Bright Horizons Family Solutions Inc.

Good day, ladies and gentlemen, and welcome to the Bright Horizons Family Solutions First Quarter 2021 Earnings Release Conference Call. Please note today's conference is being recorded. At this time, I will enter the conference over to Mr. Michael Flanagan, Senior Director of Investor Relations. Please go ahead, sir.

Thanks, Holly, and hello to everyone on the call. With me here is our CEO, Stephen Kramer, and our CFO, Elizabeth Bolin. 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 has described the detail in our 2020 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 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 healthy and keeping safe. I'll start tonight with a recap of our first quarter results and provide an update on our current operations. Elizabeth will follow with a more detailed review of the numbers before we open it up for your questions. I'm pleased with our solid start to the year and pace of the continuing recovery in our business. For the first quarter, we delivered revenue of $391 million and adjusted EPS of 23 cents per share. In our full service segment, we added seven centers, including new client centers for Regeneron, Horizon Therapeutics, the University of Maryland, and Memorial Sloan Kettering, as well as an organic center in the Netherlands and two centers acquired on the West Coast. We also made good progress in re-ramping center enrollments with the positive enrollment trends we saw in Q4 continuing through the first quarter. Our backup and net advisory segments expanded their client bases and breadth of services, delivering revenue growth in the quarter of 3% and 16%, respectively, with recent new client launches for General Motors, ConocoPhillips, Dollar Tree, Freddie Mac, and Shopify. Overall, as we approach the midpoint of the year, I remain encouraged by the consistent pace and trajectory of our recovery in 2021. We ended the quarter with 1,015 centers, roughly 900 of which are open. In the U.S., we reopened six temporarily closed centers in addition to the new centers added in the quarter. Occupancy levels in the open centers continued to improve month over month in the first quarter, tracking nicely to our expectations as families returned to our centers. Importantly, several of our more heavily concentrated markets, which were also later to reopen, made up solid ground this quarter. Reducing infection rates coupled with expanding vaccine coverage and a relaxation of COVID restrictions have contributed to the increasing occupancy and the pace of recovery in all regions. In addition to the positive trends in the US, I'm very encouraged by the strength of our UK and Netherlands operations, which have continued to serve children and families through recurring lockdowns and COVID restrictions. In the UK, the national lockdown that was in place for most of the first quarter did result in the temporary reclosure of several centers, as well as a pause in the enrollment growth we had seen over the last couple of quarters. However, with the economy again reopened, we are seeing a return to steady enrollment growth going into the second quarter. At the same time, performance in the Netherlands has remained strong from a combination of solid enrollment and long-standing government support for childcare. I am so proud of our operations teams as they continue to make great strides day after day in safely enrolling and welcoming thousands of new and previously enrolled children into our Bright Horizons family, providing a measure of stability and enrichment in these children's disrupted worlds. For our centers that have not yet reopened, our client relations team continues to work closely with clients on reopening plans, ensuring that we are strategically supporting both the employer and employee needs. While the environment remains dynamic and many clients are looking to the fall before they fully reopen their offices, we have seen a subset of clients recently pull forward their reopening timelines from the fall to the spring and summer months, recognizing not only the childcare needs of their employees, but also how their onsite center will play a critical role in attracting employees back to the office. We also remain in close dialogue with clients at the highest levels about the additional avenues in which employers can potentially support their employees. In short, these discussions have clearly conveyed that employers of all types overwhelmingly recognize the reality that childcare solutions will be as if not more critical to their long-term business strategy post-pandemic. With our scale, breadth of offerings in-center and in-home, and relationships with key decision makers, we remain uniquely positioned to be the partner of choice that can provide a range of critical solutions to employers and their employees. Let me now turn to backup care. We have another strong quarter of new client launches, which strengthens our market position and will further fuel the long-term growth opportunity. Traditional in-center and in-home use continue to rebound. although we still trail pre-pandemic levels. We saw higher levels of self-sourced reimbursed care in the first quarter than we expected, especially during the month of February, where ongoing delays in schools returning to full in-person learning temporarily shifted the mix of use from traditional to self-sourced care. Since self-sourced care is recognized on a net revenue basis, at a lower fee per use, it delivers reduced revenue growth alongside better margin performance. We are really encouraged by the registration and use trends we have seen through the end of Q1 and continuing into April. As we approach the second half of the year and the return to more conventional work and school schedules, we expect traditional use to continue to progress towards pre-COVID levels and beyond as parents increasingly transition from their pandemic patchwork of care supports to care arrangements that provide a more complete solution to their care needs. As I have discussed on prior calls, the pandemic presented many unprecedented challenges, but it also created unique opportunities for us to service clients and working families in new and innovative ways, which means being able to serve families in the way they need at their point of most need. A year ago, we made self-sourced reimbursed care a use type. Last fall, we stood up school-age programs for employees juggling hybrid school schedules. And most recently, we added virtual tutoring as another use type, expanding the solutions for families looking to stabilize and enhance academic progress as a result of remote learning. Parents' backup use banks can go towards this full array of use cases, meeting their evolving needs through changing work-life demands across life stages. In concert with this strategy, we made an acquisition this quarter to broaden our service reach. Steve and Kate's Camp, which has been a great partner of ours since 2016, provides experiential camps for school-age children across the country and has been a popular support for families, particularly over the summer school vacation months. This addition to the Bright Horizons family along with the extension of virtual tutoring, further expands our offering for school-age children and enhances the services our clients and their employees need. We will continue to look for ways to serve the evolving demands of families and create additional value to their employers. Turning to our education advisory business, which delivered solid revenue growth of 16% and launched a number of new clients. Edisys performed well again, and College Coach continues to see elevated activity with parents navigating another upended college admissions cycle. I continue to be excited about the long-term growth potential in this segment and believe our workforce education and advising solutions are well positioned to capitalize on these new growth areas. Two last items before I turn it over to Elizabeth. First, I want to share my excitement about a recent recognition that Bright Horizons received. I am very proud that Bright Horizons was once again named a Fortune Magazine 100 Best Company to Work For for the 20th time. This recognition has always been a great honor and affirmation of the work we do to build a strong culture and inclusive workplace. But during this challenge of a year, it is even more special. Secondly, as the recent proposals outlined under the American Families Plan, from the Biden administration clearly illustrate, the pandemic has spotlighted the critical importance of childcare and early education to our society, our economy, and our collective future. While the details of the various proposals are still very limited, the American Families Plan predominantly focuses on government funding support for high need areas and low and middle income families. Bright Horizons believes this is a great focus for the country and has the potential to help many children and families who have not historically been able to access high quality care and education. For the working families we serve, these proposals underscore the value and importance of our employer partners who have and will continue to make substantial investments to subsidize high quality early education as one of the key pillars employers of choice have to attract and retain working parents. So in closing, we are making good strides in recovering from the huge disruption caused by the pandemic. We delivered solid results in the first quarter and remain encouraged by the trajectory of all business segments. Our client relationships are broader and deeper than ever before, and our role as trusted advisor and a partner who can execute on solutions will continue to afford us unique growth opportunities. I remain excited about what lies ahead and remain confident we are emerging from the pandemic as a stronger and more strategic organization poised for growth in the expanding market for employer-sponsored services. Elizabeth.