Operator: [Operator Instructions]. Our next question is from Toni Kaplan with Morgan Stanley.
Toni Kaplan: I was hoping you could give a little bit more color on the $36 million impairment. And what assets are being impaired? Is this just underperforming centers? And I guess what’s the rationale from being able to add back those expenses? I know you did it last year as well, but just wanted to understand it better.
Elizabeth Boland: Sure. So the impairment relates to centers and so this would be the right-of-use asset on — from a lease standpoint and the ability to recover the lease obligation and then the leasehold improvements associated with centers that have — either are slated to close. That’s a good chunk of those that have been impaired, but also centers that having an operating performance and a cash flow generation that doesn’t clear the sort of accounting convention of the long-term recovery of the right-of-use asset and improvements. And so from the standpoint of adding it back, I think our view is that it is a standout expense that is non — it’s recurring in the context of recovering from the pandemic. We have had some impairments over the last couple of years as we’ve continued to refine the book that we are operating and the portfolio as we see it evolving over the years of recovery, but it is certainly an outsized expense that is not predictable.
And so feel like it is — it’s best to isolated so that people can see it and understand where it’s coming from. One of the things to point out about, of course, it is an accounting convention, how this is determined and some of the challenge in a market, that we are in is to long-life assets with leases to estimate what you may be able to sublease the space for in an environment where landlords are being fairly sticky with their desire to negotiate. And so that certainly comes into play.
Toni Kaplan: Got it. And for Ed Advisory, the last couple — 2 quarters, the margins were down year-over-year. Is that related to technology investments that you’ve been making? And maybe if it is, if you could give some color on what technology investments you’re making in that area?
Stephen Kramer: Sure, Toni. So yes, so the quick answer is that we’ve been making investments in people, we’ve been making investments in technology. And we’ve called out the fact that this is an area that we are focused on transformation. It’s going to be a multiyear transformation, and we believe that we are going to be able to deploy a similar playbook that we used for Back-Up Care in that we’re going to invest in the product, we’re going to invest in the technology, we’re going to invest in the personalized marketing efforts. but really see quite a large opportunity in the concept of supporting our employer clients to upskill and reskill their employees and believe that we’re particularly well positioned. So as Elizabeth stated, our expectation in 2024 is that we’ll run at a 20% margin, and that represents a degradation in margin with a clear focus on investing in this particular segment.
Operator: Our next question is from Jeff Silber with BMO Capital Markets.
Jeffrey Silber: I think you said something about expanding funding support in the U.K. I’m not sure if I got that right. But if I did, can you just give us a little bit more color on that?
Elizabeth Boland: Sure. So the U.K. has had — has long had a funding support that is — to parents. So it is called , that’s an overstatement of what it is. But it generally provides 15 hours of care and has provided 15 hours of care and a supported tuition rate for 3- to 5-year olds. That was expanded or has been expanded now to encompass 2 year olds starting in April of this year, and then it will be further made available down to the infant age groups 9-month-old and above as the U.K. is looking to make childcare more affordable to families. And they have also expanded the funding for families that are in more economic strain. So some families are eligible for up to 30 hours, but general availability for 15 hours of care is supported for 38 weeks a year.
And so what — the upside of it is that it can help parents pay for 25%, 35% or so of the care that they may need. And so it has the opportunity to drive more demand for us. It is not a revenue enhancer per se because the funding is to support the parents’ tuition, but it is an opportunity to drive more demand.
Jeffrey Silber: Okay. That’s great. I know you’ve talked about this before, but just good to get more of the color. And then at a higher level, probably more in the U.S., but maybe this can apply globally as well. I know there’s been some arguments back and forth in terms of working from home and the move back towards the office, how that impacts your business. It seems like more companies — maybe they’re not going back to 5 days a week, but 3 to 4 seems to be more of a push at least this year. Any impact on your business that you’ve seen or you think you’re going to see?
Stephen Kramer: So look, I think we have had sort of a really good flow of information from our client base, right? So we have quite a number of clients who have been sharing with us what their return to office plans have been over the last several years. It certainly feels like, as you pointed out, Jeff, that 3 to 4 days a week seems to be pretty standard at this point. And ultimately, we have always indicated that where someone is working the majority of the time is where they ultimately are going to want care for 5 days a week. And so on the margin, we have had stronger occupancy in our client-based centers actually over many quarters now because there is a real reason for our clients’ employees to leverage the high-quality opportunity to use their on-site centers.
And so ultimately, we feel good about the portfolio that we have and footprint that we have in this evolving landscape. But again, I think that in the same way that we always describe our business as sort of a longer arc kind of business. It’s not that we saw or are seeing a significant increase based on this trend, but it is something that ultimately has upward positive benefit to it. Okay. Well, thank you all for joining us this evening, and have a great rest of the day.
Elizabeth Boland: Thank you.
Operator: This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.
