Bright Horizons Family Solutions Inc.

Greetings and welcome to the Bright Horizons Family Solutions fourth quarter 2023 earnings 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, Vice President of Investor Relations. Thank you, Michael. You may begin.

Thanks, Paul. Welcome, everyone, to Bright Risings' fourth quarter earnings call. Before we begin, please note that today's call is being webcast. Your recording 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, financial performance, and outlook, are subject to the State Barber 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 should be considered in conjunction with the cautionary statements that are described in detail in our earnings release, 2022 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 may also refer to the non-GAAP financial measures, which are detailed and reconciled to the GAAP counterparts in our earnings release, which is available under the Investor Relations section of our website at investors.brightrisings.com. Joining us today to call is our Chief Executive Officer, Stephen Kramer, and our Chief Financial Officer, Elizabeth Bowen. Stephen will start by reviewing our results and provide an update on the business. Elizabeth will follow with a more detailed review of the numbers before we open it up to your questions. With that, let me turn the call over to Stephen.

Thanks, Mike, and welcome to everyone who has joined the call. I am really pleased with how we finished the year, achieving better than expected revenue and EPS results in the fourth quarter. Performance for the full year was also strong, with full service revenue extending nearly 20% and backup care revenue surpassing the $500 million mark, up an impressive 26% in 2023. These accomplishments were driven by the focus, dedication, and execution of our talented who continue to work tirelessly to deliver our high-quality services. So to get into some of the specifics, in Q4, total revenue increased 16% to $616 million, which yielded adjusted EBITDA of $99 million and adjusted earnings per share of 83 cents, an increase of 8% from the prior year. For the full year 2023, revenue of $2.4 billion represented growth of 20% with adjusted earnings per share of $2.84, expanding 9% over 2022. In our full-service child care segment, revenue increased 15% in the fourth quarter to $447 million. The drivers of this growth were enrollment and pricing, with centers that have been open for more than one year expanding enrollment at a high single-digit rate in Q4 and averaging 58% to 60% occupancy. In the U.S., year-over-year enrollment increased 10% in these life centers, with double-digit growth in our younger age groups and mid- to high-single-digit growth in preschool age groups in Q4. Outside the U.S., enrollment increased at a mid-single-digit rate in the fourth quarter compared to Q4 of 2022. Although the operating environment in the U.K. continues to be challenging and a headwind to the performance of the overall full-service segment, enrollment growth in the U.K. increased improved modestly in Q4 compared to Q3, and we have seen that progress continue into the early part of 2024. At the same time, we continue to rationalize our portfolio in the UK to ensure focus on centers with the greatest long-term viability and improve momentum in regaining operating profitability over time. In our Dutch and Australian operations, enrollment was in line with our expectations in Q4. and both portfolios continue to operate with occupancy levels averaging above 70%. Let me now turn to backup care, which delivered an outstanding quarter to finish the year. Revenue increased 24% to 135 million on strong utilization across our more than 1,100 clients. Traditional network use trended higher than our expectations as we ended the year. Use in bright horizon centers Network centers and in-home were all strong and these use cases continue to be the primary drivers for the backup business. We do continue to see solid growth across all care types. We're encouraged by the growth opportunity from the newer use cases that we have introduced in the last couple of years as this broader portfolio enables us to serve a wider set of eligible client employees. 2023 was a tremendous year for Backup Care. We saw record interest and record use. I'm very encouraged by our ability to capture demand and operationally deliver for families in need of care. As I mentioned earlier, we reached an important milestone in 2023, surpassing $500 million in revenue. For context, Backup Care was a $300 million business in 2019, and over the last four years, its contribution to the company's revenue and profitability profile has grown significantly, along with its impact on families, employees, and clients. Even as full service continues its enrollment and earnings recovery, backup care is poised to be a structurally larger contributor to our go-forward earnings profile, and we are very excited about the continued growth opportunity in this segment. Our education advisory business delivered revenue of $34 million in the quarter, Notable new client launches in the quarter for Ed Assist and College Coach included Norfolk Southern, Standard Charter, and VeriSign. The transformation of this segment is underway and focused on meeting the evolving upskilling and reskilling needs of employers and their employees. We continue to believe in and are investing against the large opportunity available in this market. As we turn to 2024, I want to take a moment to thank every member of the Bright Horizons family as well as our client partners who invest in these important services. We made great progress this past year across many dimensions of our business. This could not have been achieved without their dedication and commitment to our core mission in delivering the highest quality education and care to children, families, learners, and our employer partners. A special shout out to our teachers. who cared for the children of the San Francisco 49ers in Las Vegas during the big game this past Sunday. A great example of how we support working families to integrate work and life. I believe we executed well against our near-term goals in 2023 while also making investments to strengthen our foundation to drive our success in the years to come. We made significant progress in rebuilding our staffing levels, increasing enrollment, capacity and capabilities to support backup growth and in the continued build-out of the infrastructure for our One Bright Horizon vision. We enter 2024 on a solid footing and with good momentum, and we expect to see revenue growth of approximately 10%, resulting in revenue of $2.6 to $2.7 billion. On the earnings side, we are projecting adjusted EPS in the range of $3 to $3.20 per share. With that, I'll turn the call over to Elizabeth, who will dive into the quarterly numbers and share more details around our 2024 outlook.