Greetings, and welcome to the Bright Horizons Family Solutions Second Quarter 2025 Earnings Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce Michael Flanagan, Group Vice President of Finance. Please go ahead. Thank you, Joe, and welcome everyone to Bright Horizons' second 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 the safe harbor statement 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 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 provide an update on the business. Elizabeth will follow with a more detailed review of the numbers before we open it up to your questions. With that, let me turn the call over to Stephen.

Thanks, Mike, and welcome to everyone who has joined the call. We delivered another quarter of strong execution and solid performance, with revenue increasing 9% to $732 million and adjusted EPS growing 22% to $1.07, both ahead of our expectations. These results reflect the depth of our client relationships, the essential nature of our services to the customers we serve and our continued focus on service delivery across all of our lines of business. In our full service segment, revenue of $540 million increased 7% driven by a combination of continued enrollment growth, tuition increases and new center openings. In particular, we added 5 new centers this quarter, including 2 additional centers for an existing multi-service client, the University of Virginia. Openings like this reinforce our leadership in the employer-sponsored care market and underscore the strategic role on-site childcare continues to play in workforce strategies. Enrollment in centers opened for more than one year increased again this quarter at a low single-digit rate, and average occupancy stepped up to the high 60% range. Across this group of centers, the fastest growth is in centers below 40% occupancy driven by meaningful improvement in select underperforming centers. Among our top-performing centers, where average occupancy remains impressively above 80%, we have seen some centers cycle through peak enrollment levels, which naturally tempers the contribution to enrollment growth from that group, even as the overall operating performance remains strong. In our centers operating between 40% and 70% occupancy, operating performance and enrollment both continue to progress as well. As we move through the second half of the year, when we absorb the enrollment transitions associated with age outs tied to the school calendar, our outlook on enrollment growth is relatively consistent with what we experienced in the second quarter. Enrollment is expected to continue to grow at a low single-digit rate, and we remain focused on streamlining the path from inquiry to enrollment, including enhanced technology and more personalized and proactive communication to help families make confident care decisions. In the U.K., we saw continued operational and financial momentum in the second quarter, with solid growth in both enrollment and margins. We continue to see the benefits of our efforts over the past 2 years. Investments in staffing, technology and programming that have meaningfully improved the experience and efficiency across our center footprint. Of note, Bright Horizons in the U.K. was recently named one of Europe's best employers by Great Place to Work, reflecting our strong culture and overall teacher satisfaction. This recognition underscores the link between our investments in people and culture and the resulting improved performance through the first half of 2025. Turning to back-up care. Revenue grew 19% to $163 million, reflecting strong client and user engagement. Among other launches in the quarter, we welcomed McKesson, a Fortune 10 employer, to our client base, reinforcing the continued interest by large employers seeking high-quality care solutions to meet today's workforce needs. From a youth perspective, we experienced particularly strong demand for center, camp and in-home care. We kicked off our seasonally high youth summer period with strong growth in June, which we have seen continue into July. Utilization over the early summer months has been particularly strong among families utilizing care in our owned and network school-age and camp-based programs. The strategic expansion of supply over the past few years, enhancing both geographic reach and program, has enabled us to deliver high-quality care when and where families need it most. I remain confident in the strong momentum in our back-up care business, which continues to be a critical support for working families, a strategic advantage for our employer clients and a key growth driver for Bright Horizons. Moving to our educational advisory segment. Revenue grew 8% to $29 million this quarter. Participant and usage growth was solid, particularly in College Coach, where we saw increased demand for advising services. We continue to position EdAssist for long-term growth through targeted investments in technology and product development, aligning our offerings with the evolving needs of working learners. We are adding new clients and expanding adoption within our existing base as we build momentum across the business. Before I close, I want to highlight the continued progress we are making on our One Bright Horizons strategy, our effort to expand the reach and value of our offerings by engaging more employees and employers across the full spectrum of Bright Horizons solutions. This quarter, we saw full-service client, Centene, add back-up care to better support their national workforce facing everyday disruptions. At Northwell Health, a back-up care client introduced College Coach to extend their dependent care benefits to employees with teenage children navigating the college process. Client expansions like these, coupled with the growth of users across our lines of business, demonstrate the power of our employer-sponsored model and portfolio of services. As we continue to execute against this strategy, we remain confident in our ability to grow our impact and deepen our employee and employer penetration. Before I close, I want to highlight a few insights from our 2025 Modern Family Index, which again underscores the real and recurring stress that working parents face particularly during the summer months. Nearly two-thirds of parents report that childcare gaps during school breaks directly impact their productivity, well-being and ability to stay focused at work. Summer remains a particularly difficult time as families navigate the challenge of finding dependable and affordable care. In addition to meeting that elevated summer need through our traditional back-up care network of owned and partner suppliers, we also leaned into our unique on-site capabilities with AT&T to run a Steve & Kate's camp at their Dallas headquarters. The program has provided families with a convenient, trusted and affordable childcare solution right at their workplace. This distinctive offering demonstrates our unique capability to collaborate with a client, leverage our well-developed capabilities for on-site employer-sponsored care and operationalize an innovative care solution that responds to a client's particular need. In summary, I am pleased with our solid first half of 2025. Given the year's positive performance and momentum, we have moved up our 2025 full-year guidance to a revenue growth range of $2.9 billion to $2.92 billion, or 8% to 9% and adjusted EPS in the range of $4.15 to $4.25 per share. 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 us on the call tonight. As mentioned, I'll start with our financial highlights. Revenue for the second quarter grew 9% to $732 million driven by continued growth and disciplined execution across each of our segments. Adjusted operating income rose 25% to $86 million, with operating margins up 150 basis points over the prior year to 11.8%. Adjusted EBITDA increased 13% to $116 million, representing an adjusted EBITDA margin of 16% of revenue. And lastly, adjusted EPS of $1.07 came in ahead of our expectations, supported by solid top line growth and operating leverage. To break this down a bit, full service revenue of $540 million was up 7% in Q2 on pricing increases, enrollment gains and an approximate 150 basis point tailwind from FX. The centers we have closed since Q2 of 2024 partially offset these gains. 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 high 60s for Q2, stepping up from the prior year as well as sequentially from last quarter, given that Q2 is typically our peak enrollment quarter. In the specific center cohorts that we've been tracking for comparative purposes since the second half of 2022 and discussed on prior calls, we continue to see improvements over the prior year period. Our top performing cohort, defined as above 70% occupancy, improved from 51% of these centers in the second quarter of 2024 to 54% in the second quarter of 2025. As a reminder, this cohort continues to sustain strong average occupancy levels above 80%, which inherently limits its enrollment expansion opportunity. In our middle and bottom groups, defined as 40% to 70% and below 40% occupancy, respectively, enrollment increased at a mid-single-digit rate in the second quarter. Centers in the middle cohort now represent 36% of the total and the bottom cohort represents 10% of these centers. Adjusted operating income of $40 million in the full-service segment increased $8 million over the prior year and represents 7.5% of revenue in the quarter. Higher enrollment and improved operating leverage helped drive the growth in earnings. Turning to back-up care. Revenue grew 19% in the first quarter to $163 million driven by strong early summer demand, as Stephen outlined. The adjusted operating income for the segment was $41 million, up $9 million over the prior year, which translates to operating margins of 25%. Lastly, the educational advisory revenue increased 8% to $29 million and delivered operating margins of 17%, ahead of our expectations and broadly consistent with the prior year. Net interest expense decreased to $10.5 million from $12 million in Q2 of 2024 largely due to lower interest rates and lower overall borrowings. The structural effective tax rate on adjusted net income was 27.25%. Turning to the balance sheet and cash flow. We generated $134 million in cash from operations in the second quarter. We made fixed asset investments of $19 million and repurchased $41 million of stock in the quarter. We ended Q2 with $179 million of cash and our reduced leverage ratio is now 1.7x net debt to adjusted EBITDA. So moving on to the outlook that Stephen previewed. In terms of the top line, we are modestly raising the midpoint of our reported revenue outlook by $20 million to a range of $2.9 billion to $2.92 billion, which reflects a roughly $15 million or a 50 basis point favorable change in FX as compared to our prior guidance. This equates to a reported growth rate of approximately 8% to 9%. Let me break that down into the segments. In full service, we now expect reported revenue to grow in the range of 5.75% to 6.75%, which reflects a roughly 75 basis point tailwind from FX for the year. In back-up care, we've increased our expectations for revenue growth to 14% to 16%. And in Ed Advisory, we expect to grow in the mid-single-digits range. In terms of earnings, we now expect 2025 adjusted EPS to be in the range of $4.15 to $4.25 a share. As we look specifically to Q3, our outlook is for the total top line of $775 million to $785 million or growth in the range of roughly 8% to 9% on a reported basis. This reflects roughly 50 basis point tailwind from FX over the prior year. We expect full service to grow reported revenue 5.25% to 6.25%, again reflecting a roughly 75 basis point tailwind from FX. We would look to back-up growth of 14% to 16% in Q3 and Ed Advisory again in the mid-single digits. In terms of earnings, we expect Q3 adjusted EPS to be in the range of $1.29 to $1.34 per share. So with that, Joe, we are ready to go to Q&A.

This is Princy Thomas on for Manav. Just wanted to see if you could expand your margin expectations by segment for full year as well.

Princy, yes, so let me start with the back-up business just because it's been a pretty consistent story in back-up. So for the year we would be looking for 25% to 30% operating margins in back-up consistent with what we have said. The second half of the year is more heavily weighted than the first half of the year. So we would see similar pattern of increase in Q3 and staying relatively higher in Q4, not quite at the Q3 level, but similar cadence or pattern to last year, but still overall in the range ending some more similar to where we were in 2024. In the full-service business, we would expect to see, call it, 125 basis points or so of overall operating margin expansion for the year. We were a little north of that overall in the first half and expect to be in a similar range over the second half of the year with Q3, as I mentioned, in around 125 basis points or so of margin expansion there. And then Ed Advisory, again, pretty similar to last year in the high teens to 20% or so operating margin range for the full year.

Got it. And just wanted to pick your brain on the big beautiful bill and what you're hearing from clients and what benefits you would be seeing?

Sure. Princy, I would say that most specific to our sector, we would focus on 45F and the updated 45F program. First and foremost, I would just observe, really underscores the importance of employer-supported childcare and that's why I want to focus on that. Under the program, 40% of qualified childcare expenditures up to $500,000 are a taxable credit enabled, and that's an increase from $150,000 previously. We think for existing accounts, this could be an attractive way for our existing accounts, whether they be center clients with subsidies or back-up clients, they could benefit more significantly than they would have done in the past. I would say that we're more cautious about what this might mean in terms of velocity for new clients because certainly this has been in place, again, at a lower level, hasn't had a huge impact on stimulating demand. On the other hand, on the margin, it's certainly positive.

Elizabeth, I heard you talk about the expectations for continued low single-digit enrollment growth in full service. Did you give a specific figure for that? Does that mean like 2% to 3%? And if you could give a comment on how September enrollments are looking.

Yes, we expect enrollment growth to resemble what we observed this quarter, aiming for low single-digit increases around 2% for the remainder of the year. The September enrollment cycle is currently advantageous, and our fall marketing efforts are performing well. We've improved our lead generation and enhanced our outreach to guide parents through the enrollment process, which gives us confidence in our enrollment levels. This growth is crucial, especially as we've identified significant opportunities in infant and toddler enrollment. Last year, we had strong numbers in that area, and as those children transition to preschool age, it becomes essential due to the limited supply in the market. Our center's structure enables us to cater to more families with younger children, and that’s where our focus lies.

You mentioned taking initiatives to streamline the path from inquiry to enrollment. And I know last quarter there was some elongation of the sales cycle because of macro uncertainty. Can you talk a little bit more about what you're seeing with the sales cycles and commitment cycles from new customers?

Sure. So I think as Elizabeth just sort of put a fine point in terms of the enrollment growth expectations that we have through the remainder of the year, we continue to see a caving similar to what we saw this quarter and highlighted this past quarter. And so ultimately, as you alluded to, we are certainly taking action steps to continue to support families who are inquiring about our centers. We certainly have made investments around our web experience and helping to nurture those families early in their discovery process. We have put sort of additional resource against white-glove support by enrollment managers for families. And ultimately, we're using technology to make sure that we are creating and providing a more personalized experience all the way from inquiry to enrollment. And so overall, I would say that's how we're thinking about the sales funnel from a family perspective.

Got it. That's helpful. You mentioned occupancy is now in the high 60s. I think seasonally that will likely step down next quarter. At this point, do you have visibility as to when occupancy will get back to 70% plus?

For this year, we have seen a couple of hundred basis points of enrollment growth this quarter, and we expect that trend to continue through the second half of the year. By the end of the year, we anticipate being in the mid-60s for the full year, with Q2 being our peak. This will represent a slight increase from last year. Regarding the timeline for returning to 70% occupancy, over 50% of our centers are already performing above that level. The key will be addressing the underperforming centers, particularly those in the 40% to 70% range that need to enhance their enrollment. We also need to evaluate our worst-performing centers to either improve them or phase them out. This aspect is likely the major challenge in reaching a 70% average. Qualitatively, we feel optimistic about the top-performing centers maintaining their enrollment levels consistently over several years, which indicates they are in the right location and effectively serving families, both through employer-sponsored and community-based centers. Our strategy involves replicating this success in other locations and making tough decisions regarding centers that are not improving.

I just want to circle back to 45F. I get that it historically hasn't had great uptake in terms of companies or organizations claiming the credit, but as the market leader, it feels like there's an opportunity for you to amplify the message and make prospects aware of it. So can you just talk about what your sales force is planning to message? And then within back-up care for 45 F, the increased credit seems pretty sizable relative to what I would think typical back-up care spend is. So what's the opportunity in back-up care specifically from 45F including on potentially getting existing customers to increase spend levels?

Thanks. So here's what I would say. Certainly appreciate the compliment that we are the leader in employer-sponsored care. And certainly the sales team as well as the marketing team here at Bright Horizons have been getting the message out in full force both among prospects as well as existing accounts and that comes in the form of meetings directly with prospects and clients. It comes in the form of webinars that we are hosting to help educate prospects and clients on 45F in particular and really helping them to see the value of leaning into this. I would say that in addition to all of that awareness and education, it is fair to say that the increase in the amount should have real impact, especially among our existing accounts, around their ultimate investment in our back-up care programs. And as we think about new clients coming in on that, that is certainly the case as well. I think the biggest challenge, if there was a challenge with this, is the disconnection between our buyer who tends to be within HR and benefits, and the folks who are spending the most time thinking about tax, which tend to be in finance. And so who actually needs to have the budget versus the people who are keeping score as it relates to the net cost are different. But certainly we are trying to do outreach not only to the HR community, but are also encouraging that coordination between HR and finance. But you're right to say that, in principle this should be a good stimulant. We are certainly best positioned in the industry to take advantage of it and it's still early days. So we'll be able to give you updates over time whether or not we're seeing more momentum on 45F than we have seen in the past. So I'll answer that in 2 ways. The first is that we aren't seeing employers changing the sizes of their banks. So the user and use growth that we're seeing and experiencing that is driving the velocity of our growth is really down to getting out the vote of more users and then ultimately having them use. It's not about program design per se within our client organizations. We did see this year, and we had started to see it over the last several years, the allowance of booking earlier, so extending the booking window to accommodate for employees wanting to get reservations in for the summer period in known gaps in their own care arrangements. So again, I think that, that has given us more confidence going into this summer to be able to guide the way we have is certainly extending those windows of reservation allows us an even greater window into the amount of use that we can expect this summer. And so those would be the 2 elements that I would highlight.

Wages in the industry are increasing by approximately 4.5%. However, you anticipated a price increase this year in the 4% to 5% range. Full service margins have been particularly robust, especially considering the tight spread. I was curious if you could discuss how much of that margin expansion is attributable to the closure of underperforming centers, and whether it would be possible to quantify the impact of closing those centers on the significant increase you experienced in full service margins.

Sure, Toni. To clarify, I don't have a specific figure since it doesn't significantly impact margin expansion. We've observed that increases in wage personnel costs are lighter than what you mentioned. Thus, our price increase of 4% to 5% has averaged closer to 3% to 4%, which translates to approximately 100 basis points, and maybe 50 basis points in some instances. This reflects the typical relationship between pricing and our main cost structure. Although we have closed several centers, which have posed headwinds to margins over time, the additional boost to margin expansion from this is relatively minor. The primary driver has been enrollment growth in the 200 basis point range, along with disciplined pricing relative to costs. We've noted that the U.K. has been on a recovery path, contrasting with last year when it was a headwind affecting overall margins by over 150 basis points, and even more than that in 2023. This impact has now reduced to something closer to 100 basis points, which is another point I wanted to highlight.

Terrific. On a different note regarding M&A, it seems that many smaller centers are still struggling in the post-COVID period. The current enrollment environment remains challenging for the industry, and we continue to see difficulties faced by some of these smaller centers. I am curious about the status of your M&A pipeline. Additionally, I would like to understand why there hasn't been more M&A activity so far, considering that the current environment appears favorable for it. Thank you.

Sure. Thank you, Toni. So look, we certainly have not been as active in the M&A program as we have seen in our past. That is fact. What I would say is that we remain very focused on our strategy, which is not one to tackle turnarounds. We really look for programs that are in strategic locations, that are high quality and that have good financial characteristics. And among the programs that fit that profile, there still is a pretty good imbalance between seller expectations and what we think is a fair and truthful price to pay. So we continue to be really disciplined about that. And certainly in the meantime, we've been really focused on continuing to build enrollment in our own centers. And so we continue to see a nice uptick in that way. So I would say that from an M&A perspective, while slower, we still continue to build good relationships and in the long term believe that that will be an important part of our algorithm in the future.

Elizabeth, I apologize if I missed this, but I think you usually give us the number of centers that you open and close during the quarter. Can we get that?

Yes. We opened 5 in the quarter, Jeff, and we closed 8. So a net decrement of 3 in the quarter. Year-to-date, we're positive 1, net 1, and that is, broadly speaking, plus/minus 0 is what we would expect for the year.

Okay. And on the 8 that were closed, was there any specific geographic area? Was it U.S.? Was it U.K. or kind of mix?

It was primarily U.S. There are a couple outside the U.S., but primarily U.S., more than half.

All right. Great. And then Toni was asking about the U.K., you mentioned the headwind. But I think in the past that you said you might be or you were hoping to be on the pathway to breakeven by the end of the year in the U.K. Is that still a goal?

It is still a goal and we are on track to achieve that. As a reminder, last year we were close to $10 million in the full-service segment specifically. We were close to $10 million in losses in the U.K., within that range, and we expect to reach breakeven. The momentum has been really good in the first half of the year, so we definitely feel on track to achieve that. Ideally, we aim to make progress beyond that and be well-prepared for 2026 with our advancements. The story has been one of solid operational execution alongside a favorable demand environment supported by expanded parent fee support through a government funding program that now covers broader age groups and more hours. This combination of our service capabilities and escalating demand has significantly contributed to our progress, and we feel very positive about it.

I wanted to take a step back and consider the full service margin trajectory over the next several years. Looking at the significant progress made post-COVID, is there anything in the business that could prevent it from achieving the pre-COVID record margin of around 9% to 10% as you assess the current state and future outlook?

Yes, the short answer is that we don't see any structural barriers preventing us from returning to the 9% to 10% range in our full-service business. More than 50% of our centers are currently operating at utilization levels that exceed pre-COVID figures, meaning they have returned to their pre-COVID operating margins. These high-performing centers are actually exceeding the 10% threshold. However, we do have some underperforming centers, specifically those that are below 40% occupancy, which collectively are losing money. The improving centers are likely achieving mid-single-digit margins. If we can move more of the improving centers into the top performing group, it will certainly help with margin expansion. Most of the necessary cost investments are already in place, so boosting enrollment will be a key driver for us. The sub-40% centers, which make up about 10% of our total centers, do pose a challenge since they are operating at a loss, preventing the overall portfolio from achieving high single-digit to 10% margins. Our focus is on rationalizing our portfolio thoughtfully and staying flexible to meet parents' needs, which will help drive both enrollment and retention of families in the centers that provide care.

Got it. As a follow-up, could you remind us of your outlook regarding reaching those targeted pre-COVID enrollment levels for the total overall mix?

Yes, we have made significant progress in a substantial part of our portfolio. The truth is that aiming for total enrollment at that level has always meant we operated with centers that were below 70%, and some performed quite well even with much lower occupancy. It's not a one-size-fits-all approach. If we exclude the bottom 10% of our centers temporarily, we expect the remaining centers to continue improving. In the next year or two, we anticipate that most of the portfolio will return to pre-COVID performance levels. It’s the sub-40% enrollment from that 10% of centers that will require further discussion as we communicate with you about the potential impact. However, the majority of our portfolio is certainly close to the operating margins we achieved earlier for the entire full-service business, which is why we are optimistic about the progress we are making.

Stephen, Elizabeth, really strong back-up care growth this quarter and you mentioned expanding your geographic reach and programming. Could you talk about that? How much are you expanding and to what extent that's kind of enabling more growth that wasn't previously available?

Sure. Thank you, Josh. So what we mean by expanding the capacity is really partly down to owned assets, right? So obviously, we have our Steve & Kate's camps that's really important over the summer as an option for working families. We continue to invest in building out that footprint. In addition to that, we own Jovie, which is the nanny agency, franchisor. And so we continue to stimulate more capacity through owned assets like that. And at the same time, our team is working really diligently to continue to extend partnerships with center-based providers, camp-based providers, in-home providers, so that we can provide the type of care in the locations where we have the demand. And so the strategy and approach has really been a combination of continuing to build out owned assets and at the same time continuing to expand our third-party network.

Thank you, everyone, for joining the call today. We appreciate your interest in Bright Horizons Family Solutions and look forward to speaking with you in the future.

Okay. Thank you all very much for joining us on the call and wishing you a good night.

Thanks, everyone.

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