Bright Horizons Family Solutions Inc.

Greetings and welcome to the Bright Horizons Family Solutions second quarter 2019 earnings conference call. At this time, all participants are in a listen only mode. A brief 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. It is now my pleasure to introduce your host, Elizabeth Boland, Chief Financial Officer. Thank you, Elizabeth. You may begin.

Thanks, Ashley, and hello to everybody on the call today. With me on the call is Stephen Kramer, our Chief Executive Officer, and Dave Lissy, our Executive Chair. And after my few administrative matters, I'll turn the call over to Stephen. Today's call is being webcast, and a recording will be available into the Investor Relations section of our website, brighthorizons.com. As a reminder to participants, any forward-looking statements made on this call, including those regarding future financial performance, are subject to the Safe Harbor Statement 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 they are described in detail in our 2018 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. We also refer today to non-GAAP financial measures, which are detailed and reconciled to their GAAP counterparts in our earnings release, which is available under the IR section of our website. So Stephen will now take us through a review and update on the business. Stephen.

Thanks, Elizabeth, and thanks to all of you who have joined us this evening. As always on today's call, I'll review our financial and operating results for this past quarter 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 to your questions. As we move to the second half of 2019, we continue to be very pleased with our strong and consistent performance. For the second quarter of this year, we are reporting top line growth of 8% to $528 million and adjusted EPS growth of 14% to $0.99 a share. In our full service business, we added 12 locations, including client-sponsored centers for MindBody, our sixth center for Penn State University, and three lease consortium centers in the greater Seattle area. In addition, we expanded our backup care and ed advisory client portfolios with recent launches for Nestle, BJC Healthcare, Peloton, and WeWork. Our cross-selling and cross-promotion efforts also continued to yield good results this past quarter. A few examples of existing Bright Horizons clients who added a second or third service this past quarter include Allstate, Freddie Mac, the University of Southern California, and Vertex. As we've shared on prior calls, only about a quarter of our existing clients currently purchase more than one of our services, so the addressable opportunity in this area is still significant. Tracking our solid top-line growth, We also continue to deliver strong and consistent operating results across the business. In the second quarter, adjusted operating income grew 13% and expanded 70 basis points to 14.2% of revenue. In our full service segment, we continue to leverage solid enrollment gains from both our mature centers and from our newer client and lease consortium centers that are ramping to mature operating levels. Turning to our backup segment, The strong top line growth and operating performance reflect three key components. First, My Family Care, which we acquired in the first quarter of 2019. We're really pleased with the integration thus far and feel good about the opportunity to extend our leadership position in the emerging backup care market in the UK. Second, solid new client launches coupled with strong use by existing clients. While the feedback on our backup service has always been strong, the entire team takes a lot of pride in the progress and satisfaction related to our enhancements to the end user experience, including speed of care confirmation. Third, the targeted and personalized marketing campaigns. These initiatives drive new registrations, reservations, and ultimately more use by the employees of our client partners. The increasing shift to reservations being made on our mobile and web platforms also drive growth and operating leverage. Given the results to date, we'll continue to invest in the technological tools and innovative strategies to meet our clients' needs and expectations going into the future. Now I'll touch briefly on the three strategic growth areas we're focused on. First, our organic growth strategy continues to be focused on cultivating new clients and expanding our existing client relationships through cross-sells and additional use of current services. The sales pipeline in each of our services remains strong with interest across industries and with both new and existing clients. Next, our lease consortium centers. We have now opened 95 of these centers over the last six years with a focus on select urban settings where we see one, a concentrated population of our target demographic, two, a limited supply of high-quality childcare, and three, strong opportunities to meet the needs of our client partners in these locations. We are encouraged by the progress and positive contribution from this group of centers as they ramp to mature operating levels and are optimistic about the significant value creation opportunity of this strategy. Finally, with regard to M&A, we continue to cultivate a solid pipeline of acquisition prospects in each of our three primary geographies, including a good mix of networks and single centers that meet our high quality and performance thresholds. In the second quarter, we acquired three centers in the Netherlands that fit this profile. Over time, we also have opportunities to acquire businesses like My Family Care that enables us to further solidify our leadership position in our backup and educational advising segments. Beyond acquisitions, we actively seek relationships with like-minded providers that can deepen our service offerings and geographic scope for our clients. Today, I'm pleased to share that we've entered into a partnership with PME Familian Service, an innovative and highly regarded provider of full service and backup care for leading employers and families in Germany. This arrangement reflects our commitment to expanding the impact we have with our multinational clients in key markets around the globe. I also want to take this opportunity to reflect on employee recognition events that have been occurring across Bright Horizons over the last few months. This year we had a record number of award nominations by clients, families, and colleagues. I have personally attended many magical evenings where we celebrated the great success of our teams and individual employees across the U.S. and abroad. My heartfelt appreciation goes out to all of our 34,000 employees who work tirelessly each day to make a difference in the lives of children, families, learners, and workplaces. So in closing, we believe that we are well positioned to continue the positive momentum and operating agility we have demonstrated over the years. We anticipate continued strong performance with revenue growth in the range of 8% to 10% for the full year. We project that continued operating leverage will drive adjusted earnings per share in the range of $3.59 to $3.64. With that, Elizabeth can review the numbers in more detail, and I'll be back to you during Q&A.