Bright Horizons Family Solutions Inc.
Q4 2014 Earnings Call Transcript
Published:
- Operator:
- Greetings and welcome to the Bright Horizons Family Solutions First Quarter 2015 Earnings Release Conference Call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded. It is now my pleasure to introduce your host Mr. David Lissy, CEO for Bright Horizon Family Solutions. Thank you and please go ahead Mr Lissy.
- David Lissy:
- Thank you Jerry and greetings to everybody from the Boston area. Greetings to everybody out there. Joining me on the call today, as usual, Elizabeth Boland our Chief Financial Officer who will take you through the Safe Harbor before I kick off the call.
- Elizabeth Boland:
- Thank you Dave and hi everybody. Thanks for joining us today and our call has been webcast. Our earnings release which was issued after the market closed today and 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 along with forward-looking statements on our current expectations for future performance. The forward-looking statements inherently involve risks and uncertainties' that may cause actual operating and financial results to differ materially. These risks and uncertainties include our ability to successfully implement our growth strategies including executing contracts for new client commitments and rolling children in our child care centers, retaining client contract and operating profitably in the U.S. and abroad. Our ability to identify complete successfully integrate acquisition and to realize the attendant operating synergies, the decisions around capital investment and employee benefit that employers are making; our ability to hire, retain qualified teachers and other key employees in management, our substantial indebtedness and the terms of special indebtedness and lastly the other risk factors which are set forth in our SEC filings. We'll also discuss certain non-GAAP financial measures on this call, which are detailed and recompiled to their GAAP counterparts in our press release. Let me turn it back over to Dave for the review and update of the business.
- David Lissy:
- Thanks Elizabeth. And hello again to everybody, joining 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 follow me with a more detailed review of the numbers and then we'll be both be here for Q&A after that. First let me recap the headline numbers for the first quarter. Revenue increased 6% to 350 million and adjusted EBITDA of 65 million was up 14%. Adjusted net income of 27 million was up 20% over the first quarter of 2014 which yielded adjusted earnings per share of $0.43, up 26% from last year's first quarter. Our revenue growth of 18 million was roughly in line with our expectations for the quarter. Full service revenue was up 13 million over last year. Back up revenues increased to 42 million in the quarter and net advisory grew to 9 million. We added 8 new centers this quarter including new centers for Pioneer Natural Resources and J.M. Smucker company and Hoag Memorial Hospital. In our back up the net advisory suite of solutions, we recently launched new service for new clients that included U.S. Bank Rackspace, The Cleveland Clinic and The University of Chicago Medicine. On our last call we discussed the potential impact of foreign currency fluctuations on our results for the quarter we saw a headwind of approximately 2% on our revenue growth more than 6 million in relation to Q1 2014 as the strength of the dollar affected our report results from our European business. We're also pleased with the continued leverage at the operating income line. Our gross margin expansion this quarter drove one 180 basis point increase in adjusted operating income from 10.4% to 12.2%. Consistent with what we've talked about on previous calls the key factors contributing to this growth included the positive enrolment trend in our mature class of P&L centers which are up approximately 2% over last year, price increases that average 3% to 4%, contributions from newer and ramping centers, strong performance in our back up and educational advising segments and lastly the closure of a cohort of underperforming centers over the past year. Another factor in our margin performance that we've talked to you about in the past is the headwind from the larger classes of lease consortiums centers that we've opened over the last two years and continue to open this year. As we've discussed in the past we fully expect our investment in this class of centers to create considerable value going forward. The contributions of the centers opened in 2013 and in the first half of 2014 had begun to offset the losses from the more recently open centers. And as a result that headwind is diminishing and we're therefore seeing more uplift in the full service margins year-over-year. Overhead this quarter was on track with our plan and continued topline growth along with discipline spending should yield modest improvements in our overhead cost as a percentage of revenue as the year progresses. Now as you can tell we're pleased to be off to a strong start in 2015. As we look ahead we're well positioned to continue to deliver on our plan for the year. Our core business is in good shape with enrollment steadily increasing in amateur basic data centers and our newer class of higher performing centers are ramping on, and are ahead of plan. We're also really pleased with the performance in opportunities that continues to exist in our back up an educational advising segments, which are both poised to enjoy solid growth and also contribute to our ability to drive margin expansion. Speaking of the Ed advising business this quarter we also made a small change and when we begin to capture the portion of contract revenue for the data conversion and implementation of new clients. This has the effect of creating a slight lag of approximately three months as compared to when similar revenue hit last year, just wanted to point that out that new ones out here as there remains very good momentum in that business. All in the selling environment remains positive and the strength and breadth of our suite of services continues to be a strong competitive advantage for us in the market. On the acquisition front we're seeing good momentum from our pipeline of prospective high quality centers. We have a good mix of smaller networks and single center opportunities in our active discussion pipeline both here in the U.S. and in Europe. Of course it's always hard to predict the timing but we completed one deal in Q1 and based on what we see now we expect that we'll realize a more typical run rate of acquisitions this year as compared to 2014. As I've talked to you about before, our priorities for capital allocation are first growth related investments and acquisitions and new lease consortium model centers. So of course that's what we're focusing a lot of our attention and resources. Second priority is to enhance shareholder value through our repurchase program which we continue to execute this past quarter through modest open market purchases. So to update you on our outlook for 2015 results, we continue to expect to see revenue growth in a range of approximately 7% to 10% over 2014 levels which include the continued impact of lower FX rates generating approximately a 2% headwind. We expect to expand adjusted operating income margin by approximately 100 to 125 basis points and to produce adjusted EBITDA in the range of 270 million to 275 million. Thus we're increasing our guidance for full year 2015 earnings per share to a range of $1.74 to $1.77. Before I hand it over to Elizabeth, I want to acknowledge the amazing dedication of our entire Bright Horizons family as we were once again recently honored for the sixteenth time to be included in Fortune magazine's prestigious list of the One Hundred Best Companies to Work For in America. This honor belongs to each and every one of our employees and is a direct reflection of the passion and dedication that they bring to work every day. It has a positive impact on those that we serve. With that, Elizabeth, let me turn it over to you to review the numbers and I'll be back with you all during Q&A.
- Elizabeth Boland:
- Thanks. To recap a couple of the figures that Dave reviewed, our top line revenue growth in the first quarter was 18 million. The full service center business added 13 million on rate increases enrollment gains in our ramping centers as well of the mature class in contributions from the 35 new centers that we have added Q1 of 2014. As Dave mentioned Pound and Euro FX rates declined measurably in Q1 2015 compared to Q1 2014, which dampened our revenue growth in the full service statement by more than 6 million dollars or approximately two percentage points. On a common currency basis therefore the full service segment growth was nearly 7% in the quarter. The impact of centers that we have closed since the beginning of last year also offset topline growth in full service by about two percentage points. The backup division in net advisory services continued to grow the topline from both new clients as well as from expanded utilization of services by the existing client base. They also enjoy a rate increase in the same range of 3% to 4%. For Ed advisory, in addition to the normal seasonality that we see from Q4 to Q1, the Q1 2015 revenue growth rate of around 11% reflects that slight variability that occurs in connection with the timing of our new client launches and the associated implementation phase of contracts that Dave discussed a minute ago. Gross profit increased 9.5 million to 87 million for the quarter and gross margin was 24.7% of revenue, up 150 basis points from 2014. As we've seen in prior quarters our back up and Ed advisory services both continued to deliver strong margin performance in concert with the revenue growth. In addition both of these businesses generated gross margins that are more than double what we earn in the full service business. On the full-service side performance also remain strong in our maturing ramping class of center. The steady pace of your-over-year enrollment gains in the mature class that we've seen since 2011 has also continued until early 2015 and we realized over 1.5% increase in enrollment for that class in Q1. On cost management, alongside this enrollment growth, the exit from underperforming locations also contributed to the margin expansion. As we have talked about on previous calls we're now realizing the contributions from those investments that we made starting in late 2012 in our lease contortion growth strategy. We've opened 30 of the centres over the past two years and expect to add 15 to 20 more in 2015, although we expect to incur roughly similar level of losses from this group in 2015 as we incurred over the last two years. So in the range of 8 million to 10 million a year, we expect the headwind to gross margin to abate in the latter part of 2015 as the 2013 class will be generating gross profit at near mature contribution level and the 2014 class continues to ramp their enrollment. Overhead for the quarter was 37 million compared to 35 million in 2014 and was approximately 10.5% for both periods, adjusted to exclude the 500,000 in transaction costs associated with the secondary offering that we completed in March of 2014. Over time with more scale in our European operations and our Ed advisory business we expect to be able to leverage our overhead spend and investment at support growth at levels that are similar to the twenty basis points that we realized in 2014. Turning to a couple of other lines on the income statement. Interest expense of 10 million in Q1 of 2015 reflects the full quarter impact of the 165 million of incremental term debt that we borrowed in mid December of 2014 which were used to fund the repurchase of 4.5 million shares acquired in connection with the secondary offering that we also completed in mid December. We ended the quarter with three point four times net debt EBITDA, a reduction from the 3.6 turns that we reported at 12/31 of '14, and we expect to further reduce that ratio through EBITDA growth throughout the rest of this year. The effective or structural tax rate of 35.5% percent in Q1 of 2015 is based on the applicable rate for our projected full-year 2015 operating performance. Moving to the cash flow statement, we generated operating cash flow of 47 million in the quarter compared to 52 million in 2014 with a slight decline due primarily to the timing of collections and payment and working capital. After deducting maintenance CapEx our free cash flow totaled 40 million for the quarter and we ended Q1 of 2015 with 124 million in cash and no borrowings outstanding under our revolving credit facility. To quantify our quarter end statistics before turning to our outlook for the rest of the year in Q2. On March 31st we operated 885 centers with capacity of 101,500 which is an increase of 1.8% over a year ago. The mix of contract types remained consistent, 75% profit and loss arrangements in effect cost plus contracts. As is the average full service center capacity which is 137 in the U.S. and 78 in Europe. As Dave previewed our outlook for the full-year 25 anticipates revenue growth approximating 7% to 10% over 2014. Growth breaks down as follows. Organic growth approximates 8% to 10% including 3% to 4% price increase 1% to 3% from growth in enrollment in our mature and ramping centers, 1% to 2% from new organic full-service center addition, and 1% to 2% from our backup and Ed advisory services. In addition acquisitions add approximately 1% to 2%. Offsetting these increases are the effects of center closings which include both legacy organic and acquired centers of approximately two percentage points and projected reductions from foreign exchange through rate differences of also approximately 2%. Both of those primarily affect the full-service segment. We’re planning to add a total of around 45 to 50 new centers including organic new and acquired centers and our current outlook also contemplate closing approximately 25 to 30 centers including the handful of underperforming centers acquired as part of the group that we added in 2013. We expected income from operations in 2015 will expand to approximately a 100 to 125 basis point from the 11.1% adjusted income from operations that we reported in 2014, primarily in gross margin expansion and secondarily from a bit of modest overhead leverage. For the full year we expect amortization in the range of 28 million to 29 million, depreciation of approximately 55 million to 57 million, stock compensation of approximately 9 million and interest expense in the range of 41 million to 42 million for the year assuming continued 4% to 4.5% borrowing rates on our term loan and no borrowings required under the revolver based on our effective cash flow generation. We now estimate as I mentioned before that the effective or structural tax rate will approximate 35.5% of our adjusted pretax income in 2015 which is broadly consistent with the 2014 full year rate and the projected GAAP reported effective rate for the rest of 2015. A combination of topline growth in operating margin leverage drive adjusted EBITDA in the range of 270 million to 275 million for the full year 2015 and adjusted net income in the range of 110 million to 112 million. The share buyback that we completed in December of 2014 adds roughly $0.03 to $0.04 a share to EPS after considering the incremental interest expense on the term debt. But this is offset by the projected foreign-exchange impact that we've talked about. One other element though that we're noting this quarter is that the lower tax rate contributes to modest EPS expansion. And so as a result we now estimate that the adjusted EPS will increase to a range of 1.74 to $1.77 in 2015. Lastly, for the year we're estimating weighted average shares to range between 63.5 and 64 million shares. On the cash flow side we project that we will generate approximately 180 million to 190 million of cash flow from operations which translates to a 145 million to 155 million of free cash flow net of the projected maintenance CapEx spending of around 35 million. Based on the centers in development and slated to open in 2015 and early 2016 we expect to invest approximately 50 million to 55 million in new center capital and 25 million to 30 million on acquisitions. We expect to fund all of these investments from operating cash and would end the year with a 140 million to 150 million in cash on hand. Looking specifically to Q2 of 2015 we expect to topline growth to continue to be in the range of 5% to 7% including the impact of the lower foreign exchange. Our outlook for the adjusted EBITDA approximate 72 million to 74 million and for adjusted net income in the range of 30 million to 31 million. With approximately 63.5 million shares outstanding this would translate to adjusted EPS in the range of $0.48 per share to $0.50 per share for the second quarter of 2015. So with that Jerry we are ready to go to Q&A
- Operator:
- [Operator Instructions] The first question is from the Gary Bisbee, RBC Capital Markets, please go ahead.
- Gary Bisbee:
- Can you clarify the Ed advisory comments? Was there a change of policy of some sort or was it just sort of a timing as this stuff flowed in?
- David Lissy:
- Well the first issue on Q1, Gary, Elizabeth will talk about the change in what we talked about, but the first is that there is always seasonality in Q1 so it's always a somewhat lighter quarter what we expect to see as the year progresses. But we also did have a change that and I know it before, I let Elizabeth talk about it.
- Elizabeth Boland:
- Yes, so we have the Ed advisory business, it's a serving client, what is essentially a software a service to a large degree on the administrative side. So the period of time where the client is not able to use the product, we're deferring that portion of the contract time to recognize it over the client life. So during that three month implementation period or so, we won't be recognizing the revenue. It's not a huge number, maybe $0.5 million in the quarter. But it does show as a little bit of a sequential change. So we just wanted to make note of it for the quarter and after this year it should be okay in the comps but it will have a little bit of an effect this year.
- David Lissy:
- Yeah and I'll just end that, Gary, by saying there's still really good momentum in that business and none of what Elizabeth just said has any effect on our sort of ability to close new business which continues to happen at levels similar to what I reflected on the last time we talked.
- Gary Bisbee:
- But for a couple more quarters this would linger through a delay from when you signed business relative to how you are booking it last year?
- David Lissy:
- Yes, I mean for the year, you know we'd commented you know we think it's 20 or north of 20% grower. And I think if you didn't have this new ones we would be right there and I think this could have the effect of a few percentage points less once the year plays out.
- Gary Bisbee:
- Okay, all right. Fair enough; and then little growth in centers again. I know you said there were eight new ones, so presumably there were number of closures again. I guess I wonder, are any of those from the 2013 acquisitions and if they are and you add those in aggregate with closures from last year, do you evaluate in hindsight the acquisitions or think any differently of them than you did when you did them? Or were most of these closures really sub-scale and you knew it when you bought them?
- David Lissy:
- Yes, I mean I think anytime we do diligence on acquisitions, Gary, particularly in '13 when we acquired large networks here in the U.S. and UK, we always circle up some suboptimal performers that exist in any network that's out there, and so a lot of times it becomes more challenging I'll say to act on them too quickly because we're trying to get integration right and you know move proceed through. But we haven't circled up and as time goes we do act on them and sometimes the contract will come up, other times and different things will happen. We had seven closings in the first quarter, four of them are associated with past acquisitions. So I think that gives you a order of magnitude.
- Operator:
- Next question is from the Manav Patnaik of Barclays. Please go ahead.
- Manav Patnaik:
- So on the M&A front you mentioned there's a good pipeline, obviously, on the small to midsize. I was wondering what you think about the larger ones, I guess like you did in 2013, it seems like at least in your existing countries it doesn't feel like there's a lot more of those larger ones that you can. So I was wondering if that's a rare characteristic and, sort of an extension of that, when is the time that you decide to enter new countries?
- David Lissy:
- Well I would say, Manav, first that as I look at the pipeline of active discussions on the M&A front that it's a healthy mix of single, two or three center operators with some of what we call larger acquisitions for us. But I caveat larger by saying, larger looks a little bit like the ones that we acquired in 2014, maybe less than that in terms of numbers of centers. I would say that in both the UK and the Netherlands and also here in the U.S., there still remains a few of those that are out there. And as I said earlier I can't predict when we'll get them done or if we get them done but based on what I can see now particularly relative to where we were at this time last year, I feel good that we'll be able to produce a year where acquisitions will look different than they did last year.
- Manav Patnaik:
- Okay. Fair enough. Just by, I guess on the Ed advisory side of things, are there M&A opportunities there or is it just more sort of an organic growth business?
- David Lissy:
- Yes, we are now the largest player in what is an emerging niche business line. So there clearly are smaller operators in that business but nothing that would be a game changer as it relates to changing -- the sort of widely changing the trajectory of growth on that side. I think we may get who knows over time we may find some smaller ones to tuck in. But I suspect it on the Ed advising side, most of our growth will come organically.
- Manav Patnaik:
- And last one to follow-up with Elizabeth. The FX is obviously just in the center base line item, correct? And also, I guess the assumption of 2% headwind, I think for the full-year, that's based on current rate?
- Elizabeth Boland:
- Yes, it's based on current rates where we are now. So there's obviously a variety of outlooks out there, but that's what's it is based on. And it is in the full-service. We have some back up in the U.K. but it is not meaningful.
- Operator:
- The next question is from Sara Gubins, Bank of America Merrill Lynch. Please go ahead ma'am.
- Sara Gubins:
- This is [David] for Sara Gubin. So you post to the strong margin expansion in the quarter but expected slight down tick from this for the year, so why is the 1Q rate not sustainable
- Elizabeth Boland:
- You mean of the 180 basis points on operating margin?
- Sara Gubins:
- Yes just the operating margin line, yes.
- Elizabeth Boland:
- Yes, I think there's a couple factors, one is what we're comping against in the first quarter of last year, obviously in Q4 of last year we had also a very strong quarter. So I think it's just now, it averages out for the year. Our view is that as the year goes along we have the same kind of factors that will continue to drive improvement in each of the segments so I think we're not seeing it as a deterioration from an overall performance point.
- Sara Gubins:
- Okay, got it. And then, last quarter I believe, you mentioned that back up care was supposed to grow on like they're low teens and Ed advisory in North of 20% for the year. Is this still reasonable expectation?
- David Lissy:
- Yes, I think that's, I would say that's exactly right, David, except for what I caveated in response to Gary's question about the change that we talked about earlier. So on the Ed advising side it may be a few percentage points less than 20 based on change, but based on the change of what we're doing with the recognition and so. But then on backup I would say we are in the same place that we had talked to you about in the past.
- Operator:
- The next question is from Jason Anderson, Stifel. Please go ahead.
- Jason Anderson:
- Can you talk about -- it's Manav or somebody had a question about some other potential acquisitions whether it be Ed advisory, but I was speaking too about -- are there other employer benefit type verticals you could expand into our that you see out there, that you know maybe something entirely different that kind of adding to your suite of products.
- David Lissy:
- Yes, I think that's certainly one of our thoughts as we look to grow -- is how can we better leverage the relationships, strong relationships that we have with our clients. And I think we've successfully shown we can cross sell new services into existing clients. And it may be that in the future we will land on something that we think is the next great idea with respect to that. Right now though Jason I would tell you that we're all in on what we have. We think of Ed advising has great growth opportunity. We want to invest in it. There are some product enhancements we can make to each one of our services that we think can drive additional revenue within those segments and we're going to do that. And we'll continue to look, and if we find something and then it's entirely possible. But there's nothing in our in our sights right now that would affect 2015.
- Jason Anderson:
- Okay, thanks, and then another one for me here. The closings you mentioned, it sounds like that it picked up a bit, I believe. Did I hear that correctly? And if so what changes I guess from last quarter to this quarter? The closing guidance, and sorry?
- Elizabeth Boland:
- Yes, I know, I think that's just the additional three month of visibility into what the timing of either the centers that we talked about that Dave mentioned from the time of the acquisitions in 2013 when we may be exiting a couple of those programs and or just a normal -- some normal cycle and then we just have better visibility in the month of April than we did in earlier in the year.
- Operator:
- We have a question from Andrew Steinerman, JPMorgan. Please go ahead.
- Andrew Steinerman:
- Did you mention it, if not could you mention how much revenue from acquisitions contributed in the quarter and then also looking at the second quarter with the acquisitions that you already have, what might the contribution be?
- Elizabeth Boland:
- We acquired five centers in total last year, Andrew, and the contribution from those five in the quarter was just under 2 million hits though, about 1.7 5 million and it would be a similar about 2.5 million, perhaps with the additional center that we acquired in Q1.
- Andrew Steinerman:
- You're saying 2.5 million, the second quarter number?
- Elizabeth Boland:
- For the second quarter, yes.
- Andrew Steinerman:
- Perfect, Could you just mention if there's any change in the competitive landscape, domestically?
- David Lissy:
- No real change, Andrew, to what we've been talking to you about in the past.
- Operator:
- The next question is from Jeff Miller from Baird.
- Jeff Miller:
- Can we revisit the backup care long-term margin potential and the framework, so what are the pre reinvestment incremental margins for backup care? What investments do you need to make to accommodate the growth? I guess, what's the current thinking in terms of how high the margins can go over the longer term?
- David Lissy:
- Jeff, with respect to back up, we're not foreseeing much more expansion in margin in that business. Each quarter may fluctuate a little bit, but overall I think as time goes on it really is a top line growth story with very solid margins associated with it. With respect to longer term if we're going to find improvement in that business, it's going to be through the use of technology, a better service delivery that take some of the manual processes and puts them online. That will require some investment upfront in order to make it happen. But ultimately if there's longer term opportunity in that, you know the gross margins in that business -- it's less volume flowing through the call center for example in moving to things like our mobile app which we're just rolling and other ways that we can use technology to deliver service.
- Jeff Miller:
- I just feel that's been a area where you have been good at under promising and over delivering recently. And then, can you remind us, what's the margin delta between the U.S. and the international markets on the full service business?
- Elizabeth Boland:
- It's probably 3%, 4% or so. The centers in the U.S. have the advantage of both being a bit larger and so they just have a little bit of innate leverage in some of the fixed cost that are there but it's pretty close overall full-service margins, they are in a range of 20% to 21%. The UK business is in the high teens and the U.S. is a bit over 20.
- Jeff Miller:
- Okay, and then one more from me. Just with the unemployment rates dropping and starting to see some sides of wage inflation in the broader economy. Just how are things going for your talent pool, so just any insight into voluntary turnover wage inflation, ability to recruit employees etc
- David Lissy:
- Yes, I mean our biggest issue which we've talked about in the past is the declining supply of qualified teachers in the early childhood area and that's been a long term structural problems of the past five to ten years and it's not getting any better. So as I've talked about in the past we'd invested in online university and we're doing a lot more credentialing of our own. And as you say focusing on retention, there are pockets around the country where wages are increasing slightly ahead of other places. But I think we've got a good plan in place for the '15 that contemplates right levels of wage increases against the tuition increases that we have and so you know it averages out to what I talked about earlier. There are some places where we can move tuitions ahead of our average and as a result move up wages. So we continue to monitor it obviously in a very local basis. But I think we're in good shape for the year.
- Operator:
- We have a question from Anj Singh, Credit Suisse. Please go ahead sir.
- Anj Singh:
- Hi this is Mark in for Anj. I had a question on potential new center adds. I know you got it 45 to 50 new centers in the plan for 2015. What could allow you to exceed our prevent you from meeting that plan?
- David Lissy:
- Yeah I think within that plan, there are two real challenges to our center number, opening number in a year. One is just timing, of course we're sitting here in almost May and trying to project this specific timing of when things are going to open each quarter in Q3 and Q4 and sometimes we see slippage from quarter to quarter or from quarter to quarter four to next year. So in the micro, there's always that slippage that could challenge it. On the other side of is the thing that could provide an uplift would be acquisitions ahead of what our typical run rate would be for acquisitions. So a normal year acquisition wise for us on the smaller stuff might be ten to fifteen centers. If we get a larger acquisition done from purely a center count perspective it could have some upside with respect to our center numbers.
- Anj Singh:
- And any color you can give out on the plan for geographical?
- David Lissy:
- Do you mean new geography?
- Anj Singh:
- Yes, where do you expect those adds to be our going to be -- or going to be new or --?
- Elizabeth Boland:
- Our plans includes sort of proportionate growth, primarily organic growth in the U.S. and we would expect for pursuing acquisitions in all three of the markets that we have. So as Dave mentioned our bogey is the equivalent of, call it 15 centers from acquisitions there'd be an element of that would be in the U.S. and U.K. and in Holland proportionately. But otherwise we have the other growth, would be proportionate to where the business is. So 80% U.S., 20% abroad
- Anj Singh:
- And can you give us just a quick update on utilization and what you're seeing in the typical utilization for your acquisitions?
- Elizabeth Boland:
- On utilization we had, as we think, we mentioned another solid quarter of year-over-year gain, so over a 1.5 or rounding to 2% in the quarter. So our utilization is across the mature system, in North of 75% at this stage. In terms of the utilization that we have from acquisition, it varies a lot, but tends to be, I would say the centers tend to be in that same range but could be anywhere from 65% to 75% or 80% occupied. They tend to be on an average slightly smaller centers, so have that opportunity to be a little bit more enrolled. As we talked about in the past on acquisitions, we tend to be fine. Centers are performing well and trailing earnings is forward earnings, unless we are acquiring a group that has centers in ramp.
- Operator:
- The last question is from Jeff Silber, BMO Capital. Please go ahead.
- Jeff Silber:
- Elizabeth, when you gave your details on the guidance for the year I think you said the impact on revenues from acquisitions was about 2%, I'm just wondering if you can give us the impact on your adjusted EBITDA guidance and your cash expectations for the end of the year.
- Elizabeth Boland:
- You mean from acquisition?
- Jeff Silber:
- From acquisitions, correct.
- Elizabeth Boland:
- Well, typically acquisitions are going to be generating 15% to 20% or so of revenue. I would actually -- that we actually try to see if I can sketch that out. I don't have that right on my fingertips, but from a cash standpoint our guidance included spending 25 million to 30 million on acquisitions and so ending the year with the cash balance 142 two 150, incorporated that sort of spending. So I mean, just the EBITDA question, then I need to just take a gander.
- Jeff Silber:
- Yes, I guess from a theoretical perspective if it has a 2% impact on revenues, will have a smaller impact on EBITDA
- Elizabeth Boland:
- Yes.
- Jeff Silber:
- Okay, I just wanted to double check on that. And then just in the first quarter was there any adverse impact from the bad weather you guys had in Boston and the rest of us had around the country?
- David Lissy:
- Nothing that was material, Jeff. We obviously are counted on the back up side to deliver in bad weather and we had some pretty remarkable stories of centres opening up when pretty much everything else was closed and caring for employees, of hospital workers, and other people that needed to get to work during that time. So a back up, it was a chance for us to really shine in that regard and then really show clients what we can do, that really helps them in critical times. We did have some of our centers closed for a few days, in the Boston area in some other areas but again I don't really think that anything that occurred had any material impact on the quarter.
- David Lissy:
- Okay, I think we have circled through everybody who had a question and we want to thank everybody for joining us on the call tonight. We are very pleased with the start for the year and we look forward to seeing many of you the road in the coming months. Thanks.
- Operator:
- Ladies and gentlemen this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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