Executives: David H. Lissy - Bright Horizons Family Solutions, Inc. Elizabeth J. Boland - Bright Horizons Family Solutions, Inc. Analysts: Gunnar Hansen - RBC Capital Markets LLC David J.

Chu - Bank of America Merrill Lynch Andrew Charles Steinerman - JPMorgan Securities LLC Ryan Leonard - Barclays Capital, Inc. Jeff P. Meuler - Robert W. Baird & Co., Inc.

Operator: Greetings and welcome to the Bright Horizons Family Solutions First Quarter 2017 Conference Call.

At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, David Lissy, CEO. Thank you.

Please begin. David H. Lissy - Bright Horizons Family Solutions, Inc.: Thanks, Roya, and greetings, everybody, from Boston. Thanks for joining us in the call today. With me is Elizabeth Boland, our Chief Financial Officer, who will go through a few administrative matters before I kick things off.

Elizabeth?
Elizabeth J. Boland - Bright Horizons Family Solutions, Inc.: Hi, everyone, and thanks for joining the call today. For reference, our call is being webcast and the earnings release that we issued right after the market close today, as well as a recording of today's call, will be available under the Investor Relations section of our website, brighthorizons.com. Some of the information we're providing today will include forward-looking statements, such as those regarding our growth and operating strategy and financial outlook for Q2 and the full-year 2017, as well as expectations for revenue growth, operating margins, contributions from acquisitions, integration costs, our credit facility and pending amendment, interest expense, business segments, foreign currency rates, tax rates and expense, center openings and closings, capital spending, adjusted net income and EPS, cash flow and share repurchases. Forward-looking statements inherently involve risks and uncertainties that may cause actual and operating, financial results to differ materially.

These risks and uncertainties include those described in the Risk Factors of our Form 10-K and other SEC filings. Any forward-looking statements speak only as of the date on which it's made, and we undertake no obligation to update any forward-looking statements. Lastly, the non-GAAP financial measures that we discussed are detailed and reconciled to their GAAP counterparts in our press release and they will be included in our Form 10-Q when it's filed with the SEC, and it will also be available in the Investor Relations section of our website. So, Dave, back to you. David H.

Lissy - Bright Horizons Family Solutions, Inc.: Thanks, Elizabeth, and hi, everybody, again. Thanks for joining us. As usual, I'm going to update you on our financial and operating results for this past quarter, and I'll provide you with our updated outlook for the full year 2017. Elizabeth will then follow up with a more detailed review of the numbers before we open it up to your questions. So to recap the headline numbers for this past quarter.

Revenue increased 10% to $422 million, adjusted EBITDA increased $6 million to $78 million, and adjusted earnings per share of $0.61 increased 20% over last year. As we previewed on our last call, we've experienced an FX headwind related to our UK operations of approximately 2% in the first quarter of 2017. Therefore, on a common currency basis, revenue growth approximated 12% in Q1; and likewise, the growth in EBITDA and adjusted EPS would've also been proportionally higher. We continued to work on effectively managing our tax position as our international presence has grown and in addition, like all companies, we adopted the new accounting standard that changed the treatment of certain tax benefits, which Elizabeth will expand upon a little bit more in her section. So in summary, for Q1, we are really pleased with our solid start to the year, outperforming our expectations within our operations by roughly $0.02 of adjusted EPS, which was complemented by the tax rate, which was lower than our prior estimate, which added another $0.04 to the quarter.

Our top-line growth of $37 million, included solid contributions from each of our three business lines. This quarter, we added 10 centers, including new client centers for General Mills, Overstock and Fox Entertainment, as well as three centers we acquired in the Netherlands. In our back-up division, revenue expanded 12% this past quarter on new client launches, expanded utilization and rate increases. Similarly, our educational advising segment expanded by 14% on the top line. Recent new client launches for these segments included Symantec, PayPal, Cone Health and the Milton Hershey Medical Center.

As we've discussed on prior calls, the timing of when new clients launch these services with us can contribute some variability to the quarter-to-quarter growth rates. But by and large, we're pleased to say that we're tracking well toward our 2017 targeted growth levels of 10% to 12% for the back-up segment and approximately 20% for educational advising segment. We continue to deliver strong and consistent results in our core operations. And at the same time, we're expanding the business in strategic ways and making important investments to support continued growth and operating efficiency. Operating margins of 12.2% for the quarter are on track with our plan for the full year.

As a reminder, there are three notable areas that are and will continue to impact margins in 2017. First, the 90-center Asquith acquisition we made in the UK in the fourth quarter of 2016 contribute significant revenue in 2017 with margins broadly consistent with the rest of our UK full-service centers, yet lower than our U.S. margins, which are improved by the mix of the higher-margin back-up and educational advising services. In addition, we expect to incur approximately $2 million to $2.5 million of integration-type costs in 2017 before we realize the synergies that we targeted. The second component relates to the short-term effects on margin from our newer lease/consortium centers that we previously talked a lot about.

Since the beginning of 2013, we've opened more than 60 of these centers as part of our ongoing long-term growth strategy, and we're opening another cohort this year. While we're still ramping to a critical mass of mature centers in this cohort, the revenue contribution from these centers are significant, roughly $120 million expected this year. But the associated margin contribution is still modest. As we've discussed on prior calls, we expect this headwind will naturally diminish as these more recent classes of centers continue to ramp, which will unlock the significant value creation that exists in this group of centers. Lastly, we're making investments in technology and people to enhance our customers' user experience, build the utilization levels of our services within our client workforces and over time deliver operating efficiencies.

While we're making these investments in all three of our operating segments, there's somewhat more of an impact in back-up and ed advising due to the technology backbone of significant portions of their respective service delivery systems. In summary, although we anticipate 2017 operating margins to be broadly consistent with 2016 levels, we do expect to regain our longer-term targeted operating margin leverage of 50 to 100 basis points in 2018 and beyond. As we approach the midpoint of 2017, we do so with good momentum across all aspects of our business. The integration of Asquith has been going well as our respective teams have worked closely on the integration strategy and process. We remain on track to realize the full value of our investments in 2018.

Our growth strategy continues to be focused on organic as well as acquisition growth and are leveraging the breadth of our existing client base to cross-sell our additional value-added services. Our sales pipeline in each of our services remained strong with interest across a number of industries and with both new clients and with cross-sell opportunities. All of this puts us in a solid position to achieve our organic growth plan in 2017. On the acquisition front, after an outsized year in 2016, our plan for 2017 calls for a more typical year of tuck-in acquisitions both here in the U.S. and abroad, even as we continue to pursue opportunities that range in scale.

Our pipeline remained strong. We've got a good mix of smaller networks and single center opportunities and active discussions both here in the U.S. and in Europe. Now let me touch for a minute on our capital allocation and credit strategy. In the next few days, we expect to complete an amendment of our credit agreement, taking advantage of favorable credit markets.

Our expectation is that this will help to neutralize the impact of potential interest rate increases over the rest of 2017. Given the cash we generate, our revolver and our access to additional capacity when needed, we remain in a good position to take advantage of any strategic opportunities that continue to present themselves. Our first priority remains growth-oriented investments and acquisitions and new lease/consortium model centers. And the second priority is to enhance shareholder value through our share repurchase program, which we've also continued to execute upon this past quarter. I'd expect we'll continue for the rest of 2017 with these same priorities in mind.

So now to update you on our outlook for the remainder of the year. We're targeting revenue growth in the range of 10% to 12%, offset in part by some continued FX headwind from the pound compared to last year, approximating 2% in the first half of this year. We expect that this will drive adjusted earnings per share growth of approximately 20% over 2016 or a range of $2.57 a share to $2.61 per share. Before I turn it over to Elizabeth, let me take a moment to acknowledge our recent recognition as one of FORTUNE Magazine's 100 Best Companies to Work For in America. This is a recognition that we received proudly for the 17th time.

Our ongoing success is a direct result of the strong reputation that we've built over the years as a trusted partner. I'm incredibly proud of the Bright Horizons Family across the world, whose passion and expertise are impacting the lives of the many children, families, adult learners and employers that we have the privilege to serve. So with that, let me turn it over to Elizabeth who can dive into the numbers with you in more detail, and I'll be back to you more with the Q&A. Elizabeth?
Elizabeth J. Boland - Bright Horizons Family Solutions, Inc.: Thank you, Dave.

So again, to recap, overall, revenue was up 10% or $37 million in the quarter. In order to give a bit more detail, I'll take the FX effect out of it and talk about results on a common currency basis. So, on that basis, our overall top-line growth was 12% in the quarter. The organic growth continues to approximate 7% with 5.25% coming from full-service and about 2% coming from back-up and ed advisory. Acquisitions, most significantly, the Asquith centers that Dave mentioned, added a further 6.5% growth in the quarter.

The difference from these elements to the net 12% growth is the reduction of about 2% related to centers that we closed as a matter of course. On a segment basis, the back-up division expanded over $5 million on the top line or 12% and ed advisory services was up almost $2 million or 14%, primarily from contributions from new client launches and expanded utilization by our existing client base. The $30 million increase in full-service center revenue, or $38.5 million on a common currency basis, was driven by rate increases, enrollment gains, and contributions from newly added centers. In Q1, gross profit increased $9 million to $105 million or 24.9% of revenue and operating income increased $3 million to $51 million or 12.2% of revenue. On a segment basis, we generated 10% operating margin in full-service, 27% in back-up and 18% for ed advisory this past quarter.

So let me get into those just briefly. As previously discussed, operating margins in back-up and ed advisory can vary from quarter-to-quarter based on the timing of new client launches and service utilization levels. Also, as Dave discussed, we're making investments in technology and people to enhance the user experience, to expand consumption of our services, and to increase the efficiency of our service delivery. The short-term effect of these investments are reflected in the slightly lower operating margins this quarter, in both the back-up and ed advisory segments compared to last year. While we expect there to be – continue to be some margin headwind for the remainder of 2017, we believe that both of these segments will contribute to margin expansion over time.

In the full-service segment, operating margins are roughly consistent with 2016 levels with a couple of offsetting factors. The gains from enrollment growth in our mature and ramping centers, price increases coupled with solid cost management and contributions from new and acquired centers, are partially offset by the margin effects of the classes of lease/consortium centers that have recently opened and are still in their ramp-up stage. Increased overhead spending, which I will talk about more in a minute, was also a headwind to operating income growth in this segment. For the first quarter of 2017, overhead was $46 million compared to $40 million in 2016. In addition to typical growth spending to support operations, sales and marketing, we have the additional spending on technology and people previously referenced.

In addition, we absorbed the overhead support team from Asquith for the full quarter and incurred certain one-time integration costs. As we discussed on our call in February, as we integrate this business into our UK operations and support functions through 2017, we expected overhead to temporally tick up. We're on track to realize the synergy that we had planned from the combination of our support teams by 2018; at which point, we would expect to, again, regain some overhead leverage. Interest expense was $10.8 million in Q1 of 2017, consistent with 2016 levels as lower interest costs offset the incremental borrowing that we made to finance the Asquith acquisition. As Dave mentioned, we are also in the process of amending our credit agreement, which we expect to complete next week.

In addition to extending our revolver term out to 2022, the amendment will reduce our interest rate by 50 basis points, essentially to LIBOR plus 2.25%. With the LIBOR rate now above our 75 basis point floor, and the Fed signaling that additional rate increases are expected this year, this amendment puts us in a good position to broadly maintain our financing cost at Q1 levels for the rest of this year. We ended the quarter at 3.4 times net-debt-to-EBITDA, down slightly from 2016 year-end, in part due to the paydown of the revolver balance with cash flow that we generated from operations. Our estimate for the 2017 structural tax rate on adjusted net income is now 27%, rather than the previous estimate of approximately 30%, reflecting the favorable effects of lower statutory income tax rates in our foreign jurisdictions, as well as the impact of the new accounting for the tax benefit on certain stock compensation transactions. We generated operating cash flow of $107 million in the first quarter of 2017 compared to $86 million in 2016 on improved performance in working capital.

After deducting maintenance CapEx, our free cash flow totaled about $95 million for the quarter. As Dave outlined, we've invested in growth through new center investments and acquisitions and have also continued to make modest open market share repurchases in the first quarter. At March 31, 2017, we operated 1,041 centers with the capacity to serve 116,000 children, and we now serve over 1,100 clients across our three service lines. So again, turning to our outlook for 2017. The outlook anticipates top-line growth approximating 10% to 12% over 2016.

We expect to continue to build enrollment in our mature and ramping base of centers, and we project price increases averaging 3% to 4% across the full-service network. The foreign exchange headwind is projected to approximate 1.5% for the full year, although as Dave said, it's expected to be around 2% for the first half based on current pound and euro rates. In our full-service segment, we're planning to add a total of approximately 50 new centers in 2017, a combination of organic new and acquired centers. Our outlook also contemplates closing approximately 25 centers, consistent with 2016 levels. On the operating side, for 2017, we expect operating income margins to be broadly consistent with 2016 levels, so in the range of 12.5% to 13% of revenue.

The relative impact of the three near-term factors that Dave reviewed and that we expect to impact our operating margins are

as follows: So first, the inclusion of the Asquith group of centers represents about a 40 to 50 basis point headwind in 2017 due to the contribution at the gross margin level, which is consistent with full-service margins, plus the incremental overhead and integration spending. Second, there's the near-term drag on margins of 10 to 20 basis points from the newer lease/consortium centers and the class that we're opening this year; and third, is the 40 to 50 basis points related to the increased spending on technology, software solutions and people to strengthen our market position and service capability over time. On some other key measures for the full year 2017 and including acquisitions that we've completed in the last quarter and last year, we estimate amortization expense of $32 million to $33 million, depreciation of $70 million to $74 million, and stock compensation in the range of $12 million to $13 million. Based on our outstanding borrowings, including the revolver balance for the first half of 2017 and the updated terms of our credit agreement that will be effective mid-May of this year, we're projecting interest expense of $42 million to $43 million in 2017. As previously mentioned, the structural tax rate on our adjusted net income is estimated to approximate 27% for the full year, the same rate that we applied in Q1.

Lastly, weighted average shares are projected to be 61 million to 61.5 million for the full year. On the cash flow front, we're expecting to generate approximately $200 million of free cash flow for the year, with $235 million to $250 million of cash flow from operations and around $40 million to $45 million of maintenance capital spending. We're also looking to invest at a similar level, $45 million to $50 million in new center capital for centers that will open this year as well as in early 2018. The combination of all of these factors lead to our projection that we will generate adjusted net income of $157 million to $160 million, and adjusted EPS growth of approximately 20% in 2017 or a range of $2.57 to $2.61 a share. Looking specifically to the second quarter, so Q2 of 2017, we're projecting top-line growth of 10% to 11%, which includes the continued FX headwind that we mentioned of approximately 2 percentage points.

Our outlook for adjusted net income is in the range of $43 million to $44 million, and adjusted EPS in the range of $0.70 to $0.72 a share on 61 million weighted average shares outstanding for the quarter. So with that, Roya, we are ready to go to Q&A.

Operator: Thank you. Our first question comes from the line of Gary Bisbee with RBC. Please proceed.

Gunnar Hansen - RBC Capital

Markets LLC: Hey, guys. This is Gunnar Hansen in for Gary. I appreciate all the color and insight into some of the margin drag there. But I guess just on the guidance, just clearly you did strong quarter and kept your guidance basically in line. I guess, what are some of the puts and takes, I guess, between the 10% and 12% for the remainder of the year?
Elizabeth J.

Boland - Bright Horizons Family Solutions, Inc.: In terms of revenue growth?
Gunnar Hansen - RBC Capital

Markets LLC: Yeah, exactly. Elizabeth J. Boland - Bright Horizons Family Solutions, Inc.: Yeah. So, the growth is probably most affected by the timing of the new clients that we are adding in back-up, ed advisory services and then the timing of when new centers open and their associated ramp. So those are the primary drivers between the 10% and 12%.

Gunnar Hansen - RBC Capital

Markets LLC: Okay. Fair enough. And I guess, with the lease/consortium center strategy and the ongoing margin drag that should moderate it, maybe help us with the cadence of that for the remainder of the year. Is there an opportunity for that to kind of break even toward the end of the year? Or obviously, I know the full year guidance is for a drag, but any insight into kind of how that's progressing, and maybe some feedback or color on how some of the early 2013, 2014 and early 2015 classes and schools are progressing?
David H. Lissy - Bright Horizons Family Solutions, Inc.: Yeah.

So we are pleased that as we look at the different classes of centers, you're always going to have some that sort of are on the top end of really exceeding our plan for ramp-up and others that are sort of on plan and others that are just slightly behind in every class, but when you look at the classes more broadly, they're proceeding on average, as we hoped they would in terms of the ramp-up. So I think that comes down to both good site selection and also good execution on the part of our operations team. So I think that's happening. The challenge – the reality is, as I said earlier in the prepared remarks, we now are in this phase where we have a situation where we have a lot of revenue, to the tune of about $120 million we expect this year from this cohort that we've opened since 2013 and just a modest margin contribution. So where we are with it as a whole is, over time, that margin that it's contributing will tick up.

It will be slightly offset by the newer centers that we opened this year, but as a whole we're to the point we're now in the phase of moving towards getting the margin to improve against the revenue that they generate. So it will still be a headwind for the remainder of this year and it will abate over time. Elizabeth J. Boland - Bright Horizons Family Solutions, Inc.: Yeah, I mean, there's a slight benefit as we get to the end of the year. So that's what you'd expect as we continue to mature, but it's relatively steady in that 10 to 20 basis points for much of the year.

Gunnar Hansen - RBC Capital

Markets LLC: And just to squeeze one more in. Along those lines, have there been any limitations or anything that could – whether it's real estate cost or labor cost that could limit you guys continue to maintain these 20 to 25 lease/consortium center opening target or is this something where you guys are able to execute on for several years down the road? Thanks. David H. Lissy - Bright Horizons Family Solutions, Inc.: Yeah. I think our target is somewhere between 15 and 20 a year, and we feel good that that's within sight.

There's always going to be some challenges in terms of some lumpiness in openings because of zoning issues and because of construction timelines or we're part of a larger project that were sort of out of our control timing-wise. There's always going to be some noise on the edges of those numbers in terms of how many will open in any one year. But we remain focused in pretty much the same geographies that we've talked to you about over time. And within the geographies we're focusing, real estate is very challenging. It's not a new issue.

And we're not in a position to be paying sort of A retail rent. So we're looking to find the right location that is suitable for our use and – but yet not sacrifice the specifics of where we want to be within a certain geography. So it remains an ongoing challenge to be sure we get the right sites, but based on the number we're looking to do this year and next, and ongoing, it seems doable. Gunnar Hansen - RBC Capital

Markets LLC: Great. Thanks so much.

Elizabeth J. Boland - Bright Horizons Family Solutions, Inc.: Yeah. David H. Lissy - Bright Horizons Family Solutions, Inc.: Yeah.

Operator: Thank you.

Our next question comes from the line of David Chu with Bank of America. Please proceed. David J. Chu - Bank of America

Merrill Lynch: Hi. Thank you.

So if I calculate... David H. Lissy - Bright Horizons Family Solutions, Inc.: Hi, David. David J. Chu - Bank of America

Merrill Lynch: ...average revenue per center, it looks like the metric declined in the first quarter.

Is this more a reflection of Asquith or the lease/consortium or both?
Elizabeth J. Boland - Bright Horizons Family Solutions, Inc.: It certainly will be impacted by the addition of the Asquith group, which is coming in. I think as we've mentioned, they've got annual revenue in the £73 million, £74 million range for 90 centers, so they're under the average of the overall business. So that would pull down an average revenue. And so, well, the cadence of new centers that are opening and in their ramp-up stage, so it's probably down to mix if you're using that math.

David J. Chu - Bank of America

Merrill Lynch: Okay. And then, can you just remind us what the margin profile for U.S. versus international looks like?
Elizabeth J. Boland - Bright Horizons Family Solutions, Inc.: So the full-service margins, they're broadly similar.

The UK is in high-teens to call it 18% to 20% range on average and the U.S. market has some larger centers and some greater opportunity to be a bit north of 20%. Netherlands is in sort of in between those. So broadly, in the range of – I'd say, that the mix even that we have in the investor presentation of 20% to 25% in total, but because the U.S. is a disproportionately larger portion of that and have the ramping effect.

So I think that's the broad range. David J. Chu - Bank of America

Merrill Lynch: Okay. Got you. And then just lastly, in terms of the incremental tech investments, kind of what inning are you? Have you guys implemented a lot of it? Or is it still pretty early?
David H.

Lissy - Bright Horizons Family Solutions, Inc.: I would say it's in the early innings, but we certainly have implemented, depending on which segment you're talking about, some of the initial things that we're looking to do, and we'll continue to do that as this year plays out. And I would say, fairly rapidly, as we get toward the end of this year, we'll catch it – well, several innings will go by in the process and that we've got a number of projects to be implemented this year. So some things are already in place and are already sort of proving themselves valuable and other things will be implemented between now and in the fall. So that's where I'd sort of put us. David J.

Chu - Bank of America

Merrill Lynch: Okay. Thank you very much. Elizabeth J. Boland - Bright Horizons Family Solutions, Inc.: Thank you.

Operator: Thank you.

Our next question comes from the line of Andrew Steinerman with JPMorgan. Please proceed. Andrew Charles Steinerman - JPMorgan

Securities LLC: Hi. I wanted to talk a little bit about input costs, rent and wages, and this is all kind of outside of the innovation investments that you've laid out for 2017. And so how are the rise? How is the inflation and input cost looking relative to the tuition increases that you laid out?
David H.

Lissy - Bright Horizons Family Solutions, Inc.: Yeah, Andrew, good question. I think we're still in line with where we had hoped to be. And I think, as you know, we try to factor in the expectations we have on the cost side, most – largest of which is labor-related benefits and salaries, and then other sort of costs like where we incur real estate or other facility-related costs. And I would say we're still largely in line with what we had hoped when we set out at the end of last year and locked into our plan for this year, which is we still feel like we're pricing slightly ahead of where we expect the inflation to be on the cost side. So pretty much the story is the same as we would have answered that on the last call.

Andrew Charles Steinerman - JPMorgan

Securities LLC: Great. Thank you. David H. Lissy - Bright Horizons Family Solutions, Inc.: Thank you.

Operator: Thank you.

Our next question comes from the line of Manav Patnaik with Barclays. Please proceed. Ryan Leonard - Barclays Capital, Inc.: Hi. This is Ryan on for Manav. Just a question on the tax spending.

Is this something where you view it as a kind of a one-time cost that gets you caught up, or are there things going on in the market? Do you think technology investments will be an ongoing piece of capital spend going forward?
David H. Lissy - Bright Horizons Family Solutions, Inc.: Yeah. I think, Ryan, it's a little bit of both. We're certainly catching up. There's a catchup we're doing in terms of trying to get ourselves a competency that is – depending on which area we're talking about a little bit overdue.

And so, we are catching up. But we also can't be – I think, we can't be naïve to the reality that technology will continue to be a place where there's lots of innovation and the need for us to keep up. So I think you can think about it as there is a good chunk that we're playing catch-up and there is some that will recur. And that's kind of what we have – that's our thinking as we think about our plan. So when we talk about regaining some of the margin opportunity, we don't – we do that acknowledging that we'll probably still have some ongoing spend.

That said, we also believe that in time and we're not counting on it in the near term, but in time some of the investments we're making should drive operating efficiency in the form of replacement of what were traditionally manual labor-intensive processes that will be more automated. So in the longer run, I think we'll see some leverage from that. Ryan Leonard - Barclays Capital, Inc.: Got it. And then just, I guess, a regulatory update, here in New York City, they've extended some pre-K and obviously, there's talk about tax credits for child care going forward. Are there anything in the states or anything that's kind of on your radar that you're keeping your eye out for?
David H.

Lissy - Bright Horizons Family Solutions, Inc.: Well, certainly, I mean, there's a lot of national dialogue – I shouldn't say a lot, there's been dialogue around child care tax credits and from the Trump administration's perspective, what might be included in whatever tax reform package might ultimately get passed. And so, as I've long said, we're certainly not banking on anything like that helping us in our plan. But among the things that would be positive would be any relief that those who pay the portion for care would get in the form of it being more tax advantaged or the ability to pay with pre-tax dollars, some of which exist today, just that very, very small levels that really aren't big movers. And if they were ever to be expanded to be more significant, it could have a positive impact because, obviously, it would serve as a way to make our services more affordable and thus, on the margin, I think, it can only help demand. So I think, we're certainly watching that.

I certainly wouldn't want to be the one to predict what's going to happen. I think it's anybody's guess. At the state levels, we've been operating in New York and in other places both cities and states around the country that have had different forms of universal pre-k. They're additive in some places to what we do in the sense that we ramp our services around them in certain situations and it works well. In a place like New York, we haven't chosen yet to be part of that system because it hasn't – we haven't been able to figure out the right model for it to work for us, and there's some administrative burden that come with being part of that system.

And so we're able to operate successfully without being part of that. We'll continue to monitor that over time and make some decisions. You can make a decision every year about whether or not you want to apply to participate, and we'll continue to look at that as we will, other places around the country. But broadly speaking, nothing all that different than what – the way I would have answered that question last year. Ryan Leonard - Barclays Capital, Inc.: Got it.

Thanks. And if I could sneak one more in. You talked, obviously, about a robust M&A pipeline and you've had that for quite a while now. Has the mix of the targets in there shifted more towards internationally lately? Is it still kind of similar in the U.S.?
David H. Lissy - Bright Horizons Family Solutions, Inc.: I feel like we've got a good cross-section of opportunities in the pipe, both here in the U.S.

and in Europe. As I think I've commented in the past. I think the difference in the U.S. is it's – the volume is so much greater, yet our targets are relatively smaller. In Europe, we have fewer in terms of volume, but we have some larger targets that exist there that we continue to be mindful of and want to build relationships with.

So I think if you will just look at the numbers of deals we do over time, it will be skewed more to the U.S. However, when you look at individual size deals, we may get some larger ones to happen outside the U.S. Ryan Leonard - Barclays Capital, Inc.: Great. Thanks so much. David H.

Lissy - Bright Horizons Family Solutions, Inc.: Yeah.

Operator: Thank you. Our next question comes from the line of Jeff Meuler with Baird. Please proceed. Jeff P.

Meuler - Robert W. Baird & Co., Inc.: Yeah. Thank you. David H. Lissy - Bright Horizons Family Solutions, Inc.: Jeff.

Jeff P. Meuler - Robert W. Baird & Co., Inc.: In terms of the full-service employer-sponsored centers, I'm always impressed every quarter at the big names that you add, but it also seemed to be a slow grind in terms of the number that you add. So how are you thinking about the current market penetration of what you have relative to the landscape of what you view as the total number of good candidates out there?
David H. Lissy - Bright Horizons Family Solutions, Inc.: Yeah.

I still think there's still a lot of white space within the employer-sponsored segment. We'll still have a good contribution this year and I expect – when I look at the pipeline next year as well, based on what I can see, from the employer-sponsored area. It is, as you say, one that is gated by a long sales cycle, average of a year to get to yes and then development time after that where it can take us anywhere from a year to two years to get it built and opened. So it's a long process, long sales cycle. And I just look at it as a steady grower within our sort of portfolio of growth opportunities.

And so, I think you'll see steady growth continue to come from that area. It may tick up and down a little bit in terms of numbers of volume each year, but when I look at the pipeline of what's out there that we're already in development with, I think it gives me confidence that there's going to be some good contribution from that segment going forward. Jeff P. Meuler - Robert W. Baird & Co., Inc.: Okay.

And then, is there a way to kind of frame up the mix of lease/consortium. So I'm thinking of things like what percentage of the lease/consortium centers are sponsored by a real estate developer or like what percentage of the capacity is committed to some form of employer-sponsor versus open to people that come in off the street? Any ways that you can kind of frame up the mix of the lease/consortium portfolio?
David H. Lissy - Bright Horizons Family Solutions, Inc.: Yes. I'll do my best to describe it. It may not be in the sort of as buttoned-up a way as – we're not really sort of breaking that down in specific.

But because every one of them really is created differently. There are centers that really the whole center is accounted for from the point of view of either two sponsors or a group of sponsors and/or back-up care. And there's others where we may have just a small section of it accounted for by a sponsor or back-up care and then the rest is being sold to the community. So it's really hard to sort of give you exact numbers in terms of numbers of spaces that are accounted for, but maybe some insight in terms of how we think about these when we develop them. We are focused on certain geographies and the way we get to those geographies is in part the reality of what's going on in those locations in terms of the movement of or the density of young families and families that fit our demographic, but also where our clients are choosing to locate in terms of many of our clients have so many offices and they will all never have enough demand to have their own center, but they have pockets of employees that are moving to different areas.

So we circle that up. And then we also look at where our back-up demand is and where we expect that if we opened a center in an area it would benefit from being able to deliver back-up care through the Bright Horizons network that is now being delivered in other ways or we're not able to accommodate at all. And so – because of the excess demand. So we put all the centers through that lens and then we ultimately say to ourselves, in worst case, is this the location that could survive without any corporate support because oftentimes, we're signing a 10- or 15-year lease, and the employer contract may not match up exactly to our lease term. So we're going to be comfortable that we're doing enough diligence to understand the market that we're getting into and then if on a retail basis, we needed to survive there, the center could do well.

And then obviously, if we get – when we overlay the kinds of client support that we have, it gives us either more confidence to immediately pull the trigger or more confidence in what the center is ultimately going to return and how soon it's going to return it. So that's just giving you some more insight into how we get there. And as I said earlier, Jeff, every one of them – we have a detailed process, but every one of them is sort of – has a different mix. Jeff P. Meuler - Robert W.

Baird & Co., Inc.: Okay. That's actually a much more helpful answer than the question I was asking directly. And then just in terms of the tax rate, Elizabeth, if I look at the year-over-year decline, how much of it is due to the equity grant accounting? How much of it is due to the geographic mix? And within, I guess, geographic mix, is there an opportunity for you to better optimize your tax rate? And that's what's going on, or is it just kind of flooding in Asquith or the international business that's coming on at a lower rate?
Elizabeth J. Boland - Bright Horizons Family Solutions, Inc.: Yeah. So I think the point on the optimization of our International operations is that the UK rate now is – the statutory rate is sub 20%, the Netherlands is in the 25% range, and so we have an ability to leverage against the 40% statutory rate in the U.S.

We don't have a lot of opportunities given the nature of our business and – to do much with the actual rate, other than grow our taxable income outside the U. S. because of the relatively lower jurisdictional rate. And so we have historically been able to utilize capital structure, intercompany loans and such to our International operations that has helped us optimize that and that's been the nature of our tax planning. So the majority of the change from last year in terms of our adjusted net income is related to the tax benefit on the stock compensation activity.

So essentially, it's a consistent base rate that just is lower than the U.S. statutory rate because of our foreign operations and to the extent we can grow that, that will improve over time, but the equity element is the majority. Jeff P. Meuler - Robert W. Baird & Co., Inc.: Got it.

Thank you. Elizabeth J. Boland - Bright Horizons Family Solutions, Inc.: Yeah. David H. Lissy - Bright Horizons Family Solutions, Inc.: Jeff.

Operator: Thank you. Our next question comes from the line of Anj Singh with Credit Suisse. Please proceed.

Unknown Speaker: Hi. This is Jeff (42:51) on for Anj.

You said you're planning on adding... Elizabeth J. Boland - Bright Horizons Family Solutions, Inc.: Hi, Jeff (42:54).

Unknown Speaker: Oh, hi. You said you're planning on adding 50 centers and closing 25, so it's a net of 25.

Then I think last year you added just over 100 centers. So when you smooth out the lumpiness among years, you sort of have a long-term annual target?
Elizabeth J. Boland - Bright Horizons Family Solutions, Inc.: Yeah. So last year, in 2016, you're right, we had about 100 centers in total that we acquired. The Asquith acquisition was the large – sort of non-typical larger acquisition that we were able to complete in November of 2016.

So that's where you see most acutely the kind of lumpiness. On a typical year basis, if we were looking at unit growth, it would be order magnitude 2% additional unit growth and that is – translates depending on the timing of when those centers are added or acquired, it may be 1% to 2% coming from new center growth. So the 50 additions and 25 closures is actually more in the typical range than what we saw last year.

Unknown Speaker: Okay. And what are your current thoughts of use of capital among acquisition, share repurchases, and organic growth?
David H.

Lissy - Bright Horizons Family Solutions, Inc.: Yeah. I think as I said earlier, our priorities are really finding growth opportunities and given that we feel like we've got the facilities in which to execute on pretty much any opportunity that would come our way within our sites and so how we think about opportunities, we're looking for both. We're sort of saying we're interested in more organic lease/consortium centers or acquisitions. Acquisitions, obviously, as you probably know, we need to be opportunistic sometimes when they present themselves. So we're putting sort of – we have a continued process, a proactive process on both acquisitions and on the new lease/consortium site side.

People dedicated to both areas and we're looking to maximize both of them. So our priorities are first and foremost to get as many good acquisitions done as we can and to get as many good lease/consortium models settled up and leases signed as we think we can get done. And then second to that, to pursue opportunities for share repurchase. And we have a share repurchase plan out there and continue to work with our board on that. And we execute on – and as we have this quarter in the open market to the degree we have the ability to do so.

So the priority – our priority in that regard remains consistent with what we've been doing in the past several years.

Unknown Speaker: Great. Thank you. That's it for me. David H.

Lissy - Bright Horizons Family Solutions, Inc.: Great. Thanks. Elizabeth J. Boland - Bright Horizons Family Solutions, Inc.: Great. Thanks.

Operator: Thank you. We have no further questions in queue at this time. I would like to turn the floor over to management for closing remarks. David H. Lissy - Bright Horizons Family Solutions, Inc.: Okay.

Thanks, Roya, and thank you to everybody for joining us on the call. We're pleased to discuss with you our performance and our outlook and look forward to seeing many of you on the road. Have a good night. Elizabeth J. Boland - Bright Horizons Family Solutions, Inc.: Good night, everyone.

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