Bright Horizons Family Solutions Inc.

Greetings. Welcome to Bright Horizons Family Solutions third quarter 2019 earnings 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 then zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Elizabeth Boland, Chief Financial Officer. Please go ahead.

Thank you, Chantel, and hello to everybody on today's call. With me today are Stephen Kramer, our Chief Executive Officer, and Dave Lissy, our Executive Chair. I'll turn the call over to Stephen after covering a few administrative matters. As Chantel just mentioned, today's call is being recorded and webcast. and a recording will be available under the investor relations section of our website at 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 results and financial results to differ materially and 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. Stephen will now take us through the review and update on the business.

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 we'll provide you with our updated outlook for 2019 and initial view on 2020. Elizabeth will then follow with a more detailed review of the numbers before we open it up for your questions. As we near the end of 2019, we continue to be really pleased with the performance against our goals for the year and with the progress we're making in our various initiatives to drive both near and long-term growth across all of our business segments. For the quarter, revenue grew 8.5% to $512 million and adjusted earnings per share of 86 cents, increased 18% from last year. We added 12 full-service centers this past quarter, including locations for Stanford University and Jackson Healthcare, and expanded our backup care and ed advisory client portfolios with recent launches for Boeing and Cedars-Sinai Medical Center. Our cross-selling efforts also continue to yield results. Our sales and account management teams are working diligently to broaden our existing client relationships by extending their investment into additional services. Several clients launched a second or third service with us in this past quarter, including Bayer, Charles Schwab, and LinkedIn. At the same time, as it relates to clients deepening their commitment to existing services, Biogen and the University of California both opened additional centers in Q3. And we were thrilled to transition the management of two self-operated centers for the Walt Disney Company. This was a great example of the strength of our existing relationships with other Disney operating companies, including ESPN and Fox, our expertise in managing complex client relationships, and our reputation for operating high-quality programs. Opportunities like this illustrate the addressable market potential that exists within our existing client base. Tracking our solid top line growth, we also continue to deliver strong and consistent operating results across the business. In the third quarter, continuing the trend we delivered in the first half of the year, adjusted operating income grew 13% and expanded 50 basis points to 12.3% of revenue. In our full service segment, we continue to leverage solid enrollment gains for mature centers, and from our newer client and lease consortium centers that are ramping to mature operating levels. We also had strong utilization of services in both our backup and ed advisory operations, and we are gratified to see the benefits from our investments in technology and targeted marketing programs. These initiatives, geared towards improving the end user and client partner experience, will continue to support the business in achieving our long-term growth and operating leverage targets over time. I am also excited to announce our acquisition of a small division of GP Strategies focused on tuition program management earlier this month. This acquisition expands our Edisys client portfolio by adding a mix of new and existing clients to the Bright Horizons family, including AMD and United Technologies. As part of this transaction, we've entered into a partnership with GP Strategies a leader in customized training, to collectively market to and support employers across the full continuum of education solutions. We welcome the GP Strategies tuition program management team and clients to the Bright Horizons family and look forward to growth opportunities in the future. In addition to this exciting opportunity in our ed advisory business, let me also touch on other strategic growth areas we focused on as we close out 2019 and start to look ahead to 2020. The headline is that we're really pleased with the momentum we have across all aspects of our business. 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, are leased consortium centers. We have now opened nearly 100 of these centers over the last six-plus years, with 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 continue to be encouraged by the progress and positive contribution from this group of centers as they ramp to mature operating levels. And we are optimistic about the significant value creation opportunity of this strategy. With our growing density of centers in major metropolitan areas, we are an increasingly attractive partner to leading employers located across these markets. Finally, with regard to M&A, we continue to cultivate a solid pipeline of acquisition prospects that meet our high quality and performance thresholds. While the timing of center acquisitions can be lumpy, our diversified model provides us opportunities from time to time to acquire non-center businesses, like My Family Care in the first quarter of 2019 and the GP Strategies Tuition Management Division earlier this month. While similar in scale to the tuck-in acquisitions we see in the full-service business, these strategic additions enable us to further solidify our leadership position in our backup and educational advising segments. As they have throughout our history, we expect acquisitions to continue to be a key element of our growth plan in the years ahead. Now let me update you on our 2019 outlook. We expect continued strong performance with revenue growth projected in the range of 8% to 9% for the full year, including the ongoing effects of lower FX, and adjusted earnings per share in the range of $3.61 per share and $3.64. Finally, I also wanted to provide some initial perspective on 2020. We believe we're well positioned to continue the positive momentum we've demonstrated over many years. While we're not yet providing detailed guidance for next year, we anticipate a continuation of this year's performance with revenue growth in the range of 8 to 10 percent and sustained operating margin leverage driving low to mid-teens adjusted earnings per share growth in 2020. With that, Elizabeth can review the numbers in more detail, and I'll be back with you during Q&A.