowings and estimates of interest rates for the.
For the year, we projected interest expense will approximate 40 to 42 million.
On the tax front, we're projecting that the structural tax rate will increase from the 21% this past year to approximately 23% to 24% in 2020.
This increase primarily reflects the diminishing impact of stock option exercises on our reported tax expense as well as higher effective rates in our European operations.
Lastly, weighted average shares are projected to approximate 59 million for the year.
We estimate that will generate approximately 350 to 375 million of cash flow from operations and have 60 million of maintenance and overhead capital, yielding approximately 300 million a free cash flow to invest in the ongoing growth of the business.
We do expect to invest 50 to 55 million in new kept Newscenter capital specifically for centers that we have opening in 2020 and in early 2021.
The combination of all these factors lead to our projection of adjusted net income of 242 to 246 million and adjusted EPS growth in the low double digits to a range of $4, an 11 cents to $4 in 18 cents.
Looking specifically to Q1 of 2020, we're projecting approximately 7% to 8% topline growth.
And adjusted net income in the range of 5400 56 million.
This translates to adjusted EPS in the range of 94 to 96 cents a share.
[noise], so with that Hector we are ready to go to queuing it.
Thank you at this time will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question Q you May press star to if you'd like to remove your question from the Q for participants using speaker equipment. It may be necessary to pick up your hand.
Set before pressing the star keys, one moment, please while we poll for questions.
Your first question comes from the line of Manav Patnaik with Barclays. Please proceed with your question.
Hey, this is Ryan on for Mark of.
Just if I could ask a little bit about the operating margins.
No it came in a little bit lower, especially after the commentary in the last call. I guess, you did talk a little bit about timing did more just did you open more centers towards the end of the year or maybe you could just help flush out exactly the moving pieces were there.
Yeah, I think it's primarily looking at you know some of the usual utilization variability that we see in the back up in Ed advising business. That's a smaller factor, but it's primarily to the lease consortium centers that I mentioned, having a interest to a higher waiting of of center.
Is that opened this year and just how they came in timing wise in the effect of Q fours.
Losses against what we experienced last year, that's probably the primary driver.
We have a little bit higher equity expensing overhead as well I think you can see the overhead rates, but ticked up and so that's also a little bit of a headwind on though on the margin, but I think primarily its you know it it's just the the lease consortium centers.
Got it thanks, and then on the M&A front.
It sounds like maybe there are some more opportunities kind of outside of the core.
Senator base, even though there are still opportunities within centers themselves.
You think the you know as we go forward as you look out five years from now there's much more opportunity on the M&A side to build out kind of some of the at advisory and backup offering.
[noise], we do Ryan I think that a as we continue to look across the landscape certainly we continue to see good opportunity on the center side of the business, but I think that as the capabilities and the interest of our clients grow in the areas a backup and Ed advisory.
We continue to be very open minded as it relates to service extensions as well as continuing to deepen around the core competencies and client base that we have so I think it's really going to be that combination across the three that you'll continue to see us build out, but we were optimistic about what the.
He acquisition landscape looks like.
Got it thank you.
Thanks, Ryan [noise].
Your next question comes from line of Andrew Steinerman with JP Morgan. Please proceed with your question.
Hi, Elizabeth I'd like to talk a little bit more about the fourth fourth quarter margin within Ed Advisory No that was to segment where margins were down more than the other two segment. I think you were just making a reference to add a moment ago bike could you just go over why the Ed advisory margins were down more.
Or in the fourth quarter and how do you feel like margins in advisory will do in the current you.
Yeah. So.
A couple of factors in there I think the the as we have some the additional revenue. The we have from the the contracts from GP strategies that are we need to integrate and ramp up to our margin profile. So there's just some mix headwind they're coming in and.
I think the rest of it is attributable really to just timing of.
Some of the investments that we're making as the business grows in short sales marketing and technology resources. So nothing that looks to be changing the profile longer term as we've talked about advising to top line growth into 15% to 20% range and long term operating margins being able to be assessed.
Gained in the the 25% to 30% range, we feel really good about how we perform for the full year and so the quarter to quarter noise is really just that as a as how we look at it.
Right, but the second part of the question was and how do you feel like Ed Advisory margins will do in 2020, I think it'd be helpful to that overall 50 to 100 basis point goal, we laid out.
Oh, Yeah, I thought that I was alluding to that with the how we think that it can continue to perform so at a growth rate that's in the 15% to 20% range in driving somewhere between 25, and 30% operating margins. It will contribute to on some operating margin leverage we expect this year, particularly as we do complete the integration of.
Of those contracts with with the GP strategies group and continue to just scale the business. So yes, we do see it as a contributor.
Perfect. Thank you.
Thanks, Andrew.
Your next question comes from line of Hams, Missouri with Jefferies. Please proceed with your question.
Hi, This is Marriott portal actually filling in for Hamzah I'm. Just wondering if you can comment on your penetration rate or what you think it is for employer sponsored a child care in the U.S. and and how that's trended over time.
And then I'll, maybe you can also compare that to how it looks in the UK as well.
Sure. So first what I would observe is that from our earliest days over 30 years ago, we've really been creating the market around employer sponsored childcare right. So it's not like there is a large installed base of child care centers associated with employers aside from ones that that we.
Have really from missionary standpoint developed we estimate that there's you know somewhere between a thousand in 2000.
Centers that exists that we don't operate that are associated with employers, but again most of the growth in the market is being driven by new employers deciding that they are going to incrementally invest in an onsite and near site child care centers, we really think about the marketplace as one where a and employ.
Sure that has a site with greater than call. It 1500 employees is one that could certainly be capable of valuing and ultimately benefiting from on site or near site child care. When we think about the U.S. versus the UK. The U.S. primarily is a market.
That we are driving as it relates to employer sponsored care in the UK. The government supports a its citizens, especially those individuals that have three to five year old children with a subsidy and so in that way. Some employers believed that the government is supporting.
Child care and therefore, they don't need to play a role in that on the other hand, we do have direct employer contracts in that market as well, we just don't see the.
The long term potential quite as large and that market, but again since we are focused on markets with some form of third party support that can be in the form like you're in the U.S. that is employer driven or in the case of the UK, where it's both government and employer.
Great and then just one more and I'll turn it over I'm just a question on your backup business.
Just can you just give us a sense of what the competitive backdrop looks like there and maybe just give us an idea of what you're advantages versus other centers given the size of your network.
Sure happy too so.
Look we are by far the market leader within backup care hearing in the United States and that is also true in the UK both countries, we operate a significant.
Backup advantage over the next largest provider the competitive landscape here in the U.S.
There are a few small competitors, but again, if you think about our business as being one that is north of 300 million in the next largest.
Being sort of between 10 and 20 million we have a significant.
Market share advantage over our next largest.
What I would say is that as we look out over time, we see ourselves continuing to outpace that market with a significant advantage and the fact that we place a lot of the care on behalf of our employer clients into bright horizons owned and controlled.
Care and so therefore that care is only available through a partnership with bright horizons and so given the quality of the care in our own centers and through our network.
It really allows us to continue sustain a pretty significant advantage.
Great. Thank you.
Welcome.
Your next question comes from line of Gary Bisbee with Bank of America. Please proceed with your question.
[noise], Hey, hi, everyone. Good afternoon.
Okay.
First question I guess, you've occasionally in the past given us the.
Revenue for the lease consortium base of schools are the run rate revenue or some metric is that is that a number you can give us said at year end <unk>, how big is that.
Well, let me just pull that up here I don't have already let me just product <unk> and I guess, a bigger picture on just the lease consortium strategy in general and that now that you've got several classes that are you know in that mature camp and I think more balance across across it matures.
Developing to sort of new <unk> can you just give us an update on how the strategy is doing in total and really what I'm thinking about is that sort of notional model. If you will around revenue gross profit growth that that you, sometimes having your investor deck. I mean is it is it broadly playing out to that model, what what's better whats.
Worse, any any sort of lessons and just trying to think about you know the long term economic impact of continuing to prioritize growing. This this segment your business. Thank you.
Yes, Gary let me just maybe lead off and Stephen can speak to maybe the broader strategy and and how we're thinking about a beyond the the financial performance and.
That element, but you know I think that we would look at the earliest years of the this strategy. If you on the urban centric starting in 2013, we now as you say have a number of classes that are mature and I. If you've got a bell curve of 10 to 12 centers and how they're performing we.
We are pleased that they are hitting those returns that we show in the investor deck or some of them have a higher revenue profile. Even then that two and a half million average view because of where they're located and the situation is that they can command, but in terms of Oh gross margin in the range of 20 to 2000.
That those earliest classes as a group are are in fact in that range I'm not to say every center is in that range can as we do have some that are on a much slower slope of ramping up and will take longer to get there. So I think in around we're feeling like it's working well.
And we are.
Establishing both a a footprint of well recognized high quality centers and we're focused in the right kind of geographies to continue to.
Deploy this strategy both with the operations team that is dedicated to this what we have a dedicated division that is focused on the new centers that are opening it it's not you know each.
Operator, getting up to speed with what's different about this kind of a center.
And as a result of that we've got we think the right amount of attention on the operational side of it but.
It's true that the you know that we'll have ways of these like we you know we remarked about it in the prepared comments, but 17 centers in some of these locations. They do they do generate a substantial.
Preopening loss I'd say that might be one one difference that we see some centers.
Have a higher preopening and and ramp in loss than a typical prototype because of the the rents that they command so that that maybe a bigger drag of slightly bigger drag than we would've envisioned at the early stages of this strategy and hence the the comment today that Theres you know a couple million of enough.
Fact from format in this fourth quarter, but Steven the strategy. Yeah. So I think we feel really good about the strategy and it's very much in line with what the original thesis was which is.
We're looking to locate in areas, where we can support working families where they work and live and as there has been.
More of a shift towards individuals and young families staying in the urban areas and likewise, a migration of employers either staying or moving back into urban areas. We feel like this urban strategy is really playing out well both here in United States as well as a in the UK and.
In the Netherlands, what I would say is that you know with our increasing density there have been some really positive network effects. Both from an operational in a delivery standpoint, but also as I alluded to in the prepared remarks, the idea that our client partners are finding.
The the additional centers that are nearby their workplaces in nearby their employees, where they live has been a real positive. So again I think that overall the strategy is unfolding. The way we would have hoped and we believe we're really adding value both to the working families and the employer.
And certainly the financial characteristics have been very positive for us.
Yep and so Gary just to answer the question about what's the sort of revenue composition of these centers. It in the range of hundred 75 million or so for these hundred centers and and they are positive and they're in total but as if we look at full service margins in the range of.
Overall 20.
25% there.
They are closer to the closer to that 10% range as the overall cohort.
Great that that's a that's a helpful update I appreciate that and I guess, just one last on the full service center business.
It is you know this has been the majority of the growth in units outside of a couple of years ago and there are a couple of more sizeable acquisitions is that is that sort of by design. As you you like this model and you need to capacity from it to deliver on the backup.
Business or or.
Where would you like to grow the the non lease consortium faster and if the ladder.
What's that just hasn't grown a lot in the last few years, what's like the gating factor to delivering better growth outside of lease consortium. It if in fact, that's a high priority at the moment. Thank you.
Yeah, I mean, we still are very focused on creating a employer sponsored centers and I think actually we've had some really good consistency of our ability to convince employers to invest in onsite near site Chalker centers each year, So I think in the.
In the in the outlook, we continue to see that is a really positive driver of growth, we really view the lease consortium as an additional leg on the stool and believes that both the positive economics based on enrollment in the centers alongside of the fact that they are really important element of.
Our capacity for backup care, they really do add quite a bit in terms of the their strategic value and then you know as you alluded. The piece that has been less consistent is is the acquisition side and so we're very clear headed that we're always out there we are an acquirer of choice and.
So if we look at the history a lot of the Lumpiness in terms of the number of centers is tied directly to the number of acquisition sites that we havent given year with this past year being fewer than what I would say is a typical year on the other ham we had some really strategic.
Non centered deals in the form of dealing backup care in the UK and then GP strategies tuition management business here in the U.S., but as we look out we continue to see good opportunities to align with high quality childcare centers that are good acquisition targets for us.
Yeah, and just one other maybe follow on comment on those sort of.
Non lease consortium centers and if we look at at the three factors of New Center adds any your acquisitions client centers and and lease consortium.
Yeah, there is a little bit a noisy year to year, but we're adding around 30 lease consortium then client centers in any given year. So it is about half and half.
Coming from those two sources and so.
Yeah, I think there just to.
Just to put more of a quantitative point on that.
Okay. All right Yeah. That's good and then I'll sneak one last one if I can which is any update on on labor cost inflation, including obviously the tuition reimbursement program that that that you commented on it.
Is that picked up as we've seen with the broader economy overall and there are you still comfortably able to pass on price in excess of that as you've done historically in the past thanks a lot.
Yep, Yeah. So I think I think that what I would say is that comfortable is a relative term right. So families. You know never are appreciative of tuition increases on the other hand, we have a long history of being able to pass along tuition increases and make sure that they.
There is a margin between those and the wage increases.
That we provide to our staff understanding that there are other elements of expense like benefits et cetera that are you know moving at a rate that is even greater than wage inflation.
What I would say is that in the current climate you know it's much like what we've seen over many years, which is it has been historically challenging to find and retain a top educators and teachers for our programs on the other hand, we focus a lot of our time and energy on being.
An employer of choice and so we feel that we really do get a disproportionate share of those individuals directly related to your question about the tuition program that we're offering our employees again, we see a really positive ROI on that investment. So yes, that's an incremental expense on the other hand, we believe.
That is certainly adding two things like retention that allow us to reduce some other expenses that create friction in our in our model and therefore, we think net net that investment is overall positive.
Thanks, I appreciate all the color.
Yes. Thank you.
Your next question comes from line of George Tong with Goldman Sachs. Please proceed with your question.
Hi, Good afternoon. This is Blake on for George.
You mentioned that approximately 25% of your client base currently use multiple services can you discuss what's driving the pace of cross selling have you changed anything structurally on sale side that might be driving an uptick in and sales productivity.
[noise], yes. So we have thank you Blake so certainly our cross selling efforts have been a real focus over the last few years and what I would say is that there are a few things that we really have started to optimize.
The first is that historically before a few years ago, we had individuals who were on our sales team that we're focused on bringing new logos to the family and then we had an account management team, who is really focused on managing client relationships and Upselling and cross selling the clients today, we have.
Restructured that such that our sales team is going after both new logos, but also a extending through opportunities in the existing client base and so there's a real positive partnership that exists now between our sales team in in our account management team I'd say the second piece of that is we absolutely.
We have changed the structure of our incentive systems to align with the behavior that we're looking to drive as I just shared and then the third pieces that I think we're getting much more sophisticated about stratifying our account base to make sure that we understand the likely prospects within our.
Account base and beginning to figure out who is most likely to buy what additional services and then trying to present, a those investment opportunities for for our clients. So again I think overall, we're seeing good success on that front and bringing our cross selling efforts to a real.
The positive place.
Great. That's helpful. One more it looks like it looks like enrollment growth was pretty healthy this quarter, but are you seeing any potential headwinds I could slow the pace of new enrollments in 2020.
You know I think that the the trends in enrollment our they are hardening in general we've been pleased with both the stability of being able to eke out a little bit of of enrollment progress in our mature base and then ramping our newer centers.
It is a cycle that occurs every three four years as children age through the system and so its really a matter of us making sure that were reaching as many parents that are client partners as possible and are being very mindful of.
Well I'm, having children age up through the center and Backfilling spaces as quickly as we can so that's it's really just the nuts and bolts of of operations nothing fundamental that we see affecting that in our you know certainly if we look back in time than in past.
More economically challenged times, we're in a obviously a quite a strong economy with some.
Questions about what caused her on the horizon, but we have been successful even in times when Weve had some enrollment contraction because of a very severe recession. Yeah. We've got some ability to cost managed through that so in general we feel like we can adapt to.
Situations are pretty well, we've got good visibility on.
Forward visibility on when parents are in the centers when children are graduating out et cetera, and it's really a matter of of staying on top of the.
Front is the top of the funnel, if you will the getting prospects and potential our children in for Backfilling that stage here.
Great. That's helpful. Thank you.
<unk>.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad one moment. Please while we pull for more question.
Your next question comes from line of Toni Kaplan with Morgan Stanley. Please proceed with your question.
Thank you.
You touched.
[music].
But are there specific ones that your especially.
Here are you still really focused on the technology.
Are there other areas like maybe.
<unk>.
So any color on some of those specific investments would be helpful.
Sure happy to so look I had mentioned earlier in the call that the three areas of investment certainly are in technology digital marketing and people and what I would say is in the reverse order on the people side. We certainly continue to see I'm really good uptake and ultimately result.
From what I would consider to be a really important investment in a benefit around our teacher degree program. So I think as that continues to play out and we continue to see.
The importance of that both from a retention and an employee engagement perspective, but ultimately what we're trying to accomplish there as well is ensuring that we continue to deliver the highest quality services through the highest qualified workforce.
On the technology and digital marketing side, you know, we continued to be on a journey and I've been really pleased with the journey that we've been on on the technology front. We continue to invest so we continue to be proud of our market, leading a mark a market, leading mobile apps and other technology to me.
Make the experience for the end user and for our clients more seamless I'm. We're also doing a lot to bring together and harness the power of all of our services. So for example, allowing our client leaves owns a single place where they can see reports across all of our services isn't.
An example of how we're trying to bring together and make even more sticky all of our services under the single umbrella on the personalized marketing side I think again, our 2019, we began to see some really positive outcomes associated with that and I'll point your attention for example to the growth rate.
That we enjoyed on the backup side of our business.
We continue to learn more and more about our end users and we continue to use what we learn about their backgrounds and behaviors to ensure that we are doing more personalized outreach to them to stimulate use and so ultimately we were finding that both from a registration pursue.
Effective as well as from a reservation and reuse perspective, a those personalized digital outreach efforts are really starting to pay fruit.
That's great.
Internationally.
Can you give us an update on which geography is that you're in that you feel like the most.
Are there any other geographies that.
Really be conducive.
To the model.
Absolutely so just to take a step back we really look for markets, where there is some form of third party support whether that be in the form of employers like you're in the U.S. or government as is the case for example in the Netherlands or in a place like the UK, where there is a combination thereof.
And so we continue to believe there is tremendous opportunity here in the U.S. The you can the Netherlands, which are the three places we have the most significant footprint. In addition to that as we look more broadly we did make an investment in a company in Germany, and so it's still early days.
But we believe that we're learning a tremendous amount about that market. There is clearly as exhibited through the organization that were involved in there is a employer interest and support and at the same time, there is government support in that market as well.
I would say as we look further out and and into other markets. We're always continuing to look for a potential acquisition opportunities in market entry opportunities in markets that have that third party support. So you think about places like Singapore, you think about places like France, Australia.
These are markets where.
There is either government or employer support for both and so we continue to have our year to the ground. We continue to believe that globally. We are a an acquirer of choice and are looking always for like minded high quality providers that low no. The local market that we can then partner.
With and grow within those markets.
Thank you.
Thanks Todd.
Your next question comes from the line of just from your with Baird. Please proceed with your question Yeah. Thank you and good afternoon first on lease consortium of the centers. The total center Contra planning on opening in 2020, how many roughly lease consortium centers are you planning to open just trying to figure out us.
The year looks more like 2019 in terms of investment in that regard or or or more typical year and then related to that.
When you're [noise].
Switching or signing.
An employer sponsored for lease consortium since you're talking about the importance of didn't see what exactly are they signing up for because I think they're not contributing capital. So just.
What are they signing up for.
Yeah, So I'll.
Give me the numbers on the first Jeff and then Stephen can comment on a the client side of it so similar to this year what we've got in development is in the same range of about 15 to 17, maybe so we opened 17. This year. So roughly would expect to see the same kind of investment.
[noise] yet in terms of the employer involvement within a within these centers. So there is the the odd case, where they are actually investing capital, but by enlarge our employer partners are investing in one of three ways or multiple of the three way.
Ladies first they are providing priority access for their employees because as you know many of our centers, especially in the urban area are running weightless and therefore, what they're looking for is to provide greater access to their employee populations through investing in priority access.
They also have the ability to provide a tuition subsidy. So they can invest behind essentially lowering the cost of of that access and of that space for their employee and then of course. These centers are an important element of our backup care strategy and so.
We also see employer support in the form of backup care, that's being placed into those centers.
Okay, and then just more generally on the back up care business. If I look over a multiyear period, 12% growth has been really good and you're guiding to 12 to 13 for 2020.
But just in the context of in 2019, I think you had organic growth more in like the mid teens, 16% or something like that.
So I guess couple of questions related to that.
What drove the outsize growth and 2019 under why doesn't repeat and 2020 is the bigger question, but was there just like the outsized really strong selling season at the end of.
2018 or are you starting to get some pushback I guess, you've driven up utilization and therefore expense for your employer partners just.
Recognized on a multiyear basis. This is really good just trying to compare to 2019. Thanks [laughter].
Yes, so what I would say is [noise].
We had a very productive year in 2019 and that was as you say a combination of new sales of backup care to employer clients and also driving use through a lot of the efforts that we've been talking about through our personalized digital outreach strategies.
And in many ways, we expect that we will continue to see very positive momentum of course, the comps that we're now comping against right are more significant than than what we have had in the past and so I think really that become some of the dampening effect that you're describing but at the end of the day, Jeff we really.
We do see continued supportive employers as it relates to making new investments into backup care either in the form of taking it out as a new benefit and door I really encouraging their employees to utilize the benefit.
Got it thank you ever.
Thank you.
Your next question as a follow up from Manav Patnaik with Barclays. Please proceed with your question.
Yeah. This is a ride on for a lot of I'm just curious you know.
When you have to deal with something like the Corona virus, how parents kinda react I'm sure it's not much different than the procedures you'd have route flu season, but just curious to hear if that impacts the way you think about operating the centers I guess, particularly in Europe, but maybe more broadly.
Yeah. So I think that one of the reasons why family select bright Horizons is is because of our health and safety standards in the policies and procedures that we haven't place and it's sort of underpins the overall quality experience and a delivery that they expect from us and again I think part.
We have the ultimate choice of what they make so I would say that you know krona virus similar to the flu and other you know illnesses that come in and out of a potential center I think we get well ahead of it each season and so we have tremendous policies proceed.
Features around making sure that we keep everyone safe and keep everyone well within our centers again with the krona virus in particular, we're very much in front of communication with families as well as our teachers and so I think are both the families as well as our staff so very confident in our ability.
To keep people well within our centers and this was just an example of that.
Oh.
Excellent alright, well. Thank you all very much for joining us. This evening, we appreciate it and we look forward to see you all out on the road take care take care everyone. Thank you.
This concludes todays conference you may disconnect your lines at this time. Thank you for your participation.
[noise].