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Bright Horizons Family Solutions (BFAM) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Industrials· Jul 30, 2026

Source: earnings call transcript

Executive summary

Bright Horizons Family Solutions Q2 FY26 — Strong Back-up Care Growth and Margin Expansion

Bright Horizons delivered a strong second quarter, driven by robust double-digit growth in its high-margin back-up care segment and overall margin expansion. While the full service segment saw modest growth, it continued to face headwinds from center closures and underperformance in Australia, which the company is actively addressing through portfolio optimization and strategic reviews. The employer-sponsored model remains a key differentiator, enabling cross-service expansion and deepening client relationships.

Highlights

5

  • Revenue expanded by 7% to $779 million, driven by growth in both back-up care and full service.

  • Adjusted EPS increased 20% to $1.28, exceeding expectations.

  • Back-up care revenue grew 19% to $194 million, accelerating from 12% growth in Q1.

  • Adjusted operating margins expanded 95 basis points over the prior year quarter to 12.7%.

  • The bottom cohort of centers (below 40% occupied) declined to 5% from 10% in the prior year.

Concerns

4

  • Full service revenue growth was partially offset by an approximately 250 basis point headwind from center closures.

  • Continued enrollment headwinds in Australia contributed roughly a 100 basis point headwind to full service enrollment growth.

  • Net interest expense increased $3 million over the prior year due to higher average borrowings and modestly higher effective borrowing rates.

  • The structural effective tax rate on adjusted net income was 28.75%, higher than 2025 due to non-deductible losses in Australia.

Guidance & targets

CategoryTargetConfidence
Full-year revenue
$3.085 billion to $3.115 billion
high materiality
High
Full-year adjusted EPS
$5.05 to $5.15 per share
high materiality
High
Full-year Full Service revenue growth
2.5% to 3%
medium materiality
Medium
Full-year Back-up Care revenue growth
13% to 15%
medium materiality
High
Full-year Educational Advisory revenue growth
low single digits
low materiality
Medium
Full-year interest expense
$58 million to $60 million
medium materiality
High
Full-year adjusted effective tax rate
28.5%
medium materiality
High
Full-year diluted share count
51.5 million shares
medium materiality
High
Q3 total revenue
$835 million to $845 million
high materiality
High
Q3 Full Service reported revenue growth
50 to 100 basis points
medium materiality
Medium
Q3 Back-up Care revenue growth
12% to 14%
medium materiality
High
Q3 Educational Advisory revenue growth
low single digits
low materiality
Medium
Q3 adjusted EPS
$1.73 to $1.78 per share
high materiality
High
Full-year Back-up Care operating margins
28% to 30%
medium materiality
High
Full-year Full Service operating margins
flat-ish
medium materiality
Medium
Full-year Educational Advisory operating margins
20%
low materiality
Medium

Segment performance

SegmentRevenueYoYQoQMargin
Back-up Care
Revenue growth accelerated from 12% in Q1. Growth driven by increased unique users and frequency of use. Margin expansion due to improved operating efficiency.
Adjusted operating margin: 26% (expanded 80 bps YoY)Usage growth: strong across care typesUsers: more unique usersFrequency of use: slight uptick
$194 million19%—$50 million adjusted operating income (26% margin)
Full Service
Growth driven by tuition increases, occupancy gains, and favorable FX, partially offset by 250 bps headwind from center closures and Australian enrollment declines. Margin expansion driven by tuition increases and U.K. operations improvement.
Adjusted operating margin: 7.9% (expanded 50 bps YoY)Centers: 988 (opened 7, closed 7 lease model centers)Enrollment in centers >1 year: approximately 1% increase (excluding Australia)Australia enrollment headwind: approximately 100 bpsOccupancy: high 60% range (70% excluding Australia)Top-performing centers (>70% occupied): 53% of centersBottom cohort centers (<40% occupied): 5% of centers (down from 10% YoY)
$557 million3%—$44 million adjusted operating income (7.9% margin)
Educational Advisory
Revenue consistent with prior year. Growth in College Coach offset by lower participant engagement in EdAssist.
$28 millionConsistent with prior year—16% adjusted operating margin

BFAM operating KPIs by quarter

BFAM operating KPIs stated on its earnings calls, by fiscal quarter
KPI Mar 2026 Q1 FY26This call 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.

Product announcements

ProductTypeDetails
Employer Camps (Steve & Kate's)expansion

Deals & partnerships

Leading academic medical center Transition of management for three full service centers

The academic medical center had self-operated these centers for over 20 years and previously was a College Coach client. Bright Horizons assumed management with ongoing financial support, illustrating transition opportunities within employer-sponsored care.

Fortune 500 global consumer company New back-up care client

New client win for back-up care services, demonstrating broad relevance of care solutions.

Fortune 500 global industrial company New back-up care client

New client win for back-up care services, demonstrating broad relevance of care solutions.

Leading financial services company Added College Coach services

A long-time back-up care client expanded its relationship by adding College Coach to support employees and their families, demonstrating the 'One Bright Horizons' strategy.

Risks & headwinds

Enrollment headwinds in Australia Ongoing (Q2 FY26, FY26)

Approximately 100 basis points headwind to full service enrollment growth; $20 million to $25 million expected loss for FY26; 150 bps margin headwind for FY26.

Mitigation:Aligning staffing with enrollment levels, improving enrollment, considering center closures, exploring broader strategic options for the geography.

Headwind from center closures Ongoing (Q2 FY26, Q3 FY26, FY26)

Approximately 250 basis points headwind to full service revenue growth (Q2 FY26); approximately 200 basis points headwind for FY26; approximately 225 basis points headwind for Q3 FY26.

Mitigation:Optimizing the portfolio, closing underperforming centers, working to fully exit leases and facility costs.

Higher net interest expense Q2 FY26

Increased $3 million over prior year (Q2 FY26).

Mitigation:Not explicitly stated, but management noted comfort with current leverage ratios (2.2x net debt to adjusted EBITDA).

Higher effective tax rate Q2 FY26

28.75% (Q2 FY26), higher than 2025.

Mitigation:Primarily due to losses in Australia that are not currently deductible; mitigation tied to improving Australia operations.

What to watch in Q3 FY26

Australia operations strategic review

Next quarter and intermediate term
Current Underperforming, contributing $20M-$25M loss for FY26
Target Progress on strategic options and operational improvements

Why it matters

Australia's underperformance is a significant headwind to full service margins and overall profitability, and management is exploring strategic options.

And then over the intermediate term, we obviously are looking at strategic options as it relates to how we think about that particular geography broadly.

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Q&A highlights

How much is summer camp usage driving back-up care growth, and what are the assumptions for back-to-school enrollment in full service?

Summer camp is a component of back-up care, typically 25-30% of total network use annually, but growth is broad across care types. Full service enrollment was stable in H1, with slight positive growth ex-Australia, but backfill for graduating preschoolers takes time, and Q3/Q4 comparisons are against strong prior-year U.K. operations.

“For the overall year, we generally see summer camp use in sort of the 25% to 30% of total use. So it is still just one of the components of our network use care types.”

asked by Andrew Steinerman · answered by Stephen Kramer

2 min read 6 chapters

Detailed narrative

Back-up Care Growth Drivers and Performance

Back-up care revenue grew 19% to $194 million, accelerating from Q1, driven by increased unique users and frequency of use. The company highlighted three growth levers: deepening penetration within existing clients, expanding its ecosystem of care solutions (e.g., employer camps), and winning new logos. Investments in technology and network expansion, including instant book capability, are enhancing service delivery and competitive advantage, positioning back-up care for continued double-digit growth.

Full Service Center Strategy and Occupancy Trends

Full service revenue grew 3% to $557 million, in line with expectations, driven by tuition increases and favorable FX, partially offset by center closures and Australian enrollment headwinds. The company opened 7 centers, including 5 for employer clients, demonstrating growth through transitioning self-operated programs and partnering on new worksite locations. Occupancy averaged in the high 60% range (70% excluding Australia), with the lowest occupied centers (<40%) declining to 5% from 10% year-over-year, indicating portfolio optimization.

Addressing Underperformance in Australia Operations

Australia operations continued to be a headwind, impacting full service enrollment by approximately 100 basis points and contributing to a higher effective tax rate due to non-deductible losses. Management is focused on aligning staffing with enrollment levels, improving enrollment, and considering center closures to optimize the portfolio. The company is also exploring broader strategic options for the Australian geography to get it back on track, similar to past efforts in the U.K.

Educational Advisory Segment and Engagement

Educational advisory revenue was $28 million, consistent with the prior year. Growth in College Coach, driven by demand for expert college admissions and financial aid guidance, was offset by lower participant engagement in EdAssist. The focus for EdAssist is to increase engagement by strengthening its technology platform, expanding solution relevance, and making education benefits more accessible to working learners.

One Bright Horizons Strategy and Client-Centricity

The 'One Bright Horizons' strategy aims to extend the reach and value of the service portfolio by engaging more employees and employers across all solutions. This involves leveraging existing trust to expand relationships (e.g., a College Coach client transitioning to full service centers) and helping employees utilize available benefits. This client-centric approach drives deeper penetration at both employer and employee levels, reinforcing the strength of the employer-sponsored model.

Capital Allocation and Share Repurchases

The company generated $95 million in cash from operations and made $19 million in fixed asset investments during the quarter. It executed $250 million in share repurchases in Q2, following $225 million in Q1, demonstrating an opportunistic approach to capital allocation. With a trailing net leverage ratio of 2.2x net debt to adjusted EBITDA, management expressed comfort with current ratios and willingness to be opportunistic, though no further repurchases are contemplated in current guidance.

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