Bright Horizons Family Solutions(BFAM) - 2019 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported top line growth of 8% to $528 million and adjusted EPS growth of 14% to $0.99 per share for Q2 2019 [6][19] - Adjusted operating income grew 13% and expanded 70 basis points to 14.2% of revenue [9][23] - Interest expense decreased slightly to $12 million due to lower average revolver borrowings [26] Business Line Data and Key Metrics Changes - Full-service segment revenue grew by 6% to $24.5 million, driven by rate increases, enrollment gains, and contributions from new centers [21] - Back-up operations generated 19% top line growth, supported by new client launches and strong utilization from existing clients [22] - Educational advisory services grew 16% due to new client launches and expanded use by the existing base [22] Market Data and Key Metrics Changes - The company operates 1,083 centers with the capacity to serve 120,000 children and partners with more than 1,100 clients [28] - The back-up division is projected to grow between 17% and 19% for the full year, including approximately 4% from the addition of My Family Care [28] Company Strategy and Development Direction - The company focuses on organic growth by cultivating new clients and expanding existing client relationships through cross-selling [13] - The lease consortium centers strategy has opened 95 centers over the last six years, targeting urban settings with high demand for quality child care [14] - The company is actively pursuing M&A opportunities and has entered a partnership with PME Familienservice in Germany to expand its service offerings [17][19] Management's Comments on Operating Environment and Future Outlook - Management anticipates continued strong performance with revenue growth in the range of 8% to 10% for the full year [19] - The company expects to add between 45 and 50 new centers while closing approximately 25 underperforming locations [30] - Management remains optimistic about the UK market despite some localized headwinds related to Brexit [52][55] Other Important Information - The company projects adjusted net income of $211 million to $213 million and adjusted EPS in the range of $3.59 to $3.64 for the year [34] - The structural tax rate is projected to approximate 23% for the year [32] Q&A Session Summary Question: Details on the partnership with PME in Germany - Management highlighted PME's extensive client base and services in child care, viewing the partnership as a way to serve multinational clients and explore the German market [36][38] Question: Enrollment growth trends and technology investments - Management noted consistent enrollment growth across the portfolio, attributing it to service delivery improvements and technology investments [41][42] Question: Thoughts on entering Germany and partnership versus acquisition - Management expressed that Germany represents a long-term opportunity and the partnership allows for better understanding of the market without immediate acquisition [45][46] Question: Impact of Brexit on the UK business - Management indicated strong opportunities in the UK market despite some localized challenges, with continued demand for services [51][52] Question: Labor issues and wage pressures - Management acknowledged that while they are not minimum wage payers, they are responsive to market wage increases and can pass these costs onto clients [63][64]