Bright Horizons Family Solutions Inc.

Greetings, and welcome to Bright Horizons Family Solutions' fourth quarter 2018 earnings release conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Elizabeth Bolin, Chief Financial Officer. Please go ahead.

Thanks, Hector, and hello to everybody on the call today from snowy Boston. With me on the call are Stephen Kramer, our Chief Executive Officer, and Dave Lissy, our Executive Chair. And before I turn it over to Stephen, let me cover off a few administrative matters. As mentioned, today's call is being webcast, and a recording will be available under the Investor Relations section of our website, brighthorizons.com. As a reminder to participants on the call, any forward-looking statements made on this call, including those regarding future financial performance, are subject to the safe harbor statement that's included in our earnings release. Forward-looking statements inherently involve risks and uncertainties that may cause actual operating and financial results to differ materially and are described in detail in our 2017 Form 10-K. Any forward-looking statement speaks only as of the date on which it's made, and we undertake no obligation to update any forward-looking statements. Also, we refer today to non-GAAP financial measures, which are detailed and reconciled to their GAAP counterparts in our earnings release, which is also available under the IR section of our website. Now let me turn it over to Stephen for the review and update on the business. Stephen.

Great. Thanks, Elizabeth. And again, thanks to all of you who have joined us this evening. On today's call, I'll review our financial and operating results for this past quarter, and the full year 2018, and update you on our growth plans and outlook for 2019. 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 2018, and it sets us up well to drive continued growth across all of our business segments in 2019 and beyond. For the quarter, revenue grew 9% to $478 million, and adjusted EPS increased 23% to $0.90. In our full-service center segment, we added 15 centers, including new client centers for Colgate-Palmolive and Cambridge University, as well as additional centers for Penn State and the Mayo Clinic. We also completed two high-quality tuck-in acquisitions in the quarter, one in the UK and one in the Netherlands. We also continued to expand our backup and education advisory client base, with recent new client launches for Hilton Worldwide, Samsung, Ocean Spray, and Kettering Health. In addition, Children's Hospital Health System and HP represent cross-sells of existing clients to our backup and educational advisory services. These recent additions are great examples of the more than 250 of our employer clients who purchase more than one of our services. We continue to be very excited about these cross-selling successes and the significant untapped opportunity with the rest of our client base. As we focus on selling the full suite of services to new and existing clients, we officially unveiled our modernized logo and collection of brands that tie each of our services directly to the Bright Horizons trade name and mark. We believe the closer affiliation of each of the service names will allow clients and end users to feel greater connection with the overall Bright Horizons brand. I encourage you to visit our newly launched website to experience one of the ways we are bringing this to life. Tracking our solid top line growth, we also continue to deliver strong and consistent operating results across the business. In the fourth quarter, adjusted operating income expanded 110 basis points as we leverage enrollment gains in our newer and ramping full service centers, strong utilization of our backup and educational advising services, and operating efficiencies from technology. Over the last several quarters, we've talked about the investments we've been making in targeted marketing programs and technology to speed and improve the end user experience. We continue to be really pleased with the progress of these initiatives exemplified by improved conversion from registration to backup use and expanded capability to confirm care reservations instantly. These initiatives, once fully rolled out, should continue to drive growth and operating leverage over time. Let me turn now to another of our growth initiatives, our lease consortium center strategy. As a reminder, lease consortium centers have always been a part of the Bright Horizons growth plan. In recent years, we focused this strategy in select urban settings where we see a concentrated population of our target demographic, limited supply of high-quality childcare, and strong opportunities to meet the needs of our client partners. Over the last six years, we have opened 85 of these centers and now have more of these centers at mature operating levels than those still ramping their enrollment. As a result, in 2018, the margin generated by this group of centers as a whole has become a modest contributor to margin expansion. And we expect to continue to modestly expand that contribution as the most recently opened centers ramp to their mature levels. We are pleased with the progress of this strategy and therefore will continue to invest in this area as we see significant value creation opportunity in these centers over time. As many of you have heard us talk about on prior calls, our organic growth strategy is focused on cultivating new clients, and expanding our existing client relationships through cross-sells and additional take-up of current services. After another solid year in both of these categories, I'm really optimistic about the sales and growth momentum across all aspects of our business in 2019 and beyond. The sales pipeline in each of our services remains strong with interest across industries with both new and existing clients. We also continue to execute on our acquisition strategy, I mentioned earlier that we had completed two deals in the fourth quarter, and overall for 2018, we're really pleased to complete transactions, which added a total of 36 centers across all three of our primary geographies. We continue to cultivate a solid pipeline of prospects, including a good mix of networks and single center opportunities, both here in the U.S. and abroad, and we expect these acquisitions to continue to be a key element of our growth plan in the years ahead. Before I wrap up, I wanted to comment briefly on the thought leadership study that we published last month. For five years, we've been researching the struggle working parents face in both the U.S. and the U.K. through our Modern Family Index. The harsh reality is that when we focus the lens on working mothers, it's clear that workplaces still have a long way to go to meet the needs of women as they grow their families and their careers at the same time. Our data shows that mothers and fathers in the U.S. agree in overwhelming numbers that women are penalized in their careers for starting families while men are not. In the U.K., the study revealed that the average mother waits two years longer for a promotion than the average father. On an equally important note, our Modern Family Index reveals that mothers bring key leadership skills that are critical to today's businesses. What we've learned from the studies is that the need is as great as ever for employers to provide family-friendly services. It's not only important for families, but it's critical for the health of employers as well. We are very proud to be the partner of choice for so many leading employers looking to meet the needs of the modern workforce. So in summary, we believe that we are well positioned to continue the positive momentum and operating agility we have demonstrated over years. For 2019, 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 $3.57 to $3.63. With that, Elizabeth can review the numbers in more detail, and I'll be back with you during Q&A.