Q1 2025 Bright Horizons Family Solutions Inc Earnings Call
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Ladies and gentlemen, thank you for your patience. The conference will be beginning in just a few moments. Once again, thank you for your patience. We will be beginning momentarily.
Speaker Change: Greetings, welcome to Bright Horizons Family Solutions, 1st, Twitter, 2025, Earnings Release Conference Call
Speaker Change: At this time, all participants are in a listen only mode. A question and answer session will bother the former presentation.
Speaker Change: If anyone wants to require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Michael Flanagan, Vice President and Investor Relations for the Bright Horizons Family Solutions. Thank you. You may begin.
Speaker Change: As a reminder to participants, any board looking statements made on this call, including those regarding future business, financial performance, and outlook, are subject to the safe harbor statement included in our own release.
Speaker Change: Four living statements inherently involve risk and uncertainties that may cause actual operating and financial results to differ materially and should be considered a conjunction with the cautionary statements that are described in detail in our earned release, our Toni 24-410K
Speaker Change: Any for-looking statement speaks only as of the date on which it is made and we undertake no obligation to update any for-looking statements.
Speaker Change: Joining me on today's call is our chief executive officer, Stephen Kramer, and our chief financial officer, Elizabeth Boland. Stephen will start by reviewing our results and provide an update on the business. Elizabeth will then follow from our detailed review of the numbers before we open up to your questions. So with that, let me turn the call over to Stephen.
Thanks Mike and good evening everyone on the call.
Speaker Change: We are pleased to report a strong start to 2025 with revenue growth in line and earnings growth well ahead of our expectations. These results reflect the successful execution of our strategy across all segments.
Speaker Change: From growing enrollment and expanding our backup business to efficient service delivery, I am encouraged by our continued progress and remain confident in our ability to effectively serve the working families and employer clients that count on us each and every dead.
Speaker Change: So, to get into some of this specifics, revenue in the quarter increased 7% to $666 million, and adjusted EPS grew 61% to $0.77 per share.
Speaker Change: At a segment level, our full-service child care business grew 6% to 511 million and operating margins expanded 210 basis points to 6.5%.
Speaker Change: We added six centers in the first quarter, four of which were client sponsored, including centers for Roe Caribbean and Artrex.
Speaker Change: Overall, tuition increases, average 4 to 5 percent, and enrollment incentives open more than one year, increased at a low single digit rate, with average occupancy percentage in the mid-60s.
A sequential step up from the fourth quarter.
Speaker Change: In terms of enrollment trends in the US, we have continued to see encouraging enrollment dynamics in certain underperforming centers located in business districts, where return to office policies have been gaining traction.
Speaker Change: At the same time, we have also seen a somewhat slower velocity in the pace of commitments across some other US markets. As families consider longer term, spending decisions, including for childcare, and the context of ongoing macroeconomic uncertainty.
Speaker Change: In response, we are sharpening our focus, working in creators and see, improve follow-up and streamlining the path from inquiry to enrollment, all while reinforcing the value and quality of our services
Speaker Change: Even considering this current dynamic, we remain confident in the opportunity to drive continued margin improvement through enrollment growth and maintaining price to cost differential and operating discipline.
Speaker Change: Outside the US, the UK continues to demonstrate strong progress on enrollment and margin recovery.
Speaker Change: In addition to steady enrollment growth, we have made meaningful improvements in recruiting and staff retention. As a result, we continue to see a clear path to earnings break even in the UK in 2025.
Speaker Change: Let me now turn to backup care. Revenue increased 12% to 129 million, which was in line with our expectations.
Speaker Change: Traditional use remains strong across all network types in the first quarter.
Speaker Change: In addition, early reservations for slave programs during the peaks of our month are quite encouraging.
Likewise, employers continue to prioritize family support benefits.
Speaker Change: We started the year strong with 95% client retention and many new client launches, including the University of Michigan, Sherwin Williams and Lapport, among others.
Speaker Change: With our growing client base and increasing engagement among eligible employees, we remain on track to achieve our 2025 objectives.
Speaker Change: Our education advisory business grew 8% this past quarter to 26 million ahead of our expectations.
Speaker Change: We saw encouraging growth and participant engagement within our ethicist service and college Andrew Kramer to continue to deliver solid operating performance.
Speaker Change: We also added new clients to Portfolio, including Tower Health and Tiffany's.
Speaker Change: As we have shared over the last several quarters, this segment where we are investing with a long-term view and we remain confident that these investments will drive the meaningful value over time.
Speaker Change: Before I wrap up, I want to share some highlights from our recent annual Senior Leadership Forum, an event that brings together our top 100 leaders from across the globe to collaborate on longer-term growth strategies.
Speaker Change: A key or a focus at this year's forum continue to be our one Bright Horizons strategy, focused on extending the value and impact of our offerings at the client and user level.
Speaker Change: For existing clients, we continue to develop initiatives to gain an expansion of our broad suite of services.
In the first quarter, we drove several examples. [inaudible]
Speaker Change: Current backup client, Philip 66, expanded their services to include ASSIST.
Speaker Change: Similarly, current college code client Vertex, and current full-service client Afflak, both added back up here to their portfolio.
These results underscore the value of our increasingly integrated offering.
Speaker Change: and the strength of our strategy to drive deeper, more enduring partnerships with the employer's, family and learners we serve.
Speaker Change: So to close, I am proud of the team's execution in Q1 and their continued dedication to delivering outstanding education and care.
Speaker Change: We remain confident in our long-term strategy and are encouraged by the results we are delivering.
Speaker Change: We are raising our revenue growth guidance to a range of 6.5 to 8.5 percent, largely reflecting the recent changes in foreign exchange rates, while reaffirming our adjusted EPS in the range of $3.95 to $4.15.
Speaker Change: With that, I'll turn the call over to Elizabeth, who dive into the quarterly numbers and share more details around our outlook.
Elizabeth Boland: Thank you, Stephen and thanks to everyone for joining the call tonight.
Elizabeth Boland: To recap the first quarter overall revenue increased 7% to 666 million.
Elizabeth Boland: Adjusted operating income of $62,000, or 9.4% of revenue increased 56% over Q1 of 2024, while adjusted EBITDA of $92,000, or 13.9% of revenue increased 23% over the prior year.
Elizabeth Boland: We ended the quarter with 1,023 centers with six additions and two closures in the first quarter.
Elizabeth Boland: To break this down a bit further, our full-service revenue of 511 million was up 6% in Q1, on pricing increases and low single-digit enrollment growth, offset by just under 100 basis points of FX headwind.
Elizabeth Boland: Enrollment in our centers open for more than one year, increasing low single digits across the portfolio.
Elizabeth Boland: As Stephen mentioned, occupancy levels averaged in the mid-60s for Q1, having up from the prior year, as well as sequentially from last quarter, given the typical enrollment seasonality.
Elizabeth Boland: In the center cohorts we have discussed on prior calls, we continue to see improvement across the center cohorts over the prior year period.
Elizabeth Boland: Our top performing cohort defined as above 70% occupancy improved from 44% of these centers in Q1 of 24 to 47% of centers in Q1 of 2025.
Elizabeth Boland: As a reminder, this cohort continues to sustain strong average occupancy levels, in fact, above 80%, which inherently limits the additional enrollment expansion opportunity.
Elizabeth Boland: Conversely, in our middle and bottom groups, defined as 40 to 70% in roles and below 40% in roles respectively.
Elizabeth Boland: The enrollment has increased at a mid-single digit rate in the first quarter [inaudible]
Elizabeth Boland: In the Q1 centers in the middle cohort now represent 40% of the total work of that portfolio and the bottom cohort represents 13% of the centers.
Elizabeth Boland: Adjusted operating income of 33 million in the full service segment increased 12 million over the prior year and represents six and a half percent of revenue in the quarter.
Elizabeth Boland: Higher enrollment and improved operating leverage, notably in our U.K. and U.S. operations, help drive the growth in earnings.
Elizabeth Boland: Turning the backup care, revenue grew 12% in the first quarter to 129 million, with adjusted operating income at 21% of revenue or 26 million.
Elizabeth Boland: Lastly, educational advisory revenue increased 8% to 26 million and delivered operating margin of 10%.
Elizabeth Boland: Operating margins were consistent with the prior year, reflecting the ongoing investments that we are making in the product suite and customer experience.
Elizabeth Boland: Journey to a couple of other items on the P&L, interest expense decreased $3 million to $10 million in Q1 largely due to lower overall borrowings and the incremental interest income that we earn on invested cash.
Elizabeth Boland: The structural effective tax rate on adjusting the income was 27.5% consistent with Q1 of 24.
Elizabeth Boland: During the balance sheet and cash flow, we generated 86 million in cash from operations in the first order.
Elizabeth Boland: We made fixed asset investments of 15 million and repurchased 20 million of stock in the quarter.
Elizabeth Boland: We end at Q1 with 112 million of cash and reduced our leverage ratio to 1.8 times net death to just an e-bidum.
Now I'll turn to our 2025 Outlook Thank you very much for your time.
Elizabeth Boland: In terms of the top lines, we are modestly raising the midpoint of our reported revenue outlook by $15 million to a range of $2.865 billion to $2.915 billion.
Elizabeth Boland: This updated revenue range reflects a roughly $30 million favorable change in FX as compared to our original guidance.
Elizabeth Boland: Artially offset by roughly 159, which largely reflects a more conservative assumption around the pace of enrollment over the remainder of the year.
Elizabeth Boland: This results in a projected reported and constant currency revenue growth rate of six and a half to eight and a half percent.
Elizabeth Boland: Breaking that down a bit further at the segment level, in full service, we now expect Revenue and—sorry, reported and constant currency revenue for the year to grow in the range of 5-7%.
Elizabeth Boland: And back up here, we now expect reported revenue to increase 12-14% up 100 basis points from our prior outlook.
Elizabeth Boland: And in Ed Advisory, we continue to expect to grow in the load of mid-single digits.
Elizabeth Boland: In terms of earnings, as Stephen previewed, we continue to expect 2025 adjusted EPS to be in the range of $3.95 to $4.15 a share.
Elizabeth Boland: As we look specifically to Q2, our outlook is for top line of 720 to 730 million or growth in the range of 7.5 to 9% on a reported basis.
Elizabeth Boland: This reflects roughly 100 basis points of tailwind from FX over the prior year.
Elizabeth Boland: We expect full service to grow reported revenue 6-7%
or 5-6% in constant currency.
Elizabeth Boland: We also expect back-up to grow 13 to 15% and ed advisory to grow in the Ben-Single Digest.
Elizabeth Boland: In terms of earnings per share, we expect Q2 adjusted EPS to be in the range of $0.99 to $1.4.
Elizabeth Boland: And so with that and sharing, we are ready to go to Q&A.
Elizabeth Boland: Thank you. If you would like to ask a question please press star one on your telephone keypad. A confirmation telephone indicate your line is in the question queue.
Elizabeth Boland: You may press star two if you would like to remove your question from the queue. For a participant using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment will we pull for questions.
Andrew Steinerman: Our first question is from Andrew Steinerman with J.P. Morgan, please proceed.
Hi, I'm focusing on the mid-60s.
Utilization for Full Service in the First Quarter
Speaker Change: Could you just give us a sense of how you think that will go through the year? I know there's seasonality, particularly in the summer, and then also talk to us about your journey to eventually get back to pre-COVID levels.
Speaker Change: Sure, thanks Andrew. So, the reported enrollment utilization in the first quarter, we would expect it to step up a bit in the second quarter as we continue to sort of press space.
Speaker Change: Enrollment Seasonality in Q2, so it would improve a bit in Q2 and then taper in the second half of the year but averaging roughly in the same reported where we are in Q1 for the full year so that mid-60s.
Speaker Change: would be the trend up in Q2 and then tapering back into Q3 and relatively flat Q4.
Speaker Change: As it relates to continued progress to the sort of pre-COVID utilization levels, at this pace we're talking, you know, a couple two to three percent or so of enrollment growth for the year.
Speaker Change: And so, at that pace, I think we will have better insight next year as we continue to play out this year, but it would be at that pace we'd be taking another couple years to fully get back to a pre-COVID overall.
Speaker Change: 70% threshold, and I think that the components of that are both growing enrollment in the cohorts that we have and continuing to pair the underperformers that just are not ultimately recovering.
Well said, thank you.
Thanks.
Speaker Change: Our next question is from George Tong with Goldman Sachs, please proceed.
Speaker Change: Hi, thanks. Good afternoon. You talked about seeing a little bit of a slower velocity in commitments in some of your markets given macro uncertainty. Can you talk a little bit more about that and whether some of those changes could be structural in nature or if they're purely cyclical?
Speaker Change: Thanks for the question, George. So I think first we would start that by saying, you know, we think that those are more in line with cyclical. We don't see a structural change.
Speaker Change: At the end of the day, when we think about child care and families, working families think about child care [inaudible]
Speaker Change: They really don't think about it in the sense of being a sort of discretionary item in the way that you might see vacations or other kinds of purchases, and so with that in mind...
Speaker Change: You know, our existing families continue to persist really well within our centers, and so we're seeing good retention. And it's really on the new family side that in certain pockets here in the US, we are seeing some families choose to push out their start dates. [inaudible]
Speaker Change: perhaps taking a little bit longer to commit. But overall, as we suggested in the guidance, it's really around the edges. We're still seeing enrollment growth. It's really just not as at the velocity that we had originally taught.
Speaker Change: Got it. That's helpful. And then there's a follow up in your bottom cohort of enrollment centers. So those with less than 40% occupancy, are you taking any initiatives that are different from before in addressing those lower occupancy rates, or is it the similar playbook to earlier quarters?
Speaker Change: Yeah, I mean, we are still approaching it in the same way, George, so we continue to be very disciplined about...
Speaker Change: Looking at centers, trying to think about their, we've end date thinking about other actions that we can take, but ultimately we continue to try to improve, as we share the prepared remarks, this quarter and last quarter [inaudible]
Speaker Change: You know, that discipline is starting to pay off, especially in places that were turned to office dependent and so again those would have been potentially actions that we could have taken last year decided to take a more patient approach and as those centers have started to come back I think again it sort of reaffirms.
Speaker Change: that were making really good decisions in terms of making that bottom co-op or try to work in ones that can't ultimately pairing those over time.
Very helpful. Thank you.
Thank you.
Speaker Change: Our next question is from Menvac Patnaik with Barclays, please proceed.
Speaker Change: Hi, this is Prinsley Thomas on Firmana. Thanks for taking my question. I saw that the full-center margins were roughly 7% in one queue. I wanted to just ask you what the sustainability around that looks like and what are your segment margin expectations for 2Q?
Speaker Change: Yeah, thanks, Quincy. So we were about 6.5% in the quarter and up.
Speaker Change: just over 200 basis points from the first quarter of last year. So
Speaker Change: Please, with that progress, I think that the view as we look out for the rest of the year is that with the...
Contribution particularly from our UK business to the first quarter.
Speaker Change: or the improvement there was measurable. We're also starting to comp against more challenging.
Speaker Change: and they're not challenging. The UK had good improvement last year and
Speaker Change: over the course of the year, and so we're just lapping some of that effect, so we would expect
Speaker Change: Overall for the year that we'd be maybe 125 basis points for 2025 in total, so that 210 or so basis points in Q1 would tape or some as we lap some of those effects from last year and also just with the slightly pulled back expectation around enrollment 50 basis points or so.
Speaker Change: Got it. And can you just help us quantify how much of a drag the UK was in Q1? I know that you mentioned that you see a clear break even point for this year. And also what is your new center opening outlook?
Speaker Change: I can't compare that with the fact that the UK is not at the same level as performance yet is.
Speaker Change: as the US. So there is a headwind there, and the neighborhood of a hundred basis points or so on the full service margins coming from the UK business, even though it's...
Speaker Change: It's contributing. We do see a pathway to it breaking even this year and that will be certainly a good threshold but we will continue to make progress then in 2026 on beyond that.
Speaker Change: Overall, the UK is contributing to the improvement but is still ahead with the overall reported margin performance.
Speaker Change: As it relates to openings, we are still looking at net plus minus youthful openings, so call it 25 center openings and plus minus 25 closures for the year.
Speaker Change: and so we would expect the unit growth to be neutral, even though when a new center opens the timing of that and the timing of the closings can have.
You know, not an exact revenue offset for those two components.
Thank you.
Stephanie Moore: Our next question is from Stephanie Moore with Jeffries, please proceed.
Stephanie Moore: Thank you. I want to first is just a follow-up question, and maybe I just missed heard. So was the original assumption kind of low single digits, so call it 2 to 3 presenting enrollment growth the year, and then what is the new underlying assumption?
Speaker Change: The original assumption was about two and a half to three and a half and now we've drawn that back to two to three percent, so about fifty basis points of trim on that.
Speaker Change: Okay, great. No, I appreciate it. And then as you know, kind of as you noted, you know, where you're starting to see a bit of a macro and uncertainty driving, maybe something, driving a reduction in that kind of new enrollment.
Speaker Change: Is there, you kind of called out that you would be kind of sharpening your pencils and kind of doubling down on how to how to address that? Could you kind of remind us what the playbook would be in a slightly weaker macro environment to continue to drive healthy enrollment growth? Thank you Thank you.
So, I mean, I think that maybe-
Speaker Change: Healthy macro environment as well as the less healthy. I think our playbook is quite similar actually. We really are looking first and foremost to make sure that we're able to differentiate the quality of a Bright Horizons experience for a child and family as compared to other options in the community or at the worksite. So first and foremost, making sure that we're able to articulate the value and then making sure that that experience from initial inquiry all the way down through the start date
Speaker Change: Family is a flawless one. And so making sure that each step of the way that family feels well accommodated is having their questions answered and making sure that we're really focusing on making sure they have.
Speaker Change: because of that great experience that they're having. So, again, in all kinds of environments, our playbook is the same, and we feel like we continue to refine that over time, but ultimately, that's the focus.
Speaker Change: What that could be, but anything from a discounting or promotional standpoint that we could see as well as the environment. Thank you.
Speaker Change: Absolutely, so we tend not to do sort of broad-scale promotions at retail, if you will. That said, as we shared in the prepared remarks.
Speaker Change: We are spending a lot of time and effort thinking about how we can cross pollinate across our services and really taking this one Bright Horizons approach.
Speaker Change: down to the user level. And so, you know, you might see, for example, if you were an employee of one of our clients.
You might see special incentives.
Speaker Change: to help you to move from, let's say, being a backup customer to becoming a full service customer. So that, I think, is something that we are doing and testing in order to really try to effectuate that strategy at the consumer level and bring value to our clients at the same time.
Speaker Change: making sure that we are getting the maximum value from those who we serve.
Speaker Change: Our next question is from Toni Kaplan with Morgan Stanley , please proceed.
Thanks so much.
Speaker Change: Stephen, I was wondering if you could help us out with maybe what you're seeing as the rationale
The slower enrollment trends within the industry.
It's not just that beef ham, it seems to be more industry-wide.
Speaker Change: Do you think that there's a pricing element to it, like you've gone through a couple of years of...
Speaker Change: Above Trend Pricing, and now some consumers might be being priced out. Just wanted to understand if you think that's reasonable or if you think there are other factors that really don't have anything to do with pricing.
Speaker Change: Sure, so, I mean, look, pricing is something that we always are focused on and want to make sure that...
Speaker Change: Families are seeing value from money, and I'm sure that everyone within the sector is looking to accomplish that regardless of sort of the quality level.
at which they sit
Speaker Change: What I would say is that, you know, again, there is a little bit of an after effect right from COVID.
Speaker Change: where there are certain families, especially with older children, who had never invested in child care because they ultimately were at home. They were staying at home with their children and ultimately didn't have that experience. Nor did they have that cost as part of their sort of family budget.
Speaker Change: I think in addition to that, as we think about where we are and looking forward, you know, there are families that may feel, you know, uncertainty in their own.
Speaker Change: sort of a job situation in which case if they haven't started in formal care.
Speaker Change: They made want to feel more secure before they ultimately step up and start making that investment.
Look, I think the best indicator.
Speaker Change: is what we're seeing on the existing family side, which is really good retention.
Speaker Change: So it's not like people who are involved in our care are making different decisions than they had made in the past.
Speaker Change: Those folks who understand the value of what we're delivering continue to have both parents employed, continue to persist with that care. And so it's really...
Trying to adjudicate what's happening for new families.
Speaker Change: as opposed to for those families that have already made that selection and have already gotten involved with a Bright Horizons experience.
Makes sense. And then, Elizabeth, really good. [inaudible]
Margins on the backup care side, this quarter as well.
Thank you.
Speaker Change: I know the question was asked already on full service sustainability, but wanted to ask your thoughts on...
Speaker Change: Any timing elements, short things like that because I did notice you know you didn't raise.
Speaker Change: The Guide for the Year, maybe that's uncertainty, but just wanted to get sauce there. Thanks.
Speaker Change: Yeah, I think our thanks for the question that the performance in the corner is really down to
Speaker Change: The mix of the type of use we're providing and what we can deliver in, you know, in the center [inaudible]
Speaker Change: and other components and so we have had good cost management, good pricing on the provider network that we have and so we've been able to sustain a little bit better.
Marching Performance in Q1. I'm not, you know, nothing unusual in the quarter.
Speaker Change: For the full year, I think the view there is, as we look at the mix of where use will come as we get into the high season of use, we do have a variety of partners in our network and so we're looking at a mix that's very similar to how we have...
Speaker Change: I've been able to perform in the past, so that's why we've, I think, sustained the margins in a similar range to where we've been able to keep them the last couple of years. It's a very much a used driven business and we want to have...
Speaker Change: A choice and we want to have the matching of the services across both the US and the UK where we're providing care and so it's quite a complex algorithm.
Thank you.
Speaker Change: Our next question is from Jeff Mueller with Baird, please proceed.
Speaker Change: Yeah, thank you. As Toni mentioned, you're not the only one in the industry seeing us slower intake right now, but from the experience and your data, does the weakness? Yes.
Appear
Speaker Change: notice will be more pronounced at employer sponsors that are maybe being more directly impacted by tariff and trade war risk or federal government agency layoffs, or does it just look fairly broad across industries and geographies.
Speaker Change: Yeah, Jeff, we are not seeing that at our client-supported centers in particular, so I would say first and foremost know we're not seeing a degradation from the perspective of our client-centreers.
You know, when the lower and middle...
cohort, right? We continue to grow in a mid-single-digit rate.
and it's actually the highest enrolled.
The above 70%
Speaker Change: where again one of the facets of that is those are in our world structurally full.
Speaker Change: Right? Once you get past 80% occupied, we think to those who's relatively full [inaudible]
and, therefore, it's really the cycling of... [inaudible]
Speaker Change: Those who are leaving, and then trying to have sort of an equal amount of backfill.
Speaker Change: but it's obviously more difficult to create that perfect match in timing at a more full center. And so some of the friction that happens in the more full centers.
Speaker Change: is part of the algorithm here, but in terms of clients and tariffs and things like that, that is certainly not what the data is showing us.
Okay, and then-
Blake
Speaker Change: I guess earnings growth, well ahead of guidance on inline revenue, yet largely holding the full year adjusted for F-AX. Was there any specific timing factor that drove that upside
Speaker Change: Q1, or is there something that specifically doesn't repeat, or is it just a hold for, I guess, the macro, uncertainty or the full service enrollment intake trends or something like that?
Speaker Change: Well, the way I characterize it, Jeff, is not that the performance doesn't hold, but as an example, much of the close to half the performance out performance.
Speaker Change: came from better than we had expected performance in our full service business in the UK.
and that is coming from...
you know, solid enrollment.
Speaker Change: Continued good both cost management, labor management and effective protocols on recruiting retention there.
Speaker Change: and we're now getting to a place where we're lapping the effect in the UK had introduced expanded funding to parents as of April 1st of last year and so that
Speaker Change: contributed to some of the enrollment velocity. So enrollment is very strong, it's been strong for the last few quarters, and it will continue to be solid through the rest of the year, but not quite as...
Speaker Change: We saw in Q1 in the last couple of quarters, so that's beginning to bake itself through the comparisons.
Speaker Change: And I think from an overall performance standpoint, we just have stronger performance in the first step in the second half. It will be laughing the strong.
Speaker Change: The rest of the overall performance in the UK. So that's, it's not worked performance as much as it is just where we will be comping and what we're growing off of in terms of the base. The rest of the backup, I think I mentioned before, we had...
Speaker Change: really solid usage and you know effective cost management service delivery and you know good portion of that use in our network and being able to manage those components and it was somewhat favorable to our outlook. So those were the the drivers there I think the
Speaker Change: Forward View is certainly reflective of what I just said and Manav. [inaudible]
Speaker Change: wanting to take into account that the environment is…
Speaker Change: Certainly still settling and uncertain from a macroeconomic standpoint. And in back up in particular, we have a disproportionate amount of the business that comes over the course of the late spring and summer period. And that is still to be delivered.
Got it. Thank you.
Speaker Change: Thank you. Our next question is from Josh Chan with UBS, please proceed.
Hi, good afternoon, Stephen, Elizabeth.
So on back up here, hi.
Speaker Change: You gave a very strong guide into the second quarter of a backup care, just wondering what you saw in terms of Q1 usage that kind of gives you that conviction of that strong growth in the second quarter. Thanks.
Speaker Change: So we look to estimate, we've got a very wide client base. We look to estimate where the use patterns will be.
Speaker Change: for the year and the way that use persists through the year and cycle. Of many of our clients do cycle into a new calendar year arrangement, so we see...
Speaker Change: Sometimes we see use cycling in the same way for those users. So the fact that we have good insight into, you know, those who are repeat users, those who are unique users and the variety of use cases that we're seeing taken up.
Speaker Change: is one indicator. And then as we look to the summer bookings, we do have with the camp programs that we operate both for...
Speaker Change: our own account with Stephen Kates Camps and also through our third-party provider if we have insight into early bookings for summer camp which is solid as well. So that's some of the components that give us.
Speaker Change: the sort of conviction on use, continuing to be strong and at the upper end allowed us to step that guidance up slightly prettier.
Excellent. Let's get to get to here.
Speaker Change: And on the full service enrollment dynamic that you talked about, you mentioned mainly a slower decision-making process, but I'm wondering if...
Speaker Change: You're seeing prospective visits also decline because I guess if the macro is the concern you may expect to see that phenomenon as well.
Speaker Change: Yeah, so we actually, the metric that we watch really carefully, Josh, is actual visits.
Speaker Change: Right, so, you know, it's one thing to make an inquiry, it's another thing to schedule a visit, but where the rubber generally meets the road for us is when a family actually comes and visits.
Speaker Change: And, you know, at that statistic, you know, again, we are looking reasonably strong as it relates to that forward look.
Speaker Change: So when we think about where in the pipe, we're really focused on making sure that we're getting real precision. It's getting people not only to get to yes, which is confirming their interest.
Speaker Change: But it also is ensuring that they start. And so we have seen some families.
Speaker Change: to make the decision to delay that start date, and so we're working really hard to make sure that we continue to keep those start dates as close to their original anticipation as possible. But again, back to your point, I would say that visits for us is a really critical metric that we watch and feel good about where that's coming in.
It's great color and thanks for our thanks for time and insights.
Thank you. Thanks.
Speaker Change: As a reminder, it is star one on your telephone keypad if you would like to ask a question. Our next question is from Faiza Alwy with Deutsche Bank. Please proceed.
Yes, hi, thank you.
Speaker Change: I wanted to ask a bit more about the one Bright Horizons strategy that you mentioned, and I think you...
Speaker Change: That's almost your client that were, you know, full service client, had also added on to the backup program.
Speaker Change: So I'm curious if you could help us with, you know, just the long-term opportunity here and maybe how many of your clients are full service clients where, you know, and they don't have a backup arrangement with you, so just bring that opportunity for us.
Sure.
Speaker Change: So, if we think about our poll client base, we enjoy partnership with more than 1,400 employer clients.
Speaker Change: And for those that buy more than one, they typically are buying two.
Speaker Change: And so, as we think about, when Bright Horizons were really trying to first and foremost educate our client base
around the opportunities to invest in more than one service.
Speaker Change: And then at the same time, we're trying to find ways to make a much more seamless experience.
Speaker Change: Between our different service lines to allow both employers to see the benefit of buying from a single provider and then at the same time make it much easier for an end user to work seamlessly across our different services.
Speaker Change: And so ultimately we see great opportunity in moving our client base.
to add more services [inaudible]
Speaker Change: and then at the same time working with what we know about the end users to have them cross-pollinate across services as well. So again, we really look at 1DH as an opportunity.
to really go in multiple directions, not just...
Speaker Change: Our job for center clients is to become backup clients, but our backup clients to become college coach clients, our college coach clients to become an SS clients, etc. And likewise have our
Speaker Change: U.S. multinational clients become clients of ours in the UK, so it's both across services and across geographies that we are focused.
Speaker Change: Thank you for that. And then just to follow up on the guidance, just around Jeff's line of questioning, you know, you did beat the guy quite significantly in terms of EPS, and just want to ask again, like, is the maintenance of the guide.
Speaker Change: Just out of an abundance of caution, or is there something that you're seeing in the business? Because you do also have more of a favorable affect environment now than you did.
Speaker Change: You know, a couple months ago, so just a help also a little bit more with just your approach to guidance.
Speaker Change: Yeah, so, I mean, I can start and I think just hitting the epx question initially, I think
Speaker Change: Keeping to consider it, it does have a lot of impact on the top line because of the elements of where we are operating particularly in the UK, but as we've mentioned that business is...
Speaker Change: is not contributing in a significant way, so the movement in the FX is not really contributing, it's at the margin a little bit, but it's not really contributing to.
Speaker Change: Upside, even as we're revising the top line because of the movement. So just wanted to maybe put that out first.
Speaker Change: As it relates to the rest of the earnings, I think the view is...
Our view is that we have an environment where-
Speaker Change: The business has become more seasonal, cyclical, particularly the back of business, and we have ambitious goals for that business to deliver over the course of the summer. We've started off the year with some good momentum, but it is the...
Speaker Change: sort of small as contributing quarter and back up for the full year and therefore a lot of road to get down to deliver on that performance and so maintaining a you know a reasonable posture against that so that we can perform against a bit of an environment that is
Speaker Change: We are not sharing many changes with clients, but certainly client conversations can occur at any time of the year, and if there are...
Speaker Change: questions or concerns we'd want to be able to pivot and adjust to those. So I think that the enrollment cycle is also one that we've said we've tapered that a little bit and it has you know a modest effect on where the earnings would contribute there, but the
Speaker Change: The positive performance and backup sets that performance in full service and that's what leads us to a pretty consistent view on what we would guide to for the rest of the year.
Great, thank you very much.
Thank you.
Speaker Change: Our final question is from Jeff Silver with BMO Capital Markets, please proceed.
Jeff Silver: Thank you so much for squeezing me in. I wanted to focus on the cost side of the equation specifically on the labor environment. Can you talk about what you're seeing there in terms of your ability to find staff and wage inflation trends, etc.?
Jeff Silver: Sure, happy to Jeff. So, I think that, you know, we are in quite a different place than we have been over the last several years. We feel good about where we are in terms of wage relative to the market and then relative to other options that. [inaudible]
Jeff Silver: Teachers with our classrooms, my otherwise tunes, so we feel good about where our wages are.
Jeff Silver: We feel wage inflation continues to persist at the rates that we talk about and are well prepared to continue to be a percent ahead of that as it relates to traditions.
And then, finally, in terms of actual ability to attract [inaudible]
Jeff Silver: I would say that the combination of being able to retain, at least as well as we were in 2019, is a great accomplishment for us to be at and so we feel good about our retention. And therefore, the pressure on recruiting is quite a bit less.
Jeff Silver: But it has been because, again, as we have fewer people leaving, the need to, you know, add staff also is diminished. So overall, feel like we are in a good spot as it relates to being able to attract and retain staff and feel good about where our wages are relative to the market.
Jeff Silver: Great. And if I could shift gears to capital allocation, yeah.
Speaker Change: I noted that, you know, you accelerated some of your debt paydown and continue to buy that stock. I think you're at the lowest level, lowest leverage ratios that we've seen in a while. Can you just talk about your capital allocation, philosophy, you know, why specifically could you make those two moves, what you're looking to go to do going forward? Thanks.
Speaker Change: Sure. Thanks, Chef. We have been active in our repurchase program in the last couple of quarters and so see that as an opportunity for us to deploy.
Speaker Change: Some capital return to shareholders in a way that is both measurable and also flexible for us and measurable meaning it's a meaningful return but also one that we can be flexible about when we see opportunities on
Speaker Change: You know, on the near longer term horizon for alternative investments. Our first priority is to invest in the business and that...
Speaker Change: that can be in M&A and it can be in new centers, it can be in other businesses, the other businesses besides centers is what I mean in terms of technology and driving customer acquisition etc. So those investments can take many forms and we are investing in the business.
Speaker Change: and growing, but we all have a long, you know, a long arc of that vision and we generate a lot of cash. So we are trying to maintain both the flexible posture on our debt. We have balancing out the cost of interest and the ability to access the credit markets. We were able to...
Oops.
Speaker Change: to do some additional things in the market to give us the flexibility that we need. And upsizing the revolver gives us a bit more capacity because with the pay down, we have all the access to debt that we need. Thank you so much.
Speaker Change: I think our view is that we will continue to be opportunistic in the Sherry Purchase Program. We have an authorization available to us.
Speaker Change: Support from the board on that and we will also continue to look first and foremost at growth investments that we can make and that's where we see the best opportunity.
Going forward.
Thanks so much for the call.
Trump.
Speaker Change: Excellent. Well, thank you very much for joining the call. I really appreciate the continued interest in sport.
Thanks, everybody. Talk to you soon.
Speaker Change: Thank you. This will conclude today's conference. You may disconnect your lines at this time and thank you for your participation.