Greetings, welcome to the Bright Horizons Family Solutions fourth quarter 2022 earnings call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michael Flanagan, Senior Director of Investor Relations. Thank you, Michael. You may begin. Thanks, Paul. Hello to everyone on the call today. With me here are Stephen Kramer, our Chief Executive Officer, and Elizabeth Boland, our Chief Financial Officer. I'll turn the call over to Stephen after covering a few administrative matters. Today's call is being webcast. A recording will be available under the IR section of our website, 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 are described in detail in our 2021 Form 10-K and other SEC filings. Any forward-looking statement speaks only as of the date on which it is made. We undertake no obligation to update any forward-looking statements. We may also refer today to 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. Thanks, Mike. Welcome to everyone who has joined the call. To start this evening, I'll recap our 2022 results and outline how our progress this past year positions us well for 2023 and beyond. Elizabeth will follow with a more detailed review of the numbers and outlook before we open it up for questions. I am pleased with the way we finished the year. As I reflect on the past few years, in particular 2022, I feel incredibly proud of all that we have accomplished recovering from the effects of the pandemic. The last three years have been some of the most challenging our sector and our business have ever faced. Beginning with the temporary closure of most of our centers in 2020, followed by the unprecedented disruption of staffing to the unpredictable and recurring coronavirus variants that contributed to an uneven recovery in late 2021 and into 2022. In the last 12 months, we made solid progress across our business. We have worked incredibly hard to remain focused on our long-term strategic objectives while also adapting and reacting to this new and dynamic backdrop. Let me highlight a few of our successes. At our core, we are a people business, and we have made significant investments in our people over the last three years. We made strides in rebuilding staffing levels to accommodate growing enrollment. Our culture has been a hallmark of what makes Bright Horizons unique. In 2022, we saw our turnover rates, which peaked in 2021, return to pre-pandemic levels, alongside an uptick in formally employed teachers returning to the Bright Horizons family. At the same time, we have continued to become a tech-enabled business and are dedicated to our digital transformation efforts. As an example, in 2022, our My Bright Day app was relaunched with new and improved functionality for both center families and staff. We also upgraded Back-Up Care's booking engine to help simplify and reduce the time to make a reservation, enabling a more seamless process for both new and returning users. My Bright Horizons, which has been rolled out to more than two-thirds of our clients, is a unified portal where client employees can register and access all of their Bright Horizons benefits, as well as see personalized recommendations that match their family's life stages and interests. Our investments in technology and infrastructure have improved and modernized operational systems, processes, and most importantly, user experiences. We extended our impact strategically into new geographies. In 2022, we acquired Only About Children, a leading provider of early education in Australia. This beachhead acquisition provides us an opportunity for further growth and expansion in a new market that has high demand for childcare, a robust government-funded program that provides financial support for families, and a highly fragmented market of providers. We expanded our client base and deepened relationships with our client partners. We now have more than 1,400 employer clients, with a third buying more than one of our service offerings. The services we offer are seen as a critical to the success of our employer clients' ability to attract, retain, upskill, and ensure the productivity of their workforce. Finally, we diversified and innovated our product offering to enable new growth channels. In 2022, we expanded Steve & Kate's Camp to more than 50 new communities. We introduced Pet Care as an additional backup use case, and we expanded our debt-free degree and direct bill programs at EdAssist. These are just a few examples of the innovation we are driving with our client partners. As a result of all of this, I am excited about building on this momentum as we look ahead into 2023. These achievements have fundamentally strengthened our long-term employee value proposition, grown and deepened our standing with client partners and enabled us to continue to deliver on our core mission of providing the highest quality care and education to children, families, and clients. Let's now take a closer look at the Q4 results. To recap the headline numbers for this past quarter, revenue increased 14% to $530 million, which yielded adjusted EBITDA of $91 million and adjusted earnings per share of $0.77, an increase of 18% from the prior year. For the full year 2022, revenue of $2 billion represented growth of 15%, while adjusted earnings per share of $2.60 expanded 31% over 2021. In our full-service child care segment, revenue increased 16% in the fourth quarter to $388 million. We added three new organic centers through new client relationships with Diamondback Energy, Endeavor Energy, and Sacramento Municipal Utility. Overall enrollment trends were as expected, similar to Q3. Across like-for-like centers, we again saw year-over-year mid-single-digit enrollment growth, with notably stronger performance in the U.S. Specifically in the U.S., year-over-year enrollment increased 6%, with growth of 10% in the infant and toddler age groups and low single-digit growth in our preschool programs. As we have seen in the last several quarters, centers located in the largest metro areas continue to progress in their enrollment recovery, with Atlanta, the Bay Area, New York City, and Seattle showing strong year-over-year enrollment gains. At a client level, our higher ed healthcare and industrial clients continue to show the highest occupancy levels, while our consumer energy and tech client centers experienced faster enrollment growth over the prior period. We also continue to make incremental progress on the labor front, though staffing remains a constraint to our full enrollment potential in most geographies. Since the expanded wage investments were made last fall, our retention rates of existing staff have improved to pre-pandemic levels, and we have seen a measurable increase in inquiries and applications from prospective employees. Encouragingly, the progress we have made over the course of the last year in classroom staffing has allowed our center directors to conduct significantly more in-person tours over the last six months. As we have discussed in the past, getting more families in to tour centers, see the program in classrooms, and meet our incredible staff is critically important as we work to rebuild the enrollment pipeline for 2023 and beyond. Looking outside the U.S., enrollment gains are more challenged. Enrollment grew marginally. In both the U.K. and the Netherlands, shortages in qualified staff and higher near-term labor costs to utilize flexible and agency staff continue to restrict our ability to serve all families who request care. In the U.K., we have seen our enrollment, along with the broader sector, also be affected by inflation and macroeconomic dynamics which have weighed on parents' near-term decision-making. In Australia, our centers currently operate at higher occupancy levels than the U.S. and U.K. business, over 70% on average. Further enrollment growth has been slowed by staffing constraints as Australia experiences similar labor dynamics that we see across our global center operations. Let me now turn to Back-Up C are, which delivered solid results this quarter. Revenue increased 15% over the prior year to $108 million on expanded use and new client launches. Traditional use and unique users grew significantly year-over-year in Q4. We continue to see more use among those who utilize their backup benefit. Of particular note was the continued growth in use of Bright Horizons centers, which reflects the strong interest among families seeking high-quality, traditional center-based care and the increased spaces that our center leadership teams opened up to Back-Up families,. Reflecting on 2022, I believe it was a pivotal year for Back-Up Care. After onboarding more than 200 clients and rebuilding traditional use across 2020 and 2021, we surpassed pre-pandemic use midway through 2022. We saw further acceleration of use growth in Q4 across all traditional use types. With now more than 1,100 Back-Up clients, a broader set of use cases, and a more streamlined reservation system, I couldn't be more excited about the opportunity to grow Back-Up Care double digits over the next several years. Moving on to our Ed Advisory business, which delivered revenue growth of 11% to $33 million. We launched a number of new clients this quarter, including Arrow Electronics, Atrium Health, and IQVIA, and we continue to see healthy participation and activity levels at both College Coach and EdAssist. The demand for support in navigating the college admissions and financing processes remains solid, and employers continue to invest in supports to upskill and reskill their workforce and achieve their broader workforce development objectives. Before wrapping up, I want to take a moment to thank every member of the Bright Horizons family. We made a lot of progress last year across many dimensions of our business, and it could not have been achieved without their dedication and commitment to our core mission in delivering the highest quality education and care to children, families, and our employer partners. I also want to take a moment to welcome Mandy Berman back to the Bright Horizons family in the role of COO, Back-Up Care, and Emerging Care Services. Mandy was a well-respected member of the Bright Horizons family for more than a decade. After three years away, I couldn't be more excited for her to rejoin our executive team. Looking ahead to 2023, we are well-positioned to build on the momentum we had coming out of 2022. As I have said in the past, our recovery hasn't been and won't be linear, but we continue to make solid progress in recovering from the effects of the pandemic. Enrollment is rebuilding, backup use is growing, and participation across Ed Advisory is expanding. I remain excited about our growth prospects, and I continue to have tremendous confidence in the resiliency of our business model, the strength of our more than 1,400 client relationships, and our ability to drive long-term value to all stakeholders. We will continue to drive our One Bright Horizons vision in 2023, focused on unifying and extending the value and impact of our offerings at the client and user level. We enter 2023 with a strong foundation and expect to grow revenue at a solid double-digit rate to $2.3 billion-$2.4 billion. On the earnings side, we are projecting Adjusted EPS of $2.80-$3.00 per share, or growth of approximately 8%-15% for the year. 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, hello to everybody who's joined us today. To recap again, the fourth quarter, overall revenue increased 14.5% to $530 million. Adjusted operating income of $56 million or 10.5% of revenue increased 19% over Q4 of 2021, while adjusted EBITDA of $91 million or 17% of revenue increased 15% over the prior year. We added three new centers and permanently closed six in the quarter, ending the year with 1,078 centers. Full-service revenue increased $49 million to $338 million in Q4 or 14% over the prior year, which was in line with our expectations. Organic constant currency revenue grew approximately 8%, driven by increased enrollment and pricing. Acquisitions added a further 11% or $36 million to revenue in the quarter. Foreign exchange was a 4% headwind in Q4. Enrollment in our centers open for more than one year increased mid-single digits, with 6% enrollment growth in the U.S. and approximately 1% growth in our European operations, reflecting the ongoing effects of having to limit new enrollment due to constrained availability of staff. Average occupancy levels were roughly flat sequentially, as expected, and remain in the 55%-60% range for Q4. Adjusted operating income of $12 million in the full-service segment increased $5 million in Q4. This gain was driven by higher year-over-year enrollment and improving cost efficiency. Pairing some of this improvement was the impact of a full quarter of the investment we made in teacher compensation this past fall, in addition to the continued outside spend on agency staffing in our international operations. Support received at P&L centers from ARPA government funding program totaled $13 million in the quarter, up slightly from the $12 million that we received in the prior year. Turning to Back-Up Care, revenue grew 15% in the quarter in this segment, with total revenue of $108 million, again, in line with our expectations. As Steven mentioned, we were pleased with the strength of use growth through the quarter and the resulting operating performance, which delivered $33 million of operating income or 30% of the associated revenue. Our Ed Advisory segment delivered top-line growth of 11% to $33 million on expanded use of our workforce education and college admissions advising services, as well as contributions from new client launches. Operating income at $11 million was 33% of revenue, solid performance on higher revenue and cost efficiencies. Interest expense, excluding the one and a half million per quarter related to the deferred purchase price on our acquisition of Only About Children, totaled $11 million in Q4, an increase of $3 million over 2021 on increased overall borrowings and higher average interest rates. The structural tax rate on adjusted net income increased to 26%, which was a 200 basis point increase over Q4 of 2021. Turning to the balance sheet and cash flow. For the fourth quarter, we generated $57 million in cash from operations compared to $42 million in the same period of 2021. We made 6 asset investments and acquisitions of $23 million, compared to $51 million in the fourth quarter of 2021. We also paid down $29 million outstanding on our revolving credit facility and ended the year with $36 million of cash and a leverage ratio 3.2x net debt to EBITDA. Now moving on to our 2023 outlook. In terms of the top line, we currently expect 2023 revenue to be $2.3 billion-$2.4 billion, which translates to growth in the range of 14%-19%. At a segment level, we expect full-service to grow roughly 15%-20%, Back-Up Care to grow 12%-15%, and Ed Advisory to grow 10%-15%. In terms of earnings, we expect 2023 Adjusted EPS to be in the range of $2.80-$3.00 per share. Similar to last year, we anticipate earnings to ramp as we progress over the year with higher enrollment and with the lapping of some of the higher wage investments and interest costs that we saw during the second half of 2022. I want to briefly highlight a few discrete items which will affect our reported margins and growth rates in 2023. First, as we have discussed in the past, the ARPA government funding program targeted toward childcare is currently set to expire at the end of September 2023. We received approximately $60 million of funding in 2022, and currently estimate that we will receive approximately $30 million in total support at our P&L centers in 2023. This expected decrement translates into roughly a $0.40 headwind to growth in 2023. Given current projected interest rates, we expect interest expense to be approximately $12 million higher in 2023 compared to 2022, which translates into roughly $0.15 headwind to growth in 2023. We expect our 2023 effective tax rate to increase 200 basis points to 28%, which translates to a roughly $0.10 headwind to growth for 2023. Taken together, these three items account for roughly $0.60-$0.65 a share of expected headwind to our growth for the full year. Looking specifically at Q1 of 2023, our outlook is for full-service growth of 15%-20%, Back-up growth of 10%-12%, and Ed Advisory growth of 5%-10% on the top line, which aggregates to total revenue growth in the range of 14%-18%. In terms of earnings, we expect Q1 adjusted EPS to be in the range of $0.37-$0.42. In terms of the discrete items I mentioned above, we expect to have $5 million more in interest expense, $10 million less in government support from the ARPA program, and a tax rate that is 220 basis points higher than in the first quarter of 2022. With that, we are ready to go to Q&A. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment please while we poll for questions. Thank you. Our first question is from Manav Patnaik with Barclays. Please proceed with your question. Thank you. Good evening. Elizabeth, I was just hoping for the full year guide, could you help us with, you know, what you're assuming on the revenue side in terms of, you know, FX, M&A contribution, and also the utilization implied in that 15%-20% growth to full-service? Nice to hear your voice, Manav. Thanks for joining today. With respect to the full year, if I got all the notes here right, the full year guide for revenue overall was $2.3 million to $2.4 million, with full-service growth in the 15%-20%. Let me see if I can pull over to what that... Do you have that, Mike? For- For full-service ... 15%-20%? For what the revenue translation, I think, was the question. Yeah. As it relates to the overall performance, you had asked about utilization. We are looking at, you know, mid to high single digits enrollment growth in the full-service group. That translates, you know, to 6%-8% or so for the full year. A little bit of ramping up as the year goes on. In terms of acquisition growth, our primary acquisition contribution comes from the Only About Children deal. You know, that's in the $70 million-$75 million range in terms of its contribution. Those are the components of the full-service side. Okay, got it. The only follow-up there was FX, but, you know, on a broader basis, you know, in the Back-Up Care side, you're adding, I guess, Pet Care, I'm guessing fits in there. The Steve & Kate's Camp you talked about. Can you just talk about, like, you know, adding those extra services and Back-Up Care's been doing good, like, should that eventually, you know, increase the growth rate from this kind of 10%-15% that it's been at? Manav, I think, the way to think about the growth rate at Back-Up Care is, yes, our goal is to certainly season the clients that we've added over the last several years and then continue to add additional clients. The expansion of the use cases, and you mentioned Pet Care. We had academic tutoring. In addition to that, additional camp use. We absolutely see that as, you know, continuing to build out the Back-Up Care line of service. Keep in mind, right, that the reason we continue to focus on sort of the mid, you know, the 10%-15% growth rate is really focused around the fact that the numbers get larger, and so therefore, the actual revenue dollar contribution against those growth rates is obviously increasing each year. We certainly see that those use cases are gonna be supplemental to the core traditional use cases that we've always had, and we see our clients and their employees really valuing, those additional, services that we're providing. Ju st circle back, Manav. just on the, you know, FX specifically, you know, it's more of a pressure in the first quarter, first half of the year, three so or 3% or so. for the year, it's a, it's a modest headwind, but really more in the first half. you know, Only About Children, like Elizabeth said, is, you know, of that, you know, 15%-20% for full-service, it's about 5% or so contribution there, to the overall revenue growth for the year in full services. Got it. Thank you. Thanks, Manav. Our next question is from George Tong with Goldman Sachs. Please proceed with your question. Hi. Thanks. Good afternoon. You mentioned you're looking at mid to high single digit enrollment growth this year. Could you translate that into what that would look like from an occupancy rate perspective as it relates to the 55%-60% that you saw in 4Q? Yeah. Well, as you can imagine, it's, there's a wide variety across the portfolio. Overall, it would translate to between 60%-65% utilization on average. We have obviously higher enrollment in our best performing centers that we talked about last quarter. Those centers are already at pre-COVID operating levels and have been, they marched back to their, you know, over 70%, over 80% earliest on. The enrollment gain in those centers is more limited because they're already at sort of full run rate. The growth in the rest of the centers will mainly come from those that are still re-ramping and/or are newer. That's why we end up in that, you know, call it, 60%-65% for the year. Got it. That's helpful. You also mentioned you're making progress on the labor front. Though staffing still remains a constraint. Can you quantify how much staffing is a constraint with respect to occupancy and how you expect labor to perform in the upcoming year? In terms of the labor front, as I shared, you know, we're very pleased that, you know, our retention has returned to pre-COVID levels, which is really important to us 'cause that continuity and consistency of staff really drives the quality in our centers. In terms of looking very specifically at the pipeline of new potential teachers, we are certainly seeing as a result of the wage increases, but also some increased energy on the marketing side. We are certainly seeing more job seekers come to our career stage. We are certainly seeing an increase in the number of applications, and that is ultimately resulting in an increase in the number of net teachers month-on-month. Again, we're really pleased with the progress that we're making on that. I would say it still remains our number one challenge as it relates to enrollment. As we look across both the U.S. as well as outside the United States, we continue to stay focused on making sure that we can ameliorate that challenge. Yeah. Just the additional commentary. It's, you know, at one point, we had probably half of our centers that were holding enrollment at some level, and that has diminished. It's more, you know, a classroom here and classroom there. Maybe 20%-30% of centers still have some constraint going on and some have still an acute, you know. It is a tale that changes around the portfolio. We still are seeing some classrooms not be able to be open and/or not be able to take additional staff. So as much as Stephen is citing the progress that we're making, we're not all the way there yet, but not. It's not as straightforward to translate that to this much enrollment is being held because of the variety across the portfolio. Got it. That's helpful. Thank you. Thanks, George. Thanks, George. Thank you. Our next question is from Andrew Steinerman with JP Morgan. Please proceed with your question. Hi, Elizabeth. It's Andrew. My question is, what is the implied adjusted operating margin for 2023 and first quarter 2023 in the guide? Also in the fourth quarter, the adjusted operating margin for full-service was notably different than the reported. Could you just go through what's in there in terms of the adjustment? Sure. Sure. Sure. Let me maybe address the last question first. We had a couple of things that happened in Q4. We had some impairments that were taken in, with respect to centers that either have closed or have had, you know, significantly contracted performance. That was a charge. Let me just get the specific amount here. That was a charge of about $14 million that was added back in the, into the adjusted operating income. We also had some minor costs associated with the cyber incident that we, you know, in terms of the examination, the forensic examination that we've had and support costs for that. Those were the two- Okay. primary add backs, 1 in margin and 1 in overhead. Okay. As it, as it relates to looking forward on the, you know, the overall margin that's implied, we, you know, we've talked just maybe going through the segments, from a Back-Up Care standpoint, overall our long-term goal for Back-Up Care margins to sustain is 25%-30%. We expect given the more normalized performance with utilization where we're delivering the care itself, we have more, more provider fees in an environment where that's, you know, that's bouncing back and it's positive for the type of use, but it does have a little bit of a headwind to the margin. We would be 25%-28% or so in Back-Up Care for the year. So in the range, but on the, you know, slightly lower end of our target range. Got it. Advisory really in the 20%-30% range. We have some ongoing investments there, particularly in the EdAssist arena, where we are continuing to modernize those systems and the participant experience. Some variability there, but 20%-30% in the Ed Advisory group. In full-service, you know, we are still in a recovery mode here. Overall for the year, we expect to be in low single digits to mid single digits on the operating margin for full-service. The couple of components that go into that are, you know, strong performance in our motion mold centers, but the headwind from ARPA, you know, being about half of what we had this year, and a more challenged performance in our international operations. Then to ramp up those centers that are still, you know, under the 70% is keeping us in those low to mid-single digits rather than where we would target long term to be more high-single digits to, you know, 8%-10% over time. Did you wanna make a first quarter comment about operating margins implied in the guide? Yeah. in the first quarter, Andrew, I'd say, you know, we start with Back-Up Care first. It'd be, you know, Elizabeth said for the year, you know, 25%-28%. you know, first quarter a little bit on the lower end of there, call it, you know, 20%-25%. The first quarter is a lower just huge quarter overall for us. but be in the lower end there and I think Q1, you know, for full-service, given some of the ARPA headwinds that Elizabeth talked about year-over-year, you know, slightly positive breakeven around that range in Q1 for full-service. Got it. And, as in the lower end of the, you know, full year, you know, the 20%-30% Elizabeth said for the full year is gonna be below that in Q1, probably 10%-15% range. We're making some investments there to grow that business. That's kind of some rough parameters for Q1. Perfect. Thank you. Appreciate it. Thank you. Thank you. Our next question is from Jeff Silber with BMO Capital Markets. Please proceed with your question. Thanks so much. Wanted to go back to the full-service center business. Can you talk about the price increases that are embedded in your guidance and how that compares to the different inflation items, specifically wage inflation going forward? Sure. As we had talked about last time, Jeff, that we were mostly cycling our price increases in January, we have now obviously executed on those across most of the portfolio. Average price increases are in the 6-7% range, with some spread to the higher end of that high single digits where appropriate. In some areas we are, you know, more modest than that, but it's averaged 6-7%. Against wage increases, we're expecting a more normalized wage increase this year, but we are still lapping the investment of the wage step-up that we did last year. Overall this year, the increased average wage will be high single digits to 10% or so. That will be the net effect of those two steps. We have, you know, we have a right sizing of the price increase to the wage. You know, wage would be more like 3% to 4%, comparing apples to apples. But again, with the embedded lapping effect, it's a bit higher. We are on a track to be making progress against that investment this year and have one more year of those higher expected higher tuition increases against wages in 2024 to be, you know, more fully right-sized at, in the center economics profile. That's helpful. I wanted to drill down a bit in terms of the staffing constraints you've been facing. Obviously, you know, increasing wages is one way of helping to mitigate that a bit. Can you talk about anything else that you're doing or contemplating not only to attract staff, but to retain them as well? For sure. I think that, as we had shared in the previous two calls, we have absolutely focused a lot on the candidate experience. We're working hard to create a more seamless experience for the candidate, starting with, you know, a much improved web portal for candidates and then driving to faster interviewing and then ultimately fast-tracking individuals that have either an ECE background and/or educational profile that meets our criteria. I think we're doing a lot in terms of that candidate experience piece. In addition to that, we have been working really hard on onboarding, and so we have what's called the 100 days apart. We're really working on that first step in the new hires experience. We're certainly seeing an impact, in those, first 100 Days in terms of being able to get individuals through that first segment of their employment with us and trying to see more of those people continue to stay at Bright Horizons. As we know, and have a long history of, once someone has gotten through that first 100 Days and really understands and feels equipped to do their job well, they are gonna stay with us much longer. It's things like that that we're really focused on in terms of making sure that, on the front end, we're doing everything we can to provide a white-glove experience to candidates. Then ultimately, once we onboard, to make sure that, works well. All right, great. I'll get back in the queue. Thanks so much. Thank you. Thank you. Our next question is from Stephanie Moore with Jefferies. Please proceed with your question. Hi, good evening. Thank you. I wanted to touch. Oh, hi there. I wanted to touch on, you know, as you kind of evaluate your portfolio on the full-service side, you know, maybe for those centers that are underperforming kind of the current utilization corporate average here, you know, and maybe just your appetite for maybe kind of reevaluating, does it make sense for those centers to be open? My first question is, has there been kind of an ongoing evaluation process? You know, two, what are you seeing with some of these underperforming centers that gives you comfort that, you know, we are still in this recovery stage? I'll leave it at that. Thank you. First of all, yes, we continue to evaluate that sort of lowest performing cohort that Elizabeth described earlier, the ones that are less than 40% occupied. To get very specific to the confidence piece, you know, first of all, we are seeing increases in enrollment in that cohort, right? We continue to see enrollment into those centers. Again, in the category of something that is demonstrable, that gives us confidence, I would say that is first and foremost important for us to be seeing. I would say the second is that we continue to see inquiries and ability to continue to add staff into those centers. Again, from a forward-look perspective, I think that's also really important. The third component, just in terms of timing, is as we've talked about, the ARPA program is going to be sunsetting as it, according to the current legislation, in September of this year. As we start to move towards that and ARPA funding starts to dry up in the sector overall, we believe that some of these underperforming centers will be in markets where there is additional consolidation that happens due to the fact that owners decide that without the ARPA funding, their particular centers are no longer financially viable. Of course, we have the ability to sustain through this period and we'll obviously, you know, benefit from that. I think, you know, this will be an interesting year as it relates to continuing to track enrollment and staffing and then ultimately seeing what the impact of a sunsetting ARPA program is gonna do to the sector at large. Great. No, that's really helpful. Just switching gears, just that Back-Up Care, and this is more a point of clarification. I think you said early on, you know, 1,400 employer partners and a third are buying more than one service. Is that assuming that they're on the full-service side and either doing Back-Up Care or other education? C an you... I'm just trying to get a sense of your current full-service customers that are also Back-Up Care customers as you speak. Yeah. So, Stephanie, it's a mix of, you know, the most common overlaps that we see of those 1,400 clients is clients who are, you know, Back-Up Care clients is our largest segment, 1,100 clients, as Stephen said. It's that clients who have Back-Up Care and full-service or clients who have Back-Up Care in our Ed Advisory segment, either EdAssist or College Coach. I'd say overall, the largest overlap is Back-Up Care and Ed Advisory. It's well north of, you know, 30%, a third that buy both of those products on the full-service side. It's give or take about a third, 30%, a third of full-service clients will also have Back-Up Care as well. I think that's part of the opportunity we see over time to be able to grow that mix of clients who have a full-service center, but also, are able to add Back-Up Care as well. Great. Thank you so much. Thank you. Thank you. Thank you. Our next question is from Jeff Meuler with Baird. Please proceed with your question. Thank you. On the differences in the portfolio in terms of utilization, can you give us any sense like what are the losses on the less than 40% bucket that are weighing down full-service profitability and/or the higher utilization centers, are they operating at the target 8%-10% operating margin level currently? Starting with the second set, Jeff, that group We expect it to be operating at that level in 2023. Not fully there yet. The best performers are still absorbing some of the labor investment. But they are, you know, they are certainly within a range of being at our targeted operating performance. They're the highest enrolled, and some of them certainly could be above 10%. We're trying to be sure that we're thinking about things with and without the ARPA funding. That's what I'm describing here, is that looking at them sort of excluding that benefit that they have now, They're either in that 10% operating income or within, you know, spitting distance of that. In terms of the group that is the sub 40% enrolled cohort, yes, they are losing money. It is a headwind. Most, you know, almost any center is not going to be breaking even until they're 50% enrolled or so. Not all these centers are losing enormous amounts of money. The fact that there are 150 or so centers in that portfolio in 2022 is a headwind to the margin. For them, you know, as we look ahead to 2023 and how we expect them to continue to grow their enrollment, we would look to probably half of having migrated out of that sub 40 and into the middle cohort, making that kind of progress given what we're seeing over the last couple of quarters. We do see them beginning to contribute by the end of the year. They are still losing money in the first half for sure. Got it. Then just on the catch up to the labor inflation, are you now at the point in the industry at the point where you expect that going forward on a fairly sustained basis, your tuition price increases are going to outpace cost-based inflation? Then just anything else you can say on the path to getting back to 8%-10% margins. I would think on the negative, you still have an incremental $30 million of ARPA runoff after this year? But just- Right. any other considerations on the path to 8-10? Yeah, I mean, you've touched on it, right. We do see pricing power return. There's a few reasons for that. One is we've made a significant investment in the wages, and we are focused on being measured on the price increases with, you know, the focus on enrollment first and pricing, you know, pricing fairly, but being more continuous with the price increases as the enrollment comes back. You know, we've also seen, we've talked about this, the supply of child care has continued to contract over the last couple of years. Although there has been, you know, what we didn't predict is that the level of support that ARPA would have provided for the industry that has allowed, you know, many operators to hang on longer than we would have predicted two years ago or year ago. We do expect that there will be some further fallout from that as the program rolls off. As it does, both being able to enroll those families in our centers and/or take over the operations of a center and/or be able to acquire quality locations that have heretofore not been interested in selling are all opportunities for us to grow our footprint and our capacity to serve families. All of those things will help to keep us in a leadership position and enable us to maintain the pricing power that we've had as a high quality provider in a market that has potentially less supply. Got it. Last one for me, Stephen. I think, correct me if I'm wrong, I think when you cite some of the new client wins, those are like centers that are actually in the opening process. Correct me, one, correct me if I'm wrong on that, but if that is correct, just anything you can say on kind of the bookings trends or the pipeline for new employer-sponsored centers and if you're seeing any uptick lately. Thank you. Yeah. Of course, Jeff. When we cite new client wins on these calls, those are centers that are open, right? We announce at the time of opening as opposed to commitment from the client. The ones that I mentioned today, for example, are now open and operational and a ccepting children. We take a really conservative approach to sharing those wins. That's the same on the Back-Up Care and Advisory side of our business, where we talk about clients who have launched and the benefits are now available to those client employees. As we look at our pipeline, you know, it's interesting, the two questions that you asked are actually related, which is, I think there is growing concern among employers about the affordability, access and quality of child care, which again, I think, as they look at the landscape and as they hear from their employees about the contraction in supply, about the difficulty of accessing affordable high-quality child care, we certainly continue to see interest in learning more about our services. We continue to have good conversations on the new client, center side. I would say at the same time, they are also trying to balance that against what is an economic climate that has a little bit of uncertainty to it. You know, what I would say or characterize the pipeline, we see it as a strong pipeline, but we're also making sure that we're being realistic about the timeframe under which commitments will come through. Certainly the backdrop right now is certainly heavily weighted towards employers thinking about how they can invest in this area. Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. Our next question is from Toni Kaplan with Morgan Stanley. Please proceed with your question. Thanks very much. First I wanted to maybe talk a little bit more about the $14 million of impairment. It looked like maybe you closed six centers in the quarter 'cause I know you talked about opening three organically. I guess how many centers actually did you take impairment losses on? Is that sort of the full 150 that you talked about in the lowest cohort? Is it the half that probably won't get into the mid? Just wanted to understand it a little bit better. Thanks. It's a good question, Toni. I think the way that the accounting rules sort of govern when you take an impairment has to do with existing cash flows trends over the last few years and the near-term outlook. That write-off, that impairment includes the right of use assets and the underlying portion of fixed assets in a variety of centers, some of which are open and operating and are not on the close list and are not, certainly some of them may be in that potential to close because they're more protracted underperformers. There's no, there's no hard and fast rule that it's certainly not covering 150 centers. It's not intended to be a, you know, a same singular approach to all of those that are not yet back to their pre-COVID operating. I think you've seen that the last couple of years we've had some impairments that have come out of COVID because of this and the protracted underperformance is the main driver. Got it. Wanted to also ask about margins. I know you gave the full-service guidance for the year and for the first quarter, just I wanna make sure I understand it right. Fourth quarter, you won't get the ARPA benefit any longer and what should sort of the normalized margin be exiting 2023? We're looking at low single digit to mid-single digit for full service for the year. You're asking about full service, Toni? Yeah, yeah, full-service. Thanks. Yeah. You know, it will, you know, our expectation is we would be, it would be improving throughout the year. As you say, ARPA will fall away by Q4, but it would be countered by that improving performance. Exiting the year similar to that low single digit to mid-single digit range because we have, as I say, underlying better performance and the loss of ARPA counteracts that. The outlook then in 2024 would be for that to be, as Jeff pointed out, then, coping with the effect of the remainder of ARPA falling away, but the ongoing cohort improvement and the ability to price another cycle ahead of the labor cost that is now embedded in the overall cost model. Got it. Then just lastly, backup margins, I know you were expecting to be about 35% in 4Q and maybe even 40%. I guess what happened there that led to, you know, a lower margin quarter? Thanks. Yeah. You know, as we mentioned, we're pleased with the Back-Up Care performance, overall, the return to our more traditional use care types. We were in the range of what we had guided to for Back-Up Care for the quarter. Use was, you know, we had this cyber incident was minor. You know, we do expect there was a little bit of disruption to some of the use that it doesn't change the overall trajectory. It just was a little bit of a disruption in the quarter. Overall, I think it's a mix of the type of use that we had and the other element to this that we are in process of absorbing too, similar to the full-service side, is we see some inflation on the provider network. There are, you know, we've engaged with a number of third-party providers who support the Bright Horizons network, and some increased costs on that front as we are able to expand the use, had some effect on the margins too. On our cost structure, that was an element. I think the good news on Back-Up Care similar to the full-service business is we do have pricing power and are able to continue to take some price increase on those Back-Up Care arrangements. Not at the same level as we're seeing on tuition raises. It's not 6% to 7%, but we certainly see some reasonable cost inflation that we're able or price inflation that we're able to get on Back-Up Care to help offset those costs. Perfect. Thank you. Thank you. Thank you. Thank you. Our next question will be from Faiza Alwy with Deutsche Bank. Please proceed with your question. Yes. Hi. Thank you. I wanted to talk about the company's sensitivity to the macro environment at this point. You know, many economists are projecting a recession later this year, and historically, I believe there is a demand headwind during recessionary periods. This time it seems like... I'm curious on your view given your supply constraints to the extent there is a recession, do you think the labor environment would improve, and how do you think about sort of supply demand factors at this moment in time? What are some of the puts and takes from your perspective? Yes. I think as we think about the macroeconomic environment, I would offer a couple of things. The first is that we would expect that it would have a positive impact on our ability to attract and retain teachers, right? Which is again, our largest impediment to and, you know, taking the full enrollment that we have available to us or enrollment requests that we have available to us. I would say that from a demand perspective, you're right to point out the fact that, you know, there is real supply demand imbalance in the market today, and we expect that that will continue. I think if we sort of harken back to the Great Recession of 2008, 2009, 2010, I don't think that people think it will be as deep or severe as that. Even in the midst of what was a very deep recession, while we did see some contraction on the enrollment side, we have the ability to cost manage on the labor side, and so saw almost no impact from a margin perspective. What I would say overall is, the market today is really different. It's even more constrained from a supply perspective. While, you know, we always think of our business as relatively recession-resistant, we think that given the dynamics that exist in the market today, going into any kind of difficult macroeconomic environment, we should be able to persist quite well. Great. That's very helpful. Just wanted to talk about in the international business. It sounds like enrollment is not progressing the way it has in the U.S. in those markets. How are you planning on addressing that? Do you think it will automatically, you know, readjust and progress, or do you plan to make certain, you know, wage investments or other type of investments in those markets? Yeah. I mean, certainly what we're seeing, especially in the U.K. and the Netherlands, is that the labor constraint is even more significant than it is here in the U.S., so availability of labor is even more challenged. In those markets, we do have the ability to use some, what they call agency staffing, which is sort of third-party staffing. That comes at quite a premium in terms of cost. Even that is not in plentiful supply. The impediment of our labor shortages is impacting enrollment, you know, in those markets. We have made some wage investments in both the U.K. and the Netherlands, and also in Australia. The reality is that that will get us, you know, that has gotten us some progress. On the other hand, it really does come down to availability of labor at this point, as opposed to even what the price might look like. What I would say is we continue to look for signs of our ability to garner more high quality teachers in those markets, but that is certainly the experience we've had thus far and therefore the impact on our results. Got it. Just last question from me was is around the pet initiative. I know you talked about that previously, and you mentioned it on this call. Sort of where are you in that process? Like, have you started? Do you have a center currently that you've already opened? Is it still in the planning phase? Just talk to us about how we should see that progressing? Sure. The Pet Care offering that we have is actually through our Back-Up Care segment. it's one of the use types that a, you know, an employer's eligible employees can elect to use their Back-Up Care uses for that same kind of intermittent Pet Care. we don't have a center of any kind. We're not, we're not running directly any kind of Pet Care, doggy daycare type of things. We are, we're partnering with third-party providers who do this for any consumer, and we're doing it through an employer-sponsored benefit and it is intended to be like other Back-Up Care on an intermittent basis. An employee can use one of their 20 uses or 5 of their 20 uses for a day of coverage for their pet when they need that on an emergency basis or unexpected basis. Perfect. Thank you so much. Okay. Thank you. Thank you. Okay. Well, thank you all very much for participating in the call, and appreciate your time and interest. Have a good evening. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation