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Bright Horizons Family Solutions (NYSE:BFAM)
Q1 2019 Earnings Call
April 30, 2019 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to Bright Horizons first-quarter 2019 earnings conference call. [Operator instructions] Please note that this conference is being recorded. I would now like to turn the conference over to your host, Elizabeth Boland, chief financial officer. Thank you.

You may begin.

Elizabeth Boland -- Chief Financial Officer

Thanks, Devon, and hello to everybody on the call today. With me on the call are Stephen Kramer, our chief executive officer; and Dave Lissy, our executive chair. Before I turn it over to Stephen, let me cover 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 that are made on this call, including those regarding future financial performance 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 they are described in detail in our 2018 Form 10-K. Any forward-looking statement speaks only as of the date on which it's made, and we undertake no obligation to update any forward-looking statements. We 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.

So Stephen will now take us through the review and update of the business. Stephen?

Stephen Kramer -- Chief Executive Officer

Great. Thanks, Elizabeth. And again, thanks to all of you who have joined us this evening. As always, on today's call, I'll review our financial and operating results for this past quarter and update you on our growth plans and outlook for 2019.

Elizabeth will then follow up with a more detailed review of the numbers before we open it up for your questions. We are very pleased with the strong start to 2019. For the first quarter of this year, we are reporting top-line growth of 8% to $502 million and adjusted EPS of $0.81, an increase of 13%. In our full-service center segment, we added six centers, including our second back-up center for Barclays and a leased consortium center in Greenwich Village, New York.

We expanded our back-up care portfolio with recent client launches for ADP, Waste Management and L3 Technologies. We also added to our education advisory client base this past quarter launching services for Aurora Health Care and Thermo Fisher. We also continue to be very excited about the cross-selling and cross promotion opportunities within our existing client base. As we have shared on prior calls, less than a quarter of our clients currently purchase more than one of our services.

Chick-fil-A became the latest example of a client moving from a single service -- in this case, full-service child care, to a multiservice client with the launch of our back-up care solutions earlier this year. We have also begun to realize the benefits of the investments we have been making in targeted marketing programs and technology to speed and improve the end-user experience. We continue to be really pleased with the progress of these initiatives exemplified by the open rates of our personalized outreach journeys, the increased mix of reservations made on our mobile and web platform and the percentage of reservations instantly booked. These initiatives and others once fully rolled out, should continue to drive growth and operating leverage over time.

In other growth activity in the first quarter, we acquired My Family Care, an innovative and highly regarded provider of back-up care and other family support services for leading employers in the U.K. This transaction is a great example of Bright Horizons being an acquirer of choice, building a relationship over time that enabled us to acquire this strategic asset off market. We welcome the My Family Care founders and their talented team to our organization along with their client base, including leading employers such as Virgin Atlantic and Rolls-Royce. Together, we are well-positioned to extend our leadership position in the emerging back-up care market in the U.K.

Tracking our solid top-line growth, we also continue to deliver strong and consistent operating results across the business. In the first quarter, adjusted operating income expanded 60 basis points. We continue to leverage enrollment gains in our full-service centers, including newer client and lease consortium centers that are ramping to mature operating levels. We also had a strong utilization in our back-up operations and this, coupled with the contributions from My Family Care, drove the strong performance in that segment.

Now I'll touched briefly on the strategic growth areas we're focused on. As we approach the midpoint of 2019, we do so with good momentum across all aspects of our business. First, our organic growth strategy continues to be focused on cultivating new clients and expanding our existing client relationships through cross-sells and additional use of current services. The sales pipelines in each of our services remains strong with interest across industries and with both new and existing clients.

Second, lease consortium centers. As a reminder, these types of centers have always been a component of our growth plan. Since 2013, our focus has been on select urban settings where we see a concentrated population of our target demographic, a limited supply of high-quality child care, and strong opportunities to meet the needs of our client partners. We have opened 90 of these centers over the last six-plus years.

We continue to be pleased by the progress and positive contribution from this group of centers as they ramp to mature operating levels, and we are very optimistic about the significant value creation opportunity of this strategy. Finally, with regard to M&A, we continue to cultivate a solid pipeline of acquisition prospects in each of our three primary geographies, including a good mix of networks and single centers. In addition, we have opportunities from time to time like My Family Care to acquire noncenter businesses that add to our back-up or education advising segments. As they have throughout our history, we expect acquisitions to continue to be a key element of our growth plan in the years ahead.

Taken together, this multichannel approach puts us in a solid position to achieve our growth plans in 2019 and beyond. Before I sum up, I want to share my excitement about two final things. First, I was really pleased to have the opportunity to meet with and hear from nearly 100 of our employer clients and prospects at the Bright Horizons summit we hosted in the Bay Area a few weeks ago. Senior HR professionals from clients, including LinkedIn, Facebook and Amgen shared their stories with those in attendance.

After hearing from so many cutting edge HR leaders, I feel even more energized and optimistic about the market opportunity and our unique capabilities to assist leading employers solve the challenges facing today's workforce. Along those lines, I'm also very proud that Bright Horizons has once again been named one of Fortune Magazine's 100 Best Companies to Work For, for the 18th time. Bright Horizons has been and will always be about our people. We work hard every day to perpetuate our strong culture and commitment to being a great place to work for all of our 33,000 employees globally.

It is the passion and expertise of each and every Bright Horizons employee that allows us collectively to impact the lives of the children, families, adult learners and employers that we have the privilege to serve. So in closing, we believe that we are well-positioned to continue the positive momentum and operating agility we have demonstrated over the years. We anticipate continued strong performance with revenue growth in the range of 8% to 10% for the full year and operating leverage to drive adjusted earnings per share in the range of $3.58 to $3.64. With that, Elizabeth can review the numbers in more detail, and I'll be back with you during Q&A.

Elizabeth Boland -- Chief Financial Officer

Thank you, Stephen. Once again, recapping the headlines for the quarter. Overall, revenue was up 8.2% or $38 million in the quarter. The 6.5% growth in our full-service center revenue or $26 million was driven by rate increases, enrollment gains and contributions from newer centers and includes approximately 2% from acquisitions.

Also, foreign exchange rates created approximately 200 basis points of headwind to the full-service growth for the quarter. So on a common currency basis, this segment expanded 8.5%. Our back-up operations topped our previous estimate, generating 18% top-line growth in the quarter. In addition to new clients who launched service, revenue expanded on contributions from My Family Care in the U.K.

and on strong utilization from existing clients, which was aided by the timing of school vacation days. That advisory services grew 15% on new client launches and expanded use by the existing base. In Q1, gross profit increase $13.4 million to $127 million, which represents 25.3% of revenue, and adjusted operating income increased $63.3 million or 12.6% of revenue, as Stephen said, up 60 basis points from Q1 of '18. Breaking that down into our segments.

For the full-service segment, adjusted operating income expanded 40 basis points to 9.9% on the gains that we realized from enrollment growth in our mature and ramping centers and on contributions from new and acquired centers coupled with our usual tuition increases. Our back-up operations generated operating income margins just over 27% in the quarter, up from 25.8% in 2018 on the strong utilization levels and improving efficiency of service delivery. Turning to interest expense. It was $12 million in Q1 of '19, and up slightly over 2018 on slightly higher average interest rates.

Our current borrowing cost approximates 4% with $500 million of our term loans, which is about half fixed with an interest rate swap. We ended the quarter at three times net debt to EBITDA. The 2019 structural tax rate on adjusted net income of 23.7% in the quarter is up approximately 1% from 2018 levels. Turning to cash flow with our improved operating performance and positive working capital movements, we also continue to generate strong cash flow, $107 million in the first quarter of 2019.

In terms of the deployment of that cash flow and our capital-allocation strategy, our first priority continues to be investments in the growth of the business followed by share repurchases under our existing authorization. Through March of this year, we've invested $31 million in new centers and acquisitions, and have reinvested $9 million in our existing operations and support functions. lastly, at March 31, we operated 1,079 centers with the capacity to serve 120,000 children, and across all of our service lines, we partner with more than 1,150 clients. Adding to the guidance headlines that Stephen touched on earlier, we continue to project top-line growth for 2019 in the overall range of 8% to 10%.

We now project that our back-up division will grow in the range of 16% to 18% in 2019, including approximately 4% coming from the addition of My Family Care. We also continue to project top-line growth in our ed advisory services in the range of 15% to 20%, and for our full-service segment, we are projecting top-line growth in the range of 7% to 8%, which includes an FX headwind of approximately 1% projected on lower pound and euro exchange rates than we realized in 2018. On the operating side for 2019, we expect to continue to add approximately 1% to 2% to the top line from enrollment in our ramping and mature full-service centers, and to realize average price increases in a range of 3.5% to 4% across the P&L center network. We expect to add roughly 50 new centers, including organic openings and acquisitions.

Consistent with our disciplined strategy over time to prune underperforming centers, we also anticipate that we will close 20 to 25 centers in the year. Top-line growth, disciplined cost management and increasing efficiency in our service delivery contributed to improved operating performance -- will contribute to improved operating performance and margin improvement for 2019 in the range of 50 to 100 basis points compared to 2018. On a few other key metrics for the full year, we estimate amortization in the range of $33 million to $34 million, depreciation in the range of $75 million to $78 million and stock compensation of approximately $18 million. Based on outstanding borrowings and estimates of interest rates for the rest of the year, we project that interest expense will approximate $47 million to $49 million.

On the tax front, we're projecting the structural tax rate to be in the range -- similar to the range we reported in Q1, so 23.5% to 24%. The increase from 21% for the full-year 2018 primarily reflects the diminishing impact of stock option exercises on our reported tax expense. Lastly, weighted average shares are projected to approximate 59 million for the year. Overall, we estimate we will generate approximately $300 million to $325 million of cash flow from operations and expend $50 million or so on maintenance capital, which would yield $250 million to $275 million of free cash flow to invest in the ongoing growth of the business.

We expect to invest approximately $50 million in new center capital for centers that are opening this year and in early 2020. So again, recapping the overall earnings projection for the year. Combination of all the factors that I outlined lead to our projection of adjusted net income in the range of $211 million to $214 million and adjusted EPS in the low double-digits to a range of $3.58 to $3.64 a share. Looking specifically to Q2.

We are projecting top-line growth of 8% to 9% as we expect to sustain the growth drivers we reported this past quarter. And also project the slightly reduced foreign exchange headwind. On the bottom line, we are projecting adjusted net income in the range of $57 million to $58 million, which translates to adjusted EPS in the range of $0.97 to $0.98 a share. So Devon, with that, we are ready to go to Q&A. 

Questions and Answers:

Operator

[Operator instructions] Our first question comes from the line of Manav Patnaik with Barclays. Please proceed with your question.

Unknown speaker

Hey, this is Ryan on for Manav. Just curious, when we take a step back and look at the full-center market, we often get asked the question, how much more room is there to grow there? You guys are obviously a leading player. When you look out over the next couple of years, do you see more growth coming from cross-selling? Or is there still a lot of white space available in kind of the existing full-center market?

Stephen Kramer -- Chief Executive Officer

Yeah, it's a great question, Ryan. So we see opportunities in both. There are -- we estimate about 14,000 work sites here in the U.S. that could benefit from an on-site child care center.

Obviously, we serve a small fraction of that today. And so we continue to see with both individual organizations that don't work with us today, as well as those who do, the opportunity to continue to expand that that line of service. The additional nuance I would put on is, in addition to those who are current clients of other services, we also see clients who have a single center or two centers today, also continuing to add to their footprint of centers in again larger locations within their employ. So we see it both in existing clients who are clients of centers, existing clients who work with us in other lines of service, as well as new prospects to the Bright Horizons Family.

Unknown speaker

Got it. Thanks. And I guess, in some of these cross-selling initiatives that you've seen, is there a time that it typically takes from someone who signs up for a center to adopt some of the other services? And how has that changed over time? Are you seeing any acceleration in the time it takes for clients to adopt the second solution?

Stephen Kramer -- Chief Executive Officer

Sure. Well, I think that over the last couple of years, you've heard us talk more about our initiatives and focus around cross-selling. And so I think we are certainly beginning to see the fruits of some different dimensions, whether that be our sales people now having the ability to sell into our existing accounts and partner with our relationship managers, as well as different compensation available to our salespeople; as well as account managers that we are seeing an increased velocity. Certainly, a center decision is one that is very methodical and still has a relatively long sales cycle to it.

On the other hand, I feel like our team is very well equipped to continue to introduce that service and extend into the center world for us.

Unknown speaker

Got it. Thank you.

Elizabeth Boland -- Chief Financial Officer

Thanks, Ryan.

Operator

Our next question comes from the line of Andrew Steinerman with JP Morgan. Please proceed with your question.

Andrew Steinerman -- J.P. Morgan -- Analyst

Hi. Elizabeth, I just wanted to get a little bit more color on operating margins. What type of operating margins is implied in the second-quarter guide that you just gave on revenue and EPS? And how do you see the cadence of operating margins in the second half of the year? And what factors are driving that?

Elizabeth Boland -- Chief Financial Officer

Yeah. So as mentioned, we delivered 60 basis points against the first quarter, and if we look back to 2018, we had sort of an improving cadence to the operating margin as the year went along. I expect that as we look at the rest of this year, we'll be in that -- since we're guiding to 50 to 100 for the full year that will be in the range of how we are doing the first quarter maybe ticking up modestly as the year goes on. But no dramatic shift from quarter to quarter is how I'd frame it.

So relatively same arena for Q2.

Andrew Steinerman -- J.P. Morgan -- Analyst

OK. Thank you.

Elizabeth Boland -- Chief Financial Officer

Yup.

Operator

Our next question comes from the line of Gary Bisbee with Bank of America. Please proceed with your question.

Gary Bisbee -- Bank of America Merrill Lynch -- Analyst

Yeah. Hey, good evening. Stephen, the comment that there is 14,000 work sites in the U.S. that could benefit from an on-site center.

That big addressable market has been talked about the long time, but one thing that's curious is the number that the company has targeted -- small acquisitions and new openings or new customer centers is 40 to 50. It's been that way for a long time and the base of centers is a lot larger. If it's such a big opportunity, why wouldn't there be an opportunity to increase the number that you add for the routine M&A and organic gains? Like it's been the same every year since the IPO. A few years, obviously, there's been more when there's been bigger M&A.

But is there some like gating factor to penetrating that market at a proportional rate to the growth that the company's had over time?

Stephen Kramer -- Chief Executive Officer

Sure. So the way I would think about it, Gary, is there is the employer opportunity first and foremost that we go after with our direct sales team. And the rate limiting step on that is getting an employer to yes. And there are a lot of considerations that HR and ultimately leadership at organizations think about -- whether that be their portfolio of benefits; whether it be the allocation of their space, the real estate that would be required; the capital that is required in order to make a center happen on their site.

So I think that we are working diligently and have consistently worked diligently to introduce our concept of on-site child care to as many employers as possible. The reality is that there has been a lot of similarity in terms of the number who we have able to get to yes in that segment. As it relates to the fragmented market that we, obviously, look at from an acquisition standpoint, the rate limiting step there, is really the focus that we have on our employers in serving their employees. And so we're trying to be very selective from a quality perspective, from a strategic-fit perspective and then from a financial-fit perspective.

And so I would sort of look at the two opportunities sort of as coexisting, but the different rate limiting steps in each is different. That said, we agree with you. There is a lot of opportunity out there, and we continue to press hard to help employers see the benefit and realize the benefit of having an on-site center. And at the same time, looking very broadly at what M&A opportunities exist out there that fit our criteria.

Gary Bisbee -- Bank of America Merrill Lynch -- Analyst

Thanks. And just the follow-up on that same theme. Does the much tighter labor market -- does that help in the sales pitch? Or we hear from other parts of the HR world that there is pressure to be more efficient and use technology and actually bring down the cost base that HR is supporting. I don't know if that is like an offsetting factor.

But it strikes me you should have more demand given how tight the labor market is, and how impactful this offering can be.

Stephen Kramer -- Chief Executive Officer

Yeah. We agree. The impact of the offering is absolutely clear, and we certainly are in an environment where there war for talent is real. That said, on the on-site child care center side, the decision that an employer is making is very long term, right? This center is one that they will ultimately continue to persist with for many years, through many different economic cycles.

And so what we see the decision makers and employers thinking about is the long-term fit of an on-site center for their particular culture, for their particular set of needs and their sets of requirements. And so yes, broadly, our services benefit from the war for talent that we currently find ourselves in. I would say of all of the services that we have, clearly the on-site center has the proposition whereby they need to think the longest and the longest term about the investment that they are making.

Gary Bisbee -- Bank of America Merrill Lynch -- Analyst

OK. Great. And then just one for Elizabeth. Just given that rates have gone up and now appear to be coming in a little better, stabilizing.

Any change in how you are thinking about comfort level with your leverage and this three to four times. Is that still the right place we should think that you're targeting? Thank you.

Elizabeth Boland -- Chief Financial Officer

Sure. I think probably the range we would quote is more like to two and a half and three and a half times and ticking above that temporarily if we had a transaction that required some borrowing, which would of course come with its own cash flow and enable us to delever against that. But in terms of optimizing the flexibility and the debt and the pricing on it, we think that that is the range that works best for us.

Gary Bisbee -- Bank of America Merrill Lynch -- Analyst

Great. Thank you.

Elizabeth Boland -- Chief Financial Officer

Thanks.

Operator

Our next question comes from the line of George Tong with Goldman Sachs. Please proceed with your question.

George Tong -- Goldman Sachs -- Analyst

Hi. Thanks. Good afternoon.

Elizabeth Boland -- Chief Financial Officer

Hi, George.

George Tong -- Goldman Sachs -- Analyst

Enrollment growth has been a pretty persistent driver of overall revenue growth. Can you discuss how you expect enrollment trends to potentially change to reflect benefits from your recent technology investments that's helping to drive utilization rates higher and also given where we are in the macro cycle?

Elizabeth Boland -- Chief Financial Officer

Yeah. So let me touch first on full-service utilization because I think that's -- we want to make sure that we're distinguishing between the types of use across our three different service lines. And in the full-service centers, we are able to realize enrollment gains year over year because of the long ramp cycle that it takes centers to get to full maturity. So what we categorize as new centers, the first 12 months they're open, and then they continue to ramp in year two and three and get to a mature operating level in their fourth year -- or by their fourth year.

And so in those centers, we have enrollment gains that come from those ramping centers. And then to the extent that we can eke out a little bit of enrollment in the mature centers, that's the other element of efficiency that we can enjoy with both effective management in the center, but also by deploying more back-up use to centers that are open to -- and able to take back-up use, but ultimately having that overall portion of the 1% to 2% a year. The utilization that we are seeing some more specific impact, I think, from the technology investments is more on our back-up care services and in our ed advising services where the technology forms more of the pipeline channel, if you will -- not the pipeline, but it's part of the service delivery mechanism. And therefore, the more improved end-user experience and the speed to reserve the confirmation and then the experience with the employee can drive more utilization in that way.

So I think that's more where we will see over time, both the persistence of use, which is like in our full-service centers retaining the use we have is step one and then expanding the use to a broader population is step two. And what we are -- we're pleased with the -- with both the early outcomes of the technology investments and our marketing efforts to increase awareness, increase registrations, as well as the reservations because that ultimately is what will sustain over time.

George Tong -- Goldman Sachs -- Analyst

Got it. That's helpful. And as it relates to the lease consortium centers, can you provide an update on how much of a margin lift do you expect from the maturing cohorts? And over what time frame over the next several years you expect that tailwind to persist from a margin perspective?

Elizabeth Boland -- Chief Financial Officer

Sure. So in general, in our full-service segment, we are -- we would typically be looking to realize 20 to 25 basis points of margin expansion a year from sort of basic routine operations of maintaining cost discipline against our price increases, retaining and growing enrollment modestly, opening new centers. So that's sort of the base business. On top of that for -- we would say for the next couple of years -- this year and another two years, call it, as we ramp in more of these urban centers -- lease consortium centers, that we have another 15 to 25 basis points a year coming from that additional tailwind of those classes getting to maturity.

So this year, that's the sort of range that we would expect to have somewhere between 35 and 50 basis points of margin expansion from the combination of base business and lease consortium centers. And as you point out, George, in another two years, three years, we will be having enough mature classes that it will be more incidental what the contribution is. But it's part of the overall growth strategy and just won't be additional tailwind is our view. But that's still a couple of years out.

George Tong -- Goldman Sachs -- Analyst

Got it. Very helpful. Thank you.

Elizabeth Boland -- Chief Financial Officer

Welcome.

Stephen Kramer -- Chief Executive Officer

Thanks.

Operator

Our next question comes from the line of Jeff Meuler with Baird. Please proceed with your question.

Jeff Meuler -- Baird -- Analyst

Yeah. Thank you. Just first, what was the closing date of the My Family Care acquisition because I thought it was announced before the last quarter, but it sounds like it wasn't in the prior guidance. Just what was the closing date?

Elizabeth Boland -- Chief Financial Officer

It was early February. So it's basically in for -- so maybe it did crossover in terms of the timing of the earnings release I think that --

Stephen Kramer -- Chief Executive Officer

Yeah. I think the press announcement went out in coincidence with the last --

Elizabeth Boland -- Chief Financial Officer

[Inaudible] it was in the first week of February.

Jeff Meuler -- Baird -- Analyst

OK. But you have about a two-month contribution to the quarter from that. And I guess, it seems like even if we back out the contribution, the four points to the full year, you're still guiding back-up care to faster growth organically than it's had in a while. And just what do you see as the most impactful initiatives? Is it the tech initiatives? Is it the cross selling? Is it something else going on in the market? Just -- and is that type of growth sustainable?

Stephen Kramer -- Chief Executive Officer

Yeah. Thanks, Jeff. So we agree, and we are seeing a modest uptick in the sort of base back-up business. So certainly if you net out the uptick from the My Family Care acquisition, we do see some nice increase in terms of new client launches, as well as our ability to use our technology and marketing platforms to drive additional registration and use.

So we are seeing sort of those as the three key drivers in terms of new clients, the driving of registration and use, as well as the My Family Care acquisition, leading us to a place that is slightly higher than what we have seen historically.

Elizabeth Boland -- Chief Financial Officer

Right. So the previous -- as you say, the previous guidance would have been in the low double digits. So in the 10% to 12% range in our -- I think the -- with My Family Care, as you say, we would be looking at more like 12% to 14% organic growth this year and the My Family Care adding on to that. I think to the question of sustainability into future periods, of course, this steps up the base, but we are and we will -- we'll continue to relay to you our outlook on what it looks like beyond 2019 as the use comes in for this year.

But we are -- I think the headline is that we feel good about the expanded opportunity. That's part of why we talk about cross-selling and cross promotion within clients as the opportunity is to expand the utilization and we're seeing some of the fruits of that from the efforts we've been talking about the last couple of years -- and think that it has good opportunity, but want to say, more to come on specific guidance for future years in the coming quarters.

Jeff Meuler -- Baird -- Analyst

OK. And then in the key urban markets where you're attacking the lease consortium opportunity, what are you seeing from the perspective of competitors adding centers, adding capacity in those markets? Are there lot of competitors simultaneously adding capacity? Or if not, what do you see as the barriers to them doing so?

Stephen Kramer -- Chief Executive Officer

Yeah. So what we see is that we are seeing an occasional competitor open up in those same markets. I'd say that the reason we don't see more velocity of competition in those markets is there is pretty strong barriers to entry, right? So the real estate costs are high. The capital build-out requirements are high.

The landlords in those markets tend to be more sophisticated and really do require the kind of credit worthiness that we bring to the table. So I think if those things didn't exist, we would probably see more competition coming into this market. But I think our reality is that we have certain things that others don't have. And then the second part of it, to answer your question, is that we have an advantage in that we have clients that are also colocated in those markets.

And so our ability to ramp more quickly and to place back-up care additionally into those centers allows us to have what is a better ramp than what might be typical in that. And therefore, losses that are on the front end less than other competitors might have to absorb. So I think taken together, we feel really good about our competitive position in those urban markets despite the fact that there is a pretty significant imbalance between supply and demand.

Jeff Meuler -- Baird -- Analyst

OK. And then just one last one. Did not save the best for the last here. The ASC 842, lease accounting, is there any P&L impact, including any movement between expense line items? Or is this just balance sheet accounting?

Elizabeth Boland -- Chief Financial Officer

Yeah. Thanks for asking. We don't have any P&L impact, including either net earnings impact or classification on the income statement impact. Ultimately, as the standard was promulgated, some of those potential movements were removed.

So what we do have is the balance sheet impact. As you said, there is a component of the liability that is now in current liabilities, as well as long term. And so there is a bit of change there. And then there -- as a result of that, there is some movement on the cash flow statement between working capital line items.

But other than that, no earnings impact that we are needing to report.

Jeff Meuler -- Baird -- Analyst

That's helpful. Thank you.

Elizabeth Boland -- Chief Financial Officer

Thank you.

Stephen Kramer -- Chief Executive Officer

Thank you.

Operator

[Operator instructions] Our next question comes from the line of Jeff Silber with BMO Capital Markets. Please proceed with your question.

Jeff Silber -- BMO Capital Markets -- Analyst

Thanks so much. Stephen, in your remarks, I think you mentioned a couple of times the fact that the My Family Care deal was -- I think you called it an off-market deal. Maybe I'm reading too much into it, is it getting tougher to find companies? Is there a lot more competition out there for acquisitions?

Stephen Kramer -- Chief Executive Officer

So I think that varies by both geography, as well as sort of the size and strategic nature of the opportunity. I think the reason we keyed in on that being off-market is that we are tending to see larger more strategic opportunities tend to go through intermediaries. Again, I think we've seen that for a long time. And I think the reason we called that are, in particular, on My Family Care was because that would have naturally been one that would typically go through an intermediary and because of our relationship and because of the understanding and friendship that existed between the two organizations, we're able to do that directly with the owners rather than going through an intermediary.

I'd say that as we look at sort of smaller networks and single sites, we have a long history and we'll continue to do those in an off-market type way. And it's really in the larger network opportunities that we're seeing continued persistence of intermediaries and auction types of scenarios. Now I think we had commented a couple of years back when we made the Asquith acquisition. That was large.

It was strategic. It did go through intermediates. But again our relationship, I think, was very helpful to make sure that ultimately we ended up with that opportunity. So again, I wouldn't read anything more into it other than it's a core competency of Bright Horizons.

We believe we're an acquirer of choice and it just -- was a good recognition through the My Family Care acquisition that that continues to be our status within the industry.

Jeff Silber -- BMO Capital Markets -- Analyst

OK. I appreciate the color on that. And Elizabeth, just a quick numbers question for you. Did you disclose the number of new centers that were opened in the quarter?

Elizabeth Boland -- Chief Financial Officer

Yes. We added six centers in the quarter.

Jeff Silber -- BMO Capital Markets -- Analyst

OK. Fantastic. Thanks so much.

Elizabeth Boland -- Chief Financial Officer

Thank you.

Stephen Kramer -- Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of Hamzah Mazari with Macquarie Group. Please proceed with your question.

Hamzah Mazari -- Macquarie Research -- Analyst

Hey, good evening. I think you may have touched on this a little bit but I was hoping for a little bit more color around -- what do you sort of view as the typical sales cycle just in terms of low-to-high years, months, in terms of a new customer adding a center who doesn't have one? And then clients subscribing to more than one service. And then also people that have a center adding another center. Is there an order of magnitude in terms of sales cycle? Is there anything sort of that you can point to add some color? Thank you.

Stephen Kramer -- Chief Executive Officer

Sure. So our center sales cycle is clearly our longest. So that typically is a year plus in terms of educating the prospect or client about the value of having an on-site center. And then it will be a year-plus in development, so the actual licensing, construction and, ultimately, opening of a new center.

So that tends to be a multiyear process from beginning to end. Whereas, in our back-up plan service or ed advisory, we tend have sales cycles that are more in the six months to 12 months, from the time that we start to share and educate with that client to the time that they might decide to get to yes and/or launch. And so that would be sort of the ends. Now certainly there are clients that have come on board more quickly, and then there are others that have taken years and years.

But I would say on average, I would think about a couple of years on the center side and then six months to a year-plus on the back-up and ed advisory side.

Hamzah Mazari -- Macquarie Research -- Analyst

Right. And then when you think about client attrition -- and I guess you guys call out your retention rate, is -- why do you lose clients? Is that just pricing? Or I know you had highlighted a Starbucks contract a while back, but maybe that was just net new business. But any thoughts on attrition and customer retention?

Stephen Kramer -- Chief Executive Officer

Yeah. So we have very, very high customer retention. So very high 97% --

Elizabeth Boland -- Chief Financial Officer

97%.

Stephen Kramer -- Chief Executive Officer

Yeah, 97% retention. In the cases where there is a client who doesn't work with us or the contract is lost. The most typical is on the center side client M&A where they're consolidating their own workforces. They are sticking with the child care, but they may not have as many work sites and, therefore, they don't require child care centers at as many work sites.

The other reason we might see closures is -- we'll see closures in the wake of larger M&A deals where typically we'll know going doing that in the large portfolio of an organization that we acquire that there'll be a tail in that portfolio that we'll want to ultimately prune. But on the client centric side, it's pretty unusual for us to lose a client across any of our services and it's typically something that happens in the face of something very specific to that client.

Hamzah Mazari -- Macquarie Research -- Analyst

Gotcha. And just a last question. I'll turn it over and this may be too early, but any thoughts on impact on your business from the college admissions scandal? Is that just too small to matter in terms of being a positive for you? Or any thoughts around that? Thank you.

Stephen Kramer -- Chief Executive Officer

Thank you. Yeah. So obviously, our college advisory segment is relatively small to the total. On the other hand, what I would say is that given all of the press that there is been around the college admissions scandal, certainly, there is an increased recognition, both among individuals, but more importantly among employers as to the value of ethical college admissions advice, which obviously we have provided for many, many years now.

And so the idea that employers have the ability to level the playing field and make it available to those of a wide variety of means and educational backgrounds, that becomes really attractive. And then secondly, ensuring that employees that they employ have access to highly ethical services is also attractive. So again the way we look at it is, it's certainly given a lot of publicity to the market and ultimately, the way we do it is very attractive to employers and directly to individuals. Excellent.

So if there is no other questions, I just want to thank everyone again for joining our call, and wishing everyone a great night.

Elizabeth Boland -- Chief Financial Officer

Yup. We'll see on the road.

Stephen Kramer -- Chief Executive Officer

Take care.

Elizabeth Boland -- Chief Financial Officer

Thank you.

Operator

[Operator signoff]

Duration: 49 minutes

Call Participants:

Elizabeth Boland -- Chief Financial Officer

Stephen Kramer -- Chief Executive Officer

Andrew Steinerman -- J.P. Morgan -- Analyst

Gary Bisbee -- Bank of America Merrill Lynch -- Analyst

George Tong -- Goldman Sachs -- Analyst

Jeff Meuler -- Baird -- Analyst

Jeff Silber -- BMO Capital Markets -- Analyst

Hamzah Mazari -- Macquarie Research -- Analyst

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