Greetings and welcome to the Bright Horizons Family Solutions third quarter 2026 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. 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.

Thanks, Carrie. 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 statement speaks only as to 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 backup 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 backup care and then walk through full service, including how the fall enrollment season played out. In backup 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 Employees using their benefit along with an uptick in use per user, with the strongest demand in the care type serving families with school-age 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 period of demand. At the same time, our marketing and technology teams continue to advance the personalization initiatives that build awareness and drive use, along with the booking experience that allows families to secure care 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 opened 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 UK. In late June, the UK child care regulator published a group-wide notice requiring us to strengthen safeguarding governance and oversight across our UK 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 well-being 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 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 multi-year 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. We've continued growth in College Coach, offset by lower participant use and assist. 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 left 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 backup care and our employer-sponsored model, as well as opportunities for improvement. We are taking actions to strengthen safeguarding practices, rebuild enrollment and full service, and address challenges in Australia while continuing to invest and benefit from the long-term growth and opportunity in backup care. Notwithstanding, are 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'll turn the call over to Elizabeth, who will walk through the quarter in more detail and share more on our outlook.

Thank you, Stephen, and hello to everyone who has joined our call tonight. I'll 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 backup 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. And 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 backup 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 continue 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 advising, 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 effect of 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 end in Q3 with $119 million of cash and trailing net leverage of 2.4 times 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 reporting 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 backup care, we expect growth of approximately 13% for the full year. and Annette Advisory, we expect revenue to be approximately flat with 2025. We were 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 to $740 million, and adjusted EPS in the range of $1.14 to $1.19 per share. So with that, Carrie, we are ready to go to Q&A.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. And our first question will come from Manav Patniok with Barclays.

Hi, good afternoon. This is Ronan for Manav. Can you cover, with the UK 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?

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

U.S. enrollment.

In the third quarter? In the third quarter, yep. So overall, as mentioned on the call, the enrollment in the third quarter, excluding Australia, was down about 50 basis points. And so the enrollment is that that decrement is mostly coming from the U.S. So there's a bit of a decrement in the U.S., a bit higher than outside the U.S. And then any specific drivers to call out on that, please?

I didn't hear what he said. Drivers of U.S. Decrement.

Yeah, so the drivers of the decrement are mainly in new starters and we have experienced pretty good retention on the family side, but we are 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. So it's primarily on a pace of new starters that we are seeing a little bit of a shortfall to what we had expected.

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, you know, the reality is those are still very well-occupied centers. On the other hand, that's the place also where, you know, the speed at which the children get backfilled does have an impact on the ultimate net enrollment growth.

Got it. Thank you.

And if I may, a follow-up on the backup care fourth quarter use bank constraint. I think you had said many employees are ahead in their annual use banks and that they should dampen the backup 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 and underlying engagement or demand?

It is primarily a timing issue given that many of the users of our backup 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 that the difference versus Q4 is not indicative of anything given the growth in new users that we've seen throughout.

Thank you very much. Appreciate it.

And our next question will come from George Tong with Goldman Sachs.

Hi, this is Alex Lacker. It's on for George Tong. You mentioned that the regulatory notice had a larger than anticipated impact on new family starts in the UK. So once the notice is listed, how should we think about the pace of enrollment recovery and whether there's going to be any lag between inquiries and actual starts?

Yeah, so look, I think that's really tough for us to know for sure. An action that the UK regulator took that is without precedent. So therefore, it's 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 UK 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 we'll continue as safeguarding is always our number one priority. And so 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.

Got it. And then in backup 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're seeing amongst your longest tenured clients?

Sure. So we have had a large number of clients for a large number of years, and so we have many that would fall into the category that you just described. and certainly what you have seen over the last call it four years is very strong growth even among our quote unquote mature clients in terms of their duration as being clients. And so 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. And so we see that as a real positive in terms of both our track record and our forward outlook.

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 two or three as it's getting more awareness within the company. And then the opportunity is greater. That's one factor on how we achieve better penetration, but 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. And so 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 that might be, 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 is something of a, 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.

Thanks. I appreciate it.

And our next question will come from Andrew Steinerman with J.P. Morgan.

Yeah. Gold 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? Like, 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? And I'm just talking about really kind of the U.S. here in terms of center closings.

Yeah, so we do have an elevated level of closures this year, Andrew, and are still, you know, with 9% or so of our centers in that group that's sub 40% occupied, there's 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. So we still would expect to be, you know, in a net center closing position in the U.S. in 27, given the and the centers that are still in that group that we have on the radar to likely be exiting given the enrollment trends we're seeing now.

Okay. Thank you.

Moving next to Jeff Mueller with Baird.

Yeah. Thank you. I have a follow-up on the dampening effect of use bank utilization that you were talking to. And I understand the concept. I don't understand the maybe surprise factor because I would think you had a pretty good sense going into Q3 of where those the utilization stood and Q3 at least revenue was in your guidance range and I think you're steering the full year to the low end of the prior guidance range so if you could help me like what's the surprise factor or why is there more of an impact on Q4?

Yeah, so thanks, Jeff.

What we say is when we think about, and again, surprise factor, you know, would suggest that this was a sort of larger decrement than I think it deserves. But what I would say is that, you know, we modulate, right, between repeat users and new users. and 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. And I would say that, again, as we enter Q4, our expectation is that we're probably gonna be slightly lighter on new users because normally those new users could have sequenced in in Q3. and Boyd, some of the growth. And instead we saw repeat users using more of their bank. And so therefore that'll have the impact on Q4. Okay, thank you. That's helpful.

And 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 I think it is fair to observe that not only in the sector but just in general with

Thank you. Thank you. funnel experience, if you will. So interested families, those who are hand raisers, ensuring that they have the most speedy and effective experience learning about the centers that are available, 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 Bearhug, 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. So we've been very focused on being sure that we are sensitive to that. And then, you know, the big factor that distinguishes Bright Horizons in the market is that we have so many client partners with whom we work, both in our backup business, but across our full-service portfolio. You know, two-thirds of the centers in the U.S. are client-based centers, 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.

Thank you.

We'll go next to Josh Chan with UBS.

Good afternoon, Stephen and Elizabeth. Just back on the U.S. enrollment, so 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?

Yeah, look, Josh, I think that is a fair assertion, right?

I think it is fair to say that, you know, 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. And 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.

That makes a lot of sense. Thank you, Stephen. And then on the backup care with the less new users, certainly it's very encouraging to see the existing users use the service, but I guess for the reduced new users, is that a concern in terms of growth into the future years? How are you interpreting that reduced level of new users.

Yeah, so I don't know that we're not trying to apply. There's fewer new users, Josh. We have a solid level of new users joining the backup care offer. My point was just that the new users come in over time. And so I'm just trying to track through. We said that that's not what was intended. We have good Good new user growth and across all of our care types. That is also true.

Yeah, and 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, you know, feeling like there was a decrement anyway. So it really was a change in how we expected the year to unfold. In the end, really proud of what we were able to accomplish and what we will accomplish for the full year. And again, continuing to focus on that long-term algorithm that we stated earlier in the year.

Okay, great. Thank you for the color and the time.

Thank you.

Thank you. And as a final reminder, that is star one if you would like to ask a question. We'll go next to Toni Kaplan with Morgan Stanley.

Toni Kaplan Thanks so much. I also wanted to ask about the UK issue. It's obviously been asked a few times already. Maybe just talk about is there anything that you're changing in terms of your policies to maybe strengthen oversight across maybe the whole business? I know reputation is such an important factor. in child care. And I know you take it very, very seriously. And so, you know, I just I was wondering if there is anything that you can do, you know, sort of broadly across the centers to just strengthen oversight and things like that so that it doesn't, you know, continue to other other geographies, et cetera.

So 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're very focused on is first learning and then taking swift and appropriate action. And so in light of the incidents that we've 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. and so I'll give you a couple of examples, Tony, of things that we are and continue to implement against as it relates to things that are additional. So as an example, we're going to be, well, we've already started to roll out the implementation of cameras in Bright Horizons centers here in the US and in the UK and so that is ongoing and 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. And so 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. and then the third piece is that we're 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. So 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 and that is something that we are taking very seriously.

Thank you. And then 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 like 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.

Absolutely. So we are absolutely taking steps to make our and our centers more discoverable through LLMs and recognize that people are starting their research in many cases in that way. So 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 a stage where people are utilizing agents to actually start to do research and ultimately to look for things like tours of centers. And so 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. So 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.

Thanks so much. Thanks, John. And Jeff Silber with BMO Capital Markets has our next question.

Hey, thank you so much.

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

Yeah, it's early for guiding for next year. So, you know, 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, you know, 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. And so that's what we're thinking at this point.

I appreciate it. And then Elizabeth, you had given the backup margins that are embedded in guidance. Just was wondering if you're able to provide the full service and the ed advisory margins as well for 2026 and then Anyway, we should be thinking about the margin ramp for full service next year as we kind of anniversary some of the outside closures this year. And then maybe the Australia impact is a little bit more de minimis. Thank you.

Yeah. Yeah. So 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. So overall, that's 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. So that's the full service business. For ed advising, we would expect Q4 to be similar to last year. So broadly speaking, that's the guide for margin there. In 2027, again, it's 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 at the next quarter in terms of actual margin performance next year, but we have been Please, 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. So there is good awareness there on how we do manage for the enrollment we have. And then we will continue to gain some benefit from the closures of underperformers. And that's what some of the piece parts that are going into this that will inform next year when we give more extensive guidance in February.

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

My apologies.

Hi, guys. Thank you for the time. 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. You know, I do think there's been maybe some, unfortunately, more negative publicity or headlines in the last, you know, nine, 12 months that 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.

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

I would say those headlines, I also think, you know, I do think there just seems to be more and more headlines in child care in general, you know, accidents, unfortunately, with, you know, the teachers, and it just tends to be, you know, maybe a bit more from a negative publicity standpoint. So, yes, both sides of that, exactly.

Sure. So, I think, you know, from a workforce perspective, again, I think that, you know, as we think about it, 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. And 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. And so 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 and some of the things that we really stand out on. So 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, child care centers are the right form of care.

Thank you. 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 UK and US? And my apologies if I missed it. Thank you.

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 reduce the number of centers that are in the most challenged enrollment cohort, that sub-40% enrolled cohort. So 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 have so that we will continue to make progress on that group of underperformers. But 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 employer's needs as well. So that work is ongoing. And I think that the storyline in Australia is sort of a separate question, but in the rest of our portfolio, we'll continue to to look to have the portfolio right sized.

Well, thank you all very much.

Appreciate your time and support this evening and wishing you all a great Halloween.

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