Greetings and welcome to the Bright Horizons Family Solutions' First Quarter 2014 Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the conference over to your host, David Lissy, Chief Executive Officer. Mr. Lissy, you may begin.

Well, thanks, Stacey [ph], and hi to everybody on the call. Greetings from Boston where we're eagerly awaiting any sign of spring. Joining me on the call today, as usual, is Elizabeth Bowe, our Chief Financial Officer. And before we kick off our formal remarks, let me let Elizabeth go through the Safe Harbor Statement.

Thanks, Dave, and hi to everybody. As I hope you all saw, our earnings release went out today after the close of the market and it's on our website under the Investor Relations at brighthorizons.com. This call is being recorded and it's also being webcast and a complete replay is available in either place. The phone replay number is 877-870-5176, or for international callers, it's 858-382-5517, with conference ID number 13580485. And as I mentioned, the webcast will be available at our website also under the Investor Relations section. So in accordance with Reg FD, we use these calls and other similar public forums to provide the public and the investor community with timely information about our recent business operations and our financial performance, along with our forward-looking statements regarding our current expectations for future performance. Forward-looking statements inherently involve risks and uncertainties that may cause the actual operating and financial results to differ materially from those that we described in our forward-looking statements in this call or other public forums. These risks and uncertainties include: our ability to successfully implement our growth strategies, including executing contracts for new clients, enrolling children in our childcare centers and retaining client contracts, and operating profitably in the U.S. and abroad; secondly, our ability to identify, complete and successfully integrate acquisitions, and to realize the attendant operating synergies; third, our decisions around capital investment and employee benefits that employers are making; fourth, our ability to hire and retain qualified teachers as well as other key employees and management; fifth, our substantial indebtedness and the terms of that indebtedness; and lastly, the variety of other risk factors that are set forth in our SEC filings. We also discuss certain non-GAAP financial measures on these calls and the detailed disclosures and reconciliations relative to these measures are included in our press release which is obviously available on the Investor Relations section of our website. Let me turn it back over to Dave for his update on the business.

Great. Thanks, Elizabeth, and hi everybody again on the call. We're pleased to be off to a strong start this year as we continued to execute on our long-term plan to grow our core center business while expanding our newer lines of services and growing our footprint outside the United States. We just talked to you about, six weeks ago when we reported last quarter's results, and at that point we gave you a thorough overview of our outlook and of the business climate we're in. And really in such a short period, not much has changed. So we're going to keep our comments relatively brief this time, focus on the quarter, and our updated outlook for the rest of this year. I'll kick things off and then Elizabeth will follow with a more detailed review of the numbers. And then we'll go to your Q&A. First, let me recap the headline numbers for you for the first quarter of this year. Revenue of $332 million was up 19% over the prior year and adjusted EBITDA of $57 million was up 18%. Adjusted net income of $23 million was up 46% over the first quarter of 2013, which yielded adjusted earnings per share of $0.34, up 36% from the $0.25 that we reported in last year's first quarter. Our revenue growth in Q1 reflected strong performance across our suite of product offerings. Full service revenues grew 18% over Q1 of last year. Backup revenues increased 13% and ed advisory services grew $3 million or 63%. We added six new centers in the quarter. Highlights included our fourth center for Centene [ph], new centers for Chicos [ph] down at their headquarters in Florida, and in the U.K. and London for the Royal Holloway University, to name a few. Other new client…

Thank you, Dave. So as I mentioned earlier and we've done in previous conference calls, I'll discuss our reported results as well as certain metrics that we think help isolate unusual and non-recurring charges. The earnings release does include these tables that reconcile our U.S. GAAP reported numbers to the additional metrics for adjusted EBITDA, operating income, net income and EPS, specifically quantifying non-recurring charges such as the costs associated with stock offerings and deal costs for acquisitions. So again, top-line revenue growth was $52 million for the first quarter, with the full-service center business increasing $45 million, backup increasing $4 million, and ed advisory increasing by $3 million. In addition to the new center growth rate increases and enrollment gains that Dave mentioned, favorable FX rates also contributed to the top-line growth. Gross profits increased $11.4 million to $77 million in the quarter, and were 23.2% of revenue compared to 23.5% in 2013. In addition to the factors that we reviewed earlier, our backup division continues to be a strong contributor to our margin growth in the first quarter of 2014 as we generated 30% operating income on -- 30% operating income growth on the 13% revenue expansion. As we've talked about on prior calls, the quarterly margin trends and backup can vary somewhat based on the timing of new client launches as well as seasonal trends in utilization, which tend to be higher over the summer as full vacation periods than they are in the first quarter. Adjusted overhead in the quarter was $35 million, compared to $30 million last year, remaining flat at 10.5% of revenue. We are close to completing the integration of Kids Unlimited and Children's Choice, so the overhead synergies have not totally been realized yet. In addition, stock compensation expense of $2.4 million…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Sara Gubins with Bank of America Merrill Lynch. Please proceed. David Chu – Bank of America Merrill Lynch: Thank you. This is David Chu for Sara Gubins. So just wanted to confirm, the 45, 50 centers for 2014, that's a net number, correct?

That's a gross number, David. David Chu – Bank of America Merrill Lynch: That's a gross number?

We've always talked about that as a gross number. David Chu – Bank of America Merrill Lynch: Got it, got it. So on a net basis, what are you thinking?

Well, I think our typical run rate of closures is, you know, about 2% to 3% per year, which typically would yield 20 to 25 closings. And I think this year we have the anomaly that I talked about earlier on the call which is anywhere from 8 to 10 closings that we're likely to have in addition to that with respect to closing some under-performing centers that we acquired in the two deals we did in the past year. So closings could range between 30 and 35. David Chu – Bank of America Merrill Lynch: Got it. And can you just, sorry if I missed this, but the organic revenue growth in the quarter?

The organic revenue growth in the quarter was about 8 percentage points, so of the 19% growth we had just about 11%, $30 million or so came from the Kids and Children's Choice contributions. David Chu – Bank of America Merrill Lynch: Okay, thank you. And lastly, in terms of improving capacity utilization, how much more runway do you think you have?

As we talked about in the past, the place where we're most focused obviously is in the mature centers where we own the P&L. And in that subset of centers, we are - that's the group when we talk about enrollment in the quarter being up just over 2%, that's what I'm referring to. Overall in terms of percentage of occupancy, we probably have 5% to 6% of runway left just to get us back to where we were before the downturn when we lost enrollment in our P&L class. Beyond that, there's probably another 5 to 6 points of potential room to get us to where we'd think full capacity would look like. David Chu – Bank of America Merrill Lynch: And what is the full capacity rate?

Generally centers would peak at average around 85%, 80% to 85% of capacity. And we consider that to be practical capacity.

We wouldn't -- our target would be 78% to 80% rather than a full practical capacity that we would be achieving. Is that what your question is, David? David Chu – Bank of America Merrill Lynch: Yes, yes. Okay. Thank you very much. That was very helpful.

Good. Thanks.

Thank you. Our next question comes from Manav Patnaik with Barclays. Please proceed. Manav Patnaik – Barclays Capital: Hey. Good evening guys.

Hi, Manav.

Hi, Manav. Manav Patnaik – Barclays Capital: Hey. So just to clarify just on the guidance real quick, the $20 million to $25 million you calculated as acquisition spend, is that baked into the gross CapEx number? Or is that outside of that?

So the components of our capital spend are maintenance capital which we're estimating $25 million to $30 million for maintenance capital, new center development which is $40 million, and then acquisitions are separate from that. Manav Patnaik – Barclays Capital: Okay, got it. Just wanted to clarify that. Thank you.

Yes. Manav Patnaik – Barclays Capital: And then, you know, with respect to the share repurchases, I understand it gives you that little extra flexibility and it's obviously a good thing. I was just wondering if you could talk about the timing around why announce it today, and then how should we think about in terms of your usage of that share repurchase.

Yes. So to be clear, obviously we didn't, just to clarify, we didn't announce it today, we announced it a couple of weeks ago. The reason for it, Manav, is, you know, as we look ahead and we anticipate continued growth and look at what we project to do over the long run, we want to be in a position to have as many levers at our disposal to maximize shareholder value. And as I said earlier, the business, and those of you who have been around for a long time know this, has really good cash flow dynamics. And we think we can first and foremost deploy that in the growth of the company when we can find good acquisitions and when we can, you know, find good base model locations to do. Those things are always, A, a little bit lumpy in terms of when we can find the right ones to execute on. And B, even we may find ourselves at a place where even taking advantage of everything that's on the table in both of those places at any given point in time, we still have the opportunity we think to add additional value through a buyback. And we thought it was prudent and our Board agrees that we should be in that position. And as things play out, we'll be in a position to be opportunistic, whether that's in the open market or as Bain continues to sell shares over time, we want to be in a position to execute on that when and if the time comes we think that's the best way to drive value. Manav Patnaik – Barclays Capital: Got it. And just one sort of related to the M&A topic, can you -- I mean I know you're in the policy of characterizing obviously the M&A pipeline as being active, it's just a question of timing, lumpy. Can you characterize, you know, separate it in terms of your existing markets and sort of the scope of potentially getting into new markets that you're not it --

Yes. When I talk about -- every time I've commented historically on the acquisition pipeline, I'm only referring to markets we're currently in. So the pipeline still remains very active in the countries in which we operate in today. Separate from that, we continue to engage in dialogue in a variety of countries around the world, with the idea that, while it's unlikely that we'll make a move to another country in the short term, it's more likely that over the long run we will be operating in new countries. And so we want to stay abreast. We have some circled up around the world where we think the opportunity for us to add value might be the strongest either because we think there's potential for corporate sponsorship or there's a financing program in place nationally that we think allows us to operate in a strong way and add value and deliver returns that are similar to what we do in other places around the world. So we're active and we're in discussions. But I don't think that we -- you should think that we'll be talking about a new country in the short term. But certainly over the long term it's a good possibility. Manav Patnaik – Barclays Capital: All right. Thanks guys.

Yes.

Thank you. Our next question comes from Gary Bisbee with RBC Capital Markets. Gary Bisbee – RBC Capital Markets: Hey, Dave and Elizabeth. Good afternoon.

Hey, Gary. How are you? Gary Bisbee – RBC Capital Markets: Good. Thanks. The -- I guess the first question, you continue to get exceptional growth but off a small base I guess in fairness from educational advisory. And we know that business has really high gross margins. And so I guess I just wanted to get some commentary, as we think over the next couple of years, how is the operating profitability of that business is likely to trend? And maybe the way that'd be easiest to answer it is just, can you talk about what incremental investments in infrastructure and sales and whatnot? You know, where are the investments you're making to continue to position this asset for growth and over what time period might we see significantly better profitability?

Yes. So I think as you I think rightly pointed out, we continue to be bullish on the opportunity for ed advising to continue to grow. It's clearly a big market. We think the value proposition that we have is unique and we think clients are responding positively to it both existing Bright Horizons clients that we're cross-selling and clients that are engaging with us for the first time in this newer service. We obviously want to be sure that we feed it appropriately with respect to giving it the best chance to grow and take advantage of what we think is a pretty wide market opportunity. We look at it frankly a little bit like, you know, our best internal analog is what happens with backup care, and that business has become significant for us over the course of the past five or seven years and continues to grow nicely. And at its early stages, it had similar dynamics to what we're seeing on the -- at advisory services, that being a strong gross margin and then diluted by an oversized, overhead spend both in people and in systems and in technology to make that all that it can be. And then over, you know, once we reach a certain scale, it obviously began to contribute nicely on the operating line. Our view is that this year, that ed advising will continue to be like it is now. It will continue to grow nicely. It will continue to have strong gross margins. But we're going to continue to make technology investments, additional sales people, some marketing investments, that will continue to force it not to contribute that much on the operating line. It may slightly do slightly better than breakeven, but nothing meaningful. I would expect that beginning some point towards the middle to end of 2015 and beyond, that it'll take a turn and begin to contribute, maybe not its full potential, but certainly better than it is today. And with continued growth, we see the ability ultimately for this to be really our next backup care advantage in the way we look at it. Gary Bisbee – RBC Capital Markets: Great, thanks. And just onto the backup care, that -- those margins there are terrific right now. Should we think of -- how much upside could there be over time to that, or should we think of it more as a top-line story in maintaining very strong margins?

Yes. I think that in Q1 in backup, there's always a little seasonality that benefits us positively, and so there's some seasonality in here. So you're going to see, as we've talked about before, some fluctuation both in revenue but also in the gross margin based on utilization as the year plays out. So it's probably safe to say we're at our sort of peak of what during a year any quarter would look like from a margin perspective. Over the long run we continue to believe that's more of a growth story at this point than it is a margin leverage story. We're making good investments in that business, particularly in technology, in mobile applications, in broadening the suite of services that we offer under that umbrella. We're really pleased with some of the things that we're going to introduce in the next year and have that sort of in our guidance for what we think the business is going to need to be fed to continue to grow. So I think the short story there, Gary, is more of a top-line growth story at this point. Gary Bisbee – RBC Capital Markets: Fair enough. And then just one last one, I hate to come back to this after half the call last time, but one question I keep getting in this whole risk of universal pre-K, is, you talked about the examples of a couple of states where there is a program, you participate in those, and then for a lot of parents, also do a lot of extra hours, and, you know, I think my sense was you charge a higher price such that your economics work out. Do existing -- so here's the question, do existing relationships with employer-sponsoreds, would they in any way preclude you from raising price for part of the week [ph] if there were markets that were to adopt something similar to what you've seen in a couple of your examples?

Actually the effect on the employer-sponsored is interesting because it kind of has the effect of really reducing the proportional contribution that the employer has to make when you bring another source of revenue in. So most of the time, particularly in our cost plus arrangements with clients, the client will see a net reduction to their proportional subsidy based on, in effect, another source of revenue coming from the state. With respect to how we charge it up on community, to the degree we have a center that is a P&L center that has both corporate employees and also is open to the community, which happens at our P&L clash or our risk consortium class, there we would have full rein on how, you know, on pricing on the community-based usage within that center [ph]. Gary Bisbee – RBC Capital Markets: Right. Thanks a lot.

Yes.

Thank you. Our next question comes from Timo Connor with William Blair. Please proceed. Timo Connor – William Blair & Co.: Thank you. Just trying to square the upside that you're seeing in organic growth and the healthy enrollment at mature centers with sort of the changes to your thoughts on the net center count in 2014. Basically it seems like the business is very healthy. Just trying to figure out if there's going to be lumpiness from quarter to quarter, year to year in that center count, and then sort of more steady state annually, how many centers do you think you'll be adding in future years.

Yes. I think the order of magnitude that we're talking about this year is kind of what we see in the, you know, for the foreseeable future. And I think there are going to be anomalies on the closing side. There have been in the past, and there certainly is this year. I would just point out that the extra closings that we're talking about this year are going to be accretive and are really centers that were circled up as challenging whenever we do larger deals. By the way, this is now the first time that's happened. We've had that consistently as part of our plan over time. That, you know, I say that only because sometimes you can get lost from just looking at the actual net number. If we were to look at the sort of the margin that we're adding or even the revenue, because most of the newer centers are a lot bigger than the centers we end up closing, so there's a lot more to the story than just the net gross number. But just broadly speaking, I think the number of adds this year will approximate what we think we can do in the next couple of years, absent any larger acquisitions, which will always push that number up. And that's -- those are not in our guidance for this year or any year. And then a normalized basis of closings would be roughly 2% to 3% of centers in the normal course, absent any of these things that we'll tell you about on a periodic basis that might force that number up. Timo Connor – William Blair & Co.: Okay. And then from last year this time to currently the mature center enrollment growth has really accelerated, I guess you had a point to a couple of things that are driving the upside there. What are they?

I think it's a combination I think of a variety of factors. There's no question that, I think, we benefit from the fact that our centers tend to be -- the centers that are in this class tend to be geographic locations that do better than the general economy. And so not only are they benefiting now, but they benefited last year on a recovery basis a little faster than what some, you know, geographic areas have seen. I also think that we have, on the sort of things that we can control, we've made a lot of deliberate improvements to us. We used the down economic time to make -- continue to invest in our facilities and our program, creating a variety of new curriculum, pieces that have become a part of how we market those centers. And so I think when you add that all up, a little bit more investment in digital marketing, a little more deliberate focus on marketing, more so doing more ourselves than maybe we had to do in the past, I think all that is added up to continued momentum. And we expect that momentum to continue through the year. Timo Connor – William Blair & Co.: And then I know 78% -- this is the last question 78% to 80% is your kind of a target number for capacity utilization, but I'm assuming you have centers that are higher than that. Is there any potential for upside to that particularly later in the economic cycle?

Yes. Well, look, certainly we have centers. When you start to look at -- that are large that have better capacity than that, but when you look at such a large group of centers over the course of time and you consider the realities of when children age out and kind of that there's always sort of fluctuating enrollment, natural cycles in any year, it's challenging to look at the system as being that much higher than that. But certainly if all arrows are pointed in the right direction in a given year, that's possible. But we're not in the position to forecast that at this point. Timo Connor – William Blair & Co.: Got it. Thank you.

Yes.

Thank you. Our next question comes from Dan Dolev with Jefferies. Please proceed. Dan Dolev – Jefferies: Hey. Thanks for taking my question. Hey guys. Real quick question, on M&A contribution. If I remember correctly, last time you said it was 5% this year. And if I heard you correctly, you said 4%. Can you maybe discuss what the difference was? Thanks.

Sure. So I think it's -- ranges of where the growth is, we've moved the revenue, overall revenue growth target slightly, and I think the base of where we're seeing the contribution from the acquisitions and just timing of what we would see them just puts it closer to the range of 4. So that's really all there is to that. Dan Dolev – Jefferies: Got it. Okay. So that's what I thought. Thank you so much.

Okay. Thanks, Dan.

Thank you. Our next question comes from Jason Anderson with Stifel. Please proceed. Jason Anderson – Stifel Nicolaus: Good evening guys.

Hi, Jason. Jason Anderson – Stifel Nicolaus: On that, with the -- so would it be safe to say the dollar contribution of revenue from the closures would be about -- would maybe be 1%? Would that be what moves that?

The closures aren't having anything to do with the acquisitions revenue growth. Sorry, I wasn't quite following your question -- Jason Anderson – Stifel Nicolaus: The closures within your, you know, that you talked about needing to close.

Yes. There's a small factor for that, but that's -- that would be 4 percentage point. So I think it's just really timing of the others. Jason Anderson – Stifel Nicolaus: And would you be able to -- maybe you did, I'm sorry if I missed it, quantify maybe the accretion from those 8 to 10 closures you're talking about?

We didn't quantify the accretion, but I think it's, you know, in general terms, it's -- those centers would have been either losing order of magnitude of 50,000 to 100,000 or be breakeven. So there's accretion by virtue of not losing the cash and also because they're not contributing to revenue, with no margin contribution at all in terms of the pressure on margin growth. So overall I'd have to take a look, but they were in as a class losing money, and so they're accretive as we go forward. Jason Anderson – Stifel Nicolaus: Great. And then one more. The recent announcement you had about the special and exceptional needs partnership, how should we think about it? Is there a contribution from that or does that kind of just roll up into a suite of products -- product offering? Or anything you could help us with there?

Yes. I'll just sort of outline the strategy behind that and then I'll just comment quickly on sort of what you should think about from that. So just to be clear about it, we are, you know, as we think about increasing the value proposition of what we bring to our clients, it's clear to us that there are many areas of struggle as working families continue to navigate the challenges of working life. And we've responded to those solutions with a full suite of solutions that we now bring to bear. We think it deepens our value proposition to any one client to continue to bring new ideas to the table. We recognize that we're not always going to be able to provide those ideas ourselves because our expertise may be slightly different from what's necessary to drive a solution in any given area. One of the major things that we, when we talk to our clients, they bring up, and have brought up over the years, is the disproportionate challenges that parents have when they're trying to navigate the issues related to children with exceptional, special needs. And if you have to advocate for services or anybody has ever been in that position to do with a school system, it could become very cumbersome and cause a lot of loss of focus and loss of productivity. So we found a solution that a provider had developed, MyEd GPS [ph], and we are now the exclusive provider of that service in the employer channel. We've plugged it in to our suite of services. And we are sort of upselling it to our clients. There'll be some incremental revenue and incremental profit over the coming years from that. It's not going to be a big mover of the needle, to be frank, although it will deepen the value proposition that we have with our clients and continue to give us strong position, as other partners want to work with our clients, we want to bring, you know, we want to deepen our position with the most -- the best and most high-quality suite of solutions available, which has been our history and will be our future. So the short story, Jason, is there's no -- there's really nothing more to bake into this year financially. If it ever gets to a place where it becomes big enough for us to call it out from a financial point of view, we'll let you know. But I wouldn't expect that in the next year or two. Jason Anderson – Stifel Nicolaus: Great. Thanks a lot.

Yes.

Thank you. Our next question comes from Jeff Silber with BMO. Please proceed. Henry Chan – BMO Capital Markets: Hi. This is Henry Chan calling in for Jeff. Thanks for taking my question. Just wanted to dig in a little bit to the international component of your revenue growth, particularly in the U.K. and Netherlands. If you could provide a little commentary on that and how much of that is baked into your revenue guidance. Thanks.

Yes. So the U.K. and -- overview and the Netherlands as well both continue to operate right on plan with what we had hoped. They're each in a different phase of what we -- where they are in their evolution. Obviously the U.K. is the country we went to first besides U.S. and Canada. And we've -- we have a long track record of both growing organically and through acquisition. And obviously the biggest story in the past 12 months there has been the latest acquisition we did of Kids Unlimited. That obviously will get lapped in April, but that continues to contribute nicely. And they have a pipeline of their own both of organic and acquisition potential that they're attempting to execute on, which gives us, you know, gives us a good view that the U.K. has some good growth potential on its own going forward. The Netherlands is a place we've been, you know, a lot shorter period of time. I would describe where we are in the Netherlands, as we took this past year to really solidify our position our team, strengthen our team, and really focus on the value proposition we're offering to parents, and we opened a few new centers ourselves organically, focusing in major cities like Amsterdam, Rotterdam and The Hague. I think what we've done now in the past couple of months is we've really opened our focus to look at further consolidation of that market, and we want to be a participant in helping to consolidate that market. We think there are some good targets for us, albeit not very large, but ones that had nice scale for us in that country itself. And then there are some good organic growth opportunity we think to open some new centers in the coming years. The margins that are associated with the Netherlands and the U.K. are also strong. The U.K., the long-term story there has been a little bit like I described when I was responding to the question around EdAssist, it took us a while to take what were good gross margins and get operating margins that looked a lot more like the U.S. And we're getting a lot closer. This last acquisition really went a long way to getting us there, and I think we're going to be very close to now having a business outside the United States that actually generates similar margin characteristics to the U.S. And the Netherlands is already there, there's strong margins in that business, and we think that will be more of a top-line growth story hopefully going forward. So that's how we look at those two countries, I don’t if that's the full answer you're looking for. Henry Chan – BMO Capital Markets: Yes. No, that's great. Do you have a sort of target upside in terms of top-line growth that I guess we could think towards?

I don't think we're talking about guidance of revenue broken out by area. Obviously we'll report on our segments as we do in our releases, but I don't think we're talking about breaking down our overall guidance by country. Henry Chan – BMO Capital Markets: Got it. Okay. Thanks so much.

Yes.

Thanks.

Thank you. Our next question comes from Trace Urdan with Wells Fargo Securities. Please proceed. Trace Urdan – Wells Fargo Securities: Thank you. Good afternoon guys.

Hi, Trace. Trace Urdan – Wells Fargo Securities: I wanted to kind of rip off of Gary's question a little bit about gauging the growth of the backup centers. And I'm interested, if we go under the hood a little bit and understand, you know, does the industry map for the backup centers mirror the same sort of industry map for the sponsored Childcare centers? Is it something that you lead with or follow with as you think about kind of attacking those markets? Does that question make sense?

Yes. And I'll just one thing that I think will hopefully bring additional clarity. Trace Urdan – Wells Fargo Securities: Okay.

So, broadly, I would say that the industry sectors tend to mirror themselves, mirror one another, with the exception of things like hospitals which tend to skew more towards centers and not as much in the backup area, although that's changing, I think, over time. Just when you look at our installed base of clients. But when you look at professional services, financial services, pharma, biotech, energy, technology, those clients tend to be players in both areas. And the reason for that, and this is what I wanted to add to your question, Trace, is that backup and centers are extremely complementary of one another, both in terms of what they mean as a value proposition to a client but also what they mean in terms of our earnings. And so by that, I mean what really our backup suite of services has allowed us to do over the past, you know, several years, is to deal with touching more of our employees' lives -- more of our employee -- our client employees' lives than we could when we only had the centers that touched, you know, a good number of people very deeply but was not equitable across an entire workforce. So now it's more common, to answer your question, that we would be talking about both services together. We'd be talking to a large multi-service company about centers -- at sites with enough critical mass where they might consider that, and then backup -- the backup network in other places where centers may not be viable, but is a holistic solution to your -- to all of your needs, in addition to the other services that we now offer. Where it helps us from a financial point of view of course, where the synergy comes in, is obviously we're unique in the sense that, you know, clients value the Bright Horizons network of centers, extremely value it. They value the geography that we're in, the quality. And we can then not only be a backup provider but we're delivering the service, a lot of the service, in Bright Horizons centers, not all of it, but a lot of it. And no other competitor will ever have the Bright Horizons centers, so it creates both a financial win and also a bit of a competitive advantage. Trace Urdan – Wells Fargo Securities: That's really helpful. And I think -- so just to make sure I understand. So -- because you could kind of imagine going in with the backup centers is somehow an easier sale than upselling to the full centers, and what you're suggesting is that that's not really how it works, that you're calling on companies and attempting to kind of persuade them to go for the whole bundle.

Yes. And I would add, our educational advising to that too, our sales people are focused on selling the entire suite of solutions that we bring to bear. And we have -- we now have some clients who have all of our services and some that have three out of four and some that have more than one. And so we had to play catch-up because when we started, we had hundreds of clients that only had one thing from us, and so there's that cross-selling we've been talking about. And then -- but then there's -- when we go in fresh to a company that we haven't done business with before, we are presenting it as a suite of solutions. Trace Urdan – Wells Fargo Securities: Okay, fair enough. And then the other question I wanted to ask was that, during this last quarter, the market saw North Anglia come in to the public markets and a lot of investors got a view to their model and in part includes a market that serves expats internationally. And I wanted to ask you guys about that. Have you looked at the expat market specifically being sort of a high-end premium market where you have a third-party payer as being one that is sort of a potential way to enter markets that you're not in internationally?

No. I would say that in part, part of the reason we're in India today is because the client that we're serving there was focused on both serving their local population but also serving expats with a level of early education that's consistent with what they do in New York and London and other places we work for them. I would also say that same, you know, we're serving U.S. -- a lot of U.S. expats in our centers -- employer-sponsored centers in the U.K. and vice versa here in the U.S., not expats, people coming from other countries here. I think when you look at our ed advising businesses and our college coach business and other things like that, we're beginning to hear some discussion with our clients as we ask them kind of other ways to add value, of whether or not how those services can apply to expats, because expats who are going to other countries are challenged to think about what they're doing for education. And those companies that are bringing employees here to the U.S. are obviously thinking about the same thing. And we have businesses in college coaching and EdAssist that basically do that, although not specifically focusing on expats. And so it'll be a topical area for us that we'll continue to think about more over the next couple of years. Trace Urdan – Wells Fargo Securities: Great. Thank you.

Yes.

Thank you. Our next question comes from Jeff Volshteyn with JPMorgan. Please proceed. Jeff Volshteyn – JPMorgan: Thank you for taking my question.

Hi, Jeff. Jeff Volshteyn – JPMorgan: I wanted -- good evening. I wanted to ask about the third and fourth quarter. Is there anything about seasonality or any other factors that we should be aware of when we're modeling the second half of the year?

Sure, yes. I think as I was trying to express on the prepared remarks, Jeff, the first and second quarter of the year tend to be highest enrollment in full-service business. In the summertime we start to see older children basically aging out of the preschool groups. Sometimes families withdraw children as they go on vacation, and then they re-enroll in the fall or we're rebuilding enrollment in aging younger children into the preschool rooms. So the third quarter is definitely -- you definitely see a pullback a bit on the full-service side. And then on the backup care world, we have -- tended to have much steadier revenue stream because of the nature of the client contracts that we have, and then the costs are more variable depending on the provision of care. So as the provision of care increases over the summertime, there's a bit of profitability compression over the summer because our utilization is higher than it is in the other quarters. And then we're -- in the fourth quarter there tends to be, for backup care, there tends to be some of the variability that we talked about last quarter that can happen from individual events like Hurricane Sandy, generated a lot of need and interest in backup care. Otherwise there can be clients that have higher utilization for the various events that happen in the fall, and they're also trying to use their basket of uses for the year. So we tend to see a bit higher profitability. All that boils down to a bit higher profitability on the market side in the first and second quarter. Third quarter dips. And then we rebound a bit in the fourth quarter. And overhead tends to be steadier throughout the year. Jeff Volshteyn – JPMorgan: That's very helpful. Also on the foreign exchange, I think you said you had benefited in the first quarter from foreign exchange. What is included in your guidance?

So we have -- what we benefited from in the first quarter was primarily the U.K. where the pound exchange rate was about $1.65 compared to I think $1.57 or so last year. And so in our guidance for the rest of the year, we're using ranges in the $1.60 to $1.65 range for the pound for the rest of the year. Jeff Volshteyn – JPMorgan: Great. Thank you very much.

Thank you.

[Operator Instructions] Our next question comes from Jeff Meuler with Baird. Jeff Meuler – Robert W. Baird & Co.: Yes, thank you. Dave, I've got to say I was a little bit disappointed, you usually either make a reference to the weather, baseball, and being from Milwaukee, I was much preferring a baseball one this time.

Well, I think you guys took us down on opening day. I'm still hurting from the Bruins, but -- Jeff Meuler – Robert W. Baird & Co.: -- specifically.

I had to tell you that if we end the call sooner, I'll get to the Bruins game on time. Jeff Meuler – Robert W. Baird & Co.: All right, I'll try to be quick. I guess just first a follow-up on that last question about, you know, how we should be thinking about seasonality and whatnot over the balance of the year. Elizabeth, is it about accurate in terms of order of magnitude that going from Q2 to Q3 you're going to anniversary about an additional $10 million in M&A revenue?

It's a little bit higher than that because there's a week or so of Kids and then there's another week in the month of July, a couple of weeks in July, for Children's Choice. So it's maybe closer to $15 million. Jeff Meuler – Robert W. Baird & Co.: Fifteen. Okay, perfect. And then can you guys just remind us the new lease consortium centers? How long do they take to hit breakeven and how long do they typically take to kind of hit a scale margin?

Yes. So our typical sort of installed base model would have looked like a breakeven point in the neighborhood of 18 to 24 months and hitting their sort of mature operating levels after, you know, once they get into year four. Our new release models that we've been talking about on the last few quarters of the call, I would say our experience there has been that we've been able to move that forward by say three months or so. The centers are larger and they have a lot of interest particularly in the younger age groups. And so we're not seeing a breakeven point that's a lot faster. But we are seeing stronger year one enrollment overall. And so what it does is it sets the center up for quicker profitability as it gets past that say 18 months mark. So we, you know, that's sort of the long-winded answer I guess. Jeff Meuler – Robert W. Baird & Co.: No, that's helpful. And then just finally, you guys are obviously operating with a different balance sheet than when you were last public, so, interesting to see the share repo authorization. Do you guys have a steady state financial leverage target that investors should be thinking about?

You know, I don't know that I would call it a fixed target at this point in time, Jeff. But what I would tell you is obviously one of the things that we learned a lot about when the company was private was how the company operates with debt, because we never had any before. And so, you know, obviously we've -- we think that where we are now in the range of 3 to 3-1/2 times EBITDA, where we'll be soon and continue to leverage down to, is comfortable for us, particularly at a cost of money around 4%. And so we think that it provides good efficiency and that, you know, we're going to grow over time and we're going to continue to leverage down naturally, not necessarily by paying down the debt. That may be something we decide to do, but right now that doesn’t appear to be the best way to add additional value. So with the growth plans that we have, where we expect to continue to grow earnings, we think that being ready to do repurchases when the time is right is a good way to add incremental value. Jeff Meuler – Robert W. Baird & Co.: Okay. Thank you. Enjoy the game.

Yes.

Thank you. Our next question comes from Anj Singh with Credit Suisse. Please proceed. Anj Singh – Credit Suisse: Hi. Thanks for taking my question. Just real quick, I was hoping you can tell us where the number of new center openings was reduced. Was this on the organic or the acquisition end?

I think, Anj, that, you know, obviously as the year progresses, we have more visibility on timing. So there's always going to be some timing when we try to project stuff we'll get open in the fourth quarter or slip in 2015 at this point. You know, most of the corporate stuff, the organic corporate stuff is baked, with the exception of the transitions of management, which sort of closed a little bit earlier. So whenever we're looking at the transitions in management or making a projection based on what's in the pipe, we still have good visibility and a strong pipe there, but sort of look at it going, you know, some of them will end up opening in Q4 and some of them will end up into the first quarter of 2015. And then on the acquisition side, sort of a similar thing, good visibility on the pipeline, good deal flow, but again more weighted to the backend of the year and then ultimately trying to think about it at this point how much of it will get done by the end of the year versus what [indiscernible] in the Q on a next year. So really it's probably a little bit of both, that based on where we are now, between organic, and of course we'll have even more visibility on what we think that actual number will be when we talk to you the next time, and we'll continue to update you. Anj Singh – Credit Suisse: Okay, thanks. And then building on that, should we view the recent buyback as a sign that perhaps the acquisition pipeline is less full than it's been in the past?

No. Anj Singh – Credit Suisse: Okay. And then one other quick one, I know last quarter you guys gave this number out. I'm not sure if I missed it. But how many clients are now utilizing your ed advisory services? And what's the percentage of them that are buying another Bright Horizons service?

So I'm glad you asked that, because I think we did give quite a bit of detail on that at the end of the year, Anj, and I think our protocol will be that we update all of you on that periodically but not every quarter. So we look at that as more of an annual update. So I think, suffice it to say, we have growth in both our ed advisory and backup client list. And we continue to see cross-sell across that group. So we'll make that. We've got a note to be sure that we're updating everybody on that periodically, but there's just not that much change from quarter to quarter. Anj Singh – Credit Suisse: Got it. All right. Thank you so much.

Okay.

I would like to turn the call over to David Lissy for closing comments.

Yes. Thanks, Tracey [ph], and thanks to everybody who joined us in the call. We appreciate your continued interest in Bright Horizons and look forward to seeing many of you on the road and following up accordingly. Have a good night.

Have a good night, everyone. Thanks.

This concludes today's teleconference. You may disconnect your lines at this time. And thank you for your participation.