Bright Horizons Q3 2025: Emerging Contradictions on Back-Up Care Growth, Enrollment Projections, and Economic Impact

Date of Call: October 30, 2025

Financials Results

• Revenue: $803.0M, up 12% YOY
• EPS: $1.57 adjusted EPS, up 41% YOY
• Operating Margin: 15.5% adjusted operating margin, up ~300 bps vs prior year

Guidance:

• Full-year 2025 revenue expected to be approximately $2.925 billion (~9% growth).
• Full-year 2025 adjusted EPS raised to $4.48–$4.53.
• Segment growth: Full service ~6% YoY; Back-up care ~18% YoY; Education advisory high single digits.
• Q4 2025 revenue expected $720M–$730M; Q4 adjusted EPS $1.07–$1.12.
• Back-up care long-term operating margin target ~25%–30% (company expects to be at the upper end in 2025).

Business Commentary:

* Revenue Growth and Back-up Care Performance: - Bright Horizons Family Solutions reported revenue of $803 million for Q3 2025, a 12% increase year-on-year. - Back-up care revenue grew 26% to $253 million, driven by strong demand for care types across the company's own supply and partner network. - The growth in back-up care was attributed to increased use during school breaks and employer adoption of the benefit, with notable new clients such as MIT and Appian Corporation.

• Full Service Segment Performance:
• Full service revenue increased 6% to $516 million, driven by enrollment growth, tuition increases, and new center openings.
• Enrollment in centers opened for more than a year increased at a low single-digit rate, while average occupancy ticked down to the mid-60s due to seasonal factors.

• The growth was supported by strategic workforce solutions and enrollment improvements in select centers.

• Education Advisory Segment Growth:

• Education advisory revenue grew 10% to $34 million, ahead of expectations.
• The growth was led by the College Coach segment, contributing both top-line growth and strong margins.

• New clients were added to the portfolio, including Sony Music and Premier Health Partners, expanding its reach and reinforcing the relevance of education benefits.

• Profitability and Margin Expansion:

• Adjusted operating income rose 39% to $124 million, with operating margins up roughly 300 basis points over the prior year.
• Adjusted EBITDA increased 29% to $156 million, representing a 19% adjusted EBITDA margin in the quarter.
• The margin expansion was driven by disciplined cost management, operational improvements, and favorable labor conditions in the U.K. market.

Sentiment Analysis:

Overall Tone: Positive

• "We delivered another quarter of solid execution... revenue increasing 12% to $803 million and adjusted EPS growing 41% to $1.57." Management also said, "we are upgrading our full year earnings guidance," reflecting upgraded revenue and EPS outlook and reiterated growth drivers (back-up care, full service, education advisory).

Q&A:

• Question from Andrew Steinerman (JPMorgan Chase & Co): So obviously, I wrote a report sizing out the back-up care industry recently and your back-up growth was just tremendous. I surely wanted to ask you about the sustainability of these type of growth rates. I remember that you like to refer to kind of low double-digit growth as the sustainable rate, but you're growing above that now and into the fourth quarter.
  Response: Management: Back-up grew ~18% this year; they view it as early innings and expect sustainable growth to moderate to ~11%–13% in 2026 given runway (low penetration among eligible lives).

• Question from Keen Fai Tong (Goldman Sachs Group, Inc.): You mentioned enrollments increased in the low single-digit range. Can you clarify what low single digits means and if your full year enrollment growth outlook is still 2%?
  Response: Management: 'Low single digits' was ~1%–1%+ in Q3; expecting to exit the year around that level (similar to ~1%).

• Question from Keen Fai Tong (Goldman Sachs Group, Inc.): Got it. That's helpful. And I guess following up on that, what would you think could be positive catalysts to drive a reacceleration in enrollment growth? Is it going to be external and market-driven? Or are there internal initiatives that you have that can help pick up that growth?
  Response: Management: Reacceleration catalysts include internal initiatives—improving customer experience, faster registration/placement, targeted marketing/outreach and leveraging employer networks—while macro factors (consumer pressures, return-to-office) remain variable.

• Question from Jeffrey Meuler (Robert W. Baird & Co.): Just given those economic conditions that you just referenced, how are you planning tuition pricing, I guess, in calendar year 2026 for full service? ... And then for back-up care, how are those factors intersecting with the budgetary environment as clients do calendar year 2026 planning and budgeting for your service? Are they kind of leaning in like we've seen in the strong results this year? Or is there any sort of increased hesitancy for budgetary reasons?
  Response: Management: Expect ~4% average tuition increases in 2026 (localized variation); clients remain supportive of back-up care—it’s a small share of benefits spend, shows strong ROI, and renewals have been favorable, so budgetary hesitancy is limited.

• Question from Manav Patnaik (Barclays Bank PLC): My first question was just in the back-up performance this quarter, where did you see the outperformance versus kind of the expectations of the guide that you had given? And maybe I don't know if that correlates with the context on, Stephen, you said it's very early innings in back-up care. Like is that new logos, upsell, a combination of both? I was just hoping for some color there.
  Response: Management: Outperformance was driven primarily by increased usage among existing users (higher frequency and new users within clients), strong school-age program demand and some new logos; operational flexibility (partners, camps, in-home) supported fulfillment.

• Question from Manav Patnaik (Barclays Bank PLC): Okay. Got it. And Elizabeth, just you've given some good helpful color for the fourth quarter and some early look at '26. I was hoping you could just fill in the gaps on the margin front, like where do you think margins end up in '25? And then anything to keep in mind when we model out next year?
  Response: Management: Full-service margin improvement ~125 bps for FY25; backup care expected at upper end of 25%–30% target for FY25; education advisory in low-20s margins; expect overall FY26 margin expansion ~50–100 bps.

• Question from Toni Kaplan (Morgan Stanley): At least 3 of your representative clients have announced headcount reductions in the thousands in the past 6 months, 2 of which in September and October. Should we expect to see any impact from that? Or because of your multiyear contracts and maybe back-up care strength, would that offset any impact from those?
  Response: Management: Layoffs shouldn't materially impact demand—penetration is <10% of eligible lives and multiyear contracts plus back-up's productivity value mean clients generally maintain investment.

• Question from Toni Kaplan (Morgan Stanley): Maybe in your experience of companies where they do have reductions in force, do they typically change their benefit levels? I'm sure there's like a delay or anything like that, but have you ever seen full service clients switch to back-up care? Or is that not really a thing because they've already normally built a center already?
  Response: Management: Clients rarely close centers or change program design in downturns; centers are long-term and companies tend to retain back-up benefits to support remaining employees' productivity.

• Question from Joshua Chan (UBS Investment Bank): Stephen and Elizabeth, congrats on the good quarter. I guess on back-up, as you think about going into next year, how are you planning to resource the business, I guess? And if you were faced with kind of surprisingly high demand again, how do you or what do you do to kind of fill capacity in that scenario?
  Response: Management: They plan capacity via client- and geography-level demand forecasting using BI, provider-relations, and by leveraging owned centers, Steve & Kate's, in-home and partner networks to meet surges—high fulfillment rates.

• Question from Joshua Chan (UBS Investment Bank): And I guess how does the backup strength, does it alleviate the need for you to raise enrollment quickly in full service as you think about maybe having some of that capacity to serve your strong back-up demand? Does that change the way you're thinking about enrollment in full service?
  Response: Management: The full-service center footprint is a shared strategic asset—using center capacity for backup fulfillment reduces urgency to force rapid enrollment growth and adds margin/fulfillment value.

• Question from Harold Antor (Jefferies LLC): This is Harold Antor on for Stephanie Moore. Just real quick on the U.K. I know you guys are seeing some improvements there. So I just wanted to get any more color. What percentage of the centers are there? What percent of revenue is it running? And I think you wanted to break even this year. I guess how has it been running year-to-date compared to your projections? And then I guess, what would you be saying -- what would you be thinking the contribution to '26 would be? Just anything around that would be very helpful.
  Response: Management: U.K. business is steady and improving—on track to be modestly positive in 2025; currently roughly a ~50 bps headwind to full-service margins but will contribute to margin improvement in 2026 as recovery continues.

• Question from Ryan Griffin (BMO Capital Markets): This is Ryan on for Jeff. Just had a quick follow-up question on the pricing for next year. Just based on the data we track on child care service wages, they've been growing around 4%. I'm not sure if you're seeing anything differently. So wondering how you see the wage inflation dynamic evolving? And then what is your confidence level in just being able to price over that? I know it's a little bit different by market, but just in relation to the 4% pricing you said on average for next year?
  Response: Management: They pay median-to-higher wages and target ~100 bps spread between tuition increases and wage inflation; confident avg ~4% pricing will outpace wages while using localized pricing to drive enrollment where needed.

• Question from Ryan Griffin (BMO Capital Markets): That's very helpful. And then just for the follow-up, I was wondering how we should be thinking about the net center openings for next year. Are you in a position now where you think you'll be a net closer of centers just looking at the, I think, the 12%, sub-40% utilization you called out? And how do you kind of think about that going into the next year?
  Response: Management: Expect to net-close ~5–10 centers in the current year and plan ~25–30 closures in 2026; ~80 P&L centers are under 40% occupancy and are primary closure candidates, so they may not be net positive on openings next year.

Contradiction Point 1

Back-up Care Growth and Sustainability

It involves differing perspectives on the sustainability of back-up care growth rates and expectations, which are critical for understanding the company's future financial performance.

Can you confirm if the back-up care growth rates are sustainable and consistent with your low double-digit growth expectations? - Andrew Steinerman (JPMorgan Chase & Co, Research Division)

2025Q3: We're looking at about 18% growth for this year. Going forward, we're ticking up to 11%-13% growth. - Elizabeth Boland(CFO)

Can you update on margin differences between utilization cohorts? - Faiza Alwy (Deutsche Bank)

2024Q4: Backup Care revenue growth for 2025 is expected to be in the low to mid-teens on a percentage basis. - Elizabeth Boland(CFO)

Contradiction Point 2

Enrollment Growth Expectations

It involves changes in enrollment growth expectations, which are critical for understanding the company's customer base and revenue projections.

Can you clarify what 'low single digits' means for enrollment growth and whether the full year outlook remains at 2%? - Keen Fai Tong (Goldman Sachs Group, Inc., Research Division)

2025Q3: We're at about 1% to 1% plus this quarter. We expect to exit the year similar to that with low single-digit growth. - Elizabeth Boland(CFO)

What are your expectations for occupancy rate trends in 2025? - Keen Fai Tong (Goldman Sachs)

2024Q4: Our 2025 Full Service enrollment growth guidance is now 2.5% to 3.5%. - Elizabeth Boland(CFO)

Contradiction Point 3

Impact of Economic Factors on Enrollment Growth

It involves differing perspectives on the influence of economic factors on enrollment growth, which can impact business strategy and financial projections.

What could drive reacceleration in enrollment growth—external market factors or internal initiatives? - Keen Fai Tong (Goldman Sachs Group, Inc., Research Division)

2025Q3: We're focusing on improving customer experience and connecting customers across centers. Economic factors are in play, but we're positioned near where working families live and work. - Elizabeth Boland(CFO)

What opportunities exist to leverage the expanded tax credit (45F) to boost backup care demand, and how is client behavior changing? - Jeffrey P. Meuler (Baird)

2025Q2: We are actively promoting 45F to both prospects and existing clients, which should drive demand significantly. Existing clients are likely to increase spending, and the sales team is coordinating with HR and finance. - Stephen Kramer(CEO)