BFAM Q2 Deep Dive: Back-Up Care Drives Growth, Margin Expansion Continues

August 12, 2025 at 23:07 PM EDT

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Child care and education company Bright Horizons (NYSE: BFAM) reported Q2 CY2025 results beating Wall Street’s revenue expectations, with sales up 9.2% year on year to $731.6 million. The company’s full-year revenue guidance of $2.91 billion at the midpoint came in 0.8% above analysts’ estimates. Its non-GAAP profit of $1.07 per share was 5.8% above analysts’ consensus estimates.

Is now the time to buy BFAM? Find out in our full research report (it’s free).

Bright Horizons (BFAM) Q2 CY2025 Highlights:

Revenue: $731.6 million vs analyst estimates of $723.8 million (9.2% year-on-year growth, 1.1% beat)
Adjusted EPS: $1.07 vs analyst estimates of $1.01 (5.8% beat)
Adjusted EBITDA: $115.6 million vs analyst estimates of $112.7 million (15.8% margin, 2.6% beat)
The company slightly lifted its revenue guidance for the full year to $2.91 billion at the midpoint from $2.89 billion
Management raised its full-year Adjusted EPS guidance to $4.20 at the midpoint, a 3.7% increase
Operating Margin: 11.8%, up from 10.3% in the same quarter last year
Organic Revenue rose 8.4% year on year vs analyst estimates of 7.4% growth (93.4 basis point beat)
Market Capitalization: $6.71 billion

StockStory’s Take

Bright Horizons delivered a strong second quarter, with results exceeding Wall Street’s expectations and a significant positive market reaction. Management pointed to robust growth in the back-up care segment and steady enrollment gains in full-service centers as key drivers. CEO Stephen Kramer noted that the company benefited from “continued enrollment growth, tuition increases and new center openings,” while the back-up care business saw strong demand, particularly for summer programs and new client wins such as McKesson. CFO Elizabeth Boland highlighted improved operating leverage and margin expansion, supported by disciplined cost management and operational improvements in underperforming centers.

Looking to the remainder of 2025, management’s raised guidance is underpinned by ongoing investments in technology, marketing, and expanded care offerings. Stephen Kramer emphasized Bright Horizons’ “One Bright Horizons” strategy, aiming to deepen employer and employee engagement across services. The company expects steady low single-digit enrollment growth in full-service centers and continued double-digit growth in back-up care, with Boland stating, “the momentum has been really good in the first half of the year so we definitely feel on track to achieve” breakeven in the U.K. segment. Management is monitoring regulatory changes, such as updates to the 45F tax credit, for additional growth opportunities.

Key Insights from Management’s Remarks

Management attributed the quarter’s outperformance to strong back-up care utilization, successful client expansions, and effective cost management across business lines.

Back-up care demand surged: The back-up care segment experienced 19% revenue growth, driven by strong client and user engagement, especially for summer programs. Launches with large employers, such as McKesson, contributed to this momentum.
Enrollment growth in full service: Full-service centers delivered steady low single-digit enrollment gains, supported by tuition increases and five new center openings. Notably, new centers for long-standing partners like the University of Virginia reinforced Bright Horizons’ leading position in employer-sponsored childcare.
Operational improvements in the U.K.: The U.K. business continued its turnaround, benefiting from staffing and programming investments. Management cited improved margins and increased parent demand, aided by government funding expansion to broader age groups.
Client cross-selling success: Expanding existing client relationships was a focus, with companies like Centene and Northwell Health adding back-up care and educational advisory services, respectively, to their benefit offerings.
Cost discipline and margin expansion: Operating margin improvement was attributed to a combination of enrollment gains, price-to-cost discipline, and gradual rationalization of underperforming centers rather than significant cost-cutting from closures.

Drivers of Future Performance

Management expects growth to be driven by continued momentum in back-up care, enrollment initiatives, and disciplined margin expansion.

Back-up care growth opportunity: Management believes double-digit revenue growth in back-up care will persist, supported by expanded service offerings, geographic reach, and ongoing employer demand for flexible care solutions. Kramer noted ongoing investments in technology and third-party partnerships to extend capacity.
Full-service center optimization: The company is focused on improving occupancy in underperforming centers, aiming for mid-60% average occupancy by year-end. Efforts include streamlining family enrollment processes and targeted marketing to drive steady, low single-digit enrollment growth.
Segment margin stability: Management expects stable or expanding margins, particularly in back-up care (targeting 25–30%) and continued improvement in full service as more centers move to higher utilization. However, execution risks remain around rationalizing persistently underperforming centers and maintaining cost controls.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be watching (1) whether Bright Horizons sustains double-digit growth in back-up care through further client wins and expanded service types, (2) progress in raising occupancy levels in underperforming full-service centers, and (3) the U.K. segment’s path to breakeven and further margin improvement. Updates on leveraging regulatory changes, such as the expanded 45F tax credit, will also be closely monitored.

Bright Horizons currently trades at $118.06, up from $113.28 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).

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