Bright Horizons Family Solutions Inc.

Greetings and welcome to the Bright Horizons Family Solutions third quarter 2020 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, Michael Flanagan, Senior Director of Investor Relations. Please go ahead.

Thank you, Stacey, and hello to everyone on the call today. With me here are Stephen Kramer, our Chief Executive Officer, and Elizabeth Bolin, our Chief Financial Officer. I'll turn the call over to Stephen after covering a few administrative matters. Today's call is being webcast, and recording will be available under 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 business and financial performance, including the impact of COVID-19 on our operations, 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 are described in detail in our 2019 Form 10-K and other SEC filings. Any forward-looking statement speaks only as to the data which 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 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, Mike. Hello to everyone on the call, and thank you for joining us this evening. I hope that you and your families are remaining healthy and safe. I'll start tonight with a recap of our third quarter results and provide an update on our current operations. Elizabeth will then provide a more detailed review of the numbers before we open it up for your questions. To recap, we delivered revenue of $338 million and adjusted EPS of $0.02 per share for the third quarter. In our full service segment, we not only reopened 490 of our centers in Q3, but also launched five new centers, including client centers for Clemson University, Discovery Communications, and Walmart's Sam's Club. Our backup care business was again a critical support to tens of thousands of families trying to balance their work and family commitments, including varied fall school schedules. During the quarter, we added to the portfolio of clients we serve with Abbott Labs, IBM, Kraft Heinz, and Tractor Supply, among the employers who rolled out backup care in the quarter. In addition, we added to our educational advisory client base, launching service for Atrium Health, Cognizant, and Zoetis this past quarter. Overall, I'm really pleased with the progress we have made and with our team's exceptional response through this very challenging time. As a reminder, at the end of March, we temporarily closed nearly 850 centers globally. We marshaled resources to develop and implement industry-leading COVID-19 operating protocols, and we focused our full-service operations on caring for the children of essential workers in 250 centers that remained open. In short order, we started collaborating with our employer clients to plan for center reopenings so that as stay-at-home orders began to lift in the early spring, we were ready to deploy resources to safely welcome back families and staff. When we last spoke in early August, approximately 65% of our centers were operating, as we had reopened more than 470 centers. We reopened an additional 175 centers throughout August and September, and as we talk today, approximately 900 centers are open, representing nearly 90% of our total portfolio. While we continue to work with our client partners to phase the reopening of the remaining temporarily closed centers, our focus has transitioned to re-enrollment in our centers so that we can deliver the excellent care and education that our families have come to rely on from us and which they need more than ever in these challenging times. We've made good strides on the enrollment front having safely welcomed back tens of thousands of children since May and remain encouraged by the trajectory of returning families. Our first priority has been re-enrolling our previously enrolled families, then wait-listed families, and finally, new families in need of care. Families want to come back to our centers, and we have heard time and again how critical our industry-leading health and safety practices were in their decision to return and in their decision to stay. Another area that I feel is important to emphasize relates to our client partners. I have to tell you that I have been really gratified by the commitment we have seen from our employer clients. Employers across all industries recognize that regardless of the work environment, onsite or remote, it is impossible for employees to remain productive while caring for young children. The fact that we recently opened three new client centers is indicative of the acute needs of working parents today and in the future, and the critical value that employers provide by supporting an on-site center for their employees. The unwavering support in launching their new centers in the midst of this pandemic speaks volumes about the importance and position child care holds in their recovery and business continuity plans. Let me turn now to backup care, which again delivered strong results. This too is an example of where many clients leaned in over the last seven months. Existing clients drove use by promoting their backup benefit and in many cases added days to cover gaps in care. We also saw a significant number of new clients implement backup care for the first time. This includes existing Bright Horizons clients as well as new employers. Also of note, we took steps to expand our network of third-party centers and in-home caregivers in order to continue to serve the growing number of families who need care. In terms of Q3 backup revenue, in-center and in-home use broadly tracked our expectations. What primarily drove the revenue outperformance was the residual reimbursed care that exceeded our expectations as programs wound down throughout the summer months. As we approach the end of the year, we expect the combination of consumed use banks and the gradual re-engagement by parents with traditional in-center and in-home care arrangements to result in lower overall use in our fourth quarter. Turning now to our ed advisory business. As we discussed last quarter, learning and development have remained critically important to our employer partners, as investments in this arena help attract and develop a productive and engaged workforce, and also help build diverse and inclusive work cultures. A recent example of an Edisys client investing in their workforce education program is DaVita, who launched a new program that removes the high out-of-pocket costs employees often face in continuing their education and helps create a pipeline of highly trained nurses within their company. DaVita is utilizing our innovative Bright Horizons Fast Track program to provide cost-effective online college courses and credit. In addition, our leading educators at College Coach have delivered timely and insightful counseling to tens of thousands of prospective college students navigating a completely upended college admissions process during the pandemic. Their unique perspective and adaptive advice has been invaluable in this unusual time. I continue to be very excited about the long-term growth in this segment and believe we remain well positioned to capitalize on the cross-selling as well as new growth opportunities. Before I wrap up, I want to expand on one of the real bright spots during this pandemic, which has been the strength and durability of our long-standing employer relationships. Despite the profound impact COVID-19 has had on our business, our client relationships are deeper and broader than ever before. We have had more client and prospect interactions this past year than any year prior, and our expanded reach to key decision makers has enabled us to work strategically with employers to develop and roll out new innovative solutions. As an example, many parents have had to deal with managing a virtual or hybrid environment this fall for their school-age children. We work with several key clients, including Accenture, Bank of America, and Microsoft to create highly subsidized learning pods to help relieve parents of the stress of managing their work life and virtual school. It has been encouraging to see just how progressive many of our clients have been. They recognize the need is great and are investing in real solutions to help their employees. So in closing, we are making good progress recovering from the disruption caused by the pandemic. We have not only navigated a very challenging business environment this year, but we have been able to respond in a way that positions us for success over the long term. We have strengthened and deepened our relationships with clients over the last several months, working tirelessly to reopen centers, expand backup resources, stand up summer camps and learning pods. We've even helped parents vote this past Tuesday by partnering with clients to provide free childcare so employees can make their voices heard. Our results this year underscores the power of our employer-centric model and our ability to cater solutions to client needs. While so many things may change as a result of this pandemic, some things will remain the same. There will always be a need for high-quality, center-based childcare that is affordable and convenient for working parents. And there will be interest and willingness by employers to invest in childcare solutions to support their employees and differentiate themselves in the marketplace. I remain confident that we will emerge from this crisis well-positioned to capture the significant opportunity that lies ahead. Over to Elizabeth.