Bright Horizons Family Solutions Inc.

Greetings and welcome to the Bright Horizons Family Solutions fourth 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 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, Mr. Michael Flanagan, Senior Director, Investor Relations. Please go ahead, sir.

Thanks, Hector, and hello to everyone on the call. With me today are Stephen Kramer, Chief Executive Officer, and Elizabeth Boland, Chief Financial Officer. I'll turn the call over to Stephen after covering a few administrative matters. Today's call is being 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 business and 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 and operating and financial results to differ materially and are described in detail in our 2018 Form 10-K. Any forward-looking statement speaks only as the date on which it is 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 and 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, Mike. We are thrilled that you have joined in the newly creative role of Senior Director of Investor Relations at Bright Horizons. Welcome. And thanks to all of you who have joined us on the call today. I'll review our financial and operating results for this past quarter and the full year 2019. and then update you on our growth plans and outlook for 2020. 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 2019, and it sets us up well to drive continued growth across all of our business segments in 2020 and beyond. For the quarter, revenue grew 9% to $521 million, and adjusted EPS increased 12% to $1.01. We added seven full-service centers this past quarter, including programs for Lehigh University, two international lease models, and a strategic acquisition on the West Coast. We also continue to expand our backup and educational advisory client base with recent client launches for Atrium Health, BAE Systems, WBP Group, and Wayfair. As we have shared previously, Capitalizing on the synergy between our services remains a strategic priority for the company. We remain pleased with recent cross-selling successes as our sales and account management teams work collaboratively to broaden and deepen our existing client relationships. We hit a new milestone as more than 300 of our clients, or 25% of our client base, now invest in multiple services, including Halliburton, Nielsen Company, and Volkswagen, who launched a second or third service with us this past quarter. With more than 1,150 employer partners, the cross-selling opportunity that exists remains significant. Tracking our solid top-line growth, we continue to deliver strong and consistent operating results across the business, as adjusted operating income also expanded 6% in the fourth quarter. Over the last few years, we have discussed the investments we have been making in technology, digital marketing, and people. A few examples that illustrate the progress we are making as a result of these initiatives include improved conversion from registration to backup use, increased usage of the mobile app and reserve now, also known as instant booking, and higher overall user satisfaction, all of which together translate to higher utilization. On the people investment front, I'm especially pleased by the response to our Horizons teacher degree program. This benefit provides our teachers the ability to earn a high-quality certificate, associate's, and bachelor's degree in early childhood education, completely paid for by Bright Horizons, with no out-of-pocket expense to the employee. We now have more than three-quarters of our centers with an enrolled learner, with these participants reporting increased employee engagement scores and significantly enhanced retention rates. These examples, along with a host of other initiatives, are in various phases of rollout. We will continue to invest in these kinds of efforts to continue to drive growth, operating leverage, and enhance quality of client experience. Turning to 2020, we continue to focus on our four strategic priorities. One, preserve a strong culture and a great workplace at Bright Horizons. Two, deliver highest quality education and care services. Three, extend our impact through strategic growth, and finally, connect across functions, service lines, and geographies. Our team's efforts continue to align with these pillars and allow us to accelerate the positive momentum we have across all aspects of our business. Let me touch on a few strategic growth areas. First, our organic growth strategy continues to be focused on cultivating new clients and expanding our existing client partnerships through cross-sells and additional use of current services. After another solid year in these categories, I'm really optimistic about the sales and growth momentum across all three business lines in 2020 and beyond. 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've now opened 100 of these centers over the last seven years. We focus on select urban settings where we see a concentrated population of our targeted demographics, a limited supply of high-quality childcare, and strong opportunities to meet the needs of our client partners through both full-service and backup care solutions. We continue to be encouraged by the progress in the newer and ramping cohorts, by the positive enrollment and contribution from the group of centers that have reached mature operating levels, and by the opportunities we've been able to tap into with nearby client partners. With our growing density of centers in major metro areas, we are an increasingly attractive partner to leading employers located across these markets, and we therefore continue to see significant long-term value creation opportunity in this multifaceted strategy. Finally, with regard to M&A, we continue to cultivate a solid pipeline of acquisition prospects. and we expect acquisitions to continue to be a key element of our growth plan in the years ahead. As you know, the timing of acquisitions can be lumpy. We completed seven center acquisitions in 2019, and based on the activity in process, we anticipate a more typical year of acquisitions in 2020, approximately 15 to 20 centers with a mix of smaller networks and single centers. In addition to typical center acquisitions, Our diversified model also provides us with opportunities to acquire non-center businesses from time to time, like My Family Care in the first quarter of 2019. Strategic additions like this one enable us to continue to allocate capital with highly attractive returns while expanding our backup and educational advisory offerings. Before I wrap up, I'd like to comment on our strong values and unique culture. As many of you know, Bright Horizons' central mission is to make a lasting difference in the lives of our clients, families, and learners around the globe. It starts with our employees, and we spend a lot of time and resources to attract and retain the best while fostering an environment where people want to grow and have a sense of belonging. Diversity, inclusion, and equality have always been central to the Bright Horizons' culture and history and are woven into the fabric of all that the company does. Over the last few months, it's been an honor to be recognized by Bloomberg, Forbes, Fortune, and the Human Rights Campaign as a leader in creating inclusive workplaces where all employees can feel a sense of respect and dignity and thrive in a meaningful way. Being on these lists is not our motivation, but it is a great affirmation of the work we do to build a strong culture and a great workplace, and ultimately, a great business for the long run. Another element that defines Bright Horizons is our commitment to working parents. We released our sixth annual Modern Family Index last week, which illustrates the priorities and challenges facing a modern working family. This year's data continue to show the harsh truth that today's working parents increasingly feel burned out trying to balance both career and family commitments. Our data reveals that employees are willing to walk out the door if their work-life balance isn't achieved. and a significant majority are willing to abandon their professional commitments to manage their burnout. The survey once again underscores the value and import of employers providing meaningful support to their employees by providing more family-friendly services that address the stresses at work and at home. We are very proud to be the partner of choice for so many leading employers looking to address the needs of the modern workforce. and are also excited by the prospect of introducing our services to new employers who are looking to solve these challenges. So in summary, we believe that we are well positioned to continue the positive momentum and operating agility we have demonstrated over years. For 2020, we anticipate continued strong performance with revenue growth in the range of eight to 10% and operating leverage to drive adjusted earnings per share in the range of $4.11 to $4.18. With that, Elizabeth can review the numbers in more detail, and I'll be back with you during Q&A.