Q2 2022 Bright Horizons Family Solutions Inc Earnings Call
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Greetings, ladies and gentlemen, and welcome to bright horizons, Mr lesions chicken quota after we speak to any countries cool.
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Mr. Michael Flanagan senior to picture of Investor Relations.
Please go ahead Sir.
Thank you.
And Hello to everyone on the call today with me here are Stephen Kramer, our Chief Executive Officer.
Elizabeth Boland, our Chief Financial Officer.
I will turn the call over to Steve.
Few administrative matters.
Today's call is being webcast and a recording will be available under the Investor Relations section of our website.
Dot com.
As a reminder to participants any forward looking statements made on this call.
And future business and financial growth.
Including the effects of acquisition can be closed.
19 of our operations are subject to the Safe Harbor statement included in our earnings release.
These statements involve risks and uncertainties that may cause actual operating and financial results to differ materially.
Out in detail in our 2021.
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Any forward looking statements speaks only as of the date on which it is made and we undertake no obligation to update any forward looking statements.
We may also refer today to non-GAAP financial measures, which are detailed and reconciled to the GAAP counterparts in our earnings release, which is available under the IR section of our website.
Even though I'll take us through the review and update of the business.
Thanks, Mike Hello to everyone on the call and thank you for joining US. This evening I hope that you and your families are doing well.
I'll start Tonight with a view of our second quarter results and provide an update on the business and plans for the remainder of 2022.
Elizabeth will follow with a more detailed review of the numbers before we open it up for your questions.
First let me recap the headline numbers for the second quarter as.
As we pass the midpoint in the year, we remain focused on our growth strategy and delivery in both areas. We continue to make good progress.
Revenue increased 11% to $490 million and adjusted operating income of $50 million was up 48%.
Adjusted net income of 42 million yielded adjusted EPS of <unk> 71.
Up 45% from last year.
In our full service segment revenue expanded 11% in the second quarter to $371 million.
We added four new centers, including a center for our new clients Shannon medical and reopened five more centers in Q2, ending the quarter with 98% of our thousand 14 centers copay.
Across our centers, we saw broad based enrollment growth with sequential improvement in occupancy in the second quarter and solid year over year growth.
More specifically in our lease consortium centers occupancy increased across both urban and suburban locations.
And while the suburban locations still led to more urban settings, we saw increased velocity of new enrollment in top major metro areas in the quarter.
But in large part by D C, New York City and Seattle.
We also saw solid growth in our client centers, which continue to be more highly occupied in our lease centers with higher Ed industrial and health care verticals continuing to deliver the highest occupancy levels.
On the staffing front, we also continue to make progress in our recruiting and retention efforts.
Increased job seeker interest combined with a streamlined kennedy's experience enhanced compensation are driving positive net hiring.
While we are still unable to accommodate all of the enrollment demand we have due to unfilled staff roles. We are encouraged by the hiring momentum and feel positive about the progress we have made over the last several months.
Yeah.
Outside of the U S. The U.
K is also making strides in staffing and then rebuilding enrollment levels.
However, in the Netherlands for the first time since the start of the pandemic enrollment levels had been moderately constrained as a result of labor market challenges.
In response, our Dutch team is replicating many of the recruiting and retention actions at the U S and U K teams have deployed.
With this as a backdrop, we started to experience some seasonal enrollment impacting June which persisted into July .
The historical summer and fall seasonal enrollment pattern created by older children aging up into elementary school and backfill with new families has been muted during the pandemic recovery and re ramping period.
However, the persistence of our staffing shortages, particularly in the younger age cohorts and our inability to backfill the open spaces with all of those families that had requested care has driven a more seasonal enrollment trends than we originally anticipated.
This recent dynamic has led us to lower enrollment expectations for the second half of 2022, but we are confident that we will ultimately achieve full enrollment recovery.
Let me now turn to backup care.
Revenue increased to $92 million or 13% over the prior year, We launched service in Q2 from new clients excellent Infineon and western digital to name a few.
Traditional center based in in home use with solid and in June we hit an important milestone as you surpassed its comparable 2019 level for the first time since the pandemic began.
And encouragingly that positive momentum has persisted into July with more families engaging with our various intermediate care solutions.
Clients and their employees continue to value our expanding menu of use types within their backup to your benefit.
We recently expanded our virtual academic tutoring offering to teens and adults.
This fall our piloting a new use type petcare, enabling us to reach a new segment of our clients' workforce.
Owners.
Pet owners also requires support when care is unavailable.
These are a couple of examples that illustrate our flexibility in developing new use cases that concern be evolving and diverse needs of our clients and their employee populations.
Moving onto our education advisory business, which delivered revenue growth of 7% to $27 million.
Activity levels were solid and college coach as this business continues to see high interest levels from parents meeting, helping navigating the college admissions and financing processes.
In EDA test, while new client interest is steady we did see fewer participants than expected in part due to the continued strength of the labor market.
Given the strong underlying need and employer demand for Upskilling and reskilling to support career development and growth.
I'm optimistic about our opportunity in workforce education.
Before wrapping up I want to formally welcome the team from only about children, along with the children and families. They book search to the bright Horizons family.
We are thrilled to have completed this beachhead acquisition and should now be operational in the attractive Australian childcare market.
Elizabeth and I had the opportunity to visit with Oak in early July and over the last month, our teams have been working closely and collaboratively on the integration.
I couldn't be more impressed with the caliber of the organization and I'm excited about the potential for <unk> to further grow and broaden our impact on families.
Furthermore, we have heard from a number of our multinational clients expressing interest in exploring employer sponsored opportunity to support their Australian employees with new care supports.
We expect over 77 centers to contribute approximately 70 million of revenue over the remainder of 2022.
Yeah.
As we spoke about on our last call given the near term effects of the integration. Okay. EPS contribution will be limited in 2022 with its full potential realized in 2023 and beyond.
Let me now turn to our consolidated outlook for the rest of 2022.
We continue to operate in an environment that has more limited visibility of enrollments, particularly over the important summer and fall transition period.
And given some of the constraints, we have seen year to date on staffing we are leaning more heavily into wage investments. This fall.
Given these factors we are revising our 2022 revenue outlook to approximately 2 billion and adjusted EPS of $2 60.
Just $2 75 per share or growth of 30% to 38%.
In closing we are proud of the critical role, we feel for our clients and their employees and the significant impact we have on the development and lives of so many children families and learners.
We are focused on the critical work to be done over the near term that will most certainly fortify our foundation now and for the future.
With that I'll turn the call over to Elisabeth who will review the numbers in more detail and I will be back with you during Q&A.
Thank you Steven.
As he said all I'll recap the quarterly results and then provide some additional updated thoughts on our outlook for the remainder of 2022.
In the second quarter overall revenue increased 11% to $490 million.
Adjusted operating income increased 16, 9% to $59 or 10% of revenue and adjusted EBITDA increased 22% to 83, nine or 17% of revenue.
In the second quarter, we added four new centers reopened five centers that had been temporarily closed and permanently close nine centers.
During the quarter with 1014 centers operating.
Yes.
Well service revenue increased 37 million to 371 million in Q2 or 11% over the prior year.
15% increase on a constant currency basis.
As Stephen mentioned, our enrollment levels improved in Q2.
And the range of occupancy continues to average between 55 and 65% of capacity across the portfolio with a couple of points uptick this past quarter.
Calgary This enrollment expansion were two discrete headwinds to revenue growth in the second quarter.
The strength of the U S dollar against the British pound and Euro resulted in approximately 13 million in revenue headwind compared to Q2 of 'twenty, one which was slightly higher than we had anticipated for the quarter.
In addition, the ARPA government support for child care services that we received on behalf of certain clients centers was higher than we anticipated and reduce the subsidy revenue that was needed from those clients by approximately 6 million in Q2.
Adjusted operating income for the full service segment was $22 million or 6% of revenue an increase of 18 million over Q2 of 'twenty one.
The 50% operating income flow through was driven by the gains enrollment that I mentioned as well as an increase of 12 million and ARPA government funding that we received at our P&L centers.
This funding helps to offset operating cost during this re ramping period, including the investments that we continue to make and teacher compensation.
Backup revenue growth increased to 13% in the second quarter with total revenue of $92 million.
As Stephen mentioned, we're pleased with the overall usage trends in the quarter as we achieved our targeted central base and then held in home use levels.
Because the mix of used between cat potatoes, and pay per use clients differ slightly from our expectations. It had a modest impact on our projections for revenue in the quarter.
That said, we are pleased with the acceleration of Houston, Jim surpassing 2019 levels and the continuation of that trend and into July .
Operating income in backup care of 25 million or 27% of revenue was broadly in line with our expectations for the quarter.
Our educational advising segment delivered growth of 7% on contributions from new client launches expanded use in college admissions in financing and advising and our center city services.
The lower than expected participant used you had assessed as Stephen mentioned resulted in slightly lower overall revenue growth for this segment.
Interest expense of 8 million in Q2 was down 2 million over 2021 on comparatively lower borrowing costs in the quarter.
However in the current environment, we are expecting interest to approximate 11 million per quarter in the second half of the year on higher rates and because we will be temporarily draw on the revolver. Following the closing of the acquisition of only about children.
Yeah.
The structural tax rate on adjusted net income has increased to 26% for 2022.
The 21% in Q2 of 2021, an increasing taxable income and lower tax benefits from equity activity and their ash 2016 O nine.
So now I'm, turning to the balance sheet and cash flow.
For Q2, we generated $67 million of cash from operations and made capital investments of $8 million and executed share repurchases totaling 45 million.
Well, we ended June 30th at two four times net debt to EBITDA, It's will increase due to the completion of our acquisition of only about children on July 1st we.
We paid approximately 210 million at closing and the remaining payment of approximately 110 million is deferred until the end of 2023.
So now moving on to our revised 22 outlook.
Our updated guidance reflects the current operating trends and performance as well as other market ambitious factors.
Including FX movements rising interest rate timing and quantum of government finance support and general inflation, particularly on labor energy and fuel costs.
In terms of the top line, we now expect 'twenty to 2022 revenue of approximately 2 billion.
At a segment level, we expect full service to grow roughly 15% backup to grow in the range of 12% to 18% and Ed advisory to increase 5% to 10%.
In terms of earnings this will translate into adjusted EPS in the range of $2 67.
75 cents for the full year 'twenty two.
We expect folks to contribute roughly 70 million to revenue.
For the second half of 'twenty, two with limited earnings contribution this year as we integrate the business and operations.
And the more immediate time frame our outlook for Q3 is for overall total revenue growth in the range of 12% to 16% with full service revenue growth of approximately 12% to 15% backup growth isn't that 15% to 20% range and Ed Advisory again growing approximately 5%.
10%.
In terms of earnings we expect Q3, adjusted EPS to be in the range of 60 to.
So 65 cents a share.
And clothing various conditions have disrupted the timeframe to return to pre COVID-19 enrollment levels and operating performance and our full service child care segment.
We believe that the actions that we're taking and the investments we have made and continue to make on the wage front are critically important and will further strengthen our leadership position in our field.
Our employer sponsored business model is unique and the strength of these relationships and the diversity of our service offerings are full service childcare tobacco per the educational advising positions us well to capitalize on an expanding market opportunity for all of our services.
And with that Janice, we are ready to go to Q&A.
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Our first question comes from Andrew Steinman of J P. Morgan.
Hi, there I was wondering if I if I heard you correctly, you may not like it feels like your constraint to growth or the timing of of growth recovery really is supply staffing recruiting and you're definitely well clear of saying, we're not meeting all the demand we have but it is that true.
In most major markets or is it is it mostly a supply constraint and then in some major markets. It's it's still demand recovery.
Yes. So so first of all I'll start by saying you know half of our centers right. We have had the ability to get back to pre COVID-19 levels.
And so obviously in those markets, we have a nice balance between our ability to attract and retain staff and the demand that exists in those markets.
On the flip side of that is there are.
Certainly some of the urban markets that have been and continue to persist to be more challenging both from a staffing perspective as well as meeting that demand against that staff. So I would highlight again places like New York City D C. Seattle, where we are seeing progress on the other half.
And they definitely lagged the overall portfolio in terms of.
Both the constraints on supply, but also a certain age groups on the demand side, what I would say finally is we do see really nice progress and our clients are client centers as well as in our suburban centers and then in select urban areas like a.
Boston L. A San Francisco, So overall Andrew to answer your question. The answer is we have areas, where we've been able to garner staff and to meet that demand and then there are other places in the country, where we continue to struggle on the supply side and then ultimately are not able to fulfill.
The demand on that side.
That makes sense Elizabeth just one really quick question on the D&A side depreciation amortization that the number in the quarter just came in a little bit below my model, what should we be thinking about for D&A for the year and if you could just highlight which piece of that comes from only about children.
Yeah. So we wouldn't we would estimate the overall to be around 80 million for the year for a DNA with only about children.
Yeah.
Probably $2 million or so in about a million and a half a quarter. So $3 million just quickly trying to translation.
Okay. Thank you very much much appreciate it.
The next question comes from Manav Patnaik of Barclays.
Thank you Ethan I was hoping you know.
Exactly.
Uh huh.
You know pre COVID-19 occupancy.
Color on that.
Is that off the theme and the denominator in terms of number of pieces of it.
You've obviously had to push back your boom occupancy.
Occupancy guidance for a while now and I'm just wondering like is that when you get to that if people just because the office three days a week.
Yes, well why don't I start with the last question, who asked Manav, which is around enrollment patterns of families.
We are still seeing the vast majority of families who are registering and enrolling at our centers coming in for a full time and so that is that our onsite client centers and that is in our lease consortium centers. So from a pattern perspective schedule perspective that is identical to what <unk>.
Pre COVID-19 look like and so ultimately as we think about the progress that we're making obviously.
It's really focused on continuing to be able to take full time enrollment in our centers because that is certainly what families are seeking in terms of care.
In terms of thinking about the enrollment at the centers that have not achieved pre COVID-19.
We've been upfront to say that our client centers and our suburban centers by and large are performing better than the urban counterparts, but again, what we saw in this quarter is that in the.
Urban markets that we have seen some significant black we started to see the velocity of that enrollment coming in.
Increase and so overall I hope that's a fair characterization for you in terms of giving you a bit of context around where we're seeing enrollment and how we ultimately see it coming in across the across the portfolio.
Okay got it and then just on the labor shortage is I mean, it's been going on for about three to four quarters. Now do you anticipate I know you said you obviously.
Got that got it down to the supply will come back et cetera, but do you think it takes another like four to six quarters before you can settle that out just curious on how you think you can tackle the situation.
Yes, so we first of all as both Elizabeth and I highlighted in the prepared remarks.
We have made some labor investments and wage investments are over the past call. It six to nine months. We are also in the process of doing another.
Age adjustment for our SaaS seats.
We are hopeful that with this continued focus.
Increasing wages that we are going to continue to unlock opportunities on the staffing side.
Certainly we've been seeing that so the number of applications.
He used to rise our ability to continue to increase the number of net new staff.
He needs to rise and so as we look out we are hopeful that these actions will have an impact and continue to have an impact as it relates to our ability to staff and then ultimately enroll against that increasing staff.
Okay. Thank you.
The next question comes from George Tong with Goldman Sachs.
Hi, Thanks. Good afternoon, you mentioned seasonal factors weighing on enrollment performance in June and July and Ah, It's sort of a departure versus Covid performance.
Can you talk a little bit more about that and then talk about how you distinguish between what may be seasonal versus what may be changes in client behaviors because of an increase in work from home.
Yeah, well, let me, let me I'm starting to see what else do you want to add so from a seasonal standpoint, George what.
We're trying to convey in our description of this at the helm.
We've always had in our business, where preschoolers are aging out and they're going to elementary school.
Notably on average, 50% or so of our enrollment in our center is going to be a preschool enrollment or the capacity, maybe a little bit more but the attendances.
Attendance is going to be around 50%. So those children are the older ones are aging out and how we need to backfill them either with new families from from outside the center or with children, who are aging out from the two year old expanded a preschool age group for three year old senior for.
That's the normal pattern.
While we are well we haven't been seeing through the pandemic is because we've essentially been re ramping in rebuilding enrollment across the entire portfolio that's been a much more.
Betty and linear rather than that decline are the older shuttle and we've just been continuing to grow enrollment we have seen this this June and July as we mentioned we've seen as those preschoolers are aging out and parents are getting them prepared for elementary school that the number of children there.
We were able to backfill in from either from our two year old category or from outside and coming back into the childcare a tariff system. If you will in a post pandemic here is it that just has not been we have not been able to.
Hello spaces, and so we're seeing a little bit of that that seasonality as a result of the preschoolers growing up and needing a younger children to come into the ranks and so to the extent that your your question is how do we distinguish seasonality impact that usual aging up from from behavior.
And I'm coming back to the office or other work patterns.
It has certainly been a I a disruptor as we sat around what decisions parents are making about care choices and so are we still don't have all the parents off the sidelines and we don't have all children, who had been in care before the St levels, the children and care and so there there still is some of that disruption insist.
But it is I think at this point because of the cadence of what we're seeing in a good majority of our centers, we see it more as a more of a seasonal pattern than any other.
Hum.
Work from home work from office kind of condition.
Got it that's helpful. And then could you tell us how much in government subsidies and benefits you received in the second quarter.
Oh sure. So we received a total of about 16 million of debt that was attributable to our P&L centers. So that was able to defray costs in those centers are in the quarter.
Our cost plus clients, where we essentially return that back to the clients was another $6 million.
A total of about 22 in the quarter again of which 16 million with was offsetting have your costs I started in this in the prepared remarks 12 million that was the increase over last year. So in the second quarter of 'twenty, one we got about $4 million.
Got it very helpful. Thank you.
Oh, thank you.
The next question comes from Jeff Silber of BMO capital markets.
Thank you so much I wanted.
Wanted to go back to some of the remarks, Stephen you had at the beginning I think when you were talking about full service centers I think the quote was you're you're confident that the company is going to ultimately achieve a full enrollment recovery.
Can we get a little bit more color. What you mean by that are you talking about revenues are you talking about utilization and roughly when do you think that'll happen.
Yeah, so that that was really reflective of utilization.
And getting back to pre COVID-19 levels of utilization in our centers.
And obviously you know, we're not providing any guidance as it relates to 2023, but our expectation is that within the year that are that that is when we would be.
Looking to have utilization at pre COVID-19 enrollment levels.
Okay. That's that's very helpful. I appreciate that.
And then shifting gears, you've talked a lot about what's going on on the cost side I'm. Just wondering from a price perspective, you can remind us what price increases you took this year and what should we expect for next year.
Yes, I'll take that Jeff. So this year on average and it does vary.
Vary by location, but we took price increases of around 5% to 6% on average.
And yeah, Theres some theres some selective markets, where we are where we looked at some minor other midyear increases but that was not systemic.
So average of 5% to 6% this year as we look ahead I see you did you say when we're not.
Giving guidance yet for 2023, I think directionally given the wage investments that we made in 2021 and we have continued to make in 'twenty, two and are making even as we speak we would be looking at a higher than our historical average our historical average would have been around for.
Per cent. So obviously 22 was higher we would expect it to be again higher than average in and looking to recover as much of the sort of underlying cost inflation and cost increases that we are seeing but we continue to balance.
That against our our focus on rebuilding.
The enrollment levels first and looking at our price has a a follow on active actions to get back to their pre Covid Center economics are so broadly speaking I think you'd see something north of 5%, but we have not landed on what that would be it would just be threading the needle.
There between a b and enrollment levels and the overall cost structure that we see unfolding.
Great I appreciate the color. Thanks, so much.
Thank you.
Yeah.
The next question comes from Hamzah Nozomi of Jefferies.
Good morning. Thank you. My first question is just around visibility that you have in your financial guidance today, maybe just frame for us kind of your I guess your conviction level are.
Given you know we've got expectations a couple of times for obviously some issues with non controllable like on me.
Liberty today, just curious how much buffer you have in your guide and kind of the visibility today versus.
Versus you know I don't know if you want to compare a couple of quarters ago, or however, you want to frame that for investors.
Yeah.
Yeah I mean.
I think hamzah the visibility is is challenging.
A few ways. One is both the time of year. So we are in the sort of the summer turnover period that I tried to articulate.
Earlier about seasonality and so we are always you know sort of a building mode from an enrollment at and selling.
Standpoint anyway. So we have we have good visibility on.
A high percentage of where we are now, but we do have additional enrollment and we are looking to gain over the rest of the year and as children age out of the centers that the Bath County that we will need to do but we do think that we've been.
Measured about what we're expecting in terms of that enrollment you can see from the.
Revision too to the guide that we've you know we've looked at at the patterns of where we are now what we what we are you know the steps, we're taking now and how quickly that can convert from a you know we are we starting if you will more of the marketing engine to to follow behind the staffing actions.
So we're taking it and having all of that bear fruit and so we think we've been measured for the rest of the year and even though hundred per cent of it and that's all.
All already if you will in the books, we do have some room to go we think we've.
We set a reasonable target.
That's very helpful and maybe I missed this but just your pro forma leverage on the balance sheet post the Australia deal and maybe as part of that you know how much floating rate debt exposure do you have an end and just thoughts on where you want leverage to end up the a bench.
Will do.
Yeah, So roughly speaking how you didn't miss it because I explicitly standby you know roughly speaking we would be taking up closer to three times than where we are at the end of the quarter at two four times.
In terms of you know overall value we have floating we all all of our debt is variable interest rate, but we do have caps on.
About 800 million of that Julian and depth that we are carrying so not very much of it is floating at this point, but we do have a step up to the you know to the to the bottom on that and it's it's just comparing to a really favorable year last year as well.
I think from a leverage standpoint, we've historically carried higher levels. Then that's certainly a three and a half plus we we've just done a substantial acquisition and we've always said that that Oh groceries into D. I was looking even temporarily at something a little bit north of three and a half so I think.
Our general comfort range, where in that comfortable range and it could tick up above them three.
Three and a half.
Temporarily just because of the cash generation of the business.
Got it thank you so much.
Thank you.
The next question comes from Jason No not after that.
Yeah. Thank you so just on the summer backfill dynamic.
Is it that the children that had been born in the last two and a half years roughly during the pandemic.
Found other care arrangements, many are persisting and those other care arrangements or am I oversimplifying. It are missing some more important driver.
Well no I think that the summer Ah piece that we're talking about are currently enrolled families who are the oldest age group ends up matriculating onto elementary school right and so really the dynamic there is it sure is a very well worn.
Past that we've seen historically and are certainly seeing them in the summer period I think the piece that is the dynamic that we're focused on is our ability to backfill against those leavers right those expected leavers and when we think about the enrollment requests that we have certainly are.
One is to match those again.
South capacity and some of the impact becomes a win you know the demand obviously is.
Is most significant is the youngest age groups, where ultimately we need to continue to hire incremental teachers to take that demand versus in the age groups where.
We have had believers, where we either going to garner enrollment from the outside or to a large extent grow our own into those older age groups.
But I guess, what's the hypothesis on why the demand from those older children to backfill.
Lower than expected.
Yeah.
Well I think there certainly is some as you framed it there there are some conditions, where we have not been able with our younger so younger age group child someone who is two years old.
How there too and we have been short staffed have not been able to take the enrollment six or nine months ago. So they are not in the system to be eating up for families. As you said have not yet come back and they were they were born in the last couple of years and they have not entered.
The child care system or they were on a waitlist for it for us and we couldn't take them and so they are they have found other care. There are certainly some of that dynamic too, but it is it's difficult to quantify where you know each of those channels parents have gone down but as you say there is some of that dynamic that's happened.
Okay and then for.
Only about children just.
What type of margin profile or the onboarding, yet and are you going to be.
Including the restructuring and integration for or I guess integration charges are you, including those in your adjusted EPS ex or are you gonna be backing the integration charges out.
So generally we are we.
Integration costs are not something that I'm not sure significantly outsized. We typically have not added those back we would add back transaction costs, but the you know the overlapping cost of either incremental investment for the that we may make because it is beachhead acquisition of new resource.
Says that we need to.
Bringing to bear or temporary resources that are helping with.
The transitional yeah filings and statutory reporting and everything else. There's a there's some of those costs. It would just be absorbed so we would be reporting those and that's part of why we've said that the results we are not expecting a meaningful contribution for this.
Initial period, they are coming over to us as we talked about initially when we announced the transaction.
This is a similar sort of full service and the rest of our full service fitness operated at both you know from a fee level, a gross margin level and in overhead support level similar to our our other operations outside the United States, where they are primarily full service business.
Prior to Covid that business was operating in the high single digits, 910% are getting getting to that level.
So okay now coming over to us quite at that level because of the the as I said they are still in a slight recovery mode to from the pandemic. So they are not you know fully fully functional at their optimized run rate if you will but there.
On track to get there and that coupled with.
Some of the Hum they the interests that we mentioned that we would be attributing to this get ahead of the overall mix of our cash flow in the business.
And incremental I'm, just seeing incremental costs as what goes into it.
Okay, and then just last we can come up with an estimate but if you have a clean guidance bridge. So we get the plus 70 from Oak what is the incremental FX headwind in terms of dollars of headwind and this guidance relative to the prior guidance. Just so we can do the organic constant currency bridge.
Sorry, Mike go ahead.
So that's about $8 million to $10 million, okay for the full year.
Okay. Thank you.
Okay.
Okay.
Okay.
Thank you, ladies and gentlemen, just remind him if you knock off the question you're welcome to Bristow and then one on the telephone keypad.
The next question comes from Toni Kaplan of Morgan Stanley .
Thank you so much I'm, hoping we could go back to labor are you able to.
Clarify I guess, what is driving the labor shortage I think during COVID-19 we.
We were thinking that it seem to be about unemployment benefits being really strong and you know and it's an industry that is.
It's somewhat lower paying.
I imagine that that's largely thrill, but correct me if that's wrong, but.
But I guess have caregivers just found different jobs that are higher paying or what do you think is really driving the labor shortage here.
Okay.
Yeah. So I think we are certainly passed the unemployment benefits that we had faced in terms of a headwind previously on the on the labor side, but look I think that certainly across many industries and there is a recognition that especially frontline roles and certainly Archie.
Rolls are frontline roles.
There is a real dearth of individuals that are seeking these opportunities out and at the same time, we have had some of our retention put under pressure throughout this period. These are difficult jobs right, they're really important and they're highly valued on the other hand they are difficult.
And so we are certainly seeing a within our industry categorically and then certainly within our employees that there are teachers, who are making different decisions who are deciding to leave the industry and therefore, you know we're very focused on as we always have a hiring for attitude and training for skill one of them.
The most important programs that we have on offer is our horizons teacher degree program and that is certainly an attraction.
For new entrants into our field, but certainly I think across the childcare field and and the child care industry. It is well recognized that there continues to be a shortage of individuals that are interested in doing the work that is so important to us.
Got it.
Wanted to also ask Stephen you mentioned, the pet care that you're getting into I guess, what's the advantage is it that you already have the relationship with the employer, so you're offering a new service to them and I guess are the.
Pet caregivers are for lack of a better term.
One said are interchangeable and so you just have if you don't have the in home demand you can shift to pet demand I guess, how how does that just work and and what's your advantage and in pet care.
Yeah. So I think first and foremost you rightly pointed out the fact that we have.
Over a thousand client relationships, specifically within our backup line of surface and as we have continued to have conversations with our clients.
About the possibility of expanding the use cases.
One of the ones that has certainly come up time and time again is is this area of pet care.
And the reality is that as we all know them you know many employees of our client organizations think of their pets in the same way that they see.
Think about their children and therefore, when they have a breakdown in arrangements with their pets. They do need some support and so are similar to the work that we do on the child and elder care side.
We are going to b, providing a service that allows for employees to utilize there are set of use that is available through their employer directed towards their pets and so we're gonna be contracting with third parties to actually deliver that care.
And obviously using the backup care mechanism and benefit to fulfill that demand.
Thank you.
Okay.
The next question comes from Faiza <unk> of Deutsche Bank.
Yeah, Hi, thank you.
So I'm still but unclear around the demand versus supply dynamics and I was thinking maybe one way we could think about it is sort of urban sort of isolate out some of the urban areas and I Wonder if you can help us think through like maybe what the enrolment was in these urban centers.
As pre pandemic and find a way of funding right now and how much of that gap is you know its subside or then I guess relatedly I'm curious if you're seeing the supply issues you know across the board or are they more or are you seeing them more on the RV side.
Well.
Speaking of names that they just did disparity if you will between enrollment and our urban versus suburban is about five percentage points. So there is a distinction, but it's not okay.
Our wholesale gap, if you will I think it'd be more intense areas that we've called out around New York City D. C et cetera that had a bigger yeah. It was.
Much wider gap to knapp compared to sort of a more generic urban urban suburban comparison and.
And so from the standpoint of a demand supply obviously is a centuries 30 or 35% enrolled there's more you know that in that sense. There's more of a demand problem than there is in a center that is 60% enrolled and just can't we can't open. The next you know final toddler room.
Because we don't have to teach yourself in that room or are we somewhere where they where the preschool room. So.
The supply demand dynamic has changed depending on how much a centuries enrolled but I think that our view is that there are supply constraints that are pretty hyper localized some areas did not shut down as much as they were yeah. So therefore, they reopened more quickly and they're very.
It's less disrupted a teacher supply there.
But I don't know you know having looked at the patterns for us I don't know that there's anything particular that we would call out there yeah and I think the only thing I would add is you know.
Elizabeth rightly pointed out are the cities that have been more challenging than New York city's the D. CS.
The Seattle's but on the flip side of that we also have within the portfolio of places like Boston L. A San Francisco that have a strongly for firms and therefore, we really are yeah. We are really not thinking about this as an urban.
Challenge is very specifically in certain cities where.
They are held back for a garden variety of reasons, but nonetheless, I think that we took a great heartening in this last quarter to see even places like New York D C and Seattle continuing to progress. So those are not cities that we expect won't come back they just have not come.
Back as quickly as places like Boston L, a and San Francisco for Us.
Okay. Okay. Thank you for that and then just.
So up on the prior question really around I guess, the psyche of new parents, particularly you know children, who were born during Covid.
What is your research showing in terms of you know what they're looking for is that are you seeing that it's more you know maybe one parent hasn't gone back to work yet and is doing more of the you know the caregiving at home is it is it more of a hybrid environment I'm curious sort of what what's your read.
Search has shown shown around that.
Yeah, what would our research and certainly what or enrollment patterns bear out or that individuals who are coming back to childcare or coming into childcare for the first time are coming back on a full time basis. So theyre coming back five days, a week and are choosing to have that five days.
A week to really support the continuity and consistency of care for their children and to support the needs. They have as full time working.
Employees.
The folks who have not come back into childcare.
<unk> really are generally doing a few different things some of them are continuing to put together their patchwork of support some of which includes working from home and trying to hobble together between spouses indoor grandparents and or just off the size of their desk are carrying.
For their children and then others are really planning for what could be a fall or January enrollment in more professionalized group care settings, like bright horizons and in the meantime, our spending the summer <unk> fall trying to figure out exactly what their work arrays.
Rents are going to be and then making a decision as it relates to the where they're going to find accommodation.
Okay. Thank you really appreciate it.
Thank you.
Yeah.
Excellent well, we appreciate everyone joining us this evening and I'm wishing you a great night.
Have a good rest of your summer.
Thank you ladies and gentlemen that concludes today's conference. Thank you for your participation and you may now disconnect your lines.
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Okay.
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