Bright Horizons Family Solutions(BFAM) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue increased 14% to $530 million in Q4 2022, with adjusted EBITDA of$91 million and adjusted earnings per share of $0.77, an 18$2 billion, representing a growth of 15%, while adjusted earnings per share expanded 31% to $2.60 [19] - Organic constant currency revenue grew approximately 8$36 million to revenue in the quarter [11][19] Business Line Data and Key Metrics Changes - Full service childcare segment revenue increased 15% in Q4 to $388 million, with three new organic centers added [19][23] - Back-Up Care revenue grew 15$108 million, with operating income of $33 million, representing 30$33 million, driven by expanded use of workforce education and college admissions advising services [24] Market Data and Key Metrics Changes - In the U.S., year-over-year enrollment increased 6%, with a notable 10% growth in the infant and toddler age groups [7] - Internationally, enrollment growth was more challenging, with marginal increases in the UK and Netherlands due to staffing shortages and higher labor costs [8] - Average occupancy levels remained in the 55% to 60% range for Q4, with expectations of reaching 60% to 65% utilization on average for the year [36][47] Company Strategy and Development Direction - The company is focused on digital transformation, with investments in technology improving operational systems and user experiences [5][6] - Strategic expansion into new geographies was highlighted by the acquisition of Only About Children in Australia, which is expected to drive further growth [18] - The company aims to unify and extend the value of its offerings, projecting revenue growth of $2.3 billion to$2.4 billion in 2023, with adjusted EPS expected to be between $2.80 and$3 [22][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery from the pandemic, noting solid progress in enrollment and Back-Up Care usage [22] - The company anticipates headwinds from the expiration of government funding programs and increased interest expenses, estimating a $0.60 to$0.65 per share impact on growth for 2023 [13][22] - Management remains optimistic about the resilience of the business model and the strength of client relationships, expecting continued growth in various segments [22] Other Important Information - The company reported a cash flow from operations of $57 million in Q4, compared to$42 million in the same period of 2021 [48] - The company ended the year with 36 million in cash and a leverage ratio of 3.2x net debt to EBITDA [48] Q&A Session Summary Question: What are the assumptions for revenue growth in terms of M&A contribution and utilization? - Management indicated that the full year revenue guidance of 2.3 billion to $2.4 billion includes a contribution from the Only About Children acquisition, estimated at$70 million to $75 million [28][31] Question: Can you provide insights on enrollment growth and occupancy rates? - Management expects mid to high single-digit enrollment growth, translating to an average occupancy rate of 60% to 65% [36] Question: How is the company addressing staffing constraints? - Management noted improvements in retention rates and an increase in job applications, but staffing remains a challenge impacting enrollment [37][38] Question: What is the outlook for operating margins in 2023? - Management expects low single-digit to mid-single-digit operating margins for full service, with improvements anticipated as the year progresses [40][98] Question: How does the company view the macroeconomic environment and potential recession impacts? - Management acknowledged potential demand headwinds during recessionary periods but noted that supply constraints may improve the labor environment [102]