Bright Horizons delivered third-quarter results that exceeded Wall Street’s expectations, reflecting robust demand for its suite of child care and education benefits. Management pointed to strong performance in back-up care, which experienced broad-based demand from both new and existing clients, particularly during the summer months when school-age programs were in high use. CEO Stephen Kramer credited the company’s ability to attract more users and increase repeat utilization as critical to the quarter’s outperformance. Additionally, margin improvement was supported by operating leverage across segments, with disciplined cost management and new center openings further contributing to results.
Is now the time to buy BFAM? Find out in our full research report (it’s free for active Edge members).
Bright Horizons (BFAM) Q3 CY2025 Highlights:
- Revenue: $802.8 million vs analyst estimates of $780.2 million (11.6% year-on-year growth, 2.9% beat)
- Adjusted EPS: $1.57 vs analyst estimates of $1.32 (18.9% beat)
- Adjusted EBITDA: $156.1 million vs analyst estimates of $138 million (19.4% margin, 13.1% beat)
- Management raised its full-year Adjusted EPS guidance to $4.51 at the midpoint, a 7.3% increase
- Operating Margin: 15.1%, up from 12.4% in the same quarter last year
- Organic Revenue rose 11.1% year on year vs analyst estimates of 7.8% growth (325.5 basis point beat)
- Market Capitalization: $5.70 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Bright Horizons’s Q3 Earnings Call
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Andrew Steinerman (JPMorgan) questioned the sustainability of back-up care growth, and CFO Elizabeth Boland responded that while current growth is above historic rates, long-term expectations are for low double-digit expansion as penetration increases.
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Keen Fai Tong (Goldman Sachs) asked about potential catalysts for reaccelerating full service enrollment. Boland explained that internal initiatives, such as targeted marketing and improved registration processes, are being implemented, but external economic and return-to-office trends also play a role.
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Jeffrey Meuler (Baird) inquired about tuition pricing plans for next year, with Boland confirming a planned 4% average increase, tailored locally to market conditions and occupancy levels.
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Toni Kaplan (Morgan Stanley) raised concerns about the impact of client layoffs on Bright Horizons’ business. CEO Stephen Kramer emphasized that low penetration among eligible employees and multi-year client contracts should mitigate any near-term effects.
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Joshua Chan (UBS) asked how Bright Horizons manages capacity for back-up care during periods of unexpectedly high demand. Kramer explained that the company uses data analytics and provider network management to match supply and demand, leveraging both owned centers and partner facilities.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will monitor (1) the pace of back-up care adoption and whether Bright Horizons can increase both user penetration and frequency, (2) the effectiveness of tuition pricing strategies in offsetting cost pressures, and (3) the impact of center closures and capacity optimization on overall margin performance. Progress in the U.K. business and further client wins in education advisory will also be key indicators of execution.
Bright Horizons currently trades at $100.25, up from $92.36 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
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