Bright Horizons Family Solutions Inc.

Greetings and welcome to the Bright Horizons Family Solutions third quarter earnings release conference 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, 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, Group Vice President of Strategic Finance. Thank you. You may begin.

Thank you, Shamali, and welcome to Bright Horizons' third quarter earnings call. Before we begin, please note that today's call is being webcast and recording will be available under the investor relations section of our website, investors.brighthorizons.com. As a reminder to participants, any forward-looking statements made on this call, including those regarding future business, financial performance, and outlook, 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 should be considered in conjunction with the cautionary statements that are described in detail in earnings release 2024, 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. Today, we also refer to non-GAAP financial measures, which are detailed and reconciled to their GAAP counterparts in our earnings release, which is available under the investor relations section of our website at investors.brighthorizons.com. Joining me on today's call is our Chief Executive Officer, Stephen Kramer, and our Chief Financial Officer, Elizabeth Boland. 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, I'm going to turn the call over to Stephen.

Thanks, Mike, and welcome to everyone who has joined the call. We delivered another quarter of solid execution and performance with revenue increasing 12% to $803 million and adjusted EPS growing 41% to $1.57, both well ahead of our expectations. Demand persisted from both client employees and employers for our broad suite of education and care benefits, and our teams executed with discipline and focus. This quarter's performance positioned us to finish the year with strong momentum and confidence in our ability to deliver on our strategic objectives. Let me start with backup care, which was a clear standout in the third quarter as it has been all year. Revenue increased 26% to $253 million with strong broad-based demand for all care types across our own supply and our partner network. The momentum we saw in early summer carried through the quarter, particularly in our programs catering to school-age children, supported by working parents' significant needs during the school breaks. More employees used care, existing users leaned in further, and more employers signed on to offer the benefit, notably new clients MIT and Appium Corporation. Our operations team executed exceptionally well, delivering record levels of care during this compressed, high intensity period. And our marketing and technology teams continue to progress our personalization efforts to attract and stimulate use among client employees. Backup care continues to be an exciting growth engine, both financially and strategically, and a core pillar of our long-term value creation. While today it stands as our largest driver of revenue and profit growth, we believe we are still in the early innings of the opportunity. Our current reach spans more than 1,000 employers and millions and millions of eligible employees. But employer adoption and usage remains modest relative to its potential. Our strategy to close this gap is focused on expanding the number of unique users within our existing client base increasing frequency of use among those who already value the service, and continuing to grow our client roster. As we look ahead, we will continue to invest to support the growth of backup care, expanding capacity, deepening personalization, and reinforcing the value proposition for both employers and client employees. A critical differentiator in our model and our ability to deliver on this growth is the breadth and quality of our delivery network. Our full-service centers remain foundational in that effort, serving as a direct source of care and as an essential infrastructure that supports reliability, responsiveness, quality, and scale across our global platform. Now moving to our full-service centers. Revenue in full-service increased 6% to $516 million, driven by a combination of enrollment growth, tuition increases, and new center openings. We added three new centers this quarter, including two centers for a new higher ed client and a third location for Dartmouth-Hitchcock Medical Center. These openings not only reinforce our leadership in employer-sponsored childcare, but also underscore the enduring importance of onsite care as a strategic workforce solution. Enrollment in centers open for more than one year increased at a low single-digit rate, while average occupancy ticked down to the mid-60s, sequentially, given the usual summer to fall seasonality. While the pace of enrollment growth has moderated over the course of the year, we continue to see the fastest growth in select centers operating below 40% occupancy. Centers in the 40% to 70% occupancy range also continue to show enrollment growth and margin improvements. And among our top-performing centers, those with occupancy above 70%, we continue to have strong profitability, while the natural cycling of last year's strong occupancy levels tempered our overall enrollment growth. Outside the US, our UK full-service business continues to regain ground. Enrollment growth has continued with increased demand among working families, a segment we are well-positioned to serve. and more favorable government support to families. Operationally, we are seeing the benefits of disciplined cost management, improved staffing and retention, and an improved labor environment. The UK remains a strengthening component to our full-service segment and is now on track to contribute modestly positive earnings in 2025. As we exit 2025 and plan for 2026, Our focus in full service remains on delivering quality at scale, expanding occupancy, and fulfilling increasing amounts of backup use. We are also ensuring our portfolio is aligned with long-term opportunities for growth and margin improvement. Moving on to our education advisory segment, revenue grew 10% this past quarter to $34 million, ahead of our expectations. led by the continued strength of College Coach, which contributed both top line growth and strong margins. In addition, Ed Assist expanded its participant base as employees continue to explore education benefits to support their career development. We believe that our investments in this product offering and customer experience position us well to meet the evolving client upskilling needs and create value over time. We added new clients to the portfolio this quarter, including Sony Music and Premier Health Partners, expanding our reach and reinforcing the relevance of education and coaching benefits in today's landscape. Before I turn it over to Elizabeth, I want to take a moment to reflect on one of the most meaningful traditions at Bright Horizons, our Awards of Excellence celebration. This year, we once again had the privilege of gathering in person to honor the extraordinary contributions of our employees. With more than 20,000 nominations from colleagues, families, and clients, the awards and the events were powerful reminders of the deep impact our teams have on the lives of those we serve. Celebrating together with our Westminster, Colorado and Newton, Massachusetts teams was a true highlight, a chance to recognize the passion, care, and commitment that define our culture. To all our employees, Thank you for the work you do every day and for the difference you make in the lives of children, families, learners, and employers around the world. In closing, this terrific quarter reflects strong contributions across all of our service lines. As we look ahead, we remain focused on building a more integrated Bright Horizons, one that aligns our delivery model, technology, and client partnerships to provide a more seamless experience for working families. Our broad portfolio is central to this effort, and backup care stands out as a cornerstone of our One Bright Horizon strategy, serving as a strategic lever for strengthening client relationships, enhancing employee productivity, and driving enterprise-wide value. Given our results year-to-date and our current outlook for Q4, we are upgrading our full-year earnings guidance. We now expect revenue to be approximately $2.925 billion, representing 9% growth, and we are increasing our adjusted EPS to a range of $4.48 to $4.53. With that, I'll turn the call over to Elizabeth, who will dive into the quarterly numbers and share more details around our outlook.