Bright Horizons Family Solutions Inc.

Greetings, ladies and gentlemen, and welcome to Bright Horizons Family Solutions' second quarter of 2022 Earnings Conference Call. At this time, all participants are in listen-only mode. The question and answer session will follow the formal presentation. If anyone should require assistance by the operator during the conference, you're welcome to press Start in Xero on your telephone keypad. As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host, Mr. Michael Flanagan, Senior Director of Investor Relations. Please go ahead, sir.

Thank you, Judith. And hello to everyone on the call tonight. 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 recording will be available under the investor relations section of our website at brightrisings.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 acquisitions and 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 2021 form, 10-K, and other SEC filings. 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 may 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. Hello to everyone on the call, and thank you for joining us this evening. I hope that you and your families are doing well. I'll start tonight with a view of our second quarter results and provide an update on the business and plans for the remainder of 2022. Elizabeth will follow with a more detailed review of the numbers before we open it up for your questions. First, let me recap the headline numbers for the second quarter. As we pass the midpoint in the year, we remain focused on our growth strategy and delivery. In both areas, we continue to make good progress. Revenue increased 11% to 490 million and adjusted operating income of 50 million was up 48%. Adjusted net income of 42 million yielded adjusted EPS of 71 cents, up 45% from last year. In our full service segment, revenue expanded 11% in the second quarter to 371 million. We added four new centers including a center for our new client, Shannon Medical, and reopened five more centers in Q2, ending the quarter with 98% of our 1,014 centers open. Across our centers, we saw broad-based enrollment growth with sequential improvement in occupancy in the second quarter, and solid year-over-year growth. More specifically, in our lease consortium centers, occupancy increased across both urban and suburban locations. And while the suburban locations still led the more urban settings, we saw increased velocity of new enrollment in top major metro areas in the quarter, led in large part by D.C., New York City, and Seattle. We also saw solid growth in our client centers, which continue to be more highly occupied than our lease centers, with higher ed, industrial, and healthcare verticals continuing to deliver the highest occupancy levels. On the staffing front, we also continue to make progress in our recruiting and retention efforts. Increased job seeker interest combined with a streamlined candidate experience and enhanced compensation are driving positive net hiring. While we are still unable to accommodate all of the enrollment demand we have due to unfilled staff roles, we are encouraged by the hiring momentum and feel positive about the progress we have made over the last several months. Outside of the U.S., the UK is also making strides in staffing and in rebuilding enrollment levels. However, in the Netherlands, for the first time since the start of the pandemic, enrollment levels have been moderately constrained as a result of labor market challenges. In response, our Dutch team is replicating many of the recruiting and retention actions that the US and UK teams have deployed. With this as a backdrop, we started to experience some seasonal enrollment impact in June, which persisted into July. The historical summer and fall seasonal enrollment pattern created by older children aging up into elementary school and backfilled with new families has been muted during the pandemic recovery and re-ramping period. However, the persistence of our staffing shortages, particularly in the younger age cohorts, and our inability to backfill the open spaces with all of those families that had requested care has driven a more seasonal enrollment trend than we originally anticipated. This recent dynamic has led us to lower enrollment expectations for the second half of 2022, but we are confident that we will ultimately achieve full enrollment recovery. Let me now turn to backup care. Revenue increased to 92 million, or 13% over the prior year. We launched service in Q2, for new clients Exelon, Infineon, and Western Digital, to name a few. Traditional center-based and in-home use was solid, and in June we hit an important milestone as use surpassed its comparable 2019 level for the first time since the pandemic began. And encouragingly, that positive momentum has persisted into July with more families engaging with our various intermittent care solutions. Clients and their employees continue to value our expanding menu of use types within their backup care benefit. We recently expanded our virtual academic tutoring offering to teens and adults, and this fall are piloting a new use type, pet care, enabling us to reach a new segment of our client's workforce, pet owners. Pet owners also require support when care is unavailable. These are a couple of examples that illustrate our flexibility in developing new use cases that can serve the evolving and diverse needs of our clients and their employee populations. Moving on to our education advisory business, which delivered revenue growth of 7% to $27 million. Activity levels were solid at College Coach as this business continues to see high interest levels from parents needing help in navigating the college admissions and financing processes. In EdAssist, while new client interest is steady, we did see fewer participants than expected, in part due to the continued strength of the labor market. Given the strong underlying need and employer demand for upskilling and reskilling to support career development and growth, I am optimistic about our opportunity in workforce education. Before wrapping up, I want to formally welcome the team from Only About Children, along with the children and families that Oak serves to the Bright Horizon family. We are thrilled to have completed this beachhead acquisition and to now be operational in the attractive Australian childcare market. Elizabeth and I had the opportunity to visit with Oak in early July, and over the last month, our teams have been working closely and collaboratively on the integration. I couldn't be more impressed with the caliber of the organization, and I'm excited about the potential for Oak to further grow and broaden our impact on families. Furthermore, we have heard from a number of our multinational clients expressing interest in exploring employer-sponsored opportunities to support their Australian employees with new care supports. We expect Oak's 77 centers to contribute approximately $70 million of revenue over the remainder of 2022. As we spoke about on our last call, given the near-term effects of the integration, OAK's EPS contribution will be limited in 2022, with its full potential realized in 2023 and beyond. Let me now turn to our consolidated outlook for the rest of 2022. We continue to operate in an environment that has more limited visibility of enrollments, particularly over the important summer and fall transition period. And given some of the constraints we have seen year-to-date on staffing, we are leaning more heavily into wage investments this fall. Given these factors, we are revising our 2022 revenue outlook to approximately $2 billion and adjusted EPS of $2.60 to $2.75 per share, or growth of 30% to 38%. In closing, we are proud of the critical role we feel for our clients and their employees and the significant impact we have on the development and lives of so many children, families, and learners. We are focused on the critical work to be done over the near term that will most certainly fortify our foundation now and for the future. With that, I'll turn the call over to Elizabeth, who will review the numbers in more detail, and I will be back with you during Q&A.