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Bright Horizons (BFAM) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Industrials· May 5, 2026

Source: earnings call transcript

Executive summary

Bright Horizons Q1 FY26 — Back-Up Care Strength Offsets Australia Headwinds

Bright Horizons delivered Q1 FY26 results in line with revenue expectations and slightly ahead on adjusted EPS, driven by robust double-digit growth in Back-Up Care and improved Full Service operating margins. However, significant enrollment declines and operating challenges in Australia created a notable headwind, constraining overall margin expansion. The company reaffirmed its full-year guidance, leveraging strong momentum in Back-Up Care and strategic portfolio rationalization to offset regional underperformance.

Highlights

5

  • Total revenue grew 7% to $712 million in Q1 FY26, in line with expectations.

  • Back-Up Care revenue increased 12.5% to $145 million, marking its 16th consecutive quarter of double-digit top-line growth.

  • Adjusted EPS of $0.82 rose 6% YoY, finishing slightly ahead of guidance ($0.75-$0.80).

  • Full Service operating margin expanded 30 basis points to 6.8%, driven by tuition increases and UK operations.

  • Free cash flow conversion was 106% relative to adjusted net income over the last 12 months.

Concerns

4

  • Australia operations experienced an elevated enrollment decline, leading to a 100 basis point headwind to Full Service enrollment growth and a significant drag on reported margins.

  • Adjusted operating income for Full Service was meaningfully constrained by Australia, with margin improvement being 50+ bps lower than it would have been otherwise.

  • Interest expense rose to $12 million in Q1, up from $10 million YoY, due to higher rates and increased borrowings for share repurchases.

  • Full-year interest expense guidance increased to $50M-$52M, and adjusted effective tax rate guidance increased to 28%-28.5%.

Guidance & targets

CategoryTargetConfidence
Full Year Revenue
$3.075 billion to $3.125 billion
high materiality
High
Full Year Adjusted EPS
$4.90 to $5.10 per share
high materiality
High
Full Service Revenue Growth
2.5% to 3.5%
medium materiality
Medium
Back-Up Care Revenue Growth
12% to 14%
high materiality
High
Education Advisory Revenue Growth
mid-single digits
medium materiality
Medium
Full Year Interest Expense
$50 million to $52 million
medium materiality
High
Full Year Adjusted Effective Tax Rate
28% to 28.5%
medium materiality
High
Q2 Total Revenue Growth
5.25% to 6.5%
medium materiality
High
Q2 Full Service Revenue Growth
2.5% to 3.5%
medium materiality
High
Q2 Back-Up Care Revenue Growth
15% to 17%
medium materiality
High
Q2 Education Advisory Revenue Growth
low single digits
low materiality
Medium
Q2 Adjusted EPS
$1.17 to $1.22
high materiality
High
Long-term Back-Up Care Growth
11% to 13%
high materiality
High
Long-term Full Service Revenue Growth
4.5% to 6.5%
medium materiality
Medium
Full Service Operating Margin
9% to 10%
high materiality
Medium

Segment performance

SegmentRevenueYoYQoQMargin
Back-Up Care
Growth driven by continued expansion in unique users with solid use across all care types. Margins are seasonally lower in Q1, expected to reach 28-30% for the full year.
16th consecutive quarter of double-digit top line growth
$145 million12.5%—18% (adjusted operating margin)
Full Service
Revenue growth driven by tuition increases and FX tailwind, partially offset by center closures (250 bps headwind) and Australia enrollment declines. Margin expansion of 30 bps driven by tuition increases and UK operations, but constrained by Australia.
Occupancy: mid-60s rangeNet center closures: 22Center count: 988Enrollment growth in centers open >1 year: modestly positive (would be +100 bps without Australia)Centers >70% occupancy: 48% (vs 47% in Q1 2025)Centers <40% occupancy: 8% (vs 13% in Q1 2025)
$541 million6%—$37 million (adjusted operating income), 6.8% (adjusted operating margin)
Education Advisory
Focused on driving participant growth and use across College Coach and EdAssist services.
$27 million2%—9% (adjusted operating margin)

BFAM operating KPIs by quarter

BFAM operating KPIs stated on its earnings calls, by fiscal quarter
KPIThis call Mar 2026 Q1 FY26 Jun 2026 Q2 FY26Change vs prior quarter
New stores opened
2 We opened 2 centers in the first quarter, one in the Netherlands and our third location for Toyota here in the United States. Source: earnings call transcript
7 We opened 7 centers in the quarter, including 5 for employer clients here in the US Three centers were for a leading academic medical center that had self-operated their centers for more than 20 years before making the decision to have Bright Horizons assume the management of these programs with their ongoing financial support. Source: earnings call transcript
+250%
Stores
988 During the quarter, we had net closures of 22, resulting in a center count at quarter end of 988 centers. Source: earnings call transcript
988 We ended the quarter with 988 centers, opening 7, as Stephen mentioned, while also closing 7 lease model centers. Source: earnings call transcript
0%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Deals & partnerships

NXP Semiconductors New client launch for Education Advisory services

Notable new client launch in the Education Advisory segment.

Visa New client launch for Education Advisory services

Notable new client launch in the Education Advisory segment.

Huntington Bank New client launch for Education Advisory services

Notable new client launch in the Education Advisory segment.

Risks & headwinds

Elevated enrollment decline and operating challenges in Australia Rest of FY26

100 basis points headwind to Full Service enrollment growth; 150 basis points headwind to Full Service operating margin; $20 million to $25 million in total losses for FY26; close to $0.40 overall headwind to EPS for FY26

Mitigation:Continued focus on rationalizing the center portfolio and improving operating efficiency across the network.

Higher average interest rates and increased average borrowings FY26

Interest expense rose to $12 million in Q1 FY26 (from $10 million YoY); full-year interest expense guidance increased to $50 million to $52 million

Mitigation:Share repurchases are expected to be accretive over time, offsetting some of the financing costs.

Higher adjusted effective tax rate FY26

Full-year adjusted effective tax rate guidance increased to 28% to 28.5% (up ~100 bps from prior guide)

Mitigation:Primarily due to non-deductibility of losses in Australia.

Impact of net center closings on Full Service revenue growth FY26

Approximately 200 basis points headwind to full-year Full Service revenue growth

Mitigation:Strategic portfolio rationalization to position centers to serve client partners where they live and work.

What to watch in Q2 FY26

Back-Up Care User Growth & Reservations

Q2 FY26 and Q3 FY26
Current Continued user growth and visibility of use through early reservations for Q2 and Q3
Target Sustained momentum in active users and use patterns, supporting raised FY26 guidance

Why it matters

This metric is key to validating the raised Back-Up Care revenue guidance and its contribution to overall company growth.

And looking ahead to the summer months and peak utilization for school-age programs, we are encouraged by continued user growth and the visibility of use through early reservations for the second and third quarters.

Find out whether BFAM delivers this. Inve re-checks your case every morning.

Q&A highlights

What drove the increase in Back-Up Care guidance, and how much visibility does the company have into summer usage?

The guidance was raised from 11-13% to 12-14% based on strong momentum in active users and their use patterns. Good visibility into summer usage is provided by early reservations from clients with extended booking windows.

“So we certainly raised the guidance, right? So the previous guidance was from 11% to 13% for the year. Now we're at 12% to 14% for the year. And it's really based on our conviction around the momentum that we have around active users as well as their use patterns.”

asked by Jeffrey Meuler · answered by Stephen Kramer

2 min read 6 chapters

Detailed narrative

Post-COVID Strategy & Client-Centric Model

Bright Horizons is focusing its post-COVID strategy on long-term growth and earnings by integrating its full suite of services for employer clients. This involves a unified go-to-market approach with a singular sales force and integrated account management, supported by new resources and tools. The company is also strengthening foundational capabilities like a common client employee credit model, integrated CRM, and a seamless customer experience, as detailed in their updated investor presentation.

Back-Up Care Growth Framework

The company highlighted a three-pronged growth framework for Back-Up Care: increasing penetration within existing clients (currently less than 5% user penetration), expanding its care and education ecosystem (spanning traditional childcare, in-home, school-age, tutoring, pet, and elder care), and winning new logos (targeting 90%+ of the SMB market and half of the Fortune 500 without a solution). This strategy leverages the company's ability to deliver high-quality, flexible, and scalable care.

Full Service Portfolio Rationalization & Occupancy Trends

In the Full Service segment, Bright Horizons continues to rationalize its portfolio, closing 24 centers in Q1 FY26, contributing to a net reduction of 22 centers. Occupancy averaged in the mid-60% range, showing sequential improvement from Q4 FY25 and YoY. The company noted improvement in its center cohorts, with centers below 40% occupancy falling from 13% to 8% YoY, reflecting enrollment progress and strategic closures.

Australia Operations Headwinds

The Australian portfolio experienced significant weakness in Q1 FY26, with an elevated enrollment decline that created a 100 basis point headwind to Full Service enrollment growth. This is attributed to increased supply in the post-COVID period and an atypical dynamic of high leavers without sufficient new enrollments. Management expects Australia to remain a larger headwind to reported margin performance for the rest of the year, impacting full-year margin expansion by over 50 basis points.

Education Advisory & New Client Wins

The Education Advisory business saw 2% revenue growth in Q1 FY26, with notable new client launches including NXP Semiconductors, Visa, and Huntington Bank. The focus remains on driving participant growth and utilization across its College Coach and EdAssist services, contributing to the broader strategy of offering a connected continuum of services.

Share Repurchase & Capital Allocation

The company opportunistically repurchased $225 million of stock in Q1 FY26, funded by free cash flow and incremental revolver borrowings. This action is expected to be accretive to earnings, contributing approximately $0.08 net of interest expense this year. $577 million remains on the new repurchase authorization announced in March.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.