BRIGHT HORIZONS FAMILY SOLUTIONS INC. 2026 Q3 Earnings Call

Please go ahead. Thanks, Carrie, and welcome to Bright Horizons' third quarter earnings call.

Before we begin, please note that today's call is being webcast, and a recording will be available under the investor relations section of our website, investors.brighthorizons.com. As a reminder to participants, any forward-looking statements made on this call, including those regarding future business, financial performance, and outlook, are subject to the safe harbor statement included in our earnings release. Forward-looking statements inherently involve risks and uncertainties that may cause actual operating and financial results to differ materially and should be considered in conjunction with the cautionary statements that are described in detail in our earnings release, 2025 Form 10-K, and other SEC filings. Any forward-looking statements speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statements.

Today, we also refer to non-GAAP financial measures, which are detailed and reconciled to their GAAP counterparts in our earnings release, which is available under the IR section of our website, investors.brighthorizons.com. Joining me on today's call is our Chief Executive Officer, Stephen Kramer, and our Chief Financial Officer, Elizabeth Boland. Stephen will start by reviewing our results and will provide an update on the business. Elizabeth will follow with a more detailed review of the numbers before we open it up to your questions. With that, let me turn the call over to Stephen.

Thanks, Mike, and thank you to everyone joining us this evening. We delivered a solid third quarter with revenue growing 5% to $841 million and adjusted EPS growing 15% to $1.80. Across our portfolio of services, the third quarter is an important period and is illustrative of how we support working families at different stages of their lives. In Back-Up Care, it is our peak season for use, and in Full Service, it marks the start of a new school year, when preschoolers move up to elementary school and many new families join our centers. Getting into details on the recent quarter, I will start with Back-Up Care and then walk through Full Service, including how the fall enrollment season played out.

In Back-Up Care, revenue grew 13% to $286 million, in line with our expectations and on top of strong growth in the third quarter of each of the last four years. Growth was primarily driven by more employees using their benefit, along with an uptick in use per user, with the strongest demand in the care type serving families with school-aged children on summer break, including camps and tutoring. Meeting that demand starts well before school lets out. Heading into the busy summer season, our teams expanded our vetted provider network across care types, adding many new and, in many cases, exclusive partners in camp centers and in-home care, adding capacity in our highest demand geographies, and extending our reach into new markets where our client employees live and work.

That preparation allowed us to deliver care where and when families needed it, resulting in a high fulfillment rate throughout the peak period of demand. At the same time, our marketing and technology teams continued to advance the personalization initiatives that build awareness and drive use, along with the booking experience that allows families to secure care quickly and easily. The breadth of our care options, the quality and scale of our network, and the ease of booking through our platform are real competitive advantages, and they are why employers partner with Bright Horizons to provide this important benefit. As we have transitioned into the fall, we are mindful that many client employees are ahead of use within their annual use banks, given their strong utilization year to date.

We expect this to have a dampening effect on growth towards the end of the year, and we now anticipate 13% revenue growth for the full year. Looking over the long term, with penetration of our eligible employee base still below 5%, we see continued runway to extend participation and the breadth of use cases. Our focus is on broadening what the benefit can do for families and making it easier to use. A few examples include our new offering, Care Advising, which supports families with complex neurodiversity and senior care needs, a conversational AI-supported consumer navigation experience, and a more connected experience across our services through One Bright Horizons. Together, these and other initiatives support our long-term growth target of 11%-13%. Turning to Full Service, revenue grew 1.3% to $522 million.

Tuition increases were partially offset by modestly lower enrollment, including continued contraction in Australia, and by the impact of center closures as we continue to rationalize the portfolio. We added two centers in the quarter, including a transition for a leading academic health system client. Occupancy averaged in the mid-60% range in the third quarter, a seasonal step down from the second quarter. Excluding Australia, enrollment in centers open more than one year declined roughly 50 basis points, while Australia's contraction was an additional roughly 100 basis point headwind to our overall enrollment. Last quarter, given the slowing pace of enrollment growth we had seen develop mid-year across our markets, we tempered our enrollment growth outlook for the second half of the year. Retention of enrolled families has remained steady.

That said, new family starts this fall have been softer than we anticipated, with the biggest change from our enrollment expectations being in the U.K. In late June, the U.K. childcare regulator published a group-wide notice requiring us to strengthen safeguarding governance and oversight across our U.K. nurseries. The impact of this was limited over the seasonally quieter summer months, but we did not sufficiently anticipate the duration or full effect it would have on new families' decisions in the fall enrollment season. In mid-September, the regulator issued an updated notice that recognized our progress, but nonetheless extended the review period. Because the fall enrollment season was only beginning late in the third quarter, we expect the larger impact on enrollment will be in the fourth quarter and until the notice is lifted.

Our focus is and always has been on safeguarding and the safety and wellbeing of the children in our care. This underpins our ability to generate and convert more inquiries, retain families as their children move through our programs, and partner with our employer clients to drive enrollment. We will also continue to optimize our portfolio, positioning our centers to serve employees of our client partners and working families where they live and work, as well as continue to close underperforming centers. In Australia, the operating environment remains challenging. A combination of real estate developer-driven supply growth alongside softening demand has pushed the industry, as well as our own occupancy, to multiyear lows. Our results in Q3 were in line with our expectations, but we have not seen signs that conditions will improve in the near term.

Following an updated assessment of the market's prospects, we recorded a non-cash impairment this quarter, which Elizabeth will cover. We are actively reviewing strategic alternatives in this market, and while we would defer further comment until we have something definitive to share, we are moving with urgency. At the same time, we continue to support our Australian educators who remain focused on delivering high-quality care and education for the children and families we serve. In Educational Advisory, revenue was $33 million, with continued growth in College Coach offset by lower participant use in EdAssist. Before I wrap up, I want to reflect on a particularly special moment for Bright Horizons. This fall, we came together to honor our 40th anniversary.

It was incredibly meaningful to have our founders, former leaders, and colleagues from across Bright Horizons together in one place, reflecting on how far we have come over four decades and the positive impact we have had on the lives of others. What began 40 years ago with a simple belief in supporting working families and employers has grown well beyond our first centers into a broad portfolio of education and care solutions. Over those four decades, we have navigated economic cycles, a global pandemic, and the changing needs of families and employers, and our ability to adapt while continuing to deliver for families and clients we serve has been an absolute constant. Through it all, the commitment to making a difference in the lives of children, families, learners, and employers remains at the heart of who we are.

I am incredibly proud of what this organization has built together and confident in our ability to capitalize on the opportunities ahead. In summary, this quarter showed continued strength in Back-Up Care in our employer-sponsored model, as well as opportunities for improvement. We are taking actions to strengthen safeguarding practices, rebuild enrollment in Full Service, and address challenges in Australia, while continuing to invest in and benefit from the long-term growth and opportunity in Back-Up Care. Notwithstanding our solid results through the third quarter, our revised outlook reflects the change in our expectations for the fourth quarter. As a result, we now expect revenue to be approximately $3.07 billion and adjusted EPS in the range of $4.98-$5.03 per share. With that, I will turn the call over to Elizabeth, who will walk through the quarter in more detail and share more on our outlook.