Bright Horizons 2026 年第三季法說會摘要

Bright Horizons Family Solutions (NYSE: BFAM) 公布 2026 年第三季營收年增 5%，主要受惠於強勁的備用照顧 (Back-Up Care) 需求。然而，全時服務 (Full Service) 入學人數放緩、英國的監管壓力以及澳洲的嚴峻營運環境，促使管理層下修全年展望。

重點摘要

• 第三季營收年增 5% 至 8.41 億美元，調整後每股盈餘 (EPS) 成長 15% 至 1.80 美元。調整後營業利益率持平於 15.5%。
• 備用照顧營收成長 13% 至 2.86 億美元，主因是使用者數量增加及單一使用者使用量提高，尤其是夏季期間的夏令營與家教輔導需求。
• 全時服務營收成長 1.3% 至 5.22 億美元。學費調漲帶來的效益，部分被入學人數減少、中心關閉以及澳洲業務持續萎縮所抵銷。
• 公司提列了 2.94 億美元與國際全時服務報告單位相關的非現金減損損失，其中包括 2.9 億美元的商譽減損及 400 萬美元的其他無形資產減損。
• 管理層修訂了 2026 年展望，預估營收約為 30.7 億美元，調整後 EPS 為 4.98 至 5.03 美元。
• Bright Horizons 正檢視澳洲業務的策略替代方案；同時，預計在撤銷之前，英國的監管保護通告 (safeguarding notice) 將持續影響當地的入學人數。

核心財務業績

調整後 EPS 成長反映出營業利益增加以及股票回購帶來的效益。由於平均債務餘額和利率上升，淨利息支出年增 700 萬美元至 1,700 萬美元。

業務與營運表現

備用照顧服務

備用照顧仍是主要的成長引擎。營收成長 13% 至 2.86 億美元，調整後營業利益達 1.01 億美元，調整後營業利益率為 35%。

成長來自於更廣大的使用者基礎以及每位使用者使用頻率的提升。暑假期間針對學齡兒童的服務需求最為強勁，包括夏令營與家教輔導。管理層表示，擴增服務供給能力以及技術驅動的客製化服務，有助於在高高峰期維持高履約率。

管理層警告，許多重複使用的使用者已消耗了較高比例的年度福利額度。預計這將使今年後期的成長放緩，不過公司認為該問題主要是時間點所致，而非基礎參與度下降。

符合資格員工的滲透率仍低於 5%。在更廣泛的照顧服務、Care Advising 諮詢、AI 輔助導覽以及 One Bright Horizons 體驗的支持下，管理層繼續以 11% 至 13% 的備用照顧長期成長率為目標。

全時服務

全時服務營收微幅成長 1.3% 至 5.22 億美元。調漲學費的優勢被淨關閉中心帶來的約 200 個基點逆風，以及澳洲入學人數下滑帶來的約 100 個基點逆風所抵銷。

Bright Horizons 在本季新增 2 家、關閉 11 家中心（其中包括在澳洲關閉的 4 家）後，季末共有 979 家中心。平均住房率落在 60% 中段。若不含澳洲，營運超過一年的中心入學人數下降約 50 個基點，且大部分降幅來自美國。

管理層將美國市場的疲軟主因歸咎於新家庭加入速度放緩，而非留存率下降。學齡前兒童每年升入國小的過渡期，也對註冊率最高的一批中心造成了壓力。

全時服務調整後營業利益率下降 25 個基點至 3.7%。若排除澳洲，該利潤率將增加約 40 個基點，反映出學費漲幅高於薪資成長以及營運效率的提升。

英國與澳洲

在英國，幼兒照顧監管機構於 6 月底發布了一項針對全集團的通告，要求加強安全保護治理與監督。9 月中旬更新的通告承認了進展，但延長了審查期。管理層預計對入學人數較大的影響將出現在第四季，並持續到該通告撤銷為止。

Bright Horizons 正增加安全保護措施，包括在美國和英國的中心安裝攝影機、由專業公司進行外部審查，以及對課堂科技進行更嚴格的控管。

在澳洲，管理層指出了由開發商推動的供給成長以及需求疲軟，這些因素將住房率推至多年低點。公司已提列相關減損費用，並正積極檢視該市場的策略替代方案。

教育諮詢服務

教育諮詢服務營收為 3,300 萬美元，同比微幅下降。College Coach 的成長被 EdAssist 參與者使用率下降所抵銷。調整後營業利益率為 29%。

管理層財務預測

管理層預計全時服務營收成長將反映學費調漲，但會被入學人數減少、中心關閉以及澳洲市場疲軟所抵銷。全時服務利潤率預計與 2025 年大致持平，若排除澳洲則高出約 70 個基點。

關於 2027 年學費定價，管理層表示正考慮按公司歷史 3% 至 4% 區間的低端進行調漲，具體決定將按個別中心分別制定。目前尚未提供正式的 2027 年財測。

風險與關注焦點

• 英國的安全保護通告可能會繼續限制諮詢量與新家庭的加入。管理層表示，通告撤銷後復甦的時間與節奏難以預測。
• 澳洲持續面臨供過於求、需求疲軟以及註冊率處於多年低點的情況。策略檢討的結果仍具不確定性。
• 全時服務的入學人數正受到新家庭加入放緩、消費者謹慎態度以及每年學齡前兒童升入國小過渡期的壓力。
• 2026 年較早時期備用照顧服務的高使用率意味著部分重複使用者已接近年度福利上限，進而對年底的成長構成逆風。
• 較高的平均債務餘額和利率使單季淨利息支出增加至 1,700 萬美元。
• 資產組合優化仍在進行中。截至 9 月，Bright Horizons 已關閉 42 家中心，並預計在 2026 年剩餘時間內再關閉約 20 家。

分析師問答亮點

• 美國入學人數：管理層表示留存率維持強勁，但新家庭加入人數低於預期。趨緩主因歸咎於更廣泛的市場環境，而非英國特有的安全保護問題。
• 英國市場復甦：公司預期在監管通告撤銷後入學動能將會改善，但管理層無法估計具體時間點或諮詢與實際入學之間的潛在滯後時間。
• 備用照顧需求：管理層澄清新使用者的成長依然穩健。第四季放緩反映了重複使用者與新使用者的不同組合，重複使用者比預期更早消耗完福利天數。
• 成熟客戶成長：Bright Horizons 看到長期合作的備用照顧客戶參與度持續成長。管理層指出低滲透率與更佳的個人化員工推廣是關鍵機會。
• 中心關閉：管理層預計 2027 年美國市場仍將處於淨關閉中心狀態，因為公司將繼續退出住房率（註冊率）低於 40% 的據點。
• 招生舉措：公司正致力於提升回應速度、中心參觀體驗、潛在客戶跟進、在地定價，並透過雇主關係加強推廣。
• AI 驅動的搜尋探索：Bright Horizons 正針對透過大型語言模型及 AI 代理進行的搜尋調整其行銷策略，包括提供更容易被搜尋到的內容、影片，以及增加參觀預約的可用性。

法說會完整逐字稿

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完整財報電話會議逐字稿

管理層陳述

Operator

Good evening, and welcome to the Bright Horizons Family Solutions Third Quarter 2026 Earnings Call.

[Operator Instructions]

Please note this conference is being recorded.

I would now like to turn the call over to your host, Michael Flanagan, GVP, Strategic Finance and Investor Relations. Please go ahead.

Michael Flanagan

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.

Stephen Kramer

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% to 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 to $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.

Elizabeth Boland

Thank you, Stephen, and hello to everyone who has joined our call tonight. I will begin with some overall financial highlights. Revenue for the third quarter grew 5% to $841 million, driven by continued top-line growth in both our Back-Up Care and Full Service segments. Adjusted operating income increased 5% to $130 million, and adjusted operating margin of 15.5% was consistent with the prior year quarter. Adjusted EBITDA increased 5% to $163 million, representing an adjusted EBITDA margin of 19.4%, also in line with last year. On the bottom line, adjusted EPS of $1.80 increased 15%, reflecting both operating income growth and the leverage we have realized from our share repurchases over the past year.

Taking a closer look at each of our three business lines, in Back-Up Care, revenue grew 13% in the quarter to $286 million, driven by growth in users and led by our programs for school-aged children over the summer months, as Stephen had outlined. Adjusted operating income of $101 million represents an operating margin of 35%. As is typical, the third quarter is our seasonal high point for backup use and margins, and we continue to expect full-year operating margins in the range of 28% to 30%, consistent with the outlook we provided earlier this year. In Full Service, revenue of $522 million grew 1.3% over the prior year quarter, driven primarily by tuition increases and offset by an approximately 200 basis point headwind from net center closures and an approximately 100 basis point headwind from enrollment declines in our Australia operations.

We ended the quarter with 979 centers, opening two, as Stephen said, while closing 11 centers, four of which were in Australia. Breaking down the enrollment stats a bit further, enrollment in centers that were open for the last year declined roughly 50 basis points in the third quarter, excluding the roughly 100 basis points of headwind from the enrollment contraction in Australia. Occupancy declined seasonally from the second quarter and averaged in the mid-60% range. With respect to the center cohorts we have discussed on prior calls, we continued to drive improvement at the lower end of the portfolio. Our top-performing cohort, centers above 70% occupancy, represented 42% of these centers in the third quarter.

Our bottom cohort, that is those with below 40% occupancy, improved to 9% of these centers from 12% in the prior year, reflecting both enrollment progress in centers moving up the occupancy curve, as well as the impact of exiting underperforming centers. Enrollment continued to grow in our middle and bottom cohorts, while the annual transition of preschoolers to kindergarten weighed on our top cohort, resulting in modest overall enrollment decrement in these centers, which still average more than 80% occupied. The total Full Service adjusted operating margins decreased 25 basis points to 3.7% in the quarter. Excluding Australia operating income, margins would have reflected an increase of 40 basis points over the prior year. Operating leverage from tuition increases ahead of wage growth and improved operational efficiency were offset by the lower enrollment.

As Stephen previewed, following our annual assessment of goodwill and other intangible assets for potential impairment, including an updated review of the longer-term outlook for our Australian operations, we recorded a non-cash goodwill impairment charge of $290 million and other intangible asset impairment charge of $4 million in the third quarter, all related to our international full service reporting unit, where Australia is grouped. Turning to educational advisory, revenue of $33 million declined slightly from the prior year quarter, while adjusted operating margin was 29%. I'll cover off a couple of other items on the P&L. Our net interest expense on debt borrowings of $17 million increased $7 million over the prior year and was up $3 million sequentially, due primarily to higher average balances outstanding and interest rates.

The structural effective tax rate on adjusted net income was 28.25% in the third quarter, which is higher than 2025, due primarily to the losses in Australia that are not currently deductible for tax purposes. Relative to the balance sheet through September of this year, we've generated $208 million in cash from operations, have made net fixed asset investments of $69 million, and have repurchased $560 million of stock. We ended Q3 with $119 million of cash and trailing net leverage of 2.4x net debt to adjusted EBITDA. Now, moving on to our updated 2026 outlook. As Stephen previewed, we are revising our full year guidance, and we now expect revenue to approximate $3.07 billion and adjusted EPS to be in the range of $4.98 to $5.03 a share. Looking now at each segment for the full year.

In Full Service, we expect reported revenue to grow approximately 2%, reflecting tuition increases offset by lower enrollment, approximately 200 basis points of headwind from net center closings, and approximately 100 basis points of headwind from Australia. In Back-Up Care, we expect growth of approximately 13% for the full year. In ed advisory, we expect revenue to be approximately flat with 2025. We're expecting $61 million to $62 million of interest expense for the full year and an adjusted effective tax rate of 28.25% with weighted average diluted shares of 51 million for the full year period. This full year outlook translates into Q4 overall revenue in the range of $730 million to $740 million and adjusted EPS in the range of $1.14 to $1.19 per share.

With that, Carrie, we are ready to go to Q&A.

Operator

[Operator Instructions] And our first question will come from Manav Patnaik with Barclays.

分析師問答

Ronan Kennedy

This is Ronan for Manav. With the U.K. and Australia facing the specific headwinds you cover, how did enrollment trend in the U.S. through the fall enrollment season, and what were the key drivers of what you saw, please?

Elizabeth Boland

Can you turn up the volume a little? The question was, what is enrollment?

Ronan Kennedy

U.S. enrollment.

Elizabeth Boland

In the third quarter?

Ronan Kennedy

In the third quarter, yes.

Elizabeth Boland

Yes. Overall, as mentioned on the call, the enrollment in the third quarter, excluding Australia, was down about 50 basis points. The enrollment, that decrement is mostly coming from the U.S. There is a bit of a decrement in the U.S., a bit higher than outside the U.S.

Ronan Kennedy

Got it. Any specific drivers to call out on that, please?

Stephen Kramer

Any specific drivers?

Elizabeth Boland

I didn't hear what he said.

Ronan Kennedy

Drivers of U.S. decrement.

Elizabeth Boland

The drivers of the decrement are mainly in new starters, and we have experienced pretty good retention on the family side, on families who are in the programs that we have. But the fall enrollment cycle is one where we see preschoolers graduating out into elementary school, and then we're in a rebuilding enrollment mode. It's primarily on a pace of new starters that we are seeing a little bit of a shortfall to what we had expected.

Stephen Kramer

Yes, and I think the only other thing I would add is that certainly, the cycling of the enrollment is really in that top cohort, right? And so when we think about the reality is those are still very well-occupied centers. On the other hand, that's the place also where the speed at which the children get backfilled does have an impact on the ultimate net enrollment growth.

Ronan Kennedy

Got it. And if I may, a follow-up on the Back-Up Care fourth quarter use bank constraint. I think you had said many employees are ahead in their annual use banks, and that this should dampen the Back-Up Care growth towards year-end. How significant is that effect in 4Q, and should we view that as just primarily timing, as I think inherently implied, and that benefit limit issue rather than any moderation in underlying engagement or demand?

Elizabeth Boland

Yes. It is primarily a timing issue, given that many of the users of our Back-Up Care service is one of the strengths of the program, are repeat users. And so they're most familiar with the program. They are more inclined to be reserving ahead and using their days as the year is unfolding. Newer users to the program, as you might imagine, may be more spread out. So we see that as a timing matter overall with the use growth at the pace that it is. The fact that we had such high growth in the second quarter and the third quarter is where we see the difference versus Q4 is not indicative of anything given the growth in new users that we've seen throughout.

Operator

Our next question will come from George Tong with Goldman Sachs.

Alex Lakritz

This is Alex Lakritz on for George Tong. You mentioned that the regulatory notice had a larger than anticipated impact on new family starts in the U.K. Once the notice is lifted, how should we think about the pace of enrollment recovery and whether there is going to be any lag between inquiries and actual starts?

Stephen Kramer

Yes. Look, I think that is really tough for us to know for sure. This is an action that the U.K. regulator took that is without precedent. Therefore, it is not something that we would know in terms of how quickly things will come back. What we do know is that we are working really diligently in the U.K. to ensure that we regain the confidence of the regulator in terms of our safeguarding efforts. Those actions started well ahead of the actual notice and continue to today, and will continue, as safeguarding is always our #1 priority. Our expectation is that, given that the market in general is strong, and that this is really reflective of a challenge that is unique to Bright Horizons, that we should see the pace of enrollment recovery come back following the lift of that notice.

Alex Lakritz

Got it. In Back-Up Care, with penetration still below 5% of eligible employees, could you talk a little bit about how utilization typically develops as the client relationship matures and any trends you are seeing amongst your longest-tenured clients?

Stephen Kramer

Sure. We have had a large number of clients for a large number of years, and we have many that would fall into the category that you just described. Certainly, what you have seen over the last, call it, four years is very strong growth, even among our "mature clients" in terms of their duration as being clients. We continue to see opportunity given the low penetration that we have, even within those clients that have been partners for a long time, to continue to grow. We see that as a real positive in terms of both our track record and our forward outlook.

Elizabeth Boland

Some of what we see with this is that certainly as a benefit is introduced, it has a little bit lower penetration in that initial year or 2 or 3 as it's getting more awareness within the company. Then the opportunity is greater. That's one factor on how we achieve better penetration. Our own tools for reaching employees have also improved over the last couple of years in terms of being able to. A registered family can tell us more about themselves, and we can be marketing in real time for events that are relevant to their family situation. In that way, as we are with a client for longer, there's more opportunity for the employees who are working there to become aware of us and also for the client, even in their own circumstances.

We've even seen with clients that are introducing a new care type, that it opens it up to a new group of employees, but also it's a productivity and retention tool for employees who are perhaps working in an environment where there have been some otherwise challenging business conditions for a client, and they find it highly valuable in that way.

Operator

Our next question will come from Andrew Steinerman with JPMorgan.

Andrew Steinerman

Yes. Historically, kind of center closings in a typical year, this is kind of further back, was 1% to 2%, and that was always kind of healthy pruning. As you look into '27, do you feel like the U.S. could get back to kind of, let's call it just a typical pruning year of centers after a bigger year this year? Do you feel like by the end of this year we might kind of rationalize the higher level of closings and move into a year that's kind of more typical? I am just talking about really kind of the U.S. here in terms of center closings.

Elizabeth Boland

Yes. We do have an elevated level of closures this year, Andrew. With 9% or so of our centers in that group that is sub 40% occupied, there is still a little bit of runway there as those centers come into focus to be able to be at the end or near the end of their lease life and to be exiting. We still would expect to be in a net center closing position in the U.S. in '27, given the centers that are still in that group that we have on the radar to likely be exiting given the enrollment trends we are seeing now.

Operator

Moving next to Jeff Meuler with Baird.

Jeffrey Meuler

Yes, thank you. I have a follow-up on the dampening effect of use bank utilization that you were talking to. I understand the concept, but I do not understand the maybe surprise factor, because I would think you had a pretty good sense going into Q3 of where the utilization stood, and Q3, at least revenue, was in your guidance range. I think you are steering the full year to the low end of the prior guidance range. If you could help me, what is the surprise factor or why is there more of an impact on Q4?

Stephen Kramer

Yes. Thanks, Jeff. What we would say is when we think about, and again, surprise factor would suggest that this was a sort of larger decrement than I think it deserves. What I would say is that we modulate between repeat users and new users. The reality is that as we went through the first nine months of the year, we saw a heavier emphasis on repeat users that ultimately were using and coming up against their full bank. I would say that again, as we enter Q4, our expectation is that we are probably going to be slightly lighter on new users, because normally those new users could have sequenced in Q3 and buoyed some of the growth. Instead, we saw repeat users using more of their bank, and so therefore that will have the impact on Q4.

Jeffrey Meuler

Okay. That is helpful. Then on Full Service enrollment, you alluded to actions to rebuild Full Service enrollment. Can you go into detail on what those are and maybe just your view of kind of the current environment? Because you are talking about kind of a challenging fall for the new intake, and I do not think you are the only one in the industry that has seen greater challenges lately. Just trying to think about what could be in your control versus what is outside of your control.

Elizabeth Boland

Yes. I think it is fair to observe that not only in the sector, but just in general with consumers, we're not operating in a vacuum. The overall sentiment out there with persistent inflation and general economic unease plays a part for any parent who's making these decisions and certainly for clients who are budget conscious. We do operate in that ecosystem. Some of the efforts that we have are very much focused on the funnel experience, if you will. Interested families, those who are hand raisers, ensuring that they have the most speedy and effective experience learning about the centers that are available, what would be having a center tour and being able to meet the team, having great follow-up that enables them to register in the timeline that works for them.

Being competitive, of course, so that experience on the marketing front and making sure that we have the right bear hug, if you will, around prospects is important. Having people get into our centers, you've heard us say that before, Jeff. That is where we feel like we really shine in terms of demonstrating what our curriculum looks like and what the teacher experience is and the dedicated professionals that are doing the care every day. But it is also certainly a factor to be competitive on price and to be making sure that we are in the market in all areas. We've been very focused on being sure that we are sensitive to that. The big factor that distinguishes Bright Horizons in the market is that we have so many client partners with whom we work, both in, for Back-Up Care business, but across our Full Service portfolio.

2/3 of the centers in the U.S. are our client-based centers. But leveraging those relationships where a client may not be the only sponsor, but has employees that work all over the country, is also an opportunity for us to be redoubling our efforts in that kind of outreach so that we are capturing those kinds of prospects. Those are some of the things.

Operator

We will go next to Josh Chan with UBS.

Joshua Chan

Just back on the U.S. enrollment. Are you attributing the softness largely to market effects and safeguarding the headlines may not have as big of an effect on the U.S. as it is in the U.K.? Is that fair?

Stephen Kramer

Yes. Look, Josh, I think that is a fair assertion, right? I think it is fair to say that the circumstances in the U.K. as it relates to the regulator and the challenge that we have with the notice and safeguarding, is certainly more acute. When we think about the situation here in the U.S., I would say that, certainly we are, as Elizabeth just went through, we are subject to the broader market environment. Granted, we do have that significant advantage of being able to work with our client partners, and I think that will continue as it has, to differentiate us and allow us to continue to outperform the general market.

Joshua Chan

That makes a lot of sense. Thank you, Stephen. On the Back-Up Care with the less new users, certainly it is very encouraging to see the existing users use the service. I guess for the reduced new users, is that a concern in terms of growth into the future years? Or how are you interpreting that reduced level of new users?

Elizabeth Boland

Yes. I do not know that we are not trying to imply there is fewer new users, Josh. We have a solid level of new users joining the Back-Up Care offer. My point was just that the new users come in over time. I am just trying to track through. If we said that is not what was intended. We have good new user growth and across all of our care types, that is also true.

Stephen Kramer

Yes, I think just to clarify, Josh, it really was about changing from our expectations in terms of the mix between new users and returning users, as opposed to feeling like there was a decrement anyway. It really was a change in how we expected the year to unfold. In the end, I am incredibly proud of what we were able to accomplish, and what we will accomplish for the full year. Again, continuing to focus on that long-term algorithm, that we stated earlier in the year.

Operator

[Operator Instructions] We will go next to Toni Kaplan with Morgan Stanley.

Toni Kaplan

I also wanted to ask about the U.K. issue. It has obviously been asked a few times already. Just talk about, is there anything that you are changing in terms of your policies to maybe strengthen oversight across maybe the whole business? I know reputation is such an important factor in childcare, and I know you take it very seriously. I was wondering if there is anything that you can do broadly across the centers to just strengthen oversight and things like that so that it does not continue to other geographies, et cetera.

Stephen Kramer

I appreciate the question and certainly appreciate the nod that you provided to the quality that we are really well-known for. What I would say is that in circumstances like this, one of the things that we are very focused on is first learning and then taking swift and appropriate action. In light of the incidents that we have had, we did learn, and we did really think about the actions that we wanted to take on top of what has been a 40-year history of strong safeguarding measures. I will give you a couple of examples, Toni, of things that we are and continue to implement against, as it relates to things that are additional. As an example, we are going to be. We have already started to roll out, the implementation of cameras in Bright Horizons centers here in the U.S. and in the U.K.

That is ongoing. We believe will be an added safeguarding measure to the oversight that obviously is most important, which is leadership in classrooms and making sure that there is appropriate checks and balances between teachers in classrooms. In addition to that, we are partnering with a leading firm that has great expertise in safeguarding. Really taking an outside-in perspective and really looking to make sure that if there is anything that we can learn through that level of expertise, that we do so. The third piece is that we are taking our technology really seriously. In addition to cameras, technology in the classrooms, and making sure that we are doing everything to safeguard the use of that technology within the classrooms.

What I would say overall is, yes, we are proud of our safeguarding over 40 years, and yes, we are adding additional safeguards into it. That is something that we are taking very seriously.

Toni Kaplan

Yes. On technology, I was wondering if AI and LLM search is changing how parents are finding your centers and if you're making any changes to your marketing strategy at all as a result of any trends that you're seeing there. For example, I know if someone types in "find a center near me" or something like that, sometimes it doesn't necessarily take into account the quality or brand name and things like that. Maybe it just finds something more local and wondering how you're dealing with, or maybe don't even have to deal with, but how AI and LLM search is changing in the industry. Thanks.

Stephen Kramer

Absolutely. We are absolutely taking steps to make our organization and our centers more discoverable through LLMs, and recognize that people are starting their research, in many cases, in that way. Absolutely gearing more to that. We're doing that, and responding to that by doing more videos and other things that are very responsive to LLMs and allowing for the LLMs to pick up and discover better. I would say in addition to that, we also recognize that we're going into a stage where people are utilizing agents to actually start to do research and ultimately, to look for things like tours of centers. We've been focusing a lot on availability of tours, knowing that when it's no longer a human and rather an agent that is seeking, availability actually becomes a really important criteria.

That's to give you a little bit of color to the fact that our marketing organization is being really responsive to these changing habits of the consumers that we're looking to attract and ultimately, focusing on that discoverability and differentiation of what we have on offer.

Operator

Jeff Silber with BMO Capital Markets has our next question.

Ryan Griffin

This is Ryan on for Jeff. I was just wondering how you're thinking about the tuition pricing for full service next year.

Elizabeth Boland

It's early for guiding for next year, so we are certainly in the process of completing our annual budget process and, as I mentioned before, being very mindful of staying competitive. We make these decisions center by center, frankly, locally, but also on average, would estimate that we'd be at the lower end of our historical range of 3% to 4% on average. Looking at that, staying competitive and ensuring that we are in the best position for enrollment capture. That's what we're thinking at this point.

Ryan Griffin

I appreciate it. Elizabeth, given the Back-Up Care margins that are embedded in guidance, was wondering if you are able to provide the Full Service and the ed advisory margins as well for 2026? Is there any way we should be thinking about the margin ramp for Full Service next year as we kind of anniversary some of the outsized closures this year, and maybe the Australia impact is a little bit more de minimis.

Elizabeth Boland

Yes. For 2026, in Full Service, we would be expecting for the full year to be broadly flat with 2025, up roughly 70 basis points or so ex Australia. Overall, that is the picture for the year. That translates to more of a down 75 bps in Q4 and flat excluding Australia just in the quarter itself, given the enrollment decrement there. That is the Full Service business. For ed advising, we would expect Q4 to be similar to last year. Broadly speaking, that is the guide for margin there. In 2027, it is early given the view that we are coming out of this year on a headwind with enrollment. It is something that we will need to look to guide, I think, later in the next quarter in terms of actual margin performance next year.

We have been pleased even with the enrollment decrement we saw this quarter. Again, looking at it ex Australia, even with the 50 basis point downdraft, we were able to leverage margins about 40 basis points. There is good awareness there on how we do manage for the enrollment we have, and we will continue to gain some benefit from the closures of underperformers, and that is some of the piece parts that are going into this that will inform next year when we give more extensive guidance in February.

Operator

Moving on to Stephanie Moore with Jefferies. Stephanie, your line is open.

Stephanie Benjamin Moore

I wanted to just touch a little bit about what you're seeing maybe as we get into, or as we're in the back-to-school season. I do think there's been maybe some, unfortunately, more negative publicity or headlines in the last 9, 12 months than we've seen in the past, and maybe it's just we seem to be more prone to seeing a lot of these headlines, whether the cadence is actually maybe not higher or not, but unfortunately, it's kind of the world we're in, unfortunately, in some respects. But I just was curious if you're seeing some of the negative publicity having an impact on enrollment trends or if there's any difference in what you're seeing from enrollment trends or existing family retention.

At the same time, if there's anything you're doing behind the scenes to help from a marketing standpoint as well. Thank you.

Stephen Kramer

Sure. I assume you're talking about headlines related to employers' actions around reducing workforce. Is that correct?

Stephanie Benjamin Moore

I would say those headlines. I do think there just seems to be more and more headlines just in childcare in general, accidents, unfortunately, with the teachers, and it just tends to be maybe a bit more from a negative publicity standpoint. Yes, both sides of that. Exactly.

Stephen Kramer

Yes. Sure. I think from a workforce perspective, again, I think that as we think about the centers here in the U.S. that are in partnership with employers, we still continue to see good enrollment in those centers. And so feel good about how those centers are sized and how important we are as a resource and as a support for working families within those employers. Certainly the layoffs, when they become more acute than I think they are now, that can be challenging. On the other hand, it does not seem that it is sort of a direct cause and effect. What I would point to is the strength of the retention of our families, right? And so ultimately, that for us is a really good bellwether as it relates to the impact that may be out there.

But the reality is we're seeing really strong retention of our families. Look, in terms of the childcare market more broadly, I think that what we're talking about is a really important support for working families. I think the reality is that people recognize, despite the headlines that may exist, that this still represents a very safe and secure form of care. And when you compare it, for example, against one individual being in your home with your child, obviously, group care really does stand out as a very safe and appropriate set of care arrangements, along with the fact that parents are often looking for socialization, curriculum, and some of the things that we really stand out on.

Again, I think that from our perspective, we're really focused around making sure that we continue to deliver and deliver high quality and continue to take additional measures on safeguarding to give families the confidence that we are the right provider, and more generally, childcare centers are the right form of care.

Stephanie Benjamin Moore

I appreciate it. And maybe I missed this earlier, but did you call out the potential for further center rationalization across the broader portfolio, I guess particularly in the U.K. and U.S.? And my apologies if I missed it.

Elizabeth Boland

We didn't speak to some broader portfolio rationalization. It continues to be top of mind for us to right-size our portfolio, and we have reduced the number of centers that are in the most challenged enrollment cohort, that sub 40% enrolled cohort. We have been closing centers. We have an elevated level of closures this year. Have closed 42 through September and still have another, call it somewhere around 20 probably to close through the rest of this year. We will continue to make progress on that group of underperformers. It is part and parcel of our overall ensuring that we're in the right footprint to serve both working families where they live and work, but also employers' needs as well. That work is ongoing.

I think that the storyline in Australia is sort of a separate question, but in the rest of our portfolio, we'll continue to look to have the portfolio right-sized.

Stephen Kramer

Great. Well, thank you all very much. Appreciate your time and support this evening, and wishing you all a great Halloween.

Elizabeth Boland

Thank you.

Operator

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.