Bright Horizons Family Solutions Inc.

Greetings and welcome to Bright Horizons Family Solutions fourth quarter 2020 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 and Senior Director of Investor Relations, Michael Flanagan.

Thanks, Omar. And I loaded everyone on the call today. With me 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 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 of the date on which it is made, and we undertake no obligation to update any forward-looking statement. We also refer to data with 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 healthy and keeping safe. I'll start our call tonight with a recap of our fourth quarter results, and then we'll outline the progress we made in 2020 against our strategic priorities, which position us well to build on this performance in 2021 and further our recovery from the COVID-19 pandemic. Elizabeth will follow. with a more detailed review of the numbers before we open it up for your questions. I'm pleased with the way we finished 2020. For the fourth quarter, we delivered revenue of $377 million and adjusted EPS of $0.36 per share. In our full-service segment, we continued to make progress in re-ramping our centers and in resuming operations at temporarily closed centers, nine of which reopened this past quarter. In addition to this, we launched two new centers, including a client-sponsored center for SAS. Importantly, occupancy levels at open centers modestly improved throughout Q4, in spite of increased community spread of COVID around the holidays. Our backup care business finished the year strong, with increasing in-center and in-home use, as well as some continued self-sourced reimbursed care use, as parents accessed our backup care alternatives to help manage remote work and hybrid school schedules. We had another great quarter of new client adoptions with Danaher, McDonald's, Nordstrom, and Okta among the many additions. Collectively, our growth in 2020 propelled us past the 1,000 backup client milestone. We also continued to add to our education advisory client base, launching service for AbbVie, GitHub, and MD Anderson this past quarter. While 2020 presented unprecedented challenges, I couldn't be more proud of the Bright Horizons family's response. Our global teams quickly adapted to the changing needs of clients, families, and children, while at the same time remain focused on the four strategic priorities that underpin our work and that we carry forward into 2021. First, preserve a strong culture and a great workplace at Bright Horizons. Second, deliver highest quality education and care services. Third, extend our impact through strategic growth, and fourth, connect across functions, service lines, and geographies. As you have heard me say many times before, our culture and people are our core strength, and this year we saw their very best. Our staff immediately rose to the challenge created by COVID-19, providing safe and nurturing environments for families and children, while also ensuring tens of thousands of families could get the much-needed support through backup care. At the same time, we as an organization worked tirelessly to support our employees whose lives and families were upended throughout the year as a result of the pandemic. This included healthcare and expanded education benefits for furloughed employees, enhanced pay for teachers on the front lines, and the introduction of telehealth and school-age learning supports. As we start 2021, we continue to focus on our people and our culture. In particular, we are redoubling our efforts to ensure a healthy, safe, and supportive working environment. Within this context, we recently announced an education and appreciation program to encourage and incentivize our center staff to get vaccinated. Second, we have always been focused on high quality standards at our Bright Horizons centers and across all of our services. Quality for us encompasses many aspects, including well-trained and qualified teachers, research-based curriculum, and vigilant health and safety. In the early days of the pandemic, we quickly pivoted and adapted our service delivery to meet the difficult and involving environment. We instituted industry-leading COVID-19 protocols that set the standard for others, created an online platform for children to stay connected with classmates and teachers, as well as curriculum to progress child development in a disrupted learning setting. Having now reopened more than 650 centers and re-enrolled tens of thousands of families, we have heard over and over again how important our actions and our health and safety efforts were key to families' decisions to enroll at Bright Horizons. In 2021, we'll continue to evolve our policies and practices to respond to the changing and hopefully improving health environment. We never waver from delivering healthy, safe, and high quality experiences for children and families. This is what our clients expect and has always been core to our mission. Third, while COVID-19 has presented many challenges, it has also provided strategic growth opportunities. the pandemic has fundamentally increased the awareness of our service offerings and allowed us to deepen and expand our client relationships. As an example, we now serve more than 1,000 employers with backup care, and the large majority of those new backup clients added in 2020 are first-timers with Bright Horizons. We also had great success in cross-selling services, growing our multi-service client portfolio by 20% in 2020, to more than 360 employers. We're seen as a valuable partner to support business continuity, return to work, and other strategic business objectives of leading employers. At the same time, employees' expectations of their employer for added supports is more pronounced than ever before. Moving into 2021, we will capitalize on this momentum and continue to extend our client reach, grow our enrollment and use, while expanding our services and capabilities to accommodate a more dynamic workplace environment. Center-based childcare remains a critical area of investment for employers looking at ways to support their employees irrespective of work location, especially as they contemplate their worksite reopening strategy. Our suite of services, client relationships, and technology capabilities position us well to extend our impact. Finally, we continue to invest in technology and digital marketing to unify our services for clients and end users. One recent example is the successful launch of My Bright Horizons, a new portal for end users that showcases all of the services available through their employer's program with Bright Horizons. And it personalizes the experience to their unique life stage. We also streamlined the booking process for backup reservations in 2020, speeding the care confirmation process. In 2021, our clients and their employees will continue to feel the benefits of more personalized outreach and a more seamless user experience. Our ambition continues to be to serve our clients and their employees in an increasingly friction-free manner and to increase the awareness utility, and use of the Bright Horizons suite. Before I wrap up, I want to comment on our commitment to diversity, equity, and inclusion. Embedded in our culture, DE&I has always been a core business priority and one that is inextricably tied to Bright Horizons' long-term success. We have worked since our founding to make it a real and lasting difference in the lives we touch through the work we do and those we employ. Last June, we took steps to reinforce and expand several of our diversity, equity, and inclusion goals to ensure that we continue to be a welcoming and inclusive place for all. In addition, we are in the unique position of educating the next generation. And with that responsibility comes the opportunity to make a difference by modeling for children and families an environment that is open, curious, and genuinely interested in what is different. We are also having conversations with clients on how our services support their DE&I objectives, particularly in workforce education. I also recently signed the CEO Action Pledge, which aligns Bright Horizons with more than 1,500 like-minded organizations whose CEOs have demonstrated a commitment to diversity, equity, and inclusion. So in closing, I want to thank every member of the Bright Horizons family for their incredible efforts throughout 2020 as we navigated the near-term environment while remaining focused on our long-term priorities and objectives. As I look back on 2020, I believe it will prove to be a foundational year for Bright Horizons. While it certainly had its financial and operating challenges, it has provided us the opportunity to demonstrate to all of our stakeholders the resiliency of our business model the critical nature of our services, and the discipline we have fostered for more than three decades. As we enter 2021, we start a new chapter, poised to capitalize on our strong position and the significant opportunities that lie ahead. We believe the depth of our client relationships, reputation for quality, ability to adapt and innovate, and most importantly, our talented and committed workforce will drive our success in 2021 and beyond.