Greetings and welcome to the Bright Horizons Family Solutions First Quarter 2025 Earnings Release Conference Call. It is now my pleasure to introduce Michael Flanagan, Vice President of Investor Relations for Bright Horizons Family Solutions. Thank you. You may begin.

Thank you, Sherry. Welcome to Bright Horizons first quarter earnings call. Before we begin, please note that today's call is being webcast and a 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 Safe Harbor statements 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 our earnings release, our 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 the GAAP counterparts in our earnings release, which is available under the IR 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 will provide an update on the business. Elizabeth will then follow with a more detailed review of the numbers before we open it up to your questions. So with that, let me turn the call over to Stephen.

Thanks, Mike, and good evening to everyone on the call. We are pleased to report a strong start to 2025, with revenue growth in line and earnings growth well ahead of our expectations. These results reflect the successful execution of our strategy across all segments. From growing enrollment and expanding our backup business to efficient service delivery, I am encouraged by our continued progress and remain confident in our ability to effectively serve the working families and employer clients that count on us each and every day. So to get into some of the specifics, revenue in the quarter increased 7% to $666 million, and adjusted EPS grew 51% to $0.77 per share. At a segment level, our full-service childcare business grew 6% to $511 million, and operating margins expanded 210 basis points to 6.5%. We added six centers in the first quarter, four of which were client-sponsored, including centers for Royal Caribbean and Arthrex. Overall tuition increases averaged 4% to 5%, and enrollment in centers open more than one year increased at a low single-digit rate, with average occupancy percentage in the mid-60s, a sequential step up from the fourth quarter. In terms of enrollment trends in the U.S., we have continued to see encouraging enrollment dynamics in certain underperforming centers located in business districts, where return-to-office policies have been gaining traction. At the same time, we have also seen a somewhat slower velocity in the pace of commitments across some other U.S. markets as families consider longer-term spending decisions, including for childcare, in the context of ongoing macroeconomic uncertainty. In response, we are sharpening our focus, working to create urgency, improve follow-up, and streamline the path from inquiry to enrollment, all while reinforcing the value and quality of our services. Even considering this current dynamic, we remain confident in the opportunity to drive continued margin improvement through enrollment growth and maintaining price-to-cost differential and operating discipline. Outside the U.S., the U.K. continues to demonstrate strong progress on enrollment and margin recovery. In addition to steady enrollment growth, we have made meaningful improvements in recruiting and staff retention. As a result, we continue to see a clear path to earnings break-even in the U.K. in 2025. Let me now turn to backup care. Revenue increased 12% to $129 million, which was in line with our expectations. Traditional use remains strong across all network types in the first quarter. In addition, early reservations for school-age programs during the peak summer months are quite encouraging. Likewise, employers continue to prioritize family support benefits. We started the year strong with 95% client retention and many new client launches, including the University of Michigan, Sherwin-Williams, and LabCorp, among others. With our growing client base and increasing engagement among eligible employees, we remain on track to achieve our 2025 objectives. Our education advisory business grew 8% this past quarter to $26 million, ahead of our expectations. We saw encouraging growth in participant engagement within our EdAssist service, and College Coach continued to deliver solid operating performance. We also added new clients to the portfolio, including Tower Health and Tiffany's. As we have shared over the last several quarters, this is a segment where we are investing with a long-term view, and we remain confident that these investments will drive meaningful value over time. Before I wrap up, I want to share some highlights from our recent annual Senior Leadership Forum, an event that brings together our top 100 leaders from across the globe to collaborate on longer-term growth strategies. A key area of focus at this year's forum continued to be our One Bright Horizon strategy, focused on extending the value and impact of our offerings at the client and user level. For our existing clients, we continue to develop initiatives to gain expanded adoption of our broad suite of services. In the first quarter, we drove several examples. Current backup client, Philips 66, expanded their services to include EdAssist. Similarly, current College Coach client, Vertex, and current full-service client, Aflac, both added backup care to their portfolio. These results underscore the value of our increasingly integrated offering and the strength of our strategy to drive deeper, more enduring partnerships with the employers, families, and learners we serve. So to close, I am proud of the team's execution in Q1 and their continued dedication to delivering outstanding education and care. We remain confident in our long-term strategy and are encouraged by the results we are delivering. We are raising our revenue growth guidance to a range of 6.5% to 8.5%, largely reflecting the recent changes in foreign exchange rates, while reaffirming our adjusted EPS in the range of $3.95 to $4.15. With that, I'll turn the call over to Elizabeth, who will dive into the quarterly numbers and share more details around our outlook.

Thank you, Stephen, and thanks to everyone for joining the call tonight. To recap the first quarter, overall revenue increased 7% to $666 million. Adjusted operating income of $62 million, or 9.4% of revenue, increased 56% over Q1 of 2024, while adjusted EBITDA of $92 million, or 13.9% of revenue, increased 23% over the prior year. We ended the quarter with 1,023 centers, with 6 additions and 2 closures in the first quarter. To break this down a bit further, our full-service revenue of $511 million was up 6% in Q1, on pricing increases and low single-digit enrollment growth, offset by just under 100 basis points of FX headwinds. Enrollment in our centers open for more than one year increased low single digits across the portfolio. As Stephen mentioned, occupancy levels averaged in the mid-60s for Q1, stepping up from the prior year, as well as sequentially from last quarter, given the typical enrollment seasonality. In the center cohorts we have discussed on prior calls, we continue to see improvement across the center cohorts over the prior year period. Our top performing cohort, defined as above 70% occupancy, improved from 44% of these centers in Q1 of 2024, to 47% of centers in Q1 of 2025. As a reminder, this cohort continues to sustain strong average occupancy levels, in fact above 80%, which inherently limits the additional enrollment expansion opportunity. Conversely, in our middle and bottom groups, defined as 40% to 70% enrolled and below 40% enrolled, respectively, the enrollment has increased at a mid-single-digit rate in the first quarter. In Q1, centers in the middle cohort now represent 40% of the total of that portfolio, and the bottom cohort represents 13% of these centers. Adjusted operating income of $33 million in the full-service segment increased $12 million over the prior year and represents 6.5% of revenue in the quarter. Higher enrollment and improved operating leverage, notably in our U.K. and U.S. operations, helped drive the growth in earnings. Turning to backup care, revenue grew 12% in the first quarter to $129 million, with adjusted operating income at 21% of revenue, or $26 million. Lastly, educational advisory revenue increased 8% to $26 million and delivered an operating margin of 10%. Operating margins were consistent with the prior year, reflecting the ongoing investments that we are making in the product suite and customer experience. Turning to a couple of other items on the P&L, interest expense decreased $3 million to $10 million in Q1, largely due to lower overall borrowings and the incremental interest income that we earn on invested cash. The structural effective tax rate on adjusted net income was 27.5%, consistent with Q1 of '24. Turning to the balance sheet and cash flow, we generated $86 million in cash from operations in the first quarter. We made fixed asset investments of $15 million and repurchased $20 million of stock in the quarter. We ended Q1 with $112 million of cash and reduced our leverage ratio to 1.8x net debt to adjusted EBITDA. Now I'll turn to our 2025 outlook. In terms of the top line, we are modestly raising the midpoint of our reported revenue outlook by $15 million to a range of $2.865 billion to $2.915 billion. This updated revenue range reflects a roughly $30 million favorable change in FX as compared to our original guidance, partially offset by roughly $15 million, which largely reflects our more conservative assumption around the pace of enrollments over the remainder of the year. This results in a projected reported and constant currency revenue growth rate of 6.5% to 8%. Breaking that down a bit further at the segment level, in full service, we now expect revenue and reported and constant currency revenue for the year to grow in the range of 5% to 7%. In backup care, we now expect reported revenue to increase 12% to 14%, up 100 basis points from our prior outlook. And in advisory, we continue to expect to grow in the low to mid-single digits. In terms of earnings, as Stephen previewed, we continue to expect 2025 adjusted EPS to be in the range of $3.95 to $4.15 a share. As we look specifically to Q2, our outlook is for a top line of $720 million to $730 million for growth in the range of 7.5% to 9% on a reported basis. This reflects roughly 100 basis points of tailwind from FX over the prior year. We expect full service to grow reported revenue 6% to 7% or 5% to 6% in constant currency. We also expect backup to grow 13% to 15% and advisory to grow in the mid-single digits. In terms of earnings per share, we expect Q2 adjusted EPS to be in the range of $0.99 to $1.04. And so with that, Sherry, we are ready to go to Q&A.

Our first question is from Andrew Steinerman with JPMorgan.

Hi. Focusing on the mid-60s utilization for full service in the first quarter, could you just give us a sense of how you think that will go through the year? I know there's seasonality, particularly in the summer. And then also talk to us about your journey to eventually get back to pre-COVID levels.

Sure. Thanks, Andrew. So the reported enrollment utilization in the first quarter, we would expect it to step up a bit in the second quarter as we continue to sort of crest the enrollment seasonality in Q2. So it would improve a bit in Q2 and then taper in the second half of the year, but averaging roughly in the same reported where we are in Q1 for the full year. So that mid-60s would be the trend up in Q2 and then tapering back into Q3 and relatively flat Q4. As it relates to continued progress to the sort of pre-COVID utilization levels, at this pace, we're talking 2% to 3% or so of enrollment growth for the year. And so at that pace, I think we will have better insight next year as we continue to play out this year. But at that pace, we'd be taking another couple of years to fully get back to a pre-COVID overall 70% threshold. And I think that the components of that are both growing enrollment in the cohorts that we have and continuing to pair the underperformers that just are not ultimately recovering.

Our next question is from George Tong with Goldman Sachs.

You talked about seeing a little bit of a slower velocity in commitments in some of your markets given macro uncertainty. Can you talk a little bit more about that and whether some of those changes could be structural in nature or if purely cyclical?

Thanks for the question, George. So I think first we would start that by saying, we think that those are more in line with cyclical. We don't see a structural change. At the end of the day, when we think about childcare and families, working families think about childcare, they really don't think about it in the sense of being a sort of discretionary item in the way that you might see vacations or other kinds of purchases. And so with that in mind, our existing families continue to persist really well within our centers, and so we're seeing good retention. And it's really on the new family side that in certain pockets here in the U.S., we are seeing some families choose to push out their start dates, perhaps some taking a little bit longer to commit. But overall, as we suggested in the guidance, it's really around the edges. We're still seeing enrollment growth. It's really just not at the velocity that we had originally thought.

Got it. That's helpful. And then as a follow-up, in your bottom cohort of enrollment centers, so those with less than 40% occupancy, are you taking any initiatives that are different from before in addressing those lower occupancy rates, or is it the similar playbook to earlier quarters?

Yes, I mean, we are still approaching it in the same way, George. So we continue to be very disciplined about looking at centers, trying to think about their lease end dates, thinking about other actions that we can take. But ultimately, we continue to try to improve. As we shared in the prepared remarks this quarter and last quarter, that discipline is starting to pay off, especially in places that were return-to-office dependent. And so, again, those would have been potentially actions that we could have taken last year, decided to take a more patient approach. And as those centers have started to come back, I think, again, it sort of reaffirms that we're making really good decisions in terms of making that bottom cohort try to work and ones that can't, ultimately, pairing those over time.

Our next question is from Manav Patnaik with Barclays.

Hi, this is Princy Thomas, on for Manav. Thanks for taking my question. Saw that the full center margins were roughly 7% in 1Q. Wanted to just ask you what the sustainability around that looks like and what are your segment margin expectations for 2Q?

Yes, thanks, Princy. So, we were about 6.5% in the quarter and up just over 200 basis points from the first quarter of last year. So, pleased with that progress. I think that the view as we look out for the rest of the year is that with the contribution, particularly from our U.K. business, to the first quarter, where the improvement there was measurable, we're also starting to comp against more challenging. They're not challenging. The U.K. had good improvement last year in the full, over the course of the year. And so, we're just lapping some of that effect. So, we would expect that, overall, for the year, that we'd be up maybe 125 basis points for 2025 in total. So, that 210 or so basis points in Q1 would taper some as we lapped some of those effects from last year and also just with the slightly pulled back expectation around enrollment, 50 basis points or so.

Got it. And could you just help us quantify how much of a drag the U.K. was in Q1? I know that you mentioned that you see a clear break-even point for this year. And also, what is your net new center openings outlook?

Sure. So, a couple of questions in there. So, the U.K., as we are trying to convey a couple of positive things and also temper that with the fact that the U.K. is not at the same level of performance yet as the U.S. So, there is a headwind there in the neighborhood of 100 basis points or so on the full-service margins coming from the UK business, even though it's contributing. We do see a pathway to breaking even this year, and that will be certainly a good threshold, but we will continue to make progress in 2026 and beyond that. And so, overall, the U.K. is contributing to the improvement but is still a headwind to the overall reported margin performance. As it relates to openings, we are still looking at net plus-minus neutral openings. So, call it 25 center openings and plus-minus 25 closures for the year. And so, we would expect the unit growth to be neutral, even though when a new center opens, the timing of that and the timing of the closings can have not an exact revenue offset for those two components.

Our next question is from Stephanie Moore with Jefferies.

First, it's just a follow-up question, and maybe I just misheard. So, with the original assumption, kind of low single digits, so call it 2% to 3% enrollment growth for the year, and then what is the new underlying assumption?

The original assumption was about two-and-a-half to three-and-a-half, and now we've drawn that back to two to three percent, so about 50 basis points of trim on that.

Okay, great. I appreciate it. As you mentioned, the current macroeconomic uncertainty seems to be leading to a decrease in new enrollments. You indicated that you would be reevaluating your strategies to tackle this issue. Could you remind us of the approach you plan to take in a slightly weaker economic environment to maintain healthy enrollment growth? Thank you.

Sure. So, I mean, I think that in a healthy macro environment as well as a less healthy, I think our playbook is quite similar, actually. We really are looking, first and foremost, to make sure that we're able to differentiate the quality of a Bright Horizons experience for a child and family compared to other options in the community or at the work site. So, first and foremost, making sure that we're able to articulate the value, and then making sure that that experience from initial inquiry all the way down through the start date is a flawless one. And so, making sure that each step of the way that family feels well-accommodated is having their questions answered and making sure that we're really focusing on ensuring they have a great experience while they're in the pipeline for enrollment, all the way through ensuring that we continue to retain families because of that great experience that they're having. So, again, in all kinds of environments, our playbook is the same, and we feel like we continue to refine that over time. But ultimately, that's the focus.

And is there anything in terms of a discounting or promotional schedule that might be pulled out in this environment to also kind of attract new customers? I don't know if that's any kind of, what that could be, but anything from a discounting or promotional standpoint that we could see as well in this environment? Thank you.

Absolutely. So, we tend not to do broad-scale promotions at retail, if you will. That said, as we shared in the prepared remarks, we are spending a lot of time and effort thinking about how we can cross-pollinate across our services and really taking this One Bright Horizons approach down to the user level. And so, you might see, for example, if you were an employee of one of our clients, you might see special incentives to help you to move from, let's say, being a backup customer to becoming a full-service customer. So, that I think is something that we are doing and testing in order to really try to effectuate that strategy at the consumer level and bring value to our clients, and at the same time, make sure that we are getting the maximum value from those whom we serve.

Our next question is from Toni Kaplan with Morgan Stanley.

Stephen, I was wondering if you could help us out with maybe what you're seeing as the rationale for the slower enrollment trends within the industry. And it's not just at BFAM, it seems to be more industry-wide. Do you think that there's a pricing element to it? Like, you've gone through a couple of years of above-trend pricing and now, like, some consumers might be being priced out. Just wanted to understand if you think that's reasonable or if you think there are other factors that really don't have anything to do with pricing.

Sure. So, I mean, look, pricing is something that we always are focused on and want to make sure that families are seeing value for money. And I'm sure that everyone within the sector is looking to accomplish that, regardless of sort of the quality level at which they sit. What I would say is that, you know, again, there is a little bit of an after-effect, right, from COVID, where there are certain families, especially with older children, who had never invested in childcare because they ultimately were at home, they were staying at home with their children, and ultimately didn't have that experience, nor did they have that cost as part of their, sort of family budget. I think in addition to that, as we think about where we are and looking forward, you know, there are families that may feel uncertainty in their own sort of job situation, in which case, if they haven't started in formal care, they may want to feel more secure before they ultimately step up and start making that investment. But look, I think the best indicator is what we're seeing on the existing family side, which is really good retention. So, it's not like people who are involved in our care are making different decisions than they had made in the past. Those folks who understand the value of what we're delivering continue to have both parents employed, continue to persist with that care. And so, it's really trying to adjudicate what's happening for new families, as opposed to for those families that are, have already made that selection, have already gotten involved with the Bright Horizons experience.

Makes sense. And then, Elizabeth, really good margins on the backup care side this quarter as well. I know the question was asked already on full service sustainability, but wanted to ask your thoughts on sort of the real drivers for why the 1Q margins were so good and backup care, they tend to usually be the low point in 1Q and any timing elements or things like that, because I did notice, you didn't raise the guide for the year, maybe that's uncertainty, but just wanted to get thoughts there. Thanks.

Yes, I think our, thanks for the question. The performance in the quarter is really down to the mix of the type of use we're providing and what we can deliver in the center care versus other components. And so, we have had good cost management, good pricing on the provider network that we have. And so, we've been able to sustain a little bit better margin performance in Q1. Nothing unusual in the quarter. For the full year, I think the view there is as we look at the mix of where use will come as we get into the high season of use, we do have a variety of partners in our network. And so, we're looking at a mix that's very similar to how we have been able to perform in the past. So, that's why we've sustained the margins in a similar range to where we've been able to keep them the last couple of years. It's a very much a use-driven business, and we want to have a choice, and we want to have the matching of the services across both the U.S. and the U.K. where we're providing care. And so, it's quite a complex algorithm.

Our next question is from Jeff Muller with Baird.

As Tony mentioned, you're not the only one in the industry seeing a slower intake right now, but from the experience and your data, does the weakness appear noticeably more pronounced at employer sponsors that are maybe being more directly impacted by tariffs and trade war risk or federal government agency layoffs, or does it just look fairly broad across industries and geographies?

Yes, Jeff, we are not seeing that at our client-supported centers in particular. So, I would say, first and foremost, no, we're not seeing a degradation from the perspective of our client centers. So, I would say that when we think about where that is, ultimately, in the lower and middle cohort, right, we continue to grow at a mid-single-digit rate, and it's actually the highest enrolled, the above 70%, where, again, one of the facets of that is those are, in our world structurally full, right? Once you get past 80% occupied, we think of those as relatively full, and therefore, it's really the cycling of those who are leaving and then trying to have sort of an equal amount of backfill, but it's obviously more difficult to create that perfect match in timing at a more full center. And so, some of the friction that happens in the more full centers is part of the algorithm here, but in terms of clients and tariffs and things like that, that is certainly not what the data is showing us.

Okay. And then the, I guess, earnings growth well ahead of guidance on inline revenue, yet largely holding the full year adjusted for FX. Was there any specific timing factor that drove that upside in Q1, or is there something that specifically doesn't repeat, or is it just a hold for, I guess, the macro uncertainty, or the full-service enrollment intake trends, or something like that?

Well, the way I'd characterize it, Jeff, is not that the performance doesn't hold, but as an example, much of the close to half the performance, our performance came from better than we had expected performance in our full-service business in the U.K. And that is coming from, solid enrollment, continued good, both cost management, labor management, and effective protocols on recruiting retention there. And we're now getting to a place where we're lapping the effect in the UK had introduced expanded funding to parents as of April 1st of last year. And so, that contributed to some of the enrollment velocity. So, enrollment is very strong. It's been strong the last few quarters, and it will continue to be solid through the rest of the year, but not quite as much velocity as we saw in Q1 in the last couple of quarters. So, that's beginning to bake itself through the comparisons. And, you know, I think from an overall performance standpoint, we just have stronger performance in the first half than the second half, and we'll be lapping the strong, the rest of the overall performance in the U.K. So, that's, it's not worse performance as much as it is just where we will be comping and what we're growing off of in terms of the base. The rest of the backup, I think I mentioned before, we had really solid usage and effective cost management, service delivery, and a good portion of that use in our network and being able to manage those components, and it was somewhat favorable to our outlook. So, those were the drivers there. I think the forward view is certainly reflective of what I just said, and then, you know, wanting to take into account that the environment is certainly still settling and uncertain from a macroeconomic standpoint. And in backup in particular, we have a disproportionate amount of the business that comes over the course of the late spring and summer period, and that is still to be delivered.

Our next question is from Josh Chan with UBS.

So, on backup care. You gave a very strong guidance for the second quarter for backup care. Just wondering, what you saw in terms of Q1 usage that kind of gives you that conviction of that strong growth in the second quarter? Thanks.

So, we look to estimate. We've got a very wide client base. We look to estimate where the use patterns will be for the year and the way that use persists through the year-end cycle. Many of our clients do cycle into a new calendar year arrangement, so we see, sometimes we see use cycling in the same way for those users. So, the fact that we have good insight into those who are repeat users, those who are unique users, and the variety of use cases that we're seeing taken up is one indicator. And then, as we look to the summer bookings, we do have, with the camp programs that we operate both for our own account with Stephen Cates Camps and also through our third-party providers, we have insight into early bookings for summer camp, which is solid as well. So, that's some of the components that give us the sort of conviction on use continuing to be strong and at the upper end allowed us to step that guidance up slightly for the year.

Excellent. That's good to hear. And on the full-service enrollment dynamic that you talked about, you mentioned mainly a slower decision-making process, but I'm wondering if you're seeing prospective visits also decline, because I guess if the macro is the concern, you may expect to see that phenomenon as well.

Yes. So, we actually, the metric that we watch really carefully, Josh, is actual visits, right? So, it's one thing to make an inquiry, it's another thing to schedule a visit, but where the rubber generally meets the road for us is when a family actually comes and visits. And at that statistic, again, we are looking reasonably strong as it relates to that forward look. So, when we think about where in the pipe we're really focused on making sure that we're getting real precision, it's getting people not only to get to yes, which is confirming their interest, but it also is ensuring that they start. And so, we have seen some families make the decision to delay that start date. And so, we're working really hard to make sure that we continue to keep those start dates as close to their original anticipation as possible. But again, back to your point, I would say that visits for us is a really critical metric that we watch and feel good about where that's coming in.

Our next question is from Faiza Alwy with Deutsche Bank.

I wanted to ask a bit more about the One Bright Horizon strategy that you mentioned. And I think you said some of your clients that were full-service clients had also added on to the backup program. So, I'm curious if you could help us with just the long-term opportunity here, and maybe how many of your clients are full-service clients where they don't have a backup arrangement with you. So, does this frame that opportunity for us?

Sure. So, if we think about our whole client base, we enjoy partnership with more than 1,400 employer clients, and only a third of those clients buy more than one service. And for those that buy more than one, they typically are buying two. And so, as we think about One Bright Horizons, we're really trying to first and foremost educate our client base around the opportunities to invest in more than one service. And then at the same time, we're trying to find ways to make a much more seamless experience between our different service lines to allow both employers to see the benefit of buying from a single provider. And then at the same time, make it much easier for an end user to work seamlessly across our different services. And so, ultimately, we see great opportunity in moving our client base to add more services. And then at the same time, working with what we know about the end users to have them cross-pollinate across services as well. So, again, we really look at 1BH as an opportunity to really go in multiple directions, not just our child care center clients become backup clients, but our backup clients become college coach clients, our college coach clients become NSS clients, etc. And likewise, have our U.S. multinational clients become clients of ours in the U.K. So, it's both across services and across geographies that we are focused.

Thank you for that. And then just to follow up on the guidance just around just line of questioning, you did beat the guy quite significantly in terms of EPS. And just want to ask again, is the maintenance of the guide just out of an abundance of caution? Or is there something that you're seeing in the business? Because you do also have more of a favorable FX environment now than you did a couple of months ago. So, just help us a little bit more with just your approach to guidance.

Yes. So, I mean, I can start. And I think just hitting the FX question initially, I think the key thing to consider is it does have a lot of impact on the top line because of the elements of where we are operating, particularly in the U.K. But as we've mentioned, that business is not contributing in a significant way. So, the movement in the FX is not really contributing. It's at the margin a little bit, but it's not really contributing to upside even as we're revising the top line because of the movement. So, just wanted to maybe put that out first. As it relates to the rest of the earnings, I think the view is our view is that we have an environment where the business has become more seasonal, cyclical, particularly the backup business. And we have ambitious goals for that business to deliver over the course of the summer. We've started off the year with some good momentum, but it is the smallest contributing quarter in backup for the full year. And therefore, a lot of road to get down to deliver on that performance. And so, maintaining a reasonable posture against that so that we can perform against it in an environment that is, we are not hearing many changes with clients, but certainly client conversations can occur at any time of the year. And if there are questions or concerns, we'd want to be able to pivot and adjust to those. So, I think that the enrollment cycle is also one that we've said we've tapered that a little bit. And it has a modest effect on where the earnings would contribute there. But the positive performance in backup offsets that performance in full service. And that's what leads us to a pretty consistent view on what we would guide to for the rest of the year.

Our final question is from Jeff Silber with BMO Capital Markets.

I wanted to focus on the cost side of the equation, specifically on the labor environment. Can you talk about what you're seeing there in terms of your ability to find staff and wage inflation trends, et cetera?

Sure. Happy to, Jeff. So, I think that we are in quite a different place than we have been over the last several years. We feel good about where we are in terms of wage relative to the market and then relative to other options that teachers within our classrooms might otherwise choose. So, we feel good about where our wages are. We feel wage inflation continues to persist at the rates that we talk about and are well prepared to continue to be sort of a percent ahead of that as it relates to tuitions. And then finally, in terms of actual ability to attract staff, I would say that the combination of being able to retain at least as well as we were in 2019 is a great accomplishment for us to be at. And so, we feel good about our retention. And therefore, the pressure on recruiting is quite a bit less than it has been because, again, as we have fewer people leaving, the need to add staff also is diminished. So, overall, I feel like we are in a good spot as it relates to being able to attract and retain staff and feel good about where our wages are relative to the market.

All right. Great. And if I could shift gears to capital allocation, I noted that you accelerated some of your debt paydown and continued to buy back stock. I think you are at the lowest leverage ratios that we have seen in a while. Can you just talk about your capital allocation philosophy? Why specifically did you make those two moves? What are you looking to go to do going forward? Thanks.

Sure. Thanks, Jeff. We have been active in our repurchase program in the last couple of quarters. And so, see that as an opportunity for us to deploy some capital return to shareholders in a way that is both measurable and also flexible for us. Measurable meaning it is a meaningful return, but also one that we can be flexible about when we see opportunities on the near or longer term horizon for alternative investments. Our first priority is to invest in the business, and that can be in M&A and it can be in new centers. It can be in other businesses and the other businesses besides centers, that's what I mean in terms of technology and driving customer acquisition, et cetera. So, those investments can take many forms, and we are investing in the business and growing, but we have a long arc of that vision and we generate a lot of cash. So, we are trying to maintain both the flexible posture on our debt. We have balancing out the cost of interest and the ability to access the credit markets. We are able to do some additional things in the market to give us the flexibility that we need. And upsizing the revolver gives us a bit more capacity, gives us with the pay down, we have all the access to debt that we need. So, I think our view is that we will continue to be opportunistic in the share repurchase program. We have an authorization available to us and support from the board on that. And we will also continue to look first and foremost at growth investments that we can make and that's where we see the best opportunity going forward.

Excellent. Well, thank you very much for joining the call. I really appreciate the continued interest and support.

Thanks, everybody. Talk to you soon.

Thank you. This will conclude today's conference. You may disconnect your lines at this time and thank you for your participation.