Bright Horizons Family Solutions Inc.

Greetings. Welcome to the Bright Horizons Family Solutions fourth quarter 2021 earnings 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. Please note, this conference is being recorded. I will now turn the conference over to your host, Michael Flanagan, Senior Director of Investor Relations. You may begin.

Thanks, Shamali, and hello to everyone on the call today. With me here are Stephen Kramer, our Chief Executive Officer, and Elizabeth Boland, 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 a recording will be available under the Investor Relations section of our website, brightrisons.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 a 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 materialize differently and are described in detail in our 2020 Form 10-K and other SEC filings. Any forward-looking statement speaks only as 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 the GAAP Counterparts and Earnings Release, which is available under the IR section of our website. Stephen will now take us through the review and update of the business.

Thanks, Mike, and welcome to everyone who has joined the call. To start this evening, I'll recap our 2021 results and outline how the progress we made this past year positions us well for 2022 and beyond. Elizabeth will follow with a more detailed review of the numbers and outlook before we open it up for your questions. Overall, I'm really pleased with our performance in 2021 and all that the team has accomplished over the last two years. Prior to COVID-19, our business had been on a consistent revenue and earnings growth trajectory, which was upended with the onset of the pandemic and the temporary closure of nearly 80% of our centers. We responded swiftly with an immediate focus on health and safety, supporting clients and their essential frontline workers, and pivoting to create new backup care solutions for clients and employees to meet the incredible surge in need and demand. Throughout 2021, we gained traction in our recovery as we reopened hundreds of centers and welcomed back thousands of families. At the same time, we delivered hundreds of thousands of days of backup care, launched services for more than 75 new clients, added 44 new centers, and made important investments in technology and new service offerings that lay the foundation for growth and innovation over the next many years. As a result of all of this, we entered 2022 with good momentum. While the most recent COVID variant surge now appears to be waning, parent and client behavior has still been impacted and will take additional time to normalize. On the plus side, the long-term outlook I see for our business is incredibly positive. In fact, I believe the actions we have taken over the last two years will transform our opportunities in the years ahead. Our long-standing value proposition with clients, families, learners, and our employees has significantly strengthened during this period. Specifically, we have broadened our impact with the addition of more than 225 new clients, extending our service opportunity to more than 10 million eligible lives. We tapped into new potential use by cross-selling additional services to more than 100 existing clients. We galvanized our relationships with our more than 1,350 clients, responding to the unprecedented care needs arising from the chaos created by the pandemic. We led our sector in health and safety practices, strengthening our longstanding reputation for quality care in early education across the US, UK, and Netherlands. We rationalized our existing portfolio of early education centers while at the same time partnering with employers to expand capacity to meet their evolving needs. We expanded investments in technology to unify our services, speed and improve our end-user experience, and personalize our outreach to prospective and current employees. We invested in innovation, including deployment of additional care types in backup care and new pathways and partnerships to support adult learners in HEDASYS. And finally, now more than ever, we are engaging with the CEO and CHROs of existing and prospective clients. This underscores the strategic importance of the solutions we offer as organizations look to attract, retain, upskill, and differentiate. With these building blocks in place and associated tailwinds, I am confident we are emerging from this pandemic structurally more effective, strategic, and impactful. Let's now take a closer look at our quarter four segment results. To recap the headline numbers for this past quarter, revenue increased 23% to $463 million, which yielded adjusted EBITDA of $79 million and adjusted earnings per share of $0.65, an increase of 81% from the prior year. For the full year 2021, revenue of $1.8 billion represented growth of 16%, while adjusted earnings per share of $1.99 expanded 28% over 2020. In our full service segment, revenue grew 29% in Q4 on continued enrollment recovery. We added 14 centers in the quarter, including a second center for Houston Methodist Hospital and a network of 12 centers we acquired in the UK, expanding our footprint in the southeast of England. We reopened 17 more centers in Q4 and ended 2021 with 96% of our 1,014 centers open. As we look ahead, the remaining 37 temporarily closed centers are currently slated to reopen in the first half of 2022. In our open centers, we are encouraged by the progressive improvement in enrollment as occupancy levels ticked higher in Q4. Like many other businesses, the spread of Omicron variant has been a disruptor. Specifically for us, it dampened the pace of enrollment growth as prospective families delayed their start dates. Omicron also had an effect on the staffing of early childhood educators, particularly through the holiday period and carrying into January of this year. While still challenging, we are seeing improving trends on the labor front. As we discussed last quarter, the pandemic has exacerbated the staffing pressures the child care industry has long faced. Bright Horizons has always been an employer of choice for early educators, and we have led our field investing in career growth underpinned by development opportunities such as our ECDA credentialing and Horizons teacher degree program. In this unprecedented environment, we have also taken a number of actions to specifically address the current conditions, including increased wages, recognition bonuses, and expanded employee benefits, to ensure that we are attracting, retaining, and growing the best teachers in the industry. While enrollment is still constrained by our ability to fully staff classrooms, we are encouraged by the early results of these measures. We are closely monitoring the progress, and our talent teams continue to deploy creative solutions, including events like the National Hiring Day that we hosted earlier this month to further accelerate our recruiting efforts. Let me now turn to backup care, where revenue of $94 million increased 10% over the prior year. Overall, we saw unique users improve sequentially in the quarter, although in-home and in-center use was less than what we expected heading into the quarter. The improvement we saw in mid-fall as the Delta impact started to dissipate was once again disrupted by the emergence and spread of Omicron in the latter half of the fourth quarter, and continuing into early 2022. While we have dealt with the impact of COVID spikes over the last two years and recognize this dynamic could well persist in the first half of 2022, we believe the underlying need for backup support among working parents has not diminished. To that end, we have worked hard to roll out additional use types that align with the hurdles facing working parents. Our virtual tutoring solution that we launched mid-2021 has been highly successful, helping those parents whose children's academic progress was impacted by remote learning and other disruptions to their education. We are expanding Steve and Kate's camps to new communities where our clients' employees live and work, including Austin, Atlanta, and Minneapolis, providing more outdoor and enrichment opportunities for children during school holidays and the extended summer break. And more recently, we launched virtual camps as another use case for parents in need of support that can be delivered remotely, on demand, with a similar learning opportunity as an in-person experience. We will continue to innovate on the delivery front with the goal of not only serving more working parents, but also to drive greater uptake of their use banks provided by our client partners. Speaking of clients, the team delivered another strong quarter of new client launches, including Beyond Meat, Mitre, and the Southern Companies, to name just a few. Not only have we added a record number of new clients over the last two years, but those clients are also larger on average, with double the number of eligible employees per client than in the past. As a result, I remain very optimistic about the longer-term trajectory of backup use and the broader opportunity within our backup care segment, despite the disruptions that are currently impacting use of traditional in-home and in-center care. Turning to our education advisory business, we launched a number of new clients in the quarter, including GEICO, Qualcomm, Synchrony Financial, and Wawa. Activity levels were solid at College Coach as this business continues to see high interest levels from parents needing help navigating the college admissions process. I remain excited about our opportunity in workforce education. as this remains a significant area of investment and focus for employers looking to differentiate their employee value proposition, as well as upskill and reskill their employees into hard-to-fill roles. Before I wrap up, I want to take a moment to thank every member of the Bright Horizons family for their dedication and incredible resolve over the last two years. While there has been significant impact to our families, our employees, and our business, I couldn't be more proud of the way in which our teams came together to deliver the highest quality education and care, always staying true to our mission to be a partner and employer of choice. It is that focus and passion for our mission that will not only have a profound impact on the lives of the many children, families, learners, and clients we have the privilege to serve, but also allow us to realize the many goals we have as an organization over the next several years. We believe we will emerge from this disruption financially stronger and better positioned competitively to grow and drive value for all of our stakeholders. While the recovery in our industry hasn't been and won't be linear, our resiliency as an organization and the strength of our business model positions us for long term success. We have and will continue to weather the short term challenges, but the long term outlook for our business remains very bright. While a number of variables continue to impact the pace and velocity of our recovery from the effects of the pandemic, we continue to execute on our long-term strategy and have improving visibility to our near-term performance. Therefore, we are pleased to reintroduce top-level guidance on our expectations for near-term operating performance. As we look ahead for 2022, we anticipate 2022 revenue growth of 17 to 22% with operating leverage driving adjusted EPS growth of approximately 60 to 70% to $3.20 to $3.40 per share. This range contemplates a number of recovery paths based on current trends and our expectations of continued normalization of enrollment and use across our three segments. With that, I'll turn the call over to Elizabeth, who will dive into the quarterly numbers and share more details around our 2022 outlook.