Greetings, and welcome to Bright Horizons Family Solutions Q1 2022 Earnings Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michael Flanagan, Senior Director of Investor Relations. Thank you. You may begin.
Thank you, Doug. Hello to everyone on the call today. With me on the call today are Stephen Kramer, our Chief Executive Officer, and Elizabeth Boland, our Chief Financial Officer. I'll turn the call over to Stephen after covering a few administrative matters. Today's call is being webcast, and a recording will be available under the Investor Relations section of our website, brighthorizons.com. As a reminder to participants, any forward-looking statements made on this call, including those regarding future business and financial performance, including the impacts of COVID-19 on our operations and on acquisition activity and strategy, are subject to the safe harbor statement included in our earnings release. Forward-looking statements inherently involve risks and uncertainties that may cause actual operating and financial results to differ materially and are described in detail in our 2021 Form 10-K and other SEC filings.
Any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statements. We also refer today to non-GAAP financial measures, which are detailed and reconciled to their GAAP counterparts in our earnings release, which is available under the IR section of our website. Stephen will now take us through the review and update of the business.
Thanks, Mike. Hello to everyone on the call, and thank you for joining us this evening. I hope that you and your family are doing well. I'll start tonight with a review of our Q1 results and provide an update on the business as we approach the mid-year point in 2022. Elizabeth will follow with a more detailed review of the numbers before we open it up for your questions. I'm pleased with our start to the year and with the pace of the continued recovery in our business. We delivered 18% revenue and more than 100% earnings growth for the Q1 , generating revenue of $460 million and adjusted EPS of $0.47.
We executed well in the quarter, again navigating a dynamic environment driven by the persistent effects of COVID-19 variants and the broader economic impacts, which for us are particularly evident on the staffing front. In our full-service segment, revenue of $354 million represents an increase of 22% for the quarter. We added nine organic centers, including new client centers for the University of North Carolina and Olympus America, as well as two centers for Bryan Medical Center. We also reopened seven more centers in Q1 and ended the quarter with 97 of our 1,019 centers open. In our open centers, enrollment levels improved throughout the quarter and into April. I remain encouraged by the underlying demand trends that we see across all our center model types, Cost-Plus, Bottom-Line, and lease Consortium.
We have increasing numbers of parents expressing interest, scheduling tours, and registering at our centers as families continue to solidify their work and life schedules. We are also making positive strides on the staffing front. Our staffing levels increased throughout the quarter to serve the growing enrollment requests, and our talent and operations teams have been hard at work, creatively deploying solutions and taking actions to address the unique conditions. Although we remain constrained from enrolling all of the families requesting care in some of our locations, the actions we took last fall and earlier this year, including increasing wages and expanding benefits, have positively impacted our recruitment and retention efforts. Also, as the Omicron surge slowed in the second half of Q1, inquiries, applications, and interviews with prospective employees have been increasing, and our conversion rate to new hires continues to tick up.
These leading indicators are a positive sign of the progress we are making in a still very challenging environment and a strong affirmation that Bright Horizons is the employer of choice for early educators. Let me now turn to Back-Up Care. Revenue increased to $81 million or 6% over the prior year. We had another solid quarter of new client additions, with 7-Eleven, Intel, Mount Sinai Health System all launching in the quarter. As we discussed in February, the Omicron wave disrupted utilization levels in the latter half of Q4 and into Q1 as families showed some hesitation to engage with interim care solutions given the sharp rise in infections across the country. In addition, the availability of care providers was constrained in similar ways to our full-service childcare centers, which limited some placement of care.
Encouragingly, as we progressed through the quarter, traditional use improved both in-center and in-home through February and March, and we look forward to the opportunity to deliver care under more normalized conditions this summer. Over the longer term, our growing list of clients and range of use cases further expands the opportunities over the longer term. Our education advisory business delivered revenue growth of 6% to $26 million. We added several new clients in the quarter, including launches with Hasbro, Papa John's, and Yahoo, and continue to see solid use levels at College Coach and EdAssist. Of particular note, we are proud to have been selected to manage McDonald's Archways to Opportunity. Launching with EdAssist yesterday, this program offers more than 350,000 McDonald's employees across 14,000 U.S. restaurants the opportunity to earn debt-free high school and college degrees.
This program exemplifies the investment and focus by employers in workforce education and demonstrates how well-positioned we are to support clients and prospects who are looking to differentiate their employee value proposition as well as upskill and reskill their employees into hard-to-fill roles. Now on to an exciting development we just announced this afternoon. One of our four key priorities that underpins the work we do is to extend our impact in early education through strategic growth. To that end, I am thrilled to share that we will be entering the Australian market through the acquisition of one of the leading providers of early education and childcare, Only About Children. We have signed a definitive agreement and plan to close later this summer. Our success with this transaction further demonstrates our global reputation as an acquirer and partner of choice among like-minded, high-quality providers.
The Australian market is structured around three key elements that align really well with our company's growth strategy. First, we are attracted to markets that have some form of third-party financial support for tuitions. Australia has a long history of providing robust support to families through the government-operated Child Care Subsidy, or CCS program. CCS improves the affordability of childcare for families by covering a significant portion of the cost, thereby enabling parents to prioritize quality in their selection of childcare. Second, we look for markets with a quality-focused regulatory system. The strong national regulatory framework in Australia provides objective and transparent oversight and consistent measures of quality across the industry. It focuses on seven areas, including educational program and practice, children's health and safety, physical environment, and relationships with children. Finally, we value markets with a potential for organic and acquisitive growth as well as positive supply-demand characteristics.
The childcare industry in Australia is highly fragmented, with smaller providers representing roughly 80% of the market and a growing number of children and families utilizing center-based care. Within this positive context, we are particularly excited to be coming together with Only About Children, a high-quality, premium provider focused on serving working parents in 75 centers located in the greater Sydney, Melbourne, and Brisbane areas. In collaboration with the Only About Children team, we intend to utilize our service capabilities and expertise to further grow and broaden their impact to families in Australia. We look forward to welcoming the entire team, children, and families to the Bright Horizons family later this year, and we will share more details about their financial contribution to our business once the transaction is completed. Let me turn to our outlook for the rest of 2022.
Based on operating trends, we are revising our 2022 revenue growth to approximately 15%-20%, with operating leverage driving adjusted EPS growth of approximately 53%-63% or $3.05-$3.25 per share. I continue to be very optimistic about our future as we continue to make progress post-pandemic, leveraging our strong client partner relationships and differentiated business model to extend our services in the years to come. Before I close, I want to take a moment to recognize our entire Bright Horizons family's unwavering commitment to upholding the principles, values, and culture that makes Bright Horizons such a special place to work. We have once again been named to Forbes' list of Best Employers for Diversity, Bloomberg's Gender-Equality Index, and the Human Rights Campaign's Corporate Equality Index.
We are an intensely human business, and these external recognitions are important as they validate who we are as an organization, help us to continue to recruit and retain dedicated and talented professionals in our field, and demonstrate to our client partners our commitment to common values. With that, I'll turn the call over to Elizabeth, who will review the numbers in more detail, and I will be back with you during Q&A.
Great. Thanks, Stephen. As Steve just said, I will recap the quarter's results and then provide some updated thoughts on our outlook for 2022. For the Q1 , overall revenue increased 18% to $460 million. Adjusted operating income of $31 million was 7% of revenue, and adjusted EBITDA increased 36% to $63 million, or 14% of revenue. In the Q1 , we added nine new centers, and we reopened seven of the centers that had been temporarily closed. We also permanently closed four centers. Full service center revenue increased $64 million to $354 million in Q1, which is a 22% increase over the prior year.
As Stephen mentioned, our enrollment continues to build, and occupancy now averages between 55% and 65% of capacity across the portfolio. This sequential improvement, despite the lingering effects of COVID, reflects a continuation of the steady progress that we have seen since the earliest stages of reopening our centers. Our Q1 revenue also reflects a $10 million reduction to client subsidies relating to the ARPA government supports that we receive. As a reminder, these supports reduce the operating costs in our client-sponsored centers, which would otherwise be covered by the client subsidy. Excluding this revenue and cost offset, which has no net effect on operating income, our full-service revenue growth would have been roughly 25% in the Q1 , which compares well to our expected range of 25%-30% increase.
Adjusted operating income in the full-service segment improved $25 million over 2021 to a positive $7 million. The operating income flow-through was 40%, driven by the enrollment gains and improving cost efficiency, even as we continue to experience constraints in the labor market, as well as from the continued support from government programs that are targeted specifically for the childcare industry. Our backup revenue grew 6% to $81 million, which again, is generally consistent with our expectation in the Q1 . As in our full-service childcare business, Q1 backup care growth was dampened as the Omicron variant impacted demand trends, cancellation rates, and staffing and provider availability in late Q4 of 2021 and into Q1 of 2022. Our operating income of $20 million was 25% of revenue, which again, was broadly in line with our expectations for the quarter.
Our educational advising segment reported growth of 6% on contributions from new client launches and expanded use of our workforce education, college admissions advising, and Sittercity services. Interest expense of $7 million in Q1 was down $2 million over 2021 on lower overall borrowing costs in the quarter. Although in the current environment, we are expecting interest to tick back up to around $8.5 million-$10 million over the rest of the year as rates continue to rise. Our structural tax rate on adjusted net income has also increased to 26% for 2022, compared to 21% in the Q1 of 2021 on increasing taxable income and lower tax benefits from equity activity under ASU 2016-09.
Turning to the balance sheet and cash flow, for Q1, we generated $59 million in cash from operations, made capital investments of $12 million, and executed approximately $40 million in share repurchases early in the quarter. At March 31, our leverage ratio was 2.5x net debt to EBITDA, with $257 million of cash and no borrowings outstanding on our $400 million revolver. Now moving on to the 2022 outlook. Our revised guidance reflects our current operating trends as well as other market and business factors, including the effects of foreign exchange rates on our non-U.S. operations, rising interest rates, the timing and quantum of government support funding, and general inflation, particularly for us on labor costs.
In terms of the top line, we now expect 2022 revenue broadly to grow in the range of 15%-20% or a range of $2-$2.1 billion. At a segment level, we expect Full Service to grow roughly 15%-20%, Back-Up Care to grow between 10%-20%, and Ed Advisory to increase to the low to mid-teens. In terms of earnings, this will translate into sequential improvement over the course of the year, and we expect 2022 EPS to be in the range of $3.05-$3.25. In the more immediate time frame, our outlook for Q2 is for full-service revenue growth of roughly 13%-15%, back-up growth approximating 15%, and Ed Advisory growth in the low to mid-teens, similar to the full year.
This translates to an overall total revenue growth range of 13%-15%. In terms of earnings, we are expecting Q2 adjusted EPS to be in the range of $0.65-$0.70 a share. Lastly, as Stephen discussed, we are excited to announce today that we entered into a definitive agreement to acquire Only About Children, a high-quality early education provider in Australia. This beachhead acquisition provides us with entry into an attractive market with an opportunity to leverage our service capabilities to families and clients and to expand our position as a global leader in early education. As stated in the press release, we are acquiring 75 centers for AUD 450 million, which translates to roughly $320 million.
We plan to fund the acquisition primarily with cash on hand and borrowings under our existing revolving credit facility and anticipate the acquisition to close in Q3, at which point we will provide more details around its financial contribution. In the meantime, to provide some high-level operating context, Only About Children generated roughly $140 million in U.S. dollar revenue in 2021. The centers generally operate at similar margins to the rest of our global full service operations when comparing our respective performance to the pre-COVID period. However, given the near-term effects of the integration and financing costs, we would anticipate limited earnings contribution from Only About Children in the first year of operations with Bright Horizons, with accretion to follow in subsequent periods. In summary, we continue to be pleased with our progress in returning to pre-COVID enrollment and utilization levels and overall financial performance.
With the evident strength of our business model in such a fluid and dynamic operating environment, we see the future as bright indeed. With that, Doug, we will go to Q&A.
Thank you. Ladies and gentlemen, at this time, we will be conducting a question-and-answer session. If you'd like to ask a question, you may press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Manav Patnaik with Barclays. Please proceed with your question.
Thank you. I just wanted to touch on just the guidance revision relative to your initial expectations, Elizabeth. What exactly changed there and maybe just the ramp up assumption for the year you've built in there?
Sure. There's a couple of things, as I touched on, briefly in the revision there that would categorize as external sort of factors, if you will. The foreign exchange rates have. The dollar has strengthened significantly in the last couple of weeks and months, and interest rates have solidified into the level that we expect them to be for the rest of the year at this point. Those factors, along with a higher tax rate, so it was higher in the Q1 , but it's also a step up of about a percentage point from where we had expected earlier in our guidance. Those three factors alone take approximately $0.10 or so out of our projection for the full year.
As it relates to the rest of the performance, I think it's just a matter of us being, you know, four months plus into the year now. We had our estimates coming into mid-February with how enrollment was tracking, which is good and solid, but we are seeing some continued pressure on the labor front, where it's been a bit stubborn. Even as we've gained enrollment and gained some efficiency there is a continued challenge with labor supply, and so we have, in some markets, been needing to continue to move on wage rates.
Also in some markets, particularly in our European operations, where contract labor or temporary staffing labor helps to fill the staffing gap, it tends to be more expensive than, you know, employment labor. Those are a couple of the factors, and I think the only other thing that I'd throw in, that you know is certainly in the news. It's not the biggest factor for Bright Horizons, but energy costs continue to be quite high as well. In our lease model centers, that can have some effect in terms of energy costs.
Got it. If I could just touch on the acquisition in Australia. You know, can you just help us with, you know, some of the profitability metrics on that asset? You know, just on a high level, from a timing perspective, I mean, I would think there would be, you know, the capital could be used perhaps in the U.S. better off. You know, why Australia now?
Yeah. Let me take the first part, and I'll let Stephen talk about the strategic aspect of the investment. You know, not to deflect too much, but we haven't completed the transaction. We did give some high level guidelines on where their performance was in 2021, so $140 million of revenue, and this is a full service childcare business which operates with similar parameters to our global full service business. So we're all, you know, still in a bit of a recovery from the COVID pandemic. Australia has had solid government support throughout, which is sort of similar to our Netherlands operation, where there was a bit less contraction of enrollment and so a little bit quicker recovery.
Broadly speaking, we see them as performing similar to our full service business over time. We have, as I mentioned, some integration costs early on, but expect that the accretion would look like full service business once we get, you know, six, 12 months under our belt. Stephen, why Australia?
Sure. First, just to take a step back, I think we've been really pleased over the years with the expansion that we've made into the UK and into the Netherlands. That has proven to be a very good use of capital and a very strong opportunity for us to have impact outside the United States. We have been evaluating and looking at Australia for a number of years now. Australia really does stand out as a market with strong government support, similar to the work and government support that we see in the Netherlands.
We believe that, you know, going into a new opportunity that has strong government support to defray some of the costs for working families. In addition to that, there is a real focus around quality provision in Australia, and the regulatory regime is actually quite similar to what we see in the U.K., in terms of it being very transparent and parents really being dialed into quality provision. Overall, as we looked at an opportunity that had 75 centers, we saw that as a tremendous opportunity for a beachhead in a country that makes a lot of sense to begin our expansion plans in Australia, which again, we believe is a strong market for us.
As we talk about the United States, certainly we continue to track progress here in the United States. I will say, and we've shared this over the last several years, for the most part, what is available in the U.S. are small tuck-in acquisitions. You know, one, three, up to maybe 10 or 12 groups, really limited as it relates to larger scale opportunities like the one that we are starting with in Australia. We'll continue to seek out high quality opportunities in the U.S., but believe this is a really great step forward for the company to enter a new strong market with a premier player within that market.
Thank you.
Thanks, Manav Patnaik.
Our next question comes from the line of Andrew Steinerman with J.P. Morgan. Please proceed with your question.
Hi. Could I just ask about Only About Children? It sounds like it's really kind of focused on the parents and the government subsidy. I believe there's another player in that market called Guardian that's really focused on more corporate opportunities in terms of childcare. If you could just you know comment on the positioning vis-à-vis you know corporate childcare in that marketplace, and is that a good market?
Absolutely. Thank you, Andrew. Certainly, both Only About Children as well as Guardian are recognized as both very strong quality players. Both really do benefit from the government support that is provided to working families. The amount of employer support in that market is actually quite limited, sort of categorically and across all providers, given the fact that because there is strong government support in a market like that specifically focused on full service childcare, you tend to see employers step back from actually directly supporting childcare centers. I would say that you have highlighted two very high quality players in that market.
The largest player in the market is a nonprofit, and then there are probably a half dozen in terms of size and scale between that largest nonprofit and the two players that you identified that we also see as the premier players within the market. Again, we like our position with Only About Children. We believe it's a great starting point for our growth in that market, and believe that similar to the Netherlands, because the government has programming to defray some of the costs of childcare, that we are able to compete on quality, which is something that Only About Children does well, and we will continue to support them in those efforts.
Okay. Elizabeth, would you be willing to talk about the capacity utilization in the Q2 , the current quarter that we're in, that you're expecting to fall within the parameters that you laid out?
Yeah. I mean, our guidance looks to probably a similar slope to what we've been seeing the last few quarters. A couple percentage points ticking up based on how we're seeing April come in. This quarter, as you know, is, you know, sort of a solid enrollment cycle before any summer turnover, if you will, that happens with older children getting ready for elementary school. We're pleased with the performance in Q1. As you heard, we moved up the average range from what had been averaging around 50%-60%. It's now averaging, you know, 55%-65%. We're seeing good solid improvement there.
You know, a couple percentage points of uptick that we would expect to see again continuing in Q3.
Okay. Last question if I could. Just any new initiatives around the summer strategy and using the summertime? Surely, you know, mentioned camp, I've heard, you know, tutoring, those type of things. With all that in mind, do you feel like there might be kind of, let's say, newer drivers, this summer before we even, you know, think about the fall?
Yeah. Look, the summer as it relates to backup care tends to be a very strong season for us. What I would say is last summer and obviously the summer before saw a more dampened ability for us to deliver traditional care in the form of summer camps and even in centers and in-home, given the capacity constraints that we saw. As you know, we acquired Steve & Kate's Camp, and we are certainly in the planning process around opening many more camps than we had opened last year. I think that is emblematic of the broader sort of summer camp market where there is absolutely gonna be more supply and therefore we are going to be able to meet demand at a higher level than we have seen over the last two years.
Again, summer is really important for us. We're looking forward to it and believe that we're gonna be able to support working families during this important season where their children are off from school and ultimately they need to be at work.
Okay. Thank you very much.
Thanks, Andrew.
Our next question comes from the line of Hamzah Mazari with Jefferies. Please proceed with your question.
Hi, this is Josh Chan filling in for Hamzah Mazari. My first question is, could you just comment on how you're thinking about labor availability easing? I know, like, last time you guys, you know, touched on this. You know, you couldn't really meet demand, you know, due to labor. I guess, you know, where do you stand now, and how is it geographically in terms of labor easing, you know, when you look at the overall portfolio? Thanks.
I think that it's been a sort of an all hands on deck effort for us with our talent acquisition team and others in the field to be identifying and onboarding as many people as possible. I think that you know that there's no one geographic area that is particularly notable, except that I'd say some of the more urban environments have been a little bit more challenged than some of those that are more suburban. We are making progress, I think, in all of our key markets and are taking an approach that is not unitary across the country. Taking a different approach in different locations with different clients, different cities, so that we are addressing the needs that are appropriate for those locations.
I'd say that as we said in the prepared remarks, pleased with the progress, but it continues to be as enrollment rises, as we are getting more families back, it remains quite an acute problem in terms of accessing all of the supply that we need. We continue to hold enrollment at, you know, at a number of our centers because of that.
Great. Yeah, that's definitely helpful. Just my follow-up. Could you just give us a sense of, you know, how big Ed Advisory could be for you over time, you know, and you know, how M&A could sort of play a role there? I know, you know, Back-Up gets more focused outside of full service daycare, but just any thought there would be helpful.
Sure. In the Ed Advisory segment, just to be really specific, we have our EdAssist line of service, which is focused on workforce education, so employees going back to school. It also includes College Coach, and then finally, a small portion of it is related to Sittercity. Where we see the greatest opportunity is really in that first part of this segment, which is supporting employers as they think more strategically about upskilling and reskilling their employee base and making their employee value proposition stronger through workforce education. That's where we see a particular opportunity and upside in this segment. We think that today the vast majority of employers do this work themselves internally.
Increasingly, we are able to work with them and convince them that working with us to support their employees to become more skilled in hard-to-fill roles is a value add. Again, we see a very large opportunity over time in that particular aspect of Ed Advisory.
Got it. Thank you.
Thank you.
Our next question comes from the line of Jeffrey Meuler with Robert W. Baird. Please proceed with your question.
Yeah. Thank you. On the Australia acquisition, just first, are you assuming a financial contribution? I know that it's like EPS breakeven, but are you assuming a revenue contribution in calendar 2022 in the guidance?
Not in the guidance. Thanks for asking that clarifying question. No, it is not in the guidance of $2 billion-$2.1 billion that we laid out. It will be additive to that when we are completed and fold in you know more fulsome commentary on how they contribute.
Okay. I understand the pitch for the attractiveness of the Australian market, and it has some parallels to models and markets that you know well. Maybe to just take a different approach to it, what are the synergies like when you acquire a company in another market like this? It doesn't sound like there would be employer overlap, given that it's a government-sponsored market. I'd imagine some, like, best practices sharing at a high level. Just help me understand what the synergies are, and do you increase margins through the integration process? Just if you could help me with that.
Yeah. If we use, you know, the U.K. and/or the Netherlands as the benchmark, I think what we have been able to demonstrate over time in both of those two markets is that we bring a particular competency in supporting the growth of those organizations, both organically as well as through acquisition. I think we have a pretty well-established playbook of how to actually create the growth and the impact with support and leadership of the local team. I would say the second is there is generally great appreciation for the global quality standards that we are able to support, again, the local team with.
I think that what we find is that we are able to add value from an educational quality perspective and therefore support additional reputation and enrollment based on that fact. I'd say the third is that given our scale we are really helpful as it relates to systems and processes. Think about things like enrollment systems, recruiting systems and you know things that at our scale we are able to deploy in market that support the ultimate success within the local environment.
What I would say is it's less about sort of the financial synergies, if you will, as much as it is deploying the expertise and know-how that we have that allows what is a successful organization like Only About Children to be able to both grow and expand and scale, and also have processes and systems to support that growth.
Really helpful perspective. Just last from me, you gave us the ARPA figure. The other child care financial support from government programs, can you give us a sense of what it was in the quarter? The press release says that it was up year-over-year, I think. If you could give us a sense of 2022 full year, what you're expecting relative to what it was in 2021.
Sure. Framed it as ARPA, there's very incidental remaining support that's come through from the Consolidated Appropriations Act and/or CARES Act. Really the funding that we're getting now is all ARPA. In the quarter, we had around $17.7 million of funding that came into our P&L center. Excluding the effect of our Cost-Plus centers that I mentioned in the prepared remarks, we had estimated about $25 million in total for the full year. Some of that came in a bit sooner than we had expected. It's also a little, we expect now it to be a little bit higher than what we expected.
That $25 million, we would now look at probably $30 million or so for the full year, on the P&L center benefit from those supports. Of course, many of them are being deployed toward, you know, toward the purpose of why they're being laid out, whether it's some of the labor costs, the operational inefficiencies that happen as we're re-enrolling and re-ramping, and/or even supports to parents. That's the quantum of what we would have in the outlook for the rest of the year. I'll say one other thing, Jeff, just to, you know, maybe give a more complete view of that, because we did mention the Cost-Plus effect.
It is in those centers where our client partners want to avail themselves of these benefits, we do apply for them. As we receive them, they reduce the cost that those employers need to contribute. As mentioned, that was about $10 million in Q1. We estimate that could be another $15 million-$20 million perhaps over the rest of the year based on the states that we have left to hear from or receive funding from. That's one of the reasons for the cost plus revenue effect we would see for the rest of the year is another, you know, element of where the revenue guidance has come in a little bit lighter than where we were before.
Got it. Appreciate all the detail. Thank you.
Sure.
Thank you.
Our next question comes from the line of Jeffrey Silber with BMO Capital Markets. Please proceed with your question.
Thanks so much. Wanted to go back to your full service centers. Can you just remind us about the price increases you took at the beginning of the year? I'm just curious if you got any pushback and how that pushback is or was, you know, relative to typical price increases that you usually put in.
Yeah. We did, you know, as you know, Jeff, it's a location-by-location decision. Broadly speaking, we put through 5%-6% increases on average this January. Some locations may have been a bit higher, but that was the average. The response to that was quite accepting. I characterize it as parents understand both from the cost of labor, the challenges with our staffing situation. Now, you know, as inflation has persisted along, I think they're seeing it in many parts of their lives, but we did not receive much pushback there on that price increase.
Okay. That's great to hear. If I could switch over back to the OAC acquisition. I know you're gonna give us more color when you close it in terms of guidance, but I'm just curious, the $140 million in U.S. dollar revenues that you quoted in 2021, how did that compare to pre-pandemic levels? I know you talked about some of the government support, but I'm just curious how the business was impacted. Thanks.
Yeah, I mean, without getting into too much detail, I think the headline is that their business has been impacted by the series of variants, but to a much lesser degree in terms of enrollment disruption than we've seen. For example, there wasn't a similar kind of wholesale shutdown. Enrollment has persisted relatively well. There was some contraction, but it wasn't significant. That's why we quote 2021 as pretty representative really of where an annual look would be.
Okay. That's really helpful. Thanks.
Welcome.
Thank you.
Our next question comes from the line of George Tong with Goldman Sachs. Please proceed with your question.
Hi. Thanks. Good afternoon. With your Only About Children acquisition, can you talk about how it grew prior to the pandemic and how you expect it to grow longer term exiting COVID?
I'll generally comment about how they've approached their business. They are an operator that is, like Bright Horizons, has grown through both greenfield new center growth and through some acquisitions. They've been looking at tuck-in acquisitions, single sites, you know, some multi-site locations, and that has been their growth strategy. As Stephen mentioned, they are a high-quality provider, and there is a subsidy program in Australia that sort of sets a general level of where parent support can come through, and that provides a guideline as to where tuitions will be.
They've been, you know, they've certainly been a provider that charges at the premium end, and they have been, you know, they do price increases that correlate to their cost of business. Those are a couple of things that have driven their overall growth over the years, is both price and unit growth and enrollment, of course.
Yeah. I think the only thing I would add, just to touch on the second part of your question around sort of looking out into the future, again, we see a lot of good opportunity there and have done sort of a fairly extensive look at what the rest of the market looks like as it relates to growth opportunities. We believe, given the level of fragmentation in that market, that there is some really good room to continue to build out from the starting point of Only About Children.
Got it. Very helpful. Your occupancy rate in the quarter improved to the 55%-65% range. Could you provide your latest views on when occupancy will return to pre-COVID levels?
Sure. We can certainly give you our view on how things are trending. Similar to what we had said last quarter, we think that we will be close to pre-pandemic levels by the end of the year. May not be all the way back there, but we are certainly on a track similar to what we had said last quarter to be getting back to pre-COVID occupancy utilization levels in our centers by the end of the year. That would be, you know, fully back then in 2023, but that's our view at this point.
Got it. Lastly, could you estimate what the tight labor market is having in terms of an impact on occupancy rates?
I mean, it's again similar to what we had said last quarter. We estimate that it's based on the enrollment that we are not able to take in our centers, that it's probably 3-4 percentage points of occupancy that we are holding at this point. As I say, similar to what we had said last quarter, we've made headway with enrollment, we've made headway with staffing, but we still have a demand profile that's ahead of our ability to take it.
Very helpful. Thank you.
Thanks, George Tong.
As a reminder, it's star one to ask a question. Our next question comes from the line of Toni Kaplan with Morgan Stanley. Please proceed with your question.
Thanks so much. Wanted to focus on the margins for a second. You know, when I looked at Ed Advisory this quarter and that the margins there do tend to jump around, but was there anything in particular that sort of drove the, you know, lower level of margins? And how should we be thinking about full year margins in that segment?
Yeah. There is in particular in that segment, Toni, thanks for asking that. Stephen mentioned before that as our third segment and the smallest of our businesses, it does capture our EdAssist, College Coach, Sittercity, and any other, you know, residual non-specific segment information. What is affecting the margin of that segment most significantly right now is our investment in our Sittercity business and that platform. We are building out the capabilities in that marketplace to be able to both serve parents in a B2C environment, but also the significant number of clients who are utilizing it and their employees who are able to utilize the Sittercity platform through our back-up extended family supports program.
We are in an investment mode with Sittercity, so that's having an effect on that. We think for the full year it'll be, you know, in the 15%-20% range, probably overall. That is a mix of, you know, EdAssist and College Coach being better than that and Sittercity being a headwind.
Great. On backup care, I think last quarter you had talked about sort of margins being, you know, 25%-35% for the year. Q1 obviously towards the lower end of that. You know, is that still a good number because like, or should we be thinking about it as sort of more towards the lower end of the range? Like, just wondering if there's any impact from wage inflation or anything that would impact that expectation.
It is still the range, Toni, that we're expecting for the full year, 25%-35%. Q1 does not have the same kind of use volume that we have in the second and Q3 with all of the opportunity for care in backup across the summer season. It does tend to be lower in the first half and particularly Q1 . 25%-35% would be the range that we would be looking at there. I think that to the question about inflation, it's one that maybe impacts backup in a slightly different way, in that when there is, we utilize third-party providers to, as part of our service capability.
To the extent that they are experiencing caregiver inflation, it's a cost factor, but because that is a much lower cost element than it is in our full service business, we still think that within that range, we can continue to manage what inflation effects there are there.
Perfect. Thank you.
Thank you.
Thank you.
Our next question comes from the line of Faiza Alwy with Deutsche Bank. Please proceed with your question.
Yes. Hi. Thank you so much. I wanted to actually follow up on that and just talk about the full service center margins. I don't know if I missed this, but I think you'd previously talked about those margins sort of exiting the year at around or near 10% level. I was curious how we should think about if that still stands, and how we should think about 2Q for that segment in particular.
Yeah. I don't think we've talked about exiting margins in full service. We are on a track. I think the framing has been on where we think revenue can be back to pre-COVID levels, occupancy getting close to pre-COVID levels by the end of the year, whereas margin performance will not be. Operating margins, certainly before pre-COVID, were in the high single digits, you know, 8%-9%, getting to 10%. We will not be at those levels at the end of this year because we are both recovering from the enrollment standpoint and all of the cost factors that we have been talking about. The flow through, as we mentioned, this quarter, was around 40%. That will be...
We would expect that to be diminishing, you know, as the year goes on, and we keep comping against, you know, prior quarters of ramp. That's an indication that while the operating income is improving, the, you know, marginal flow through will be gradually contracting. I think that's as much of a range of guidance as we've provided on those details.
Okay. Okay, that's helpful. I guess I would. I'm curious, like, what do you need to get back to that maybe even high single-digit level, like 8%-9%? Like, is it-
Yeah.
Like, what enrollment level do you need? Do you need inflation? Like, can you offset inflation with pricing more so maybe this year or next year? Just talk more about what gets you back to that path.
Yeah. Yeah. I mean, I think what gets us back there is of course there's a broad geographic spread here. It is getting enrollment back to the pre-COVID levels on average is one factor. Having at least one more cycle. You know, we had said this at the beginning of the year that we did a 5%-6% price increase. We know that labor inflation has been higher, and we would likely have two cycles of price increase to right size the economics.
If inflation continues to persist, you know, we may need to be either more aggressive with those price increases or look to some other pricing capability, whether it's mid-year pricing, you know, differentiated pricing for newer families or different age groups. We need to be dynamic about how we consider where the pricing can cover the cost increases. In general, enrollment will do it, will contribute to it. Getting another cycle of price increase against the labor cost increases that we have seen. Also having a more visible labor market that allows us to, you know, staff in a more regulated way, so that we are in our most efficient operating structure.
That's some of the factors that would get us back to that. I think the only other, you know, just a wild card that I'll throw in here is that of course we have always been a growing business. We've announced this acquisition, but also as we open new centers, again, we've been in a contraction and reopen mode. As new business comes in, you know, we do have a cadence with newer centers that are opening that have had losses during a ramp-up cycle and sometimes that can be a factor over time.
The underlying fundamental business is, there's really no reason that we see that it won't be able to get back to those high single digits, you know, in that 8%-10% range and, you know, in the quarters to come.
Okay, understood. Maybe just one last question around enrollment. I don't know if you have talked about this before, but are you willing to share, like, how enrollment trends are across, like, your customer end markets? You know, you've talked about like healthcare, pharmaceuticals or tech, consumer education, et cetera. If there's any sort of discernible difference across end markets and whether your sort of leased centers versus employer-based centers are seeing sort of different trends as it relates to enrollment.
Yeah, I mean, I think we haven't talked about specific end user markets except to say that where client demand is highest in the current environment where we're seeing hospitals and the healthcare industry in general, pharmaceuticals as well as universities, having quite high demand and that they often have you know quite high attendance and enrollment. But it really is. It tends to be client specific. Our client centers have slightly higher enrollment than our Lease Consortium centers, but not dramatically different. It's a few points on the overall enrollment scale.
I think from our standpoint it's really more a matter of having a differentiated portfolio that can serve a variety of working parents. We haven't seen it turn out to be. It's been more geographic than it's been industry verticals.
Understood. Thank you so much.
Okay, thank you.
Great. Well, thank you all very much for joining us on the call. As you detect from our prepared remarks as well as the Q&A, we are excited about the progress that we're making and appreciate all of your support and wish you a great night. Thank you.
Thanks, everyone.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.