Sign in

You're signed outSign in or to get full access.

BH

BRIGHT HORIZONS FAMILY SOLUTIONS INC. (BFAM)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered a clean beat on adjusted EPS and revenue, with diluted adjusted EPS at $1.07 vs S&P Global consensus of $1.01 (+5.8%) and revenue at $731.6M vs $724.3M (+1.0%); GAAP diluted EPS was $0.95 . EPS beat was driven by higher back-up care utilization, full-service enrollment growth, lower interest expense, and a lower effective tax rate . S&P Global values marked with *; Values retrieved from S&P Global.
  • Operating margin expanded 150 bps YoY to 11.8% and gross margin rose to 25.0%, reflecting operating leverage and mix shift toward higher-margin back-up care; adjusted EBITDA rose 13% to $115.6M (16% margin) .
  • Management raised FY 2025 revenue guidance to $2.90–$2.92B and adjusted EPS to $4.15–$4.25, and provided Q3 adjusted EPS of $1.29–$1.34 alongside revenue of $775–$785M . CFO cited ~50–75 bps FX tailwinds aiding reported growth .
  • Key near-term catalysts: strong early-summer back-up care demand, visible client expansions, and UK performance tracking to breakeven by year-end; medium-term drivers include continued full-service enrollment progress and potential demand lift from expanded U.S. childcare tax credit (IRC §45F) .

What Went Well and What Went Wrong

What Went Well

  • Back-up care revenue grew 19% to $162.7M with segment operating margin ~25%, underpinned by strong center/camp/in-home demand and expanded owned/network supply. “Utilization over the early summer months has been particularly strong...enhancing both geographic reach and programming” (CEO) .
  • Full-service center-based child care revenue increased 7% to $540.3M on pricing and enrollment, with occupancy in the “high 60%” and improving cohorts; operating income rose to $40.3M .
  • UK turnaround on track: “We are on track to achieve [breakeven]… momentum has been really good… supported by expanded parent fee support through a government funding program” (CFO) .

What Went Wrong

  • GAAP EBITDA ($108.8M) was below S&P Global consensus ($112.7M), reflecting ongoing investment in network, technology, and marketing for back-up care scale; adjusted EBITDA ($115.6M) exceeded consensus *.
  • Portfolio drag persists from underperforming centers: ~10% of centers below 40% occupancy still lose money; management noted rationalization remains necessary to reach portfolio-level margin targets .
  • Sequential net center count declined in Q2 (opened 5, closed 8; net -3), highlighting continued pruning in the U.S. footprint; year-to-date net +1 .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$674.1 $665.5 $731.6
Gross Profit Margin %20.8% 23.4% 25.0%
Operating Income ($USD Millions)$48.2 $62.3 $86.1
Operating Margin %7.2% 9.4% 11.8%
Net Income ($USD Millions)$29.1 $38.0 $54.8
Net Income Margin %4.3% 5.7% 7.5%
Diluted EPS (GAAP) ($)$0.50 $0.66 $0.95
EBITDA ($USD Millions)$70.5 $84.1 $108.8
Adjusted EBITDA ($USD Millions)$110.7 $92.3 $115.6
Adjusted EBITDA Margin %16% 14% 16%
Diluted Adjusted EPS ($)$0.98 $0.77 $1.07

Segment breakdown (Revenue and Operating Income):

SegmentQ2 2024 RevenueQ2 2025 RevenueQ2 2024 Op IncQ2 2025 Op Inc
Full-service Center-based Child Care$507.1 $540.3 $32.6 $40.3
Back-up Care$136.5 $162.7 $31.6 $40.9
Educational Advisory Services$26.5 $28.6 $4.8 $4.8
Total$670.1 $731.6 $69.1 $86.1

KPIs:

KPIQ4 2024Q1 2025Q2 2025
Centers Operated (#)1,019 1,023 1,020
Capacity (Children)~115,000 ~115,000 ~115,000
Cash & Equivalents ($MM)$110.3 $112.0 $179.2
Cash from Operations (YTD/period) ($MM)$337.5 (FY24) $86.2 (Q1) $220.4 (H1)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Billions)FY 2025$2.865–$2.915 $2.90–$2.92 Raised midpoint; narrowed range
Diluted Adjusted EPS ($)FY 2025$3.95–$4.15 $4.15–$4.25 Raised range
Revenue ($USD Millions)Q3 2025—$775–$785 New quarterly outlook
Diluted Adjusted EPS ($)Q3 2025—$1.29–$1.34 New quarterly outlook
Full-service Revenue Growth (%)FY 2025—5.75–6.75 (incl. ~75 bps FX tailwind) Set explicit range
Back-up Care Revenue Growth (%)FY 2025—14–16 Raised expectations
Ed Advisory Revenue Growth (%)FY 2025—Mid-single digits Maintained
Segment Operating Margin (%)FY 2025—Backup: 25–30; Full-service: ~+125 bps expansion; Ed Advisory: high teens to ~20 Margin parameters reaffirmed
Structural Effective Tax Rate (%)FY 2025~27–28 ~27.25 Clarified

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
AI/Technology in enrollment funnelNoted disciplined execution; operational improvements (Q1 2025) “Enhanced technology and more personalized communication” to streamline inquiry-to-enrollment (CEO) Improving digital enablement
Macro/tax policy (IRC §45F)Not highlighted in Q4/Q1 filingsExpanded childcare employer tax credit; mgmt educating clients; opportunity especially for existing accounts, but HR–Finance coordination is key Constructive tailwind, execution-dependent
Product performance – Back-up CareFY 2024 revenue $610M, strong utilization +19% revenue; strong summer demand across center/camp/in-home; owned + partner network expansion Accelerating
Regional trends – UKUK a margin headwind in 2024; losses ~>$10M in segment On track to breakeven in 2025; supported by improved demand and government funding expansion Improving
Full-service occupancy/enrollmentOngoing progress; pricing/enrollment gains (Q1) Occupancy “high 60s”; low single-digit enrollment growth expected through H2; portfolio rationalization ongoing Gradual improvement, mix drag diminishing
M&A postureFY24 paydowns and deferred consideration; limited acquisitions Remain disciplined; prefer strategic, high-quality assets; valuation gaps constrain activity Selective

Management Commentary

  • CEO: “We generated strong results this quarter, driven by disciplined execution and a continued focus on delivering high-quality education and care.” He highlighted deeper client usage underpinning growth .
  • CEO on back-up care: “Utilization over the early summer months has been particularly strong…enhancing both geographic reach and programming” .
  • CFO: “Operating margins up 150 basis points over the prior year to 11.8%…Adjusted EBITDA increased 13% to $116M…EPS of $1.07 came in ahead of our expectations supported by solid top line growth and operating leverage” .
  • CFO on UK: “We are on track to achieve [breakeven]… supported by…expanded parent fee support through a government funding program” .

Q&A Highlights

  • Segment margins: Backup care operating margin expected 25–30% for FY; Full-service overall operating margin expansion ~125 bps; Ed Advisory high teens to ~20% .
  • Enrollment and occupancy trajectory: Low single-digit enrollment growth (~~2%) expected through H2; average occupancy to end mid-60s in 2025; >50% of centers above 70% utilization; rationalization of underperformers continues .
  • 45F childcare tax credit: Expanded cap potentially boosts existing client investment; mgmt driving awareness via webinars; impact contingent on HR–Finance alignment (CEO) .
  • Network capacity & mix in back-up care: Growth enabled by owned assets (Stephen’s camps, Jovie) plus expanded third-party networks; booking windows opened earlier to capture summer demand .
  • Footprint actions: Opened 5, closed 8 in Q2 (net -3); majority closures in U.S.; YTD net +1 .

Estimates Context

  • Q2 2025 vs S&P Global consensus: Adjusted EPS $1.07 vs $1.01* (beat), Revenue $731.6M vs $724.3M* (beat), EBITDA $108.8M vs $112.7M* (miss on GAAP EBITDA; Adjusted EBITDA $115.6M exceeded consensus) . S&P Global values marked with *; Values retrieved from S&P Global.
MetricQ2 2025 Consensus*Q2 2025 Actual
Adjusted EPS ($)1.0117*1.07
Revenue ($USD Millions)724.3*731.6
EBITDA ($USD Millions)112.7*108.8 (GAAP)
Adjusted EBITDA ($USD Millions)—115.6
EPS – # of Estimates9*—
Revenue – # of Estimates6*—

Key Takeaways for Investors

  • Mix and leverage are improving: back-up care growth and full-service enrollment gains expanded margins; continued cohort improvement suggests further operating leverage into FY25–26 .
  • Guide raised across both revenue and adjusted EPS with Q3 visibility; FX tailwinds add ~50–75 bps to reported growth, supporting near-term execution .
  • UK breakeven is a tangible margin tailwind vs 2024; watch policy support and operational execution to sustain progress .
  • Portfolio cleanup continues (net closures, underperformer rationalization); near-term noise likely, but margin structure should benefit as middle cohort migrates upward .
  • Policy catalyst: expanded §45F credit could lift employer-supported spend, particularly in back-up care; uptake hinges on HR–Finance coordination—monitor client adoption momentum .
  • Investment cadence in back-up care (network, tech, marketing) tempers near-term GAAP EBITDA vs consensus, but supports durable mid-teens top-line growth and 25–30% segment margins .
  • Trading setup: Raised FY guide and strong Q3 outlook are positive; any signs of sustained occupancy gains and UK breakeven confirmation likely support multiple; risks include lingering underperforming centers and macro sensitivity in enrollment cycles .

S&P Global values marked with *; Values retrieved from S&P Global.