Bright Horizons Family Solutions(BFAM) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue increased by 11% to $490 million, with adjusted operating income rising by 48$50 million [8][22] - Adjusted net income reached $42 million, resulting in adjusted EPS of$0.71, up 45% from the previous year [8] Business Line Data and Key Metrics Changes - Full service segment revenue grew by 11% to $371 million, with occupancy rates improving across both urban and suburban locations [9][10] - Backup care revenue increased by 13$92 million, surpassing pre-pandemic levels for the first time [14][28] - Education advisory business revenue grew by 7% to $27 million, driven by high interest in college admissions assistance [16][29] Market Data and Key Metrics Changes - Enrollment levels improved, with occupancy averaging between 35$13 million [24] Company Strategy and Development Direction - The company is focused on growth strategies and plans to invest in staffing and wage adjustments to meet demand [20][35] - The acquisition of Only About Children is expected to contribute approximately $70 million in revenue for the second half of 2022, with full potential realized in 2023 [19][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full enrollment recovery, particularly in suburban and client centers [13][55] - The company revised its 2022 revenue outlook to approximately$2 billion, with adjusted EPS projected between $2.60 and$2.75 [20][33] Other Important Information - The company is experiencing seasonal enrollment impacts due to children aging into elementary school, affecting backfill capabilities [13][50] - The structural tax rate on adjusted net income increased to 26% for 2022, compared to 21% in the previous year [30] Q&A Session Summary Question: What is constraining growth recovery? - Management indicated that staffing and recruiting challenges are the primary constraints, with some urban markets lagging behind suburban areas in meeting demand [37][39] Question: What are the expectations for depreciation and amortization? - The estimated D&A for the year is around $80 million, with a contribution from Only About Children of approximately$2 million [40] Question: Can you provide more details on enrollment percentages? - Management noted that half of the centers have returned to pre-COVID levels, while urban markets like New York City and DC are still facing challenges [42][44] Question: What is the outlook for labor shortages? - Management is hopeful that wage investments will help alleviate staffing shortages, with an increase in applications and net new staff [46] Question: How are seasonal factors affecting enrollment? - The company is experiencing typical seasonal patterns, with preschoolers aging out and not enough younger children to backfill [48][50] Question: What government subsidies were received in Q2? - The company received approximately $16 million in government subsidies for P&L centers, which helped offset costs [51] Question: What are the price increases for this year and expectations for next year? - Price increases averaged 5% to 6% this year, with expectations for higher increases next year due to rising costs [56][58] Question: What is the visibility on financial guidance? - Management acknowledged challenges in visibility due to seasonal turnover and enrollment patterns, but believes the revised guidance is reasonable [60][62] Question: What is the margin profile for Only About Children? - Only About Children is expected to operate at a lower margin initially, with integration costs absorbed into the overall results [70]