Bright Horizons Family Solutions Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Strong finish to 2025 with Q4 revenue up 9% to $734M and adjusted EPS up 17% to $1.15. Full-year revenue $2.93B (+9%) and adjusted EPS $4.55 (+31%).
• Back-up care had 17% Q4 revenue growth, driven by solid utilization across programs, with focus on scaling by expanding unique users and increasing frequency.
• Full service saw 6% Q4 revenue growth, with additions of new centers and progress in lower occupancy cohorts. U.K. full-service business turned profitable.
• Ed advisory had 10% Q4 revenue growth, with College Coach and EdAssist contributing. Added new employer clients.
• 2026 marks 40th anniversary, highlighting evolution into a diversified solutions provider. Strengthened balance sheet with $225M share repurchase in 2025.

Segment Performance

• Back-up care: In Q4, revenue increased 17% to $183 million. For the full year, revenue grew 19% to $728 million, with strong operating margins. Service reach spans over 1,100 employer clients globally, and existing clients had double-digit growth in backup users.
• Full service: Q4 revenue increased 6% to $515 million, driven by tuition increases and enrollment growth, tempered by portfolio rationalization. Added 6 new centers, including 4 client centers. Enrollment in centers open over 1 year increased ~1%, occupancy averaged mid-60% range. U.K. full-service business delivered positive operating profit for the year, a turnaround from prior losses.
• Ed advisory: Q4 revenue increased 10% to $36 million, with full-year growth of 9% to $125 million. College Coach and EdAssist contributed to growth, with new employer clients added.

Guidance

• 2026 revenue expected in range of $3.075B to $3.125B (5%-6.5% growth). Adjusted EPS expected $4.90 to $5.10.
• Q1 2026 top line growth expected 6%-7.5%. Segment breakdown: full service 5.5%-6.5% growth, back-up care 11%-13% growth, ed advisory low to mid-single digits. Q1 adjusted EPS expected $0.75 to $0.80.

Risks

• Health and safety incidents at centers, though business impact currently not significant.
• Local market and licensing risks, including potential changes in UPK contracts in New York City.
• Lease and occupancy issues with underperforming centers, including ongoing costs from closures even after ceasing operations.
• Potential changes in employer backup care policies, though most employers have stable program parameters.

Question and Answer

Q: Can you help us with how you're thinking about the full-service margin outlook, including as you close these centers that are a 200 basis point revenue headwind on average, are they at a loss? Or just how should we factor in the different drivers of full-service margin outlook?

A: Yes. As we look at 2026, we expect about 25 to 50 basis points of margin improvement in full service. Most closed centers are in loss-making positions, with some ongoing costs from leases even after ceasing operations.

Q: Can you just comment on health and safety protocols, any changes that you're making or considering? And then just how you think about any sort of like local market or licensing risks or a private public partnership for UPK opportunities that could be impacted from those issues.

A: Our #1 priority is high-quality care. We take incidents seriously, but business impact currently not significant. In New York City, we have good UPK relationships, though contracts not guaranteed, but confident in position.

Q: Elizabeth, maybe just firstly on the guide, if you could help us with the assumption on pricing and enrollment growth in the full center business? And then also just if you want to just knock out the margins for the other two businesses in 1Q and the full year.

A: Overall, price increases ~4% and enrollment growth +100 basis points. Back-up care operating margin expected 27%-30%, ed advisory low 20s.

Q: You mentioned occupancy averaged mid-60s in 4Q. Based on your guide for this year, can you describe how you expect occupancy to unfold over the course of 2026 by quarter roughly?

A: Seasonal pattern with lift in Q1 and Q2, peaking in high 60s, then back to mid-60s in second half. Still in mid-60s by year-end, with modest growth expected.

Q: I guess, around your expectation to grow enrollment 100 basis points which is similar to kind of the exit rate in Q4. Have you seen kind of a solid or pretty stable fall enrollment season during Q4 to kind of inform you of that?

A: Slowdown in second half of 2025, but stable going into next year. Notable uptick in younger age group enrollment, positive for future growth.

Q: I was hoping you could talk a little bit about what you're seeing from just an overall pricing standpoint, general appetite from parents and customers on tuition increases, how you view kind of pricing going forward now that inflation is kind of arguably a bit under control, labor is in a little bit better positioned.

A: Tuition increases driven by personnel costs. Parents understand cost is labor-intensive, and our measured approach balances economics and affordability.