Bright Horizons raises 2025 guidance to $2.925B revenue and $4.48–$4.53 EPS as back-up care drives growth

Earnings Call Insights: Bright Horizons Family Solutions Inc. (BFAM) Q3 2025

MANAGEMENT VIEW

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CEO Stephen Kramer opened the call by stating, "We delivered another quarter of solid execution and performance with revenue increasing 12% to $803 million and adjusted EPS growing 41% to $1.57, both well ahead of our expectations." He highlighted persistent demand for the company's suite of education and care benefits and emphasized the strong performance of the back-up care segment, which saw revenue rise 26% to $253 million. Kramer noted new client wins including MIT and Appian Corporation as contributing to the segment's growth and stated, "Back-up care continues to be an exciting growth engine, both financially and strategically and a core pillar of our long-term value creation." He also discussed expansion in full service centers, the addition of new clients in education advisory, and ongoing investments in personalization and customer experience across all business lines.

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CFO Elizabeth Boland reported, "Revenue for the third quarter grew 12% to $803 million, driven by continued growth and disciplined execution across each of our segments. Adjusted operating income rose 39% to $124 million, with operating margins up roughly 300 basis points over the prior year to 15.5%." She broke down the performance by segment and highlighted improvements in operating leverage and margin expansion, particularly in back-up care and educational advisory. Boland also disclosed, "We have generated $203 million in cash from operations, made fixed asset investments of $59 million and have repurchased $105 million of stock. We ended Q3 with $117 million of cash, and we've reduced our net leverage ratio of 1.7x net debt to adjusted EBITDA."

OUTLOOK

* Management upgraded full-year 2025 guidance, with Kramer announcing, "We now expect revenue to be approximately $2.925 billion, representing 9% growth, and we are increasing our adjusted EPS to a range of $4.48 to $4.53." Boland detailed, "We now expect revenue to approximate $2.925 billion and adjusted EPS to be in the range of $4.48 to $4.53. In terms of our updated full year outlook by segment, we expect full service revenue to grow roughly 6%, back-up care to grow roughly 18% and ed advisory growth to be in the high single digits for -- again, for the full year." For Q4, Boland projected, "overall revenue in the range of $720 million to $730 million and adjusted EPS in a range of $1.07 to $1.12."

FINANCIAL RESULTS

* The company reported revenue of $803 million for Q3 2025, up 12%. Adjusted EPS reached $1.57. Adjusted operating income was $124 million, and adjusted EBITDA totaled $156 million, reflecting a margin of 19%. Back-up care revenue was $253 million, full service revenue was $516 million, and education advisory revenue was $34 million. Boland noted, "Adjusted operating income of $95 million increased $25 million over the prior year, and that translates to an operating margin of 38%" for back-up care. Recurring interest expense was $10 million, and the company ended Q3 with $117 million in cash.

Q&A

* Andrew Steinerman, JPMorgan: Asked about the sustainability of back-up care growth rates. Boland responded, "We're looking at about 18% growth for this year...low double digits ticking up a bit probably from that to maybe 11% to 13% would be where we would be looking for next year."
* Keen Fai Tong, Goldman Sachs: Inquired about enrollment growth and catalysts. Boland explained their initiatives to improve customer experience and marketing, while noting external economic pressures affecting demand.
* Jeffrey Meuler, Baird: Asked about tuition pricing for 2026. Boland shared, "We're looking at around a 4% average that would be at the higher end of our historic range," with localized adjustments based on market conditions.
* Manav Patnaik, Barclays: Queried about margin expectations. Boland confirmed, "We would expect to finish off the year in the 125 basis points or so range for the full year" in full service, and back-up care margins are expected at the upper end of the 25% to 30% range.
* Toni Kaplan, Morgan Stanley: Asked about client layoffs and impacts. Kramer highlighted low penetration within existing clients and multiyear contracts as mitigating factors.
* Joshua Chan, UBS: Explored resourcing back-up care for future demand. Kramer discussed sophisticated planning and capacity management tools.
* Harold Antor, Jefferies: Requested color on the U.K. business. Boland said performance was "steady and improving" and the U.K. is expected to contribute positively in 2026.
* Ryan Griffin, BMO: Asked about wage inflation and center openings. Boland expressed confidence in pricing ahead of wage growth and anticipated a net closure of centers in 2026, particularly those with sub-40% occupancy.

SENTIMENT ANALYSIS

* Analysts raised questions about sustainability of segment growth, margin expansion, wage inflation, and the impact of macroeconomic factors, reflecting a neutral to slightly positive tone, with some focus on risks and operational execution.
* Management maintained a confident and constructive tone during prepared remarks, frequently referencing "confidence," "opportunity," and "momentum," yet adopted a more measured and detailed approach when addressing potential risks and uncertainties in the Q&A.
* Compared to the previous quarter, both analysts and management showed increased optimism, especially regarding back-up care growth and enhanced guidance, while maintaining caution regarding enrollment trends and economic headwinds.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for full-year revenue and EPS was raised from the previous quarter's $2.9–$2.92 billion and $4.15–$4.25 per share to $2.925 billion and $4.48–$4.53, respectively.
* Back-up care growth expectations were increased from 14–16% to approximately 18% for 2025.
* Full service occupancy levels moderated sequentially, with enrollment growth tapering slightly from 2% last quarter to just over 1% this quarter.
* Margin expansion was more pronounced in Q3, especially in back-up care, contributing to the stronger overall margin profile.
* Management's confidence level improved, with a greater focus on the growth potential of back-up care and the positive trajectory for the U.K. business.
* Analysts maintained a similar line of inquiry but placed heightened emphasis on sustainability and macroeconomic sensitivity.

RISKS AND CONCERNS

* Management cited macroeconomic pressures, consumer affordability, and variability in parent demand as ongoing challenges.
* The company continues to face under-enrollment in certain centers, with planned closures of sub-40% occupancy locations.
* Wage inflation remains a concern, but management is confident in their ability to price ahead of costs.
* Questions about the impact of client layoffs were addressed by emphasizing low penetration and contract structures.

FINAL TAKEAWAY

Bright Horizons delivered a strong third quarter with robust revenue and EPS growth, driven primarily by the back-up care segment and solid execution across service lines. Management raised full-year guidance and highlighted continued investments in personalization, capacity, and client engagement to support ongoing growth. The company remains focused on margin expansion, operational efficiency, and strategic portfolio alignment, while actively managing risks related to market conditions, enrollment, and wage pressures.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/bfam/earnings/transcripts]

MORE ON BRIGHT HORIZONS

* Bright Horizons Family Solutions Inc. (BFAM) Q3 2025 Earnings Call Transcript [https://seekingalpha.com/article/4835996-bright-horizons-family-solutions-inc-bfam-q3-2025-earnings-call-transcript]
* Seeking Alpha’s Quant Rating on Bright Horizons [https://seekingalpha.com/symbol/BFAM/ratings/quant-ratings]
* Historical earnings data for Bright Horizons [https://seekingalpha.com/symbol/BFAM/earnings]
* Financial information for Bright Horizons [https://seekingalpha.com/symbol/BFAM/income-statement]