Bright Horizons reported fourth quarter results that exceeded Wall Street’s revenue and non-GAAP profit expectations, but the market reacted negatively, reflecting concerns beyond the headline numbers. Management attributed performance to robust growth in its back-up care segment, with CEO Stephen Kramer highlighting a 17% revenue increase driven by both predictable and unexpected care needs. The company also made progress in its U.K. business, achieving positive operating profit after significant losses in recent years, and continued to rationalize its center portfolio to address underperforming locations.

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

While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions From Bright Horizons’s Q4 Earnings Call

• Jeffrey Meuler (Baird) asked for detail on the margin impact from center closures. CFO Elizabeth Boland said most closures involve loss-making sites, and while closures should modestly improve margins, some costs will persist due to lease tails and transition expenses.
• Manav Patnaik (Barclays) requested assumptions behind full-service pricing and enrollment growth. Boland explained pricing is localized but averages 4%, with enrollment expected to grow about 1%. She also clarified margin expectations for each business line.
• Toni Kaplan (Morgan Stanley) inquired about the rationale for center closures and whether lease expirations or persistent underperformance were the primary factors. Boland said both factors contribute, with closures focusing on sites facing lease end or sustained low enrollment.
• Andrew Steinerman (JPMorgan) sought insight into whether corporate clients were reducing back-up care benefits. CEO Stephen Kramer responded that most growth comes from increased penetration within existing clients and that benefits remain a modest line item for employers.
• Keen Fai Tong (Goldman Sachs) asked about expected occupancy trends by quarter. Boland noted seasonality, with occupancy peaking in Q2, returning to the mid-60% range by year-end, and gradual improvement expected over time.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will be watching (1) the pace and effectiveness of center closures and their impact on profitability, (2) continued growth in back-up care user adoption and frequency within employer clients, and (3) progress toward improving enrollment in underperforming centers. Execution on pricing strategies and the ability to manage labor and benefit costs will also be critical for margin improvement.

Bright Horizons currently trades at $70.87, down from $81.83 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).

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