Child care and education company Bright Horizons (NYSE: BFAM) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 11.6% year on year to $802.8 million. Its non-GAAP profit of $1.57 per share was 18.9% above analysts’ consensus estimates.

Is now the time to buy BFAM? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Bright Horizons delivered third-quarter results that exceeded Wall Street’s expectations, reflecting robust demand for its suite of child care and education benefits. Management pointed to strong performance in back-up care, which experienced broad-based demand from both new and existing clients, particularly during the summer months when school-age programs were in high use. CEO Stephen Kramer credited the company’s ability to attract more users and increase repeat utilization as critical to the quarter’s outperformance. Additionally, margin improvement was supported by operating leverage across segments, with disciplined cost management and new center openings further contributing to results.

Looking forward, management raised its full-year profit guidance, underpinned by continued expansion in back-up care and ongoing investments in personalization and network capacity. Kramer stated that Bright Horizons is still in the early stages of realizing the potential for its back-up care platform, emphasizing efforts to increase unique users and deepen engagement within its employer client base. CFO Elizabeth Boland highlighted targeted tuition increases and improved U.K. operations as additional drivers of future margin expansion, while noting that prudent capacity management and a focus on center utilization will remain priorities.

Key Insights from Management’s Remarks

Management attributed third-quarter performance to the outsized growth of back-up care, operating leverage in key segments, and targeted expansion efforts across new and existing markets.

• Back-up care momentum: The back-up care segment was the largest contributor to growth, with demand driven by both new employer signups and deeper usage among existing clients. Management noted a surge in use during summer months, particularly for school-age care programs, and highlighted increasing employer awareness of back-up care as a productivity tool.

• Full service center dynamics: Enrollment growth in full service centers moderated, but new center openings for higher education and healthcare clients helped offset slower occupancy gains. Management emphasized that underutilized centers are being repurposed to support back-up care, leveraging existing capacity to maximize revenue and margin.

• U.K. business recovery: The U.K. full service segment showed steady improvement, with operational enhancements and favorable government support leading to positive earnings contributions. Management expects the U.K. operations to be a modest tailwind for margin expansion in the coming year.

• Education advisory growth: The education advisory segment, led by the College Coach product, experienced double-digit revenue growth. New client wins in both education and healthcare sectors reinforced the relevance of upskilling and education benefits.

• Margin expansion drivers: Margin gains in the quarter were attributed to improved operating leverage, disciplined cost management, and a focus on higher-occupancy centers. Management signaled that ongoing portfolio optimization and utilization of capacity for back-up care will remain key priorities.

Drivers of Future Performance

Management expects continued growth in back-up care utilization, further margin expansion, and disciplined center management to drive performance in upcoming quarters.

• Back-up care penetration and investment: Management believes back-up care remains underpenetrated, with less than 10% of eligible employees using the service. The company plans ongoing investment in expanding capacity and personalization to drive higher adoption and recurring usage, aiming for double-digit growth in this segment.

• Tuition pricing and cost control: CFO Elizabeth Boland outlined a balanced tuition pricing strategy for next year, with average increases expected around 4%. The company intends to maintain a margin buffer above wage inflation, using localized pricing strategies to balance demand and affordability while preserving profitability.

• Portfolio optimization and closures: The company will continue to close underperforming centers, focusing on those with sustained low occupancy. Management expects a net reduction in centers next year but will prioritize repurposing capacity to support back-up care demand and improve margin contribution across the portfolio.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will monitor (1) the pace of back-up care adoption and whether Bright Horizons can increase both user penetration and frequency, (2) the effectiveness of tuition pricing strategies in offsetting cost pressures, and (3) the impact of center closures and capacity optimization on overall margin performance. Progress in the U.K. business and further client wins in education advisory will also be key indicators of execution.

Bright Horizons currently trades at $103.20, up from $92.36 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

High Quality Stocks for All Market Conditions

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.