Executive Summary

BFAM delivered a broad-based beat in Q3: revenue $802.8M (+12% YoY) and GAAP diluted EPS $1.37 (+46% YoY); adjusted EPS $1.57 (+41% YoY). Strength was led by Backup Care (+26% revenue) with significant operating leverage; full-service showed improved margins despite seasonal occupancy step-down .
FY25 guidance was raised: revenue to ~$2.925B (from $2.90–$2.92B) and adjusted EPS to $4.48–$4.53 (from $4.15–$4.25). Q4 guide implies revenue $720–$730M and adjusted EPS $1.07–$1.12 .
Results beat S&P Global consensus: Q3 revenue $802.8M vs $781.1M*, Q3 adjusted EPS $1.57 vs $1.321*; Q4 guidance brackets consensus (rev ~$728M*, EPS ~$1.122*)—buyside likely recalibrates FY25 EPS higher and tests Backup sustainability into 2026 (management suggested 11–13% next year for Backup) . Values retrieved from S&P Global.
Catalyst: outsized Backup Care utilization, full-service margin expansion, and a guidance raise; management emphasized durable demand, growing personalization/technology, and balanced pricing against labor costs .

What Went Well and What Went Wrong

What Went Well
- Backup Care outperformance: revenue up 26% to $253M with ~38% operating margin; “record levels of care” supported by owned and third-party supply and personalization efforts . CEO: “Back-Up Care outperformance was driven by higher utilization among client employees supported by increased supply…” .
- Full-service margin progress: adjusted operating income rose to $20M (4% margin) on pricing, modest enrollment gains, and FX tailwind; UK turning positive, aiding portfolio margins .
- Guidance raised with confidence: FY25 revenue to ~ $2.925B and adjusted EPS to $4.48–$4.53 on Q3 outperformance and Q4 visibility; CFO outlined segment growth: FS ~6%, Backup ~18%, Ed Advisory high-single digits .
What Went Wrong
- Enrollment momentum moderated: low-single-digit growth slowed to ~1% in Q3; occupancy averaged mid‑60% and stepped down sequentially due to seasonality .
- Portfolio rationalization ongoing: net closures expected in 2025 (5–10) and a similar 25–30 closure cadence contemplated for 2026 among sub‑40% occupancy centers—an overhang to unit growth optics .
- Cash generation YTD below prior year: nine-month cash from operations $202.8M vs $216.8M in 2024; cash fell to $116.6M at Q3 from $179.2M at Q2, reflecting capital deployment and revolver activity .

Financial Results

Quarterly trend (oldest → newest)

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue ($M)	$665.5	$731.6	$802.8
GAAP Diluted EPS	$0.66	$0.95	$1.37
Adjusted EPS	$0.77	$1.07	$1.57
Gross Margin %	23.4%	25.0%	27.0%
Operating Margin % (GAAP)	9.4%	11.8%	15.1%
Net Margin %	5.7%	7.5%	9.8%

Q3 actuals vs prior year and vs estimates (oldest → newest)

Metric	Q3 2024	Q3 2025 Actual	Q3 2025 S&P Consensus*
Revenue ($M)	$719.1	$802.8	$781.1*
GAAP Diluted EPS	$0.94	$1.37	—
Adjusted EPS	$1.11	$1.57	$1.321*

Segment performance (oldest → newest)

Segment	Q3 2024 Revenue ($M)	Q2 2025 Revenue ($M)	Q3 2025 Revenue ($M)
Full-Service Center-Based	$486.6	$540.3	$515.5
Back-Up Care	$201.8	$162.7	$253.4
Educational Advisory	$30.7	$28.6	$33.9
Total	$719.1	$731.6	$802.8

Segment	Q3 2024 Op Inc ($M)	Q2 2025 Op Inc ($M)	Q3 2025 Op Inc ($M)
Full-Service Center-Based	$12.5	$40.3	$16.8
Back-Up Care	$70.5	$40.9	$95.3
Educational Advisory	$6.4	$4.8	$8.8
Total	$89.4	$86.1	$120.8

KPIs (oldest → newest)

KPI	Q1 2025	Q2 2025	Q3 2025
Centers Operating (period-end)	1,023	1,020	1,013
Capacity (children)	~115,000	~115,000	~115,000
Occupancy (portfolio avg)	—	High-60%	Mid‑60%
Cash & Equivalents ($M)	$112.0	$179.2	$116.6
Nine‑Month CFO ($M)	—	—	$202.8 YTD

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY2025	$2.90–$2.92B (Q2)	~$2.925B (Q3)	Raised
Adjusted EPS	FY2025	$4.15–$4.25 (Q2)	$4.48–$4.53 (Q3)	Raised
Revenue	FY2025	$2.865–$2.915B (Q1)	~$2.925B (Q3)	Raised vs Q1
Adjusted EPS	FY2025	$3.95–$4.15 (Q1)	$4.48–$4.53 (Q3)	Raised vs Q1
Q4 Revenue	Q4 2025	—	$720–$730M (implied)	New
Q4 Adjusted EPS	Q4 2025	—	$1.07–$1.12	New
Full-Service Rev Growth	FY2025	~5.75–6.75% (Q2)	~6% (Q3)	Maintained/Refined
Backup Rev Growth	FY2025	~14–16% (Q2)	~18% (Q3)	Raised
Ed Advisory Rev Growth	FY2025	Mid-single digits (Q2)	High-single digits (Q3)	Raised

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3)	Trend
Backup Care growth/strategy	Q2: 19% growth; expanding owned and partner supply; early summer strength; new F10 client; mid-teens FY guide	26% growth; record utilization; 38% margin; management frames 2026 growth in low double digits (11–13%)	Strengthening; near-term outperformance, sustainable double-digit LT
Technology/personalization	Q2: enhanced tech and personalized outreach to convert inquiries to enrollments	Personalization to stimulate Backup usage; BI tools for capacity mapping	Expanding use cases across segments
Full-service occupancy/margins	Q2: high-60% occupancy; margin expansion; UK progress; target 125 bps FY expansion	Mid‑60% occupancy seasonality; adjusted OI margin 4%; UK modestly positive in 2025	Sequential seasonal step‑down; structural improvement intact
Pricing vs wages	Q2: 4–5% tuition; wages lower than tracked indices; ~100 bps price-wage spread	2026 planning ~4% average tuition; aim to price ~100 bps over wage inflation	Pricing discipline maintained
Portfolio optimization	Q2: net close/open ≈ flat YTD; closures headwind narrowing	2025 net closures 5–10; 2026 closures 25–30 among sub‑40% centers	More decisive pruning ahead
Regulatory (45F credit)	Q2: 45F expansion awareness push; benefit mostly for existing clients; HR–finance coordination needed	Continued framing as tailwind to budgets; not core to near-term guide	Positive optionality; execution-dependent
Macro/return-to-office	Q1 release cited macro uncertainty; Q2 discussed mixed RTO cadence and affordability pressures	Consumer pressures persist; diversified client base and employer ROI narrative mitigate	Mixed macro; company-specific levers offset

Management Commentary

CEO opening: “We posted a strong third quarter that again highlights the value of our unique employer sponsored model… Back-Up Care outperformance was driven by higher utilization… Full-Service also progressed with improvements in enrollment and margins.”
CEO on Backup momentum: “Revenue increased 26% to $253 million… More employees used care, existing users leaned in further… we are still in the early innings of the opportunity.”
CFO on margins and leverage: “Adjusted operating income rose 39% to $124 million… adjusted EBITDA margin of 19%… supported by strong Backup Care revenue performance and operating leverage.”
CFO on pricing: “On balance… around a 4% average [tuition increase for 2026]… we have typically targeted a 100 basis point spread between average tuition increases and average wages.”

Q&A Highlights

Backup Care sustainability: FY25 Backup growth ~18%; early view for 2026 at 11–13% growth, driven by user growth and frequency across a large under-penetrated eligible base (<10% penetration today) .
Full-service enrollment: Growth moderated to ~1% in Q3; average occupancy mid‑60% (seasonal); continued margin expansion expected into 2026 (50–100 bps) with UK improving .
Pricing and wages: Planning ~4% tuition in 2026; aim to maintain ~100 bps spread over wage inflation; localized pricing based on demand .
Portfolio actions: 2025 net closures 5–10; 2026 closures 25–30 among sub‑40% occupancy centers, while leveraging some capacity for predictable Backup Care demand .
Q4 framework: Company guided revenue $720–$730M and adjusted EPS $1.07–$1.12; Backup margins expected at upper end of 25–30% for full year .

Estimates Context

Q3 2025 vs S&P consensus: Revenue $802.8M vs $781.1M* (beat), adjusted EPS $1.57 vs $1.321* (beat). Q2 also modestly beat (rev $731.6M vs $724.3M*, EPS $1.07 vs $1.012*). Q4 guide brackets consensus (rev ~$728.0M*, EPS ~$1.122*), implying estimates likely move higher for FY EPS but Q4 EPS may settle near the top end of the guide . Values retrieved from S&P Global.

Metric	Q2 2025 Estimate*	Q2 2025 Actual	Q3 2025 Estimate*	Q3 2025 Actual	Q4 2025 Estimate*
Revenue ($M)	724.3*	731.6	781.1*	802.8	728.0*
Primary/Adjusted EPS	1.012*	1.07	1.321*	1.57	1.122*

Values retrieved from S&P Global.

Key Takeaways for Investors

Backup Care is the principal earnings engine; utilization and supply breadth yielded a sizable Q3 beat and a guidance raise, with 2026 growth framed at 11–13%—supporting a durable multi-year growth algorithm .
Full-service margin expansion is ongoing despite moderated enrollment; UK turning positive and targeted pricing vs wages should continue to lift segment profitability through 2026 .
Portfolio rationalization will weigh on headline center count but should enhance ROIC and margin profile; some under-enrolled capacity is being repurposed to meet predictable Backup demand—accretive to consolidated margins .
Raised FY25 guide (EPS to $4.48–$4.53) and Q4 framework indicate management confidence; near-term estimate revisions should be upward, anchored by Backup momentum and operating leverage .
Watch conversion initiatives in full-service (tech-enabled personalization and funnel improvements) to re-accelerate enrollment and occupancy; sequential trends into Q1 seasonally matter for trajectory .
Cash generation remains solid but below prior-year YTD; monitor working capital and revolver usage as portfolio pruning and selective investments continue .
Regulatory 45F expansion is a structural tailwind to employer budgets, but near-term impact depends on HR–finance alignment; BFAM is best positioned to commercialize as awareness builds .

Notes on non-GAAP: Q3 adjustments include $1.3M debt refinancing costs and $2.4M net lease termination costs (in full-service); other interest costs of $2.2M related to a pre-acquisition obligation and refinancing. Adjusted metrics reconcile in press release/8-K .

BRIGHT HORIZONS FAMILY SOLUTIONS INC. (BFAM)·Q3 2025 Earnings Summary