Skip to content
    BFAM
    Earnings call· Mar 2026(Q1 FY26)

    BRIGHT HORIZONS FAMILY SOLUTIONS Q1 FY26 earnings call BFAM

    May 5, 2026 Source

    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

    15
    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

    3
    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)

    Operational metrics

    22
    Adjusted Operating Income
    $65 millionup 4% over prior year quarter
    Q1 FY26
    Adjusted EBITDA
    $96 millionup 4%
    Q1 FY26
    Free Cash Flow Conversion
    106%
    TTM

    Over the last 12 months.

    Share Repurchases
    $225 million
    Q1 FY26

    Opportunistically repurchased, funded with FCF and incremental revolver borrowings.

    Remaining Share Repurchase Authorization
    $577 million
    Q1 FY26 end

    Remaining on new authorization announced in March.

    Cash Balance
    $133 million
    Q1 FY26 end
    Net Debt to Adjusted EBITDA Ratio
    1.9x
    Q1 FY26 end
    Structural Effective Tax Rate on Adjusted Net Income
    27.5%consistent with Q1 2025
    Q1 FY26
    Full Service Center Openings
    2
    Q1 FY26

    Opened 2 centers.

    Full Service Center Closures
    24
    Q1 FY26

    Closed as part of portfolio rationalization.

    Full Service Net Center Closures
    22
    Q1 FY26

    Resulted in a center count of 988 at quarter end.

    Full Service Enrollment Growth
    +100 bpsvs. reported
    Q1 FY26

    Enrollment growth in centers open for the last year was modestly positive, but would have increased by 100 bps without Australia's impact.

    Back-Up Care User Penetration
    <5%
    Current

    Highlights significant opportunity for growth.

    SMB Market Unvended
    90%+
    Current

    Estimated market opportunity.

    Fortune 500 without Back-Up Care Solution
    roughly half
    Current

    Estimated market opportunity.

    Australia Full Year Revenue Profile
    $140 million
    FY26

    Estimated revenue for the Australian segment.

    Australia Full Year Losses
    $20 million to $25 million
    FY26

    Estimated total losses for the Australian segment.

    Australia Headwind to Full Service Margin
    150 bps
    FY26

    Overall headwind to the Full Service business from Australia.

    Australia Headwind to EPS
    close to $0.40
    FY26

    Overall headwind to earnings performance from Australia, including tax impact.

    Share Repurchase EPS Tailwaind
    $0.08
    FY26

    Contribution to EPS from Q1 share repurchases.

    Full Service Margin Improvement (ex-Australia)
    25 to 50 bps
    Annual

    Expected annual margin improvement for Full Service, excluding the impact of Australia.

    Full Service Run Dark Costs Tapering
    50 bps
    Next couple of years

    Expected tapering of operating costs from exited leases.

    Industry KPIs

    7
    MetricValueDetails
    EPS$0.82USD
    Revenue$712 millionUSD
    Operating margin9.1%%
    Adjusted EBITDA ebita$96 millionUSD
    Operating income EBIT$65 millionUSD
    Cash investments balance$133 millionUSD
    Share buyback capital return$225 millionUSD

    Deals & partnerships

    3
    NXP SemiconductorsNew client launch for Education Advisory services

    Notable new client launch in the Education Advisory segment.

    VisaNew client launch for Education Advisory services

    Notable new client launch in the Education Advisory segment.

    Huntington BankNew client launch for Education Advisory services

    Notable new client launch in the Education Advisory segment.

    Risks & headwinds

    4
    Elevated enrollment decline and operating challenges in AustraliaRest 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 borrowingsFY26

    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 rateFY26

    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 growthFY26

    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

    5

    Back-Up Care User Growth & Reservations

    Q2 FY26 and Q3 FY26
    CurrentContinued user growth and visibility of use through early reservations for Q2 and Q3
    TargetSustained 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.

    Q&A highlights

    6

    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 read6 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.