Greetings and welcome to the Bright Horizons Family Solutions Second Quarter Earnings Conference Call. At this time, all participants are in a listen only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] And as a reminder this conference is being recorded. I would now like to turn the conference over to your host Mr. David Lissy, CEO for Bright Horizon. Thank you. David, you may now begin.

Thanks, Mike and greetings from the Boston, hello to everybody on our call today. Joining me on today's call, Elizabeth Boland our CFO, who will go through a few administrative manners before I kick of 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 are or will be available under the -- Investor Relations section of our Web site, brighthorizons.com. In accordance with [Regulation FD] we use these conference calls and other similar public forms to provide the public and the investing community with timely information about our recent business operations and financial performance. Please note that some of the information, you will hear today consist of forward-looking statements including without limitation those regarding our current expectations for future performance and business outlook, overhead cost, operating margins, acquisitions and integration, center opening and closures and the associated cost, 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 strategy, integrating acquisitions, our substantial indebtedness and other risks and uncertainties that are identified and discussed in risk factors set forth in our Form 10-K for 2014 and our other SEC filings. Any forward-looking statements speak only as of the date on which it’s made and we undertake no obligation to update any forward-looking statements. We'll 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 Web site and are filed with the SEC. So back over to Dave for the review and update on the business.

Thanks Elizabeth and hello again to everybody who has join 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 is 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 backup of 5 million and advisory adding just over a 1 million. We added 46 new centers this quarter including 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, Russell Reynolds, Sony and Ingersoll-Rand. Lastly on topline growth as we discussed on our last call, we continue to see some impact from foreign exchange this past quarter is 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 approximate 9%. On the margin side we had a strong quarter with 200 basis points of…

Great, thanks, Dave. So, all recap of few other things that Dave reviewed and give you a bit more color. As we started out 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 '14, 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 topline growth in full service by about two percentage points. The backup 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 increase 12.8 million to 96 million in the quarter and gross margin was 25.9% of revenue compared to 23.9% in 2014. Turning with the smaller segments, our backup and Ed advisory services generate gross margin that a more than double what we earned in the full service business. So, efficient service delivery allows us to leverage the topline growth and expand operating margin by approximately 140 basis points in our backup care group and more than 500 basis points in the Ed advisory sector. On a full service side, performance remains strong in our maturing 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 continued in 2015 and we realized…

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 just maybe help us just with a little bit more on the financial impact from the hedge around acquisition any details you could give us on what that degrees margin maybe amortization intangible looks like?

Sure. So we are in preliminary stages on 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 prices in the range of 19 million or so and we have as Dave mentioned the revenue per centers is a little less than a $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 we have these are cost plus type contracts that have sort of similar economics to ours in the range of 15% or so gross margins 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 has been quite of 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 varies from case-to-case but just share your thought that would be helpful?

Yes, I think Sara it really does depend on the industry and sort of the client base we’re talking about. So I think we’ve 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 newly -- to the part of the company that has not been a client of ours. So I think it's been very depending on the industry and depending on which client we’re talking about.

And then just last question, the [certain choice] and kids unlimited centers, are those now all considered mature or is there still some that are in ramp up mode?

Pretty much mature, there maybe a couple that have 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.

And our next question comes from the line of Gary Bisbee with RBC Capital Markets. Please proceed with your question.

I guess the first question the guidance for the full year since implied some deceleration in the profitability and is that just the comparison has become a lot more challenging in Q4 on margin expansion or is there anything else that’s going on there?

I think that’s the effect that you're seeing in the back half for 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 consortium centers that we're opening this year, we’ve opened five so far and have a little bit of backend waiting there. So just the combination of those factors that we see a little bit more of a tougher comp in Q4.

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 [indiscernible] just reported?

Well I mean I think that the point that we’re at now is as we had predicted that by the middle of this year we would sort of see the headwind not getting any worse and beginning to turn around. And so I think there is -- 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 the benefit of it will continue to manifest more in the first-half of 2016, but a little bit this year, but it will be the third layer coming in of profitability especially as the 2014 centers are now getting to past their breakeven point. So I think that from here what we see is that little bit of momentum starting to pick up from that past 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 enrolment level in our legacy class that has been recapturing enrolment that we had lost a few years ago, that is starting to reach it's phase this point in the next couple of years too.

And then just one last quick one on the educational advisory business, the growth you accelerated like you predicted a quarter ago is 20% still a decent growth potential over the next few years or is this in the team maybe a better way to think about that in the near-term?

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 a quarter that was north of 20% and I expected for the year even with the changes that we made starting this year will approximate 20% growth. But there is good momentum in that business and I think there is a good reason to see that continue to be a strong grower for some time.

Our next question comes from the line of Anj Singh with Credit Suisse. Please proceed with your question.

This is actually Zack in for Anj. I am just interested in taking a closer look at the margins we saw in the full service centers, you obviously have a lot of moving pieces there, the consortium centers maybe some FX tailwind you also acquired centers are tend to be smaller so those are going to have less than normal growth potential. Just when I am 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?

Yes, I think Zack 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. Our history has been to try to manage to about 1% spread between price and, you know, 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 is still to be some time left to recover enrollment in that class that should produce 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're pleased with the results and in the full service segment this quarter and other than some quarterly noises as was brought up before in terms of a comp in the fourth quarter, I think there is good signs that that segment will still continue to drive strong results for the foreseeable future.

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

Thanks for that color on quantification, I appreciate it, in backup 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 is always going be some nice quarter-to-quarter comp wise but we feel good about what we've said about that growth rate and in expected year to play out that way.

Thanks for that color. And then finally, if you could just update us on the cross selling of services, it seems like the growth rate trailed off a little bit and Ed advisory some of that obviously is going to be some the accounting change. You said, it was going to be upwards of 20% for this quarter if you've made the adjustment for that current change and it sounds like you said, it was going to be about 20%, a little bit better than you seemed to have talk about it last quarter when you were on the call, so you're seeing some acceleration there Ed advisory or is this just consistent with what you've been saying so far?

I think, we've been pretty consistent aside from talking about the effects of the change when we began to recognize revenue on our newer contracts and how that comp against 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 its continued growth going forward.

Thank you. And our next question comes from the line of Manav Patnaik with Barclays. Please proceed with your question.

Hi 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 U.S., [indiscernible] kind of the high end of center of groups that you see remaining in the U.S. and also if you could give a little color on the recent acquisition of active learning and kind of the rationale and the size of numbers related to that as well

Yes, 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 regional chain with both here in Europe and also single site operators that have been sort of the bread and butter of what we've required over the years. [indiscernible] is a group that I've personally known for years and we've 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 the 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, they're proposals just that, but just in terms of you're seeing minimum wage a drive to $15 there, and obviously some of the proposed overtime rules, can you just give us some color to help us size what that means for you guys?

Yes, obviously I think we've 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 and we follow them closely. I think in most cases, where it's either been enacted or it's being discussed, we expect there to be legislation that all sort of make its way in overtime and 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 [comfort] pretty nicely with where most geographies are going with respect to a minimal range.

Thank you. And our next question comes from the line of Jeff Miller with Baird. Please proceed with the question.

Yes. Thanks this is Nick on for Jeff. Ed advisory really strong performance there particular within the margins just looking at the back half I know you said it's probably a couple of year few year period till you get 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 ramping 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've 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 be the kind of pro-forma that back up is in over the next couple of years.

Okay. And then just within full service looking ahead of the second half and the fall, how are trends looking for rebuilding the enrollment pipeline and just [Indiscernible] similar 3% or 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 U.K.

Okay. That's great. And just one last one from me just I guess listening to the employer side it sounds like the pipeline still remains pretty healthy any areas or geographic or industries are particularly strength to call up?

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've continued to get traction with selling multiple services and at the same time to prospects and also cross selling 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 geographies if you take the 10 major cities like Boston, New York, D.C., San Francisco, Chicago Land, Atlanta those places and I would say a lot activity focused around those Seattle and those areas if I were to look at industries I would say technology, biotech, healthcare, hospitals, universities continue to be that sort of brightest of the spots for us.

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

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

Sure. The overall growth is about 1.5% coming from acquisitions in the quarter including the contribution from [Indiscernible]

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 will the other puts and takes be?

I think that part of it was that we talked about 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 also the continued positive influence of enrollment gains in the mature class of centers and as we've talked about before we had lost some enrollment a while back and we're getting regaining it for the past couple of years and to the degree we're regaining 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 our typical margins so those three factors are really the key and the enrollment gains really are consistent throughout here in the U.S. and abroad.

And now the only thing I would add to that is 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 are client centers or lease/consortium centers also contribute.

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.

Okay. Well 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 with us on the call Elizabeth and I look forward to seeing you all in the row and wish you a continued enjoyable summer. Thanks have a good night.

Bye everyone. Good night.

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