Bright Horizons Family Solutions Inc.

Greetings and welcome to the Bright Horizons Family Solutions third quarter 2022 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. Thank you, Michael. You may begin.

Thank you, Paul, and a hello to everyone on the call. 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 calls being webcast and recorded will be available under the Investor Relations section of our website, brightrisings.com. As a reminder to participants, any forward-looking statements made in 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 effects or 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 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 IRS 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 review of our third quarter results and provide an update on the business and outlook for the year. Elizabeth will follow with a more detailed review of the numbers before we open it up for your questions. First, to recap the headline numbers for the third quarter. Revenue in the quarter increased 17% to $540 million with adjusted net income of $38 million and adjusted EPS of $0.66. In our full-service child care segment, revenue increased 14% in the third quarter to $381 million. We added four organic centers, including one for our new client, Quick Trip, and we completed the acquisition of 75 centers in Australia. We also reopened four of our temporarily closed centers in Q3, ending the quarter with 99% of our 1,081 centers open. Across our portfolio of life-for-life centers, we saw mid-single-digit year-over-year enrollment growth in Q3. In the U.S., our centers located in the largest metro areas continue to progress their enrollment recovery, with New York City, San Francisco and the Bay Area, Los Angeles, and Atlanta showing notably strong year-over-year enrollment gains. Our higher ed, healthcare, and industrial clients, that represent approximately 60% of our client center portfolio, continue to show the highest occupancy levels, while our tech and consumer client centers experience the fastest enrollment growth over the prior year. In terms of age mix, infant and toddler enrollment grew 8% over the prior year, more than double the rate of our preschool, despite the more acute staffing challenges in these younger age classrooms due to tighter teacher to child ratios. While staffing continues to constrain enrollment in most geographies, we saw incremental progress on the retention and recruiting from this past quarter. Our recent investments in teacher compensation have had an impact on retention, and we continue to see greater interest from job seekers. Taken together, this has resulted in continued improvement in net hiring. Importantly, the gains made in overall staffing levels is enabling center directors to spend less time covering classroom hours and more time on traditional leadership activities, including engaging with prospective families through tours and visits. These marketing activities, which had been severely curtailed during the pandemic, are helping us rebuild the enrollment pipeline to drive all classrooms back toward pre-pandemic occupancy levels. Outside the US, enrollment trends were mixed. In the UK and the Netherlands, growth was muted as labor market challenges continue to restrict our ability to serve all of the enrollment demand that we have. We have several initiatives underway to drive recruitment in the face of a market that remains very challenging in the availability of qualified classroom staff. In addition to stalling of our enrollment growth, the other short-term impact of this is higher labor costs, given a greater reliance on agency staff to augment directly employed teachers, which comes at a cost premium. In Australia, where we closed on the Only About Children acquisition on July 1st, we are pleased with this initial quarter's performance. Specifically, enrollment was in line with our expectations, even while Australian operations continue to experience similar labor dynamics that we see across our global center operations. Let me now turn to backup care, which delivered exceptional results this quarter. Revenue increased 30% over the prior year to $129 million, outpacing expectations on strong use in the third quarter. We also continue to see good new client success with Q3 launches for Hard Rock International, Leader Corporation, Lucid Group, and Premier Health Partners, to name a few. As we spoke about last quarter, we were encouraged to see record use in June with that momentum continuing throughout the third quarter. We saw use across all of our care types, resulting in our highest revenue quarter in our backup segment history. A particular note was the contribution of Stephen Keith Camp, an acquisition that we made in 2021. Under our ownership, we expanded their footprint, enabling us to increase our available backup capacity and serve a growing number of families with school-age children. Additionally, as part of our broader strategy to expand the utility of backup care to a broader set of eligible client employees, we recently rolled out pet care as an additional use case. This followed the successful pilot with a third-party service provider over the last several months. Along with virtual tutoring and expanded school-age camp programs, this is the latest example of our product innovation designed to drive greater adoption and frequency of use. Moving on to our education advisory business, which delivered revenue growth of 14% to $31 million. We added several new clients in the quarter, including launches, with Amerisource Bergen, Johns Hopkins, and VMware. We continue to see solid use levels with particularly notable participant growth at EdAssist in the quarter. I continue to be excited about our opportunity in workforce education as this remains an area of focus for employers looking to differentiate their employee value proposition and upskill employees into hard to fit roles. Let me now briefly touch on our consolidated outlook for the rest of 2022. We remain on track to achieve $2 billion in revenue, and we are narrowing our adjusted EPS to a range of $2.60 to $2.65 per share, or growth of 30% to 33% for the full year. Before wrapping up, I want to take this opportunity to reflect on the signature employee recognition event that has been occurring across Bright Horizons over the last couple of months. This year, we had nearly 25,000 award nominations from clients, families, and colleagues. And after two years of only virtual celebrations, it was great to celebrate with colleagues here in Newton two weeks ago. My heartfelt appreciation goes out to all of our employees who work tirelessly each day to make a difference in the lives of children, families, learners, and workplaces. So in closing, we are encouraged by the continued progress we are seeing across our business. We have met the challenges of the last two-plus years head-on by making investments in teachers' compensation and benefits, expanding recruiting work streams, further investing in technology to enable seamless client and end-user experiences, and developing and launching new care types to reach a broader range of clients and employees whose needs for child care and family supports have never been greater. I continue to believe that the strength of our client relationships and unique employer-sponsored business model, coupled with the acute need for our quality services, position us well to execute against our short and long-term objectives, all while remaining steadfast in our focus on delivering the highest quality, care for education for children, families, and clients. With that, I'll turn the call over to Elizabeth, who will review the numbers in more detail, and I will be back to you during Q&A.