The decline of the U.S. dollar could happen at ‘warp speed’ in the era of coronavirus, warns prominent economist Stephen Roach

Stephen Roach, a Yale University senior fellow and former Morgan Stanley Asia chairman, tells MarketWatch that his forecast for a sharp deterioration of the U.S. dollar could be a very near-term phenomenon, not an event that looms off in the distance.

“I do think it’s something that happens sooner rather than later,” the economist told MarketWatch during a Monday-afternoon interview.

His comments come as the financial expert has been warning for weeks of an epic downturn of the buck that could signal the end of the hegemony of the greenback as a reserve currency — an event that would ripple through global financial markets.

Check out: ‘The dollar is going to fall very, very sharply,’ warns prominent Yale economist

“In a COVID era everything unfolds at warp speed,” Roach told MarketWatch on Monday. He pointed to the contraction of the U.S. economy from an employment rate that was hovering around a 50-year low at around 3.5% near the start of 2020 to one that shows some 49 million people unemployed since the pandemic took hold in March. He also noted the rapid and unprecedented fiscal and monetary response that has ballooned the Federal Reserve’s balance sheet to more than $7.2 trillion from $4 trillion at the start of the year as examples of the celerity at which the currency market could change.

Read: A by-the-numbers look at COVID-19’s toll on American lives and livelihoods

Roach is calling for the dollar to soon decline 35% against its major rivals, citing increases in the nation’s deficit and dwindling savings.

“This massive shift to fiscal stimulus is going to blow out the national savings rates and the current-account deficit,” he told MarketWatch, reiterating comments he has previously made in interviews and in an op-ed that published by Bloomberg News on June 14.

Last week, the U.S. current-account deficit, a measure of the nation’s debt to other countries, slipped 0.1% in the first quarter, falling to $104.2 billion from a revised $104.3 billion in the 2019 fourth quarter. The current account reveals if a country is a net lender or debtor.

Roach said that his recent warnings about the dollar have garnered intense and emotional responses from readers and critics, because he believes that the U.S. is at a particularly sensitive time in history.

He said the racial upheaval — sparked by the death of George Floyd — the pandemic and the intensity of the presidential election have combined to elicit powerful responses from readers that he hasn’t gotten since his days writing financial commentary at Morgan Stanley.

He said during this time you’re going to get “hair-trigger responses” from people.

“We’re at a critical point in the political cycle and the dollar is a relative price, so you’re making a comparison to the United States and other countries and there are just really strong views against the analysts that” call into question U.S. dominance, he explained.

Asked if investors should be fearful of a downturn of the dollar, Roach said that this wouldn’t be the first time the dollar has slumped meaningfully, and that “fear is a question of context.”

Fear may be justified “if they are unprepared and not hedged and have not thought about what some of the options are take advantage,” he said, pointing to the euro as a possible alternative to dollars for currency buyers. In the past, he has said that China’s yuan


may be viewed as increasingly appealing to investors, but that view is contingent on China following through with structural reforms the country is undergoing from a manufacturing-heavy economy to one focused more on services.

One measure of the buck, the ICE U.S. Dollar Index
has been weakening over the past 30 days, down 2.9%, but is up slightly on the year, rising 0.7%, according to FactSet data.

The index measures the buck against a basket of six rival currencies, including the euro
the pound

and the yen

A weaker dollar has implications for assets and the stock market, including the Dow Jones Industrial Average

and S&P 500 index
with most debts denominated in dollars. In addition, a majority of cross-border financing and international trade are conducted in dollars.

Original source link

Bright Horizons Family Solutions’ (BFAM) CEO Stephen Kramer on Q4 2019 Results – Earnings Call Transcript

Bright Horizons Family Solutions (NYSE:BFAM) Q4 2019 Earnings Conference Call February 13, 2020 5:00 PM ET

Company Participants

Michael Flanagan – Senior Director, IR

Elizabeth Boland – CFO

Stephen Kramer – CEO

Conference Call Participants

Ryan Leonard – Barclays

Andrew Steinerman – JPMorgan

Mario Cortellacci – Jefferies

Gary Bisbee – Bank of America

Blake Johnson – Goldman Sachs

Toni Kaplan – Morgan Stanley

Jeff Meuler – Baird


Greetings, and welcome to the Bright Horizons Family Solutions Fourth Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I’d like to turn the conference over to your host, Mr. Michael Flanagan, Senior Director, Investor Relations. Please go ahead, sir.

Michael Flanagan

Thanks Hector and hello to everyone on the call. With me today are Stephen Kramer, Chief Executive Officer; and Elizabeth Boland, Chief Financial Officer. I’ll turn the call over to Stephen after covering a few administrative matters. Today’s call is being webcast, and a recording will be available under the Investor Relations section of our website at

As a reminder to participants, any forward-looking statements made on this call, including those regarding future business and financial performance, are subject to the Safe Harbor statement included in our earnings release. Forward-looking statements inherently involve risks and uncertainties that may cause actual and operating and financial results to differ materially and are described in detail in our 2018 Form 10-K.

Any forward-looking statements speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statements. We also refer today non-GAAP financial measures, which are detailed and reconciled to their GAAP counterparts in our earnings release, which is available under the IR section of our website.

Stephen will now take us through the review and update on the business.

Stephen Kramer

Thanks Mike. We are thrilled that you have joined in the newly creative role of Senior Director of Investor Relations at Bright Horizons. Welcome. And thanks to all of you who’ve joined us on the call today.

I’ll review our financial and operating results for this past quarter and the full year 2019 and then update you on our growth plans and outlook for 2020 Elizabeth will then follow with a more detailed review of the numbers before we open it up for your questions.

We’re very pleased to continue our solid performance in the fourth quarter of 2019, and it sets us up well to drive continued growth across all of our business segments in 2020 and beyond. For the quarter, revenue grew 9% to $521 million, and adjusted EPS increased 12% to $1.01.

We added seven full service centers this past quarter, including programs for Lehigh University, two international lease models and a strategic acquisition on the West Coast. We also continued to expand our back up and educational advisory client base with recent client launches for Atrium Health, BAE Systems, WBP Group and Wayfair.

As we have shared previously, capitalizing on the synergy between our services remains a strategic priority for the company. We remain pleased with recent cross-selling successes as our sales and account management teams work collaboratively to broaden and deepen our existing client relationships.

We hit a new milestone as more than 300 of our clients or 25% of our client base now invest in multiple services, including Halliburton, Nielsen company and Volkswagen, who launched a second or third service with us this past quarter. With more than 1,150 employer partners, the cross-selling opportunity that exists remains significant. Tracking our solid topline growth, we continue to deliver strong and consistent operating results across the business, as adjusted operating income also expanded 6% in the fourth quarter.

Over the last few years, we have discussed the investments we have been making in technology, digital marketing and people. A few examples that illustrate the progress we are making as a result of these initiatives include improved conversion from registration to back-up use, increased usage of the mobile app and reserve now, also known as instant booking, and higher overall user satisfaction, all of which together translate to higher utilization.

On the people investment front, I’m especially pleased by the response to our Horizons Teacher Degree Program. This benefit provides our teachers the ability to earn a high-quality certificate, associates and bachelor’s degree in early childhood education, completely paid for by Bright Horizons with no out-of-pocket expense to the employee.

We now have more than three quarters of our centers with an enrolled learner. With these participants reporting increased employee engagement scores and significantly enhanced retention rates. These examples, along with a host of other initiatives, are in various phases of rollout. We will continue to invest in these kinds of efforts to continue to drive growth, operating leverage, and enhanced quality of client experience.

Turning to 2020, we continue to focus on our 4 strategic priorities: one, preserve a strong culture and a great workplace at Bright Horizons; two, deliver highest-quality education and care services; three, extend our impact through strategic growth; and finally, connect to cross function, service lines and geographies. Our team’s efforts continue to align with these pillars and allow us to accelerate the positive momentum we have across all aspects of our business.

Let me touch on a few strategic growth areas. First, our organic growth strategy continues to be focused on cultivating new clients and expanding our existing client partnerships through cross-sells and additional use of current services. After another solid year in these categories, I’m really optimistic about the sales and growth momentum across all three business lines in 2020 and beyond. The sales pipeline in each of our services remains strong, with interest across industries and with both new and existing clients.

Next, our lease/consortium centers. We’ve now opened 100 of these centers over the last seven years. We’ve focused on select urban settings, where we see a concentrated population of our targeted demographics, a limited supply of high-quality child care and strong opportunities to meet the needs of our client partners through both full service and back-up care solutions.

We continue to be encouraged by the progress in the newer and ramping cohorts by the positive enrollment and contribution from the group of centers that have reached mature operating levels and by the opportunities we’ve been able to tap into with nearby client partners.

With our growing density of centers in major metro areas, we are an increasingly attractive partner to leading employers located across these markets. And we, therefore, continue to see significant long-term value-creation opportunity in this multifaceted strategy.

Finally, with regard to M&A, we continue to cultivate a solid pipeline of acquisition prospects, and we expect acquisitions to continue to be a key element of our growth plan in the years ahead. As you know, the timing of acquisitions can be lumpy.

We completed seven center acquisitions in 2019. And based on the activity in process, we anticipate a more typical year of acquisitions in 2020, approximately 15 to 20 centers with a mix of smaller networks and single centers.

In addition to typical center acquisitions, our diversified model also provides us with opportunities to acquire non-center businesses from time to time, like My Family Care in the first quarter of 2019. Strategic additions, like this one, enable us to continue to allocate capital with highly attractive returns, while expanding our back up and educational advisory offerings.

Before I wrap-up, I’d like to comment on our strong values and unique culture. As many of you know, Bright Horizons’ central mission is to make a lasting difference in the lives of our clients, families and learners around the globe. It starts with our employees, and we spend a lot of time and resources to attract and retain the best, while fostering an environment where people want to grow and have a sense of belonging. Diversity, inclusion and equality have always been central to the Bright Horizons’ culture and history and are woven into the fabric of all that the company does.

Over the last few months, it’s been an honor to be recognized by Bloomberg, Forbes, Fortune and the Human Rights Campaign as a leader in creating inclusive workplaces, where all employees can feel a sense of respect and dignity and thrive in a meaningful way. Being on these lists is not our motivation, but it is a great affirmation of the work we do to build a strong culture and a great workplace and ultimately, a great business for the long run.

Another element that defines Bright Horizons is our commitment to working parents. We released our sixth annual Modern Family Index last week, which illustrates the priorities and challenges facing a modern working family. This year’s data continued to show the harsh truth that today’s working parents increasingly feel burned out, trying to balance both career and family commitments.

Our data reveals that employees are willing to walk out the door if their work-life balance isn’t achieved, and a significant majority are willing to abandon their professional commitments to manage their burnout.

The survey once again underscores the value and import of employers providing meaningful support to their employees by providing more family-friendly services that address the stresses at work and at home. We are very proud to be the partner of choice for so many leading employers looking to address the needs of the modern workforce and are also excited by the prospect of introducing our services to new employers who are looking to solve these challenges.

So, in summary, we believe that we are well-positioned to continue the positive momentum and operating agility we have demonstrated over years. For 2020, we anticipate continued strong performance with revenue growth in the range of 8% to 10% and operating leverage to drive adjusted earnings per share in the range of $4.11 to $4.18.

With that, Elizabeth can review the numbers in more detail, and I’ll be back with you during Q&A.

Elizabeth Boland

Thank you, Stephen and hello everybody. Thanks for joining us today. Once again, recapping the headlines for the quarter. Overall revenue was up $42 million or 9% in the quarter. The 6.1% growth in full service center revenue or $24 million was driven by rate increases, enrollment gains and from contributions from new centers.

Strong utilization by existing clients, along with the launches of new clients and contributions from My Family Care, helped drive 24% revenue growth in back-up and 13% in Ed Advising services in the quarter. In Q4, gross profit increased $11 million to just over $131 million or 25.2% of revenue, and adjusted operating income increased to $67.4 million or 13% of revenue.

As mentioned in our full service segment, the gains from enrollment growth in our mature and ramping centers and contributions from new and acquired centers as well as tuition increases were partially offset by the headwind of preopening and ramping losses in our new lease model centers.

With a larger cohort opening in 2019, over 17 in total compared to 12 in 2018, we incurred higher total losses this past quarter than in the prior period. The back-up and Ed Advisory segments both generated solid operating margins in the quarter, approximately 31% and 29%, respectively, on their strong — continued strong utilization levels and on continued scale in the operations, which brought efficiency of service delivery.

Interest expense of $11 million in Q4 of 2019 was down slightly over 2018 as lower average revolver borrowings and modestly lower average interest rates contributed. Our current borrowing cost approximates 4% with $500 million of our term loans fixed with an interest rate swap. We’ve repaid all outstanding borrowings under our revolver during 2019, and we ended the quarter at 2.6x net debt-to-EBITDA. The 2019 structural tax rate on adjusted net income came in at 21%, lower than our previous estimate due primarily to a higher tax — higher level of tax benefit on equity activity.

With our improved operating performance and positive working capital movements, we also continue to be very pleased with our strong cash flow generation. For 2019, operating cash flow was $330 million, up $35 million over 2018.

In terms of deploying net cash flow and our capital allocation strategy, our first priorities continue to be investments in the growth of the business. This is illustrated by the $100 million plus that we spent in 2019 on new centers and acquisitions as well as the $50 million that we reinvested in our existing operations and support functions. Share repurchases are our third priority after new business investment and acquisitions. And in 2019, we acquired a total of 210,000 shares under our share repurchase program.

Lastly, at 12/31/19, we operated 1,084 centers with the capacity to serve over 120,000 children. Adding to the guidance headlines that Stephen touched on earlier, we continue to project topline growth for 2020 in the range of 8% to 10%, including revenue gains in our back-up division in the range of 12% to 13% and topline growth in our Ed Advisory services in the range of 15% to 20%. In our full service segment, we’re projecting topline growth in the range of 7% to 8%.

On the operating side for 2020, we expect to continue to add approximately 1% to 2% to the topline from enrollment in our ramping and mature full service centers and to realize average price increases in the range of 3% to 4% across the P&L center network.

We’re looking to add approximately 45 to 55 new centers, including organic openings and acquisitions, and our outlook also anticipates that we will close approximately 25 centers. Topline growth and increased efficiency in our service delivery contribute to improved operating performance and margin improvement for 2020 in the range of 50 to 100 basis points compared to 2019.

On some other key metrics for the full year 2020, we estimate amortization of $32 million to $33 million, depreciation in the range of $80 million to $84 million, and stock compensation of $20 million to $22 million. Based on our outstanding borrowings and estimates of interest rates for the year, we project that interest expense will approximate $40 million to $42 million.

On the tax front, we’re projecting that the structural tax rate will increase from the 21% this past year to approximately 23% to 24% in 2020. This increase primarily reflects the diminishing impact of stock option exercises on our reported tax expense as well as higher effective rates in our European operations.

Lastly, weighted average shares are projected to approximate $59 million for the year. We estimate that we’ll generate approximately $350 million to $375 million of cash flow from operations and have $60 million of maintenance and overhead capital, yielding approximately $300 million of free cash flow to invest in the ongoing growth of the business.

We do expect to invest $50 million to $55 million in new center capital, specifically for centers that we have opening in 2020 and in early 2021. The combination of all these factors lead to our projection of adjusted net income of $242 million to $246 million and adjusted EPS growth in the low double digits to a range of $4.11 to $4.18.

Looking specifically to Q1 of 2020, we’re projecting approximately 7% to 8% topline growth and adjusted net income in the range of $54 million to $56 million. This translates to adjusted EPS in the range of $0.94 to $0.96 a share.

And so with that, Hector, we are ready to go to Q&A.

Question-and-Answer Session


Thank you. At this time, we’ll be conducting a question-and-answer session. [Operator Instructions]

Your first question comes from the line of Manav Patnaik with Barclays. Please proceed with your question.

Ryan Leonard

Hey, this is Ryan on for Manav. Just if I could ask a little bit about the operating margins. It came in a little bit lower, especially after the commentary on the last call. I guess, you did talk a little bit about timing, did more just — did you open more centers towards the end of the year? Or maybe you could just help flush out what exactly the moving pieces were there?

Elizabeth Boland

Yes, I think primarily looking at some of the usual utilization variability that we see in the back-up and Ed Advising business, that’s a smaller factor, but it’s primarily the lease/consortium centers that I mentioned, having just a higher weighting of centers that opened this year and just how they came in timing-wise and the effect of Q4 losses against what we experienced last year. That’s probably the primary driver. We have a little bit higher equity expense in overhead as well. I think you can see that the overhead rates a bit ticked up, and so that’s also a little bit of a headwind on the margin. But I think primarily, it’s just the lease/consortium centers.

Ryan Leonard

Got it. Thanks. And then on the M&A front, it sounds like maybe there are some more opportunities kind of outside of the core center base, even though there are still opportunities within centers themselves. Do you think that as we go forward, as you look out five years from now, there’s much more opportunity on the M&A side to build out kind of some of the Ed Advisory and back-up offering?

Stephen Kramer

We do, Ryan. I think that as we continue to look across the landscape, certainly, we continue to see good opportunity on the center side of the business. But I think that as the capabilities and the interest of our clients grow in the areas of back-up and Ed Advisory, we continue to be very open-minded as it relates to service extensions as well as continuing to deepen around the core competencies and client base that we have. So, I think it’s really going to be that combination across the three that you’ll continue to see us build out, but we’re optimistic about what the acquisition landscape looks like.

Ryan Leonard

Got it. Thank you.

Elizabeth Boland

Thanks Ryan.


Your next question comes from the line of Andrew Steinerman with JPMorgan. Please proceed with your question.

Andrew Steinerman

Hi Elizabeth, I’d like to talk a little bit more about the fourth quarter margin within Ed Advisory. That was the segment where margins were down more than the other two segments. I think you were just making a reference to it a moment ago. But could you just go over why the Ed Advisory margins were down more in the fourth quarter? And how do you feel like margins in Ed Advisory will do in the current year?

Elizabeth Boland

Yes. So, a couple of factors in there. I think the — we have some — the additional revenue that we have from the contracts from GP Strategies that are — we need to integrate and ramp up to our margin profile. So, there is just some mix headwind there coming in. And I think the rest of it is attributable really to just timing of some of the investments that we’re making as the business grows and sort of sales, marketing and technology resources. So, nothing that looks to be changing the profile longer term.

As we’ve talked about, Ed Advising’s topline growth in the 15% to 20% range, and long-term operating margins being able to be sustained in the 25% to 30% range. We feel really good about how we performed for the full year. And so the quarter-to-quarter noise is really just that as how we look at it.

Andrew Steinerman

Right. A little bit — the second part of the question was how do you feel like Ed Advisory margins will do in 2020? Are they going to be helpful to that overall 50 to 100 basis point goal you laid out?

Elizabeth Boland

Yes, I thought that I was alluding to that with how we think that it can continue to perform. So, at a growth rate that’s in the 15% to 20% range and driving somewhere between 25% and 30% operating margins, it will contribute to some operating margin leverage we expect this year as — particularly, as we do complete the integration of those contracts with the GP Strategies Group and continue to just scale the business. So, yes, we do see it as a contributor.

Andrew Steinerman

Perfect. Thank you.

Elizabeth Boland

You’re welcome.

Stephen Kramer

Thanks Andrew.


Your next question comes from the line of Hamzah Mazari with Jefferies. Please proceed with your question.

Mario Cortellacci

Hi, this is Mario Cortellacci filling in for Hamzah. Just wondering if you can comment on your penetration rate or what you think it is for employer-sponsored child care in the U.S. And how that’s trended over time? And then maybe you can also compare that to how it looks in the U.K. as well?

Stephen Kramer

Sure. So, first, what I would observe is that from our earliest days, over 30 years ago, we’ve really been creating the market around employer-sponsored child care, right? So, it’s not like there’s a large installed base of child care centers associated with employers, aside from ones that we have — really, from a missionary standpoint developed. We estimate that there’s somewhere between 1,000 and 2,000 centers that exist that we don’t operate that are associated with employers.

But again, most of the growth in the market is being driven by new employers deciding that they are going to incrementally invest in on-site and near-site child care centers. We really think about the marketplace as one where an employer that has a site with greater than, call it, 1,500 employees is one that could certainly be capable of valuing and ultimately benefiting from on-site or near-site child care.

When we think about the U.S. versus the U.K., the U.S. primarily is a market that we are driving as it relates to employer-sponsored care. In the U.K., the government supports it citizens, especially those individuals that have three to five-year-old children with subsidy. And so in that way, some employers believe that the government is supporting child care, and therefore, they don’t need to play a role in that.

On the other hand, we do have direct employer contracts in that market as well. We just don’t see the long-term potential quite as large in that market. But again, since we are focused on markets with some form of third-party support that can be in the form, like here in the U.S. that is employer-driven or in the case of the U.K., where it’s both government and employer.

Mario Cortellacci

Great. And then just one more and I’ll turn it over. Just a question on your back-up business. Could you just give us a sense of what the competitive backdrop looks like there? And maybe just give us an idea of what your advantage is versus other centers, given the size of your network?

Stephen Kramer

Sure. Happy to. So, look, we are by far the market leader within back-up care here in the United States, and that is also true in the U.K. both countries we operate a significant back-up advantage over the next largest provider.

The competitive landscape here in the U.S., there are a few small competitors. But again, if you think about our business as being one that is north of $300 million and the next largest being sort of between $10 million and $20 million, we have a significant market share advantage over our next largest.

What I would say is that as we look out over time, we see ourselves continuing to outpace that market with a significant advantage in the fact that we place a lot of the care on behalf of our employer clients into Bright Horizons owned and controlled care.

And so therefore that care is only available through a partnership with Bright Horizons. And so given the quality of the care in our own centers and through our network, it really allows us to continue to sustain a pretty significant advantage.

Mario Cortellacci

Great. Thank you.

Elizabeth Boland



Your next question comes from the line of Gary Bisbee with Bank of America. Please proceed with your question.

Gary Bisbee

Hey, hi everyone. Good afternoon.

Elizabeth Boland


Gary Bisbee

First question, I guess, you’ve occasionally in the past given us the revenue for the lease/consortium base of schools or the run rate revenue or some metric. Is that a number you can give us at year-end? How big is that?

Elizabeth Boland

Let me just pull that up, Gary. I don’t have the rate here, but let me just pull it up.

Gary Bisbee

And I guess, a bigger picture on just the lease/consortium strategy, in general. Now that you’ve got several classes that are in that mature camp and I think more balanced across it mature to developing to sort of new. Can you just give us an update on how the strategy is doing in total?

And really, what I’m thinking about is that sort of notional model, if you will, around revenue and gross profit growth that you sometimes have in your investor deck. I mean, is it broadly playing out to that model? What’s better, what’s worse? Any sort of lessons? And just trying to think about the long-term economic impact of continuing to prioritize growing this segment of your business? thank you.

Elizabeth Boland

Yes. Gary, let me just maybe lead off and Stephen can speak to maybe the broader strategy and how we’re thinking about it beyond the financial performance and that element. But I think that we would look at the earliest years of this strategy, if you will, in the urban centric. Starting in 2013, we now, as you say, have a number of classes that are mature. And I — if you’ve got a bell curve of 10 to 12 centers and how they’re performing, we are pleased that they are hitting those returns that we show in the investor deck.

Some of them have a higher revenue profile even in that $2.5 million average view because of where they are located and the tuitions that they can command. But in terms of a gross margin in the range of 20% to 25%, those earliest classes as a group are, in fact, in that range, not to say every center is in that range because we do have some that are on a much slower slope of ramping up and will take longer to get there.

So, I think in the round, we’re feeling like it’s working well, and we are establishing both a footprint of well-recognized, high-quality centers, and we’re focused in the right kinds of geographies to continue to deploy the strategy, both with the operations team that is dedicated to this. So, we have a dedicated division that’s focused on the new centers that are opening. It’s not each operator getting up to speed with what’s different about this kind of a center.

And as a result of that, we’ve got — we think — the right amount of attention on the operational side of it. But it’s true that the — we’ll have ways of these like we remarked about it in the prepared comments, but 17 centers in some of these locations, they do generate a substantial preopening loss. I’d say that might be one difference that we see.

Some centers have a higher preopening and ramp-in loss than a typical prototype because of the rents that they come in. So, that may be a bigger drag, a slightly bigger drag than we would have envisioned at the early stages of this strategy. And hence, the comment today that there’s a couple of million of an effect from that in this fourth quarter. But Stephen, the strategy?

Stephen Kramer

Yes. So, I think we feel really good about the strategy, and it’s very much in line with what the original thesis was, which is we’re looking to locate in areas where we can support working families where they work and live and as there has been more of a shift towards individuals and young families staying in the urban areas.

And likewise, a migration of employers either staying or moving back into urban areas. We feel like the urban strategy is really playing out well, both here in the United States as well as in the U.K. and The Netherlands.

What I would say is that with our increasing density, there have been some really positive network effects, both from an operational and a delivery standpoint. But also, as I alluded to in the prepared remarks, the idea that our client partners are finding the additional centers that are nearby their workplaces and nearby their employees where they live, has been a real positive.

So, again, I think that overall, the strategy is unfolding the way we would have hoped and we believe we’re really adding value both to the working families and the employers. And certainly, the financial characteristics have been very positive for us.

Elizabeth Boland

Yes. And so, Gary, just to answer the question about what’s the sort of revenue composition of these centers. It’s in the range of $175 million or so for these 100 centers, and they are positive in total. But if we look at full-service margins in the range of overall 20% to 25%, they’re closer to the 10% range as overall cohort.

Gary Bisbee

Great. That’s a helpful update. I appreciate that. And I guess, just one last on the full service center business. Is — this has been the majority of the growth in units outside of a couple of years ago, and there are a couple of more sizable acquisitions. Is that is that sort of by design as you like this model and you need the capacity from it to deliver on the back-up business? Or would you like to grow the non-lease/consortium faster?

And if the latter, what’s — that just hasn’t grown a lot in the last few years, what’s like the gating factor to delivering better growth outside of the lease/consortium? If, in fact, that’s a high priority at the moment. Thank you.

Stephen Kramer

Yes, I mean, we still are very focused on creating employer-sponsored centers. And I think actually we’ve had some really good consistency of our ability to convince employers to invest in on-site and near-site child care centers each year.

So, I think in the outlook, we continue to see that as a really positive driver of growth. We really view the lease/consortium as an additional leg on the stool and believe that both the positive economics based on enrollment in the centers, alongside the fact that they are a really important element of our capacity for back-up care, they really do add quite a bit in terms of their strategic value.

And then, as you alluded, the piece that has been less consistent is the acquisition side. And so we’re very clear headed that we are always out there. We are an acquirer of choice. And so if we look at the history, a lot of the lumpiness in terms of the number of centers is tied directly to the number of acquisition sites that we have in a given year. With this past year being fewer than what I would say is a typical year.

On the other hand, we had some really strategic non-center deals in the form of deal in back-up care in the U.K. and then GP Strategies, tuition management business here in the U.S. But as we look out, we continue to see good opportunities to align with high-quality child care centers that are good acquisition targets for us.

Elizabeth Boland

Yes. And just one other maybe follow-on comment on the sort of non-lease/consortium centers. And if we look at the three factors of new center adds in year acquisitions, client centers and lease/consortium, we’ve — there’s a little bit of noise year-to-year, but we are adding around 30 lease/consortium and client centers in any given year. So, it is about half and half coming from those two sources and so I think the — just to put more of a quantitative point on that.

Gary Bisbee

Okay. All right. Yes, that’s good. And then I’ll sneak one last one, and if I can, which is any update on labor cost inflation, including obviously the tuition reimbursement program that you commented on, is that picked up as we’ve seen with broader economy overall? And are you still comfortably able to pass on price in excess of that as you’ve done historically in the past? Thanks a lot.

Elizabeth Boland


Stephen Kramer

Yes. So, I think that what I would say is that comfortable is a relative term, right? So families never are appreciative of tuition increases. On the other hand, we have a long history of being able to pass along tuition increases and make sure that there is a margin between those and the wage increases that we provide to our staff, understanding that there are other elements of expense like benefits, et cetera, that are moving at a rate that is even greater than wage inflation. What I would say is that in the current climate, it’s much like what we’ve seen over many years, which is, it has been historically challenging to find and retain top educators and teachers for our programs.

On the other hand, we focus a lot of our time and energy on being an employer of choice. And so we feel that we really do get a disproportionate share of those individuals. Directly related to your question about the tuition program that we’re offering our employees. Again, we see really positive ROI on that investment. So, yes, that’s an incremental expense.

On the other hand, we believe that it is certainly adding to things like retention that allow us to reduce some other expenses that create friction in our model. And therefore, we think net-net, that investment is overall positive.

Gary Bisbee

Thanks. Appreciate all the color.

Stephen Kramer

Yes, thank you.


Your next question comes from the line of George Tong with Goldman Sachs. Please proceed with your question.

Blake Johnson

Hi, good afternoon. This is Blake on for George. You mentioned that approximately 25% of your client base currently use multiple services. Can you discuss what’s driving the pace of cross-selling? Have you changed anything structurally on the sales side that might be driving an uptick in sales productivity?

Stephen Kramer

Yes. So, we have — thank you, Blake. So, certainly, our cross-selling efforts have been a real focus over the last few years. And what I would say is that there are a few things that we really have started to optimize. The first is that, historically, before a few years ago, we had individuals who were on our sales team that were focused on bringing new logos to the family. And then we had an account management team who is really focused on managing client relationships and upselling and cross-selling the clients.

Today, we have restructured that such that our sales team is going after both new logos, but also extending through opportunities in the existing client base. And so there’s a real positive partnership that exists now between our sales team and our account management team. I’d say the second piece of that is we absolutely have changed the structure of our incentive systems to align with the behavior that we’re looking to drive as I just shared.

And then the third piece is that I think we’re getting much more sophisticated about stratifying our account base to make sure that we understand the likely prospects within our account base and beginning to figure out who is most likely to buy what additional services and then trying to present those investment opportunities for our clients. So, again, I think overall, we’re seeing good success on that front and bringing our cross-selling efforts to a really positive place.

Blake Johnson

Great. That’s helpful. One more. It looks like enrollment growth was pretty healthy this quarter. But are you seeing any potential headwinds that could slow the pace of new enrollments in 2020?

Elizabeth Boland

I think that the trends in enrollment are — they are heartening. In general, we’ve been pleased with both the stability of being able to eke out a little bit of enrollment progress in our mature base and then ramping our newer centers. It is a cycle that occurs every three, four years as children age through the system. And so it’s really a matter of us making sure that we’re reaching as many parents at our client partners as possible and are being very mindful of having children age up through the center and backfilling spaces as quickly as we can.

So, that’s — it’s really just the nuts and bolts of operations, nothing fundamental that we see affecting that in our — certainly, if we look back in time and in past more economically challenged times, we’re in obviously quite a strong economy with some questions about what clouds are on the horizon. But we have been successful even in times when we’ve had some enrollment contraction because of a very severe recession. We’ve got some ability to cost manage through that.

So, in general, we feel like we can adapt to most situations pretty well. We’ve got good visibility on — forward visibility on when parents are in the centers when children are graduating out, et cetera. And it’s really a matter of staying on top of the front of the — the top of the funnel, if you will, to getting prospects and potential children in for backfilling as they age through.

Blake Johnson

Great. That’s helpful. Thank you.


[Operator Instructions]

Your next question comes from the line of Toni Kaplan with Morgan Stanley. Please proceed with your question.

Toni Kaplan

Thank you. You touched earlier on the call on the investments that you’re making. But are there specific ones that you’re especially excited about this year? Are you still really focused on the technology aspect? Or are there other areas like maybe labor that you’re looking at as well. Just any color on some of the specific investments would be helpful.

Stephen Kramer

Sure. Happy to. So, look, I had mentioned earlier in the call that the 3 areas of investments, certainly, are in technology, digital marketing and people. And what I would say is in the reverse order. On the people side, we certainly continue to see really good uptick and ultimately results from what I would consider to be a really important investment in a benefit around our Teacher Degree Program.

So, I think as that continues to play out and we continue to see the importance of that, both from a retention and an employee engagement perspective, but ultimately, what we’re trying to accomplish there as well is ensuring that we continue to deliver the highest-quality services through the highest-qualified workforce.

On the technology and digital marketing side, we continue to be on a journey, and I’ve been really pleased with the journey that we’ve been on. On the technology front, we continue to invest so we continue to be proud of our market-leading mobile apps and other technology to make the experience for the end user and for our clients more seamless. We’re also doing a lot to bring together and harness the power of all of our services.

So, for example, allowing our client liaisons a single place where they can see reports across all of our services is an example of how we’re trying to bring together and make even more sticky all of our services under the single umbrella.

On the personalized marketing side, I think, again, 2019, we began to see some really positive outcomes associated with that. And I’ll point your attention, for example, to the growth rate that we enjoyed on the back-up side of our business.

We continue to learn more and more about our end users, and we continue to use what we learn about their background and behaviors to ensure that we are doing more personalized outreach to them to stimulate use.

And so ultimately, we’ve — we’re finding that both from a registration perspective as well as from a reservation and reuse perspective, those personalized digital outreach efforts are really starting to pay fruit.

Toni Kaplan

That’s great. And just on the international side, can you give us an update on which geographies that you’re in, that you feel like you have the most opportunity in? And are there any other geographies that would really be conducive to the model?

Stephen Kramer

Absolutely. So, just to take a step back, we really look for markets where there is some form of third party support, whether that be in the form of employers, like here in the U.S. or government as is the case, for example, in The Netherlands or in a place like the U.K. where there’s a combination thereof. And so we continue to believe, there is tremendous opportunity here in the U.S., the U.K. and The Netherlands, which are the three places we have the most significant footprint.

In addition to that, as we look more broadly, we did make an investment in a company in Germany. And so it’s still early days. But we believe that we are learning a tremendous amount about that market. There is clearly — as is exhibited through the organization that we’re involved in, there is employer interest and support. And at the same time, there is government support in that market as well.

I would say, as we look further out and into other markets, we’re always continuing to look for potential acquisition opportunities and market-entry opportunities in markets that have that third-party support. So, you think about places like Singapore, you think about places like France or Australia, these are markets where there is either government or employer support or both.

And so we continue to have our ear to the ground. We continue to believe that globally, we are an acquirer of choice and are looking always for like-minded, high-quality providers that know the local market that we can then partner with and grow within those markets.

Toni Kaplan

Thank you.

Elizabeth Boland

Thanks Toni.


Your next question comes from the line of Jeff Meuler with Baird. Please proceed with your question.

Jeff Meuler

Yes, thank you and good afternoon. First, on lease/consortium of the centers — the total center count you’re planning on opening in 2020, how many roughly lease/consortium centers are you planning to open? Just trying to figure out if the year looks more like 2019 in terms of investment in that regard or a more typical year?

And then related to that, when you’re pitching or signing an employer sponsor up lease/consortium, since you’re talking about the importance of the density, what exactly are they signing up for? Because I think they’re not contributing capital. So, just what are they signing up for?

Elizabeth Boland

Yes. So, I’ll give you the numbers on the first, Jeff, and then Stephen can comment on the client side of it. So, similar to this year, what we’ve got in development is in the same range of 15 to 17, maybe. So, we opened 17 this year. So, roughly, would expect to see the same kind of investment.

Stephen Kramer

Yes. And in terms of the employee involvement within these centers. So there is the odd case where they are actually investing capital. But by and large, our employer partners are investing in 1 of 3 ways or multiple of the three ways.

First, they are providing priority access for their employees because, as you know, many of our centers, especially in the urban area, are running waitlists. And therefore, what they’re looking for is to provide greater access to their employee populations through investing in priority access.

They also have the ability to provide a tuition subsidy, so they can invest behind essentially lowering the cost of that access and of that space for their employee. And then, of course, these centers are an important element of our back-up care strategy. And so we also see employer support in the form of back-up care that’s being placed into those centers.

Jeff Meuler

Okay. And then just more generally on the back-up care business. If I look over a multiyear period, 12% growth has been really good, and you’re guiding to 12% to 13% for 2020. But just in the context of — in 2019, I think you had organic growth more in like the mid-teens, 16% or something like that.

So, I guess a couple of questions related to that. What drove the outsized growth in 2019? And/or why doesn’t it repeat in 2020 is the bigger question. But was there just like this outsized, really strong selling season at the end of in 2018? Or are you starting to get some pushback as you’ve driven up utilization, and therefore, expense for your employer partners? Just recognized on a multiyear basis, this is really good, just trying to compare it to 2019. Thanks.

Stephen Kramer

Yes. So, what I would say is we had a very productive year in 2019, and that was, as you say, a combination of new sales of back-up care to employer clients and also driving use through a lot of the efforts that we’ve been talking about through our personalized digital outreach strategies. And in many ways, we expect that we will continue to see very positive momentum. Of course, the comps that we’re now comping against, right, are more significant than what we have had in the past.

And so I think really that becomes some of the dampening effect that you’re describing. But at the end of the day, Jeff, we really do see continued support of employers as it relates to making new investments into back-up care, either in the form of taking it on as a new benefit and/or really encouraging their employees to utilize the benefit.

Jeff Meuler

Got it. Thank you everyone.

Stephen Kramer

Thank you.

Elizabeth Boland

Thank you.


Your next question is a follow-up from Manav Patnaik with Barclays. Please proceed with your question.

Ryan Leonard

Yes. This is Ryan on for Manav. Just curious, when you have to deal with something like the coronavirus, how parents kind of react? I’m sure it’s not much different than the procedures you have around flu season, but just curious to hear if that impacts the way you think about operating the centers, I guess, particularly in Europe, but maybe more broadly?

Stephen Kramer

Yes. So, I think that one of the reasons why families select Bright Horizons is because of our health and safety standards and the policies and procedures that we have in place. And it sort of underpins the overall quality experience and delivery that they expect from us. And again, I think part of the ultimate choice of what they make.

So, I would say that coronavirus similar to the flu and other illnesses that come in and out of a potential center. I think we get well ahead of it each season. And so we have tremendous policies, procedures around making sure that we keep everyone safe and keep everyone well within our centers.

Again, with the coronavirus, in particular, we were very much in front of communication with families as well as our teachers. And so I think our — both the families as well as our staff felt very confident in our ability to keep people well within our centers, and this was just an example of that.

Stephen Kramer

Excellent. All right. Well, thank you all very much for joining us this evening. We appreciate it, and we look forward to seeing you all out on the road. Take care.

Elizabeth Boland

Take care everyone. Thank you.


This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.

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