Bright Horizons Family Solutions Inc (BFAM) 2015 Q2 法說會逐字稿

Greetings, and welcome to the Bright Horizons Family Solutions second-quarter earnings conference call.

(Operator Instructions)

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. David Lissy, CEO of Bright Horizons. Thank you, David, you may now begin.

Thanks, Mike, and greetings from Boston, hello to everyone on our call today. Joining me on today's call is Elizabeth Boland, our CFO, who will go through a few administrative matters before I kick off the call. Elizabeth.

Thanks, Dave. Hi, everyone, and thanks for joining us today. Our earnings release was issued after the market closed today, and the webcast recording of the call will be available in the investor relations section of our website at brighthorizons.com.

In accordance with Reg FD, we use these conference calls and other similar public forums to provide the public and investing community with timely information about our recent business operations and financial performance. Please note that some of the information you'll hear today consists of forward-looking statements including, without limitation, those regarding our current expectations for future performance and business outlook, overhead costs, operating margins, acquisitions and integration, center openings and closures and the associated costs, capital spending, income from operations, borrowings, adjusted earnings per share, cash flow, and cash on hand.

Forward-looking statements inherently involve risks and uncertainties that may cause actual operating and financial results to differ materially. Factors that could cause actual results to differ include risks related to implementing our growth strategies, integrating acquisitions, our substantial indebtedness, and other risks and uncertainties that are identified and discussed in the risk factors set forth in our Form 10-K for 2014 and our other SEC filings.

Any forward-looking statement speaks only as of the date on which it's made, and we undertake no obligation to update any forward-looking statements. We will also discuss certain non-GAAP financial measures on this call, which are detailed and reconciled to their GAAP counterparts in our press release and Form 10-Q which are available on our investor relations website and are filed with the SEC. Back over to Dave for the review and update on the business.

Thanks, Elizabeth, and hello again to everybody who's joined us on our call today. As usual, I'll update you on our financial and operating results for this past quarter as well as our business outlook for the rest of 2015. Elizabeth will then follow me with a more detailed review of the numbers, and then we'll be together for Q&A after she's done.

So first, let me recap the headline numbers for the second quarter. Revenue increased 6% to $370 million and adjusted EBITDA of $75 million was up 16%. Adjusted net income of $33 million was up 20% over the second quarter of 2014, which yielded adjusted earnings per share of $0.53, up 29% from last year's second quarter.

We're very pleased to report another strong quarter which is reflective of continued positive trends across our business. The $22 million gain in revenue was spread across all three of our operating segments, with full-service revenue up $16 million, back-up $5 million, and ED advisory adding just over $1 million.

We added 46 new centers this quarter, including the Hildebrandt Learning Centers we acquired in May, which I'll talk more about in a minute. Some highlights for new client adds and cross selling across our suite of services this past quarter include Equifax, Guardian Life, Northrop Grumman, Rustle Reynolds, Sony, and Ingersoll Rand.

Lastly on top-line growth, as we discussed on our last call, we continue to see impact from foreign exchange this past quarter. This translated to a headwind of approximately 2.5% on our revenue growth this quarter over last year, or more than $7 million. So on a common currency basis, therefore, our revenue growth in Q2 would have approximated 9%.

On the margin side, we had a strong quarter with 200 basis points of year-over-year improvement at both the gross and adjusted operating income lines. We're seeing positive impact on margins come from improved enrollment in our mature classes centers, our ability to manage the confluence of pricing and cost increases at the center level, growth of our back-up and educational advising businesses, and the impact of our newer class of lease consortium model P&L centers.

The contributions from the class of our newer released consortium model centers that opened in 2013 and 2014 have now begun to offset the losses from the more recently opened centers, and as a result, the headwind we have been experiencing is diminishing. Overall, adjusted operating income expanded from 12.2% to 14.2% in the second quarter and is up 190 basis points in the first half of the year.

Overhead was on track with our plan for the quarter. Although we expect to have some modest integration costs associated with our acquisitions this year, we're still projecting overhead as a percentage of revenue to approximate last year's levels.

Now, let me turn to the acquisition we completed this past quarter. Hildebrandt Learning Centers joined the Bright Horizons' family at the end of May, adding 40 new client centers to our portfolio. These included centers for Penn State, West Virginia University, Santa Fe Pasteur, Vertex Pharmaceuticals, Lancaster Laboratories, and several other regional health care providers and government agencies.

Their centers are concentrated in the Pennsylvania area, and they're highly respected programs that have delivered high quality care and education to working families for many years. Although it's still relatively early, we're really pleased with the integration process to date, and I personally met with several of our new clients.

The Hildebrandt Centers are smaller than our average centers and all but two of them are on cost-plus contract models. The contract economics are similar to our existing cost-plus portfolio although the average revenue per center is less than $1 million. Looking ahead to 2016 and beyond, we're excited by the opportunities that exist within the Hildebrandt group, which include cross selling our other Bright Horizons services to this new class of clients, opening their pipeline of a handful of centers that they had under development, and completing the transition and the integration of the overhead support services.

As we finish the first half of the year, we're pleased with the continued momentum across all of our service offerings and we're well positioned to continue to deliver on our plan for the full year. In addition to the full-service performance I have already discussed, our back-up and educational advising segments also continue to deliver solid growth from new and existing clients -- from both new clients and existing clients who are expanding their services.

As we head into the second half of the year, our sales pipeline across all of our services remains strong. Our full suite of solutions continues to provide us with a strong competitive advantage in the market, and we remain on track to continue to drive our organic growth plan.

Moving over to acquisitions, as we've discussed on past calls, our activity continues to exceed last year. Our team has cultivated a solid pipeline of prospects that are in various stages of active discussion and review. This pipeline includes a good mix of smaller networks and single center opportunities both here in the US and in Europe. And while it's always hard to predict timing, we remain on track to complete a more typical run rate of acquisitions this year, as compared to 2014, and to continue this momentum into next year.

Shifting to our capital allocation strategy, as I've talked to you about before, our priorities remain, first, growth oriented investments in acquisitions and in new lease consortium model centers. So that's where we're focusing a lot of our attention and our resources. And as you can see from some of the results this quarter, those investments are beginning to return strong results.

Second priority is to enhance shareholder value through our share repurchase program, which we also continued to execute this past quarter through modest open market purchases, as well as a block share purchase from Bain in connection with a secondary offering we completed June 1.

So to update you now on our outlook for 2015 results, we continue to expect to see revenue growth in a range that approximates the 7% to 10% over 2014 levels, and this includes the continued impact of lower FX rates, which we expect to generate a 2% headwind for the year. We expect to expand adjusted operating income margin by approximately 100 to 125 basis points and to produce adjusted EBITDA in the range of $273 million to $276 million. Thus we're increasing our guidance for full-year 2015 earnings per share to a range of $1.79 to $1.83.

And with that, Elizabeth -- I'll turn it over to Elizabeth so she can take you through a more detailed review of the numbers, and I'll be back to you during Q&A. Elizabeth.

Great, thanks, Dave. So I'll recap a few of the things that Dave reviewed and give you a bit more color. As we started off the top-line revenue growth in the second quarter was $22 million and the full service center business added $16 million, or 5.5% on rate increases, enrollment gains in our ramping centers as well as our mature class, and contributions from the 73 new centers that we have added since the second quarter of 2014.

As Dave mentioned, the pound and euro foreign exchange rates declined more measurably in Q2 of 2015, compared to Q2 of 2014, which dampened the revenue growth primarily in the full service segment by approximately $7.5 million, or 2.5 percentage points. The impact of centers that we have closed since the beginning of last year also offset the top-line growth in full service by about 2 points, 2 percentage points.

The back-up division grew 12%, and ED advisory services grew 16% in the quarter, from both new clients and expanded utilization services by the existing client base. Gross profit increased $12.8 million to $96 million in the quarter and gross margin was 25.9% of revenue, compared to 23.9% in 2014.

Starting with the smaller segments, our back-up and ED advisory services generate gross margins that are more than double what we earn in the full-service business. So, efficient service delivery allows us to leverage the top-line growth and expand operating margins by approximately 140 basis points in our back-up care group and more than 500 basis points in the ED advisory sector.

On the full service side, performance remains strong in our mature and ramping class of centers. The steady pace of year-over-year enrollment gains in the mature class that we have been achieving, starting in 2011, continues in 2015, and we have realized approximately 2% increase in 2015. Strong cost management alongside this enrollment growth and disciplined price increases also contribute to the margin expansion.

As Dave discussed, we're now realizing more significant returns on the investments we have been making, starting in late 2012, in our expanded lease consortium growth strategy. We've opened more than 35 of these centers over the past 2.5 years, and we expect to add 15 to 20 a year, including this year. Although we expect to incur roughly a similar level of losses from this group in 2015 as we have incurred in the last 2 years, around $8 million to $10 million, the headwind to gross margin has begun to abate as the 2013 class is nearing mature contribution levels and the 2014 class ramps their enrollment in their second full year of operation.

Overhead in the quarter of $36.5 million was 9.9% of revenue compared to $33 million or 9.5% last year. These figures exclude the transaction costs that we incurred with our secondary offering with about $350,000. Including the overhead we'll temporarily absorb in connection with the Hildebrandt acquisition, our outlook for 2015 is for overhead to roughly approximate 2014 levels as a percentage of revenue, and we would then expect to regain overhead leverage in future periods, post integration, and with the continued scale and leverage from our European operations and the ED advisory business.

Including the impact of acquisitions, and the shares that we repurchased in the second quarter, we ended June 30, 2015, with approximately 3.4 turns of net debt to EBITDA, which is consistent with the levels that we reported at March 31. The effective or structural tax rate of 35.5% in 2015 is based on our expected applicable rate for the projected full year 2015 operating performance and is consistent this quarter with last quarter in the full year.

We generated operating cash flow of $67 million in the quarter, compared to $53 million last year, primarily due to the timing of collections and payments and working capital plus the incremental net income. After deducting maintenance CapEx, free cash flow totaled $60 million for the quarter and at $100 million year to date. We ended Q2 2015 with approximately $77 million in cash and no borrowings outstanding under our revolver.

At June 30, we were operating 922 centers with capacity of 106,000, which is an annual increase of 6.5% over the June 30, 2014 capacity. The mix of contract types is roughly consistent, 70% profit and loss arrangements, and 30% cost plus contracts. With cost plus up slightly due to the Hildebrandt acquisition.

As Dave previewed, our outlook for the full year 2015 anticipates revenue growth approximating 7% to 10% over 2014. I'll break down the growth for you as I typically do. Organic growth approximates 8% to 10%, including the 3% to 4% price increase, 1% to 3% growth from enrollment in our mature and ramping centers, 1% to 2% from new organic full service center editions, and 2% from our back-up and educational advisory services. In addition, acquisitions will add approximately 2.5%. Offsetting these increases are the effects of center closings, which include both legacy organic and historically acquired centers, approximating 1% to 2%, and projected reductions of foreign exchange rate differences of approximately 2%.

We're planning to add a total of 80 to 85 new centers, including organic, new and acquired centers, and our current outlook also contemplates closing approximately 30 centers. As Dave mentioned, we expect income from operations in 2015 to expand approximately 100 to 125 basis points from the 11.1% adjusted income from ops that we reported for 2014, primarily on gross margin expansion.

For the full year, we're looking at amortization in the range of $28 million to $29 million and depreciation in the range of $53 million to $55 million. Stock compensation should approximate $9 million and interest expense we expect to be in the range of $41 million to $42 million for the year, assuming continued 4% to 4.5% overall borrowing rates on our term loans and no borrowings under the revolver required based on the expected cash flow generation.

The combination of top-line growth and operating margin leverage will drive adjusted EBITDA in the range of $273 million to $276 million for 2015 and adjusted net income to a range of $112 million to $114 million. The share buyback we completed on June 1, 2015 adds roughly $0.02 a share to the 2015 EPS that we had previously projected. Coupled with the performance through the first half of the year and our updated outlook, therefore we now estimate adjusted EPS to increase to a range of $1.79 to $1.83 in 2015. One other statistic for the year is we estimate weighted average shares to approximate 63 million.

Lastly for the full year, we'll project that we'll generate approximately $185 million to $195 million cash flow from operations, or $150 million to $160 million of free cash flow, net of projected maintenance CapEx in the range of $35 million. Based on the centers in development in slated to open in 2015 and early 2016, we expect to invest approximately $50 million to $55 million in new center capital, and we expect to spend $65 million to $70 million for acquisitions in 2015. We expect to fund all of these investments from operating cash and end the year with $50 million to $60 million in cash on hand.

Lastly before Q&A, let me look specifically at Q3 of 2015. We're projecting our top-line growth to be in the range of 8% to 10% for the quarter, including the impact of the lower foreign exchange rates and adjusted EBITDA to approximate $64 million to $66 million. This translates to net income, adjusted net income in the rage of $25 million to $26 million, and adjusted EPS in a range of $0.40 to $0.42 per share for Q3 of 2015 on approximately 62.5 million shares.

So that is end of our prepared remarks, Mike, and with that, we're ready to go to Q&A.

Thank you.

(Operator Instructions)

Thank you. Our first question comes from the line of Sara Gubins with Bank of America, Merrill lynch. Please proceed with your question.

Good afternoon. Could you maybe help us just with a little bit more on the financial impact from the Hildebrandt acquisition, any details you can give us on what revenues, margin, maybe amortization of intangibles looks like?

Sure. We're in preliminary stages just on the last point, Sara, so amortization would fit into the range of the guidance I gave for the full year compared to what you have. The purchase price is in the range of $19 million or so, and we have, as Dave mentioned, the revenue per center is a little less than $1 million per site.

Annualized revenue is in the range of $33 million to $35 million or so from the group. As he mentioned, too, these are cost-plus type contracts that are, you know, have sort of similar economics to ours in the range of, you know, 15% or so gross margin in general, so that's sort of the context for the business.

Got it. Okay, that's helpful. And then this is more of a theoretical question at the moment, but there's been quite a bit of M&A announcements from large corporations in the last couple of months. Could you talk about historically what you've typically seen when M&A does happen? It probably various from case to case, but just general thoughts on it would be helpful.

I think, Sara, it really does depend on the industry and the client base we're talking about. I think we have had situations in the past where M&A has meant the closing of some centers based on closing of different work sites, but in other cases M&A has meant opportunity for us to expand programs to the part of the Company that is not been a client of ours. I think it's been varied depending on the industry and depending on, you know, which client we're talking about.

Okay. Fair enough. And then just last question, the Children's Choice and Kidsunlimited Centers, are those now all considered mature or is there still some that are in ramp up mode?

Pretty much mature. There may be a couple that are in their third year of ramp, but the ones that were immature when we acquired them in 2013 would be close to mature at this stage.

Great. Thank you.

Yes.

Thank you, and our next question comes from the line of Gary Bisbee with RBC Capital Markets, please proceed with your question.

Hey, guys, good afternoon. I guess the first question, you know, the guidance for the full year seems to imply some deceleration in the profitability. Is that just that the comparisons become a lot more challenging in Q4 on margin expansion, or is there anything else that's going on driving that?

Yes, no, I think that is the effect that you see in the back half of the year. We did have a really strong Q4 last year, and so the way that the new center openings are slated to come in, the lease consortium centers that we're opening this year, we have opened five so far, and have a little bit of back-end weighting there. Just the combination of those factors that we would see a little bit more of a tougher comp in Q4.

Okay. And then the lease consortium centers in general, so the amount of the drag, as you predicted, has decelerated. What happens from here, just thinking over the next couple of quarters, are we now at the steady state or does that get better for a bit more? Or is the back-loaded timing actually make it not quite as good in the back half relative to what you just reported?

Well, I mean, I think that the point that we are at now is as we had predicted by the middle of the year, we would sort of see the headwind not getting any worse, and beginning to turn around, and so I think there's -- it will be not an immediate flip to all the centers are mature, but we will start to see some modest contribution.

I mean, you're seeing it in the full service business for the year, notwithstanding a little bit of this quarter-to-quarter noise, but I think that the benefit of it will continue to manifest in more in the first half of 2016, but a little bit this year. It will be that third layer coming in of profitability, especially as the 2014 centers are now getting past their breakeven point.

I think that from here what we see is that little bit of momentum starting to pick up from that class that will contribute to our ability to leverage full service margins going forward, even as we get closer and closer to that mature operating, mature enrollment level in our legacy class that has been recapturing enrollment that we had lost a few years ago. That is starting, you know, to reach its stasis point in the next couple of years, too.

All right. That's great. And one last quick one. On the educational advisory business, the growth rate accelerated like you predicted a quarter ago. Is 20% still a decent, you know, growth potential over the next few years, or is this, you know, in the teens maybe a better way to think about that --?

Gary, I think, as we talked about a little bit the last time, we're still -- the growth -- we're happy to see the growth rate pick up, but it's still somewhat dampened by the change we made. So if you were to sort of remove the accounting sort of change we would have seen in the quarter that was north of 20%, and I expect that for the year, even with the changes that we made, you know, starting this year will approximate 20% growth. There's good momentum in that business, and I think there's a good reason to see that continue to be a strong grower for some time.

Great. Thank you.

Thank you. Our next question comes from the line of Anjaneya Singh with Credit Suisse.

Thank s for taking my question. This is actually Zach in for Anj. I'm just interested in taking a closer look at a the margins we saw in the full service centers. You obviously have a lot of moving pieces there, the ramping with leasing consortium centers, maybe some FX tailwind, you also acquired a center that tends to be smaller. Those are going to have less enrollment growth potential.

Just when we're thinking about where we can go from here, how should we be thinking about that for the rest of the year into 2016, on a long-term basis?

I think, Zach, as we go forward, the basic factors that should continue to drive performance in the full service segment continue to be our ability to manage positively the confluence between price and cost increases within the full service class. You know, our history has been to try to manage to about a 1% spread between price and cost increases, and we feel good about what's happening in that regard this year, and as we look forward, that's our expectation.

The other piece that's continuing to contribute is you did see the mature class approximate 2% growth in this quarter and then we expect that there still to be some time left to recover enrollment in that class that should produce, you know, positive results over the next couple of years before that begins to normalize. And then, as you mentioned, the class of lease consortium model centers, as Elizabeth just talked about, has begun to turn but still has some significant value creation left in that class to play out over the course of the next couple of years, as those centers continue to mature, so those are the main drivers.

And again, we were pleased with the results in the full service segment this quarter. And other than some quarterly noise, as was brought up before in terms of a comp in the fourth quarter, I think there's good signs that, that segment will still continue to drive, you know, strong results for the foreseeable future.

Yes, and I think from a quantification standpoint, you know, what we have talked about is being able to expand margins in the next couple of years from in the neighborhood of 75 basis points to 100 basis points, and that would be -- the number of combination factors would go into that.

Thanks for that color on the quantification. Definitely appreciate it. In back-up services you previously talked about low-teens growth for this year.

With the first half coming in just a tad below that, and the comps getting tougher in the second half, is that still the way we should be thinking about that segment? And if so, what gives you confidence regarding the acceleration there?

I think we feel good that there's always going to be noise quarter to quarter comp wise, but we feel good about what we've said about that growth rate, and expect the year to play out that way.

Thanks for that color. And finally, if you could just update us on the cross selling of services? It seems like the growth rate trailed off a little bit in ED advisory, some of that obviously is going to be some of the accounting change. You said it was going to be upwards of 20% for this quarter if you've made the adjustment for that accounting change.

And it sounded like you said it was going to be about 20%, a little bit better than you seemed to talk about it last quarter when you were on the call. So are you seeing some sort of acceleration there in ED advisory, or is this just consistent with what you've been seeing so far?

I think we have been pretty consistent, aside from talking about the effects of the change of when we began to recognize revenue on our newer contracts and how that comped against, you know, prior years. I think we continued to be consistent in our thinking that, that business has good momentum in it, good sales trends, a strong pipeline, and as I said earlier, we feel good about, you know, its continued growth going forward.

Thanks for taking my questions.

Okay.

Thank you, and our next question comes from the line of Manav Patnik with Barclays. Please proceed with your question.

This is Ryan filling in for Manav. I was wondering if you could talk a little bit about just the M&A environment in the US? Is Hildebrandt kind of the high end of the center of groups that you kind of see remaining in the US? And also if you could give a little color on the recent acquisition of Active Learning and kind of the rational, and then size or any numbers related to that as well?

I think, first, as I said earlier in the prepared comments, I think we feel good that the team has done a nice job at building a solid pipeline of acquisitions. And included in that mix are, what I'll call, regional [chain] both here and in Europe, and also, single-site operators that have been sort of the bread and butter of what we have acquired over the years.

So, Hildebrandt's a group that I have personally known for years, and we have known as a company for years and have long respected. It really was just a matter of timing on their part, but I think we made for a good home, and that's actually a natural fit for us. I think there are others out there that fit that same sort of category, both here and in Europe, and obviously we're trying to have discussions wherever possible to that end.

Again, I think we feel good that there is continued conversion. Active Learning is a perfect example of a smaller group that we acquired in London recently, and again, a high quality operator that we have known for years, and it was a matter of the timing being right. That's a small acquisition, so we're not in the habit of trying to detail information on every small acquisition that we do. So I'm not going to talk too much about the specifics of it, other than to say that's just an example of what you'll continue to see from us going forward.

Got it. And on the cost side, there's obviously been, I mean a lot of discussion proposals and granted, you know, they're proposals just that, but just in terms of, you know, you're seeing minimum wage a drive to $15 there, and obviously some of the proposed overtime rules. Can you give us some color and help us size what that means for you guys?

Yes, obviously, we have long been focused on ensuring that we have competitive and strongly competitive compensation and try to be a leader in that regard in our field. So, federally, minimum wage has never been an issue for us. It's more some of the initiatives in different states that have come up over time and continue to come up. We follow them closely.

I think in most cases where it's either been enacted or being discussed, we expect there to be legislation that will sort of make its way in over time, and you know, over the next couple of years, expect you to be at a certain level. And as we analyze our pay rates in those places, we feel good about where we stand relative to the field.

So we may have some issues here and there that are small pockets, but I feel good that our overall pay levels comport pretty nicely with where most geographies are going with respect to minimum wage.

Great. Thank you.

Thank you, and our next question comes from the line of Jeff Meuler with Baird, WD Baird. Please proceed with your question.

This is Nick on for Jeff. Ed advisory really strong performance there, particularly within the margins, just looking at the back half, I know you said it's probably a couple-year, few-year period until you get to maybe a steady state, similar margin profile as back-up care, but any reason why we shouldn't see just a similar year-over-year trend over the second half?

No, I think the business is in a ramp and growth mode, so as we continue to launch new clients into the business, we will have an opportunity to continue to step leverage on the overhead side, so I think our view is that we are -- we have made some of the foundational investments that will allow us to drive some operating margin leverage there. And we'll continue to have to make those periodically along the way as it continues to grow, but it's on its way to being the kind of performer that back-up is over the next couple of years.

Okay. And then just within a full service looking ahead to the second half in the fall, how are trends looking for rebuilding the enrollment pipeline and just do you feel comfortable with kind of the similar 3% to 4% pricing increase?

Yes, I think we're on track, as I talked about before, in the range of 3% to 4% with price. And I'm pleased with the way enrollment continues to play out, both here and in the UK.

Okay. That's great, and just one last one for me. I guess switching to the employer side, it sounded like the pipeline still remains pretty healthy. Any areas geographic or industries of particular strength to call out?

Yes, I would just say that across the board, what's been nice to see is that our suite of solutions now really do hang together nicely, and we have continued to get traction with selling multiple services in at the same time to prospects and also cross sell in our new services to our legacy clients. And so I think the trends are good, and the sales pipeline, as I said earlier, does remain strong.

If I were to think about sort of geographies, you'd sort of take the 8 or 10 major cities like Boston, New York, DC, San Francisco, Chicagoland, Atlanta, those places, and I would say a lot of activity focused around those, Seattle, those areas. If I were to look at industries, I would say technology, biotech, healthcare, hospitals, universities continue to be the sort of brightest of the spots for us.

Okay. Great, thanks for taking the questions.

Yes.

Thank you. And our next question comes from the line of Andrew Steinerman with JPMorgan. Please proceed with your question.

This is Louis Pavia for Andrew Steinerman tonight. Thanks for taking my question. Can you tell us what the acquired revenues were in the quarter?

Sure. Of the overall growth, it's about 1.5% coming from acquisitions in the quarter, including the contribution from Hildebrand.

Okay. Great, thanks, and then going back to gross margin one more time. We saw the pace of gross margin expansion accelerate this quarter. Is that all because of the diminishing headwind from lease consortium, or what would the other puts and takes be?

I think part of it was what we talked with the lease consortium model centers, but the other two really important puts and takes continue to be, as I said earlier, price versus our ability to manage the cost structure at our centers. And then, also, the continued positive influence of enrollment gains in the mature class of centers.

And as we have talked about before, we had lost some enrollment a while back, and we have been regaining it for the past couple of years. And to the degree we're regaining it in centers that have a cost structure that is somewhat mature, the incremental margins associated with that, those enrollment gains are probably twice our installed margins or our typical margins.

So those three factors are really the key, and the enrollment gains really are consistent throughout here, in the US, and abroad.

Yes, and the only thing I would add to that is that we talk about the lease consortium centers, we also add other new centers that ramp up as effectively, too. So each of those new centers that are coming to us, whether they're client centers or lease consortium centers, also contribute.

Great. Thank you.

You're welcome.

Thank you. There are no other questions in the queue at this time. I would like to turn the call back over to Dave for any closing comments.

We thank all of you, and all of you who stood in for other people who couldn't be with us tonight, and those of you who are with us on the call. Elizabeth and I look forward to seeing you all on the road and wish you a continued enjoyable summer. Thanks, have a good night.

Thanks, everyone, good night.

This concludes today's teleconference. You may disconnect your lines at this time, and we thank all of you for your participation.