Bright Horizons Family Solutions Inc.BFAMNYSE
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Operator: Greetings, and welcome to the Bright Horizons Family Solutions Fourth Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Michael Flanagan, Vice President of Investor Relations. Please go ahead.
Michael Flanagan: Thanks, Paul, and welcome to Bright Horizons Fourth 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, 2024, Form 10-K and other SEC filings. Any forward-looking statement speaks only as of the date on which is made, and we undertake no obligation to update any forward-looking statements. Today, we will also refer to non-GAAP financial measures, which are detailed and reconciled to the GAAP counterparts in our earnings release. which is available under the Investor Relations section of our website at investors.brighthorizons.com. Joining me on today's call are 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, I let turn the call over to Stephen.
Stephen Kramer: Thanks, Mike, and good evening to everyone on the call. I am pleased to report a strong finish to 2025, closing out a year of solid growth and continued progress across the business. In the fourth quarter, revenue increased 9% to $734 million and adjusted EPS increased 17% to $1.15 both ahead of our expectations. For the full year, we delivered revenue of $2.93 billion, up 9% over the prior year and adjusted EPS of $4.55 representing 31% growth year-over-year. These results exceeded the expectations shared at the beginning of the year and highlight the continued evolution of Bright Horizons into a diversified, integrated solutions provider of employer-sponsored education and care. The improvements in our business mix throughout 2025, combined with our growing impact on families and employers, reinforce our confidence in the durability of our model and long-term opportunity for growth. Let me now walk through the segments. First, back-up care again delivered strong growth and earnings contribution in Q4 as it is done over the course of 2025. In Q4, revenue increased 17% to $183 million. Driven by solid utilization across center-based, in-home and school age programs. Utilization during the quarter reflected a combination of unplanned CAGR when regular arrangements were disrupted along with more predictable care needs such as scheduled school breaks and holiday coverage. For the full year, back-up care revenue grew 19% to $728 million and sustained strong operating margins. Our service reach spans more than 1,100 employer clients and millions of eligible employees globally. Importantly, our existing clients had double-digit growth in backup users even as their eligible populations remain relatively flat, meaning growth was driven by deeper penetration into the eligible population, underscoring the value of the benefit to an increasing number of working families. Looking forward, our focus remains on scaling the backup business by expanding unique users within existing clients, increasing frequency of use among those utilizing care and continuing to retain and add new employer clients. This growth relies upon an unmatched delivery model that combines owned capacity across our full service centers and backup operations alongside a broad third-party provider network. We still well less than 10% penetration within existing clients we have a significant opportunity to further expand active user adoption and utilization through targeted marketing, expanded capacity across use types and our One Bright Horizons initiatives to increase awareness across our services. We remain confident that back-up care will continue to be a durable source of growth in earnings while also strengthening broader employer partnerships across Bright Horizon services. Turning to full service. Revenue increased 6% in the fourth quarter to $515 million, with growth driven by a combination of tuition increases and enrollment growth tempered by our continued portfolio rationalization. We added 6 new centers this quarter, including 4 client centers, 3 of which were transitioned of management for Stormont Vail Health and Cone Health. These additions extend our leadership in employer-sponsored child care and reaffirm the critical role on-site care plays in supporting working families and their employers. Enrollment in centers opened for more than 1 year increased approximately 1% in the fourth quarter, and occupancy averaged in the mid-60% range, broadly consistent with seasonal patterns we typically see in the back half of the year. Underlying enrollment dynamics remained similar to what we saw throughout 2025, with solid demand in many geographies, countered by more muted enrollment growth levels in some of our more challenged areas. We are pleased to see continued progress, particularly in our lower occupancy cohort, were centers operating below 40% occupancy declined from 16% to 12% of the portfolio in the fourth quarter year-on-year. Specifically in the U.K., our full-service business continued to make progress and delivered positive operating profit for the year, a significant milestone post pandemic and a meaningful turnaround from the $30 million of annual losses we absorbed just 2 years ago. This progress reflects higher occupancy, more consistent staffing and improved affordability for families aided by expanded government supports. Looking ahead, our focus remains on serving families where they work and live, continuing to invest in the quality of our services and strengthening the long-term economics of our portfolio. We will continue to operate in locations that are important to our client partners, are strategic in delivering back-up care and in areas with strong supply-demand dynamics. At the same time, we'll continue to rationalize locations where these characteristics are not present. Turning to ed advisory. Revenue increased 10% to $36 million in the quarter. and for the full year grew 9% to $125 million, both ahead of our initial expectations. College Coach led the growth in margin performance as more families engage with our college counseling services, while EdAssist also continued to expand its participant base. During the quarter, we added new employer clients to the portfolio, including launches with [indiscernible] Estee Lauders and Becton Dickinson, among others. Before I turn it over to Elizabeth, I want to take a moment to recognize an important milestone. 2026 marks the 40th anniversary of Bright Horizons. When our founders launched the company in 1986 they, believed employers could play a meaningful role in supporting working families. And then doing so, we benefit children, parents and employers alike. Over 4 decades, Bright Horizons has developed thoughtfully alongside changes in the workforce, employer priorities and the needs of working families. Central to that evolution has been the development of our back-up care business. and the expansion of our services to support families and employees across life and career stages, broadening our impact to a much wider population. That progression reflects our ability to listen to clients adapt to changing needs and invest in ways to maximize impact, all while remaining grounded in our mission to support children, families and employers. We are proud of what this organization has built over 4 decades. Deeply grateful to our employees whose dedication make it possible and appreciative of our client partners and customers who place their trust in us. In closing, 2025 was a year of solid financial performance and meaningful progress across many dimensions of our business. We grew revenue 9%, expanded adjusted operating margins 200 basis points and delivered 30% earnings growth. We strengthened our balance sheet, repurchased $225 million of shares and position the company for long-term success. As we look ahead to 2026 we are optimistic about the opportunities in front of us and look to build on the momentum we saw in 2025. Elizabeth will walk through the guidance in more detail, but at a high level, we expect revenue to be in the range of $3.075 billion to $3.125 billion and adjusted EPS to be in the range of $4.90 to $5.10 per share. With that, I will turn the call over to Elizabeth.
Elizabeth Boland: Thanks, Stephen, and hello to everyone who's joined the call tonight. I'll start with our financial highlights. Revenue in the fourth quarter was $734 million, representing 9% growth year-over-year and modestly ahead of our expectations. The quarter reflected solid execution across the business with continued strength in back-up care and steady performance in full service and ed advisory. Adjusted operating income rose 14% to $91 million, with operating margins up roughly 60 basis points over the prior year to 12.3%. Adjusted EBITDA increased 12% to $123 million representing an adjusted EBITDA margin of 17%. And lastly, adjusted EPS of $1.15 per share, ahead of our expectations, grew 17% over the prior year. . Breaking this down into the segment results. back-up care revenue grew 17% in the fourth quarter to $183 million, driven by solid demand over the fall and holiday season. As Stephen mentioned, utilization continues to be driven by both predictable and planned needs as well as unexpected care disruptions. Operating margins remained strong in the quarter at 32% and in line with our expectations for the higher volume of care that we deliver in the second half of the year, while also reflecting our disciplined expense management and a favorable mix of utilization. Full service revenue of $515 million was up 6% in Q4, mainly on pricing increases, modest enrollment gains and an approximate 175 basis point tailwind from foreign exchange. Centers we have closed as part of our portfolio rationalization since Q4 of '24 partially offset these gains representing an approximate 200 basis point headwind. Enrollment in our centers opened for more than 1 year increased approximately 1% and occupancy levels across our portfolio averaged in the mid-60s for Q4. In the specific center cohorts we have discussed on prior calls, we continued to show improvement over the prior year period. Our top-performing cohort centers above 70% occupied, improved from 39% of those centers in Q4 of '24 to 40% of centers in Q4 of '25. And as Stephen commented, our bottom cohort of centers those sub-40% occupied, improved from 16% in the prior year period to 12% of the total population this past quarter. Adjusted operating income of $20 million in the full service segment increased roughly 45 basis points to 4%, up $3 million over the prior year higher enrollment and improved operating leverage, particularly in our U.S. and U.K. operations helped drive the growth in earnings, while higher benefits costs partially offset some of these advances. Lastly, our revenue in the educational advisory segment increased 10% over the prior year to $36 million with operating margins of 30%, consistent with Q4 '24. Net interest expense ticked up to $12 million in Q4 of '25, also consistent with the prior year quarter and totaled $45 million for the full year. Our non-GAAP effective tax rate was 26.4% in the quarter -- in the fourth quarter, bringing the effective rate for the full year to 27%. Turning to the balance sheet and cash flow. For the full year 2025, we generated $351 million in cash from operations compared to $337 million in 2024. Capital investments totaled $91 million in the current year 2025 as compared to $95 million in the prior year. And with the continued cash build specifically free cash flow generated in Q4, we repurchased $225 million of stock in 2025, including roughly $120 million in the fourth quarter. We ended the year with $140 million of cash and a leverage ratio of roughly 1.7x net debt to adjusted EBITDA. Moving on to our 2026 outlook. In terms of the top line, we currently expect 2026 revenue to be in the range of $3.075 billion to $3.125 billion or growth of 5% to 6.5%. Looking at this at a segment level, in full service, we expect reported revenue to grow in the range of 3.5% to 4.5% on enrollment gains and tuition increases offset by approximately 200 basis points in headwind from net center closings. In back-up care, we expect reported revenue to increase 11% to 13% and driven by the continued expansion of use. And in ed advisory, we expect to grow in the mid-single digits. In terms of earnings, we expect 2026 adjusted EBITDA, EPS, excuse me, to be in the range of $4.90 to $5.10 a share. As we look specifically in Q1 '26, our outlook is for total top line growth in the range of 6% to 7.5%. The segment breakdown would be full service reported revenue growth of 5.5% to 6.5% back-up of 11% to 13% and ed advisory in the low to mid-single digits. In terms of earnings, we expect Q1 adjusted EPS to be in the range of $0.75 to $0.80 a share. So with that, Paul, we are ready to go to Q&A.
Operator: [Operator Instructions] Our first question is from Jeff Meuler with Baird.
Jeffrey Meuler: Can you help us with how you're thinking about the full-service margin outlook, including as you close these centers that are a 200 basis point revenue headwind on average, are they at a loss? Or just how should we factor in the different drivers of full-service margin outlook? .
Elizabeth Boland: Yes. Thanks, Jeff. So as we look at 2026, we had, obviously, good performance this year and are building off of where we ended 2025 into '26. We mentioned a couple of things on the prepared remarks, including about 100 basis points of enrollment gain in the year. That will contribute some continued performance in our U.K. business, which had a certainly a strong year in 2025, and that velocity will be -- continues to grow, but it will be expanding at a little bit lower pace than it was able to this year. So we're looking overall at about 25 to 50 basis points of margin improvement in the full service business in '26. That captures some effect of these closures as you're highlighting, most of them are in a loss-making position, yes, because that's the reason for underperformance leading to a closure decision. There is some tail to those costs even as the center ceases operations if we're running dark and/or we're not able to fully exit the lease are paying off multiple years of lease expense in advance. So we are having some ongoing effect of that, but it does add modestly to the operating leverage as we are exiting these underperforming centers. But overall, full service 25 to 50 bps.
Jeffrey Meuler: Got it. And then just given the headlines and new stories, can you just comment on health and safety protocols, any changes that you're making or considering? And then just how you think about any sort of like local market or licensing risks or a private public partnership for UPK opportunities that could be impacted from those issues. .
Stephen Kramer: Sure. Thank you for the question, Jeff. As you'll know, and those who interact with know, our #1 priority continues to always be delivering high-quality care and education for families and ultimately for the clients that we serve. When we have any incident at a center. We take it incredibly seriously. What I would say is that enrolled families at other centers tend to focus on the experience that they are having at their individual center. And the relationships that we enjoy with our clients. We focus on transparency and also strong communication so that we can express to them exactly what has occurred. And then ultimately, the actions that we are taking to make ourselves even stronger going forward. So overall, to be very direct with you, we continue to see strong retention of families in our centers. We continue to see stability in our client base. And so overall, while we take these incidentally seriously, from a business impact perspective, I would say, at this point, our view is that, that is not the case. You referenced the relationships that we may have with UPK, so for example, in New York City, in particular. And what I would say is that we enjoy contracts in the majority of our centers for UPK . We have received feedback from the regulator. Having visited almost all of our UPK centers in recent months that we continue to perform at a high level. There is never a guarantee that contracts will ultimately be renewed over time. On the other hand, we feel confident in our position at this point within the New York City market and our ability to continue to deliver for the large number of families that we do.
Operator: Our next question is from Manav Patnaik with Barclays.
Manav Patnaik: Elizabeth, maybe just firstly on the guide, if you could help us with the assumption on pricing and enrollment growth in the full center business? And then also just if you want to just knock out the margins for the other two businesses in 1Q and the full year. .
Elizabeth Boland: Sure. So overall, we're looking at price increases, which would vary as I'm sure most on the call know we make individual localized decisions on this. But on average, the price increases for '26 are approximately 4% and we are looking at overall enrollment for the year plus 100 basis points give or take. So the two of those are the two primary components there. The price increase reflects what we see in the wage offsetting around 3% or so range against that 4% for wages. As it relates to the overall margin in the other businesses. So back up, we would be looking at our long-term average. Just to reiterate that, we would expect to be 25% to 30% operating margin over time. We certainly have been performing well against that, and we would look in '26, we would look to be seeing that in the upper half of that range. So call it, 27%, 28% to 30% for the year. So that's what we're seen in back-up care. And then in ed advisory business similar to this year overall in the low 20s .
Manav Patnaik: Got it. And maybe just back to New York City, I guess, with the new mayor and the free child care proposal. I wanted to just get your take, if you've spoken to the administration, you're involved in there. Just some color on what your New York City exposure is? I know in the past with pre-K and those kinds of things, you benefit from wraparound care, but I'm not sure what these proposals look like.
Stephen Kramer: Sure. So as I shared, we -- as the majority of the centers that we have in New York City proper, we participate in UPK and that is a good relationship with the city in terms of a good demonstration of the power of private public partnerships. It's an environment where the city funds at a level that supports quality and likewise, is an environment that is open to working with private providers like us. So New York City has been, in our opinion, a really good example of where UPK can work well both for the city, but also for Bright Horizons and the families that we serve. The expectation going forward is there have been conversations about moving to younger age groups, so the twos, so 2k and there is an indication that it would likely look similar to the UPK program that's in place only for younger age groups. The expectation also is that they are going to be starting with a pilot that is focused on the neediest areas of the city and then potentially expand in the way they did previously to a much broader aspects of the city. In terms of the relationship, yes, I mean, I think we as one of the largest providers in New York City or UPK, we certainly have a good and ongoing relationship with the folks that manage those programs and continue to feel like we have a good sense of how this may unfold over time.
Operator: Our next question is from Andrew Steinerman with JPMorgan.
Andrew Steinerman: So Bright Horizons continues to have strong backup cap growth as employees at the corporate clients engage and use their additional use cases of their backup benefits. I was wondering how do the corporate clients feel about that kind of the increased spend that comes as employees realize and use their backup benefits more and do you see any tightening of backup benefits in terms of like use cases that are allowed by corporate clients? .
Stephen Kramer: Sure. I'm happy to answer that, Andrew. So first, it's fair to say that we're very pleased with the 19% growth that we experienced this year. And that is in addition to the last several years of very strong growth. And as you all know, the majority of the revenue that we derived is directly from the employer support of these programs because there's really a limited co-pay that goes along with it at the employee level. But I think that we have done a really good job of articulating to employers the value in terms of productivity. That backup provides to their employees and then ultimately accrues to them as employers. And so I think that strong ROI has really held us in good stead as it relates to the continued investments that they're making. I would also observe that within the benefits portfolio that HR manages, backup is still a pretty modest line item, especially as it compares to some of the more traditional and larger benefits that they manage. And so while the increases are significant for us and obviously for the progress that we have continued to make from any one employer's perspective, it's still a pretty modest line item despite the fact that on a percentage basis for them, it is growing more significantly. But again, I think our teams have done a really good job of ensuring that we are focused on -- and secondly, the feedback from employees around the backup benefit continues to be incredibly strong.
Operator: Our next question is from George Tong with Goldman Sachs.
Keen Fai Tong: You mentioned occupancy averaged mid-60s in 4Q. Based on your guide for this year, can you describe how you expect occupancy to unfold over the course of 2026 by quarter roughly? .
Elizabeth Boland: Yes. So the seasonal pattern would be pretty consistent where we see a lift in enrollment in the first half of the year, particularly in Q2 is where it would be peaking in the -- it was in the high 60s in 2025, so being picked up -- it would tick up a bit above that. And then in the second half, it would be back down into the mid-60s for the second half of the year, Q3 and ending the year similar to Q4 as Q3. So it's a lift in Q1 and Q2 and then similar to the pattern you saw this year.
Keen Fai Tong: Got it. So by 4Q this year, would you expect it to be better than mid-60s from 4Q last year? Or do you think you've reached the steady state and mid-60s as a reasonable year-end? .
Elizabeth Boland: Yes. It would be still in the mid-60s exiting '26 because with a growth rate of just 100 basis points in a year. We're we're making headway against that gradually, but it wouldn't be getting beyond the mid-60s by the end of the year. Still growth to come though. We are heartened by the continued interest, and we have the overall number of enrollment in the 100 basis point range is masks the improvement in the middle and lower cohorts, which are growing low to mid-single digits because they're more under enrolled than the top cohort, which is very well enrolled. And in fact, can't really take any more enrollment and may see some cycling. So overall, we're pleased with the ongoing momentum, it's modest, and it's year-by-year, quarter-by-quarter, but we are seeing growth and think that, that will continue to allow us to move beyond the mid-60s over time. That won't happen, we wouldn't expect in '26, but certainly have the opportunity down the road.
Operator: Our next question is from Toni Kaplan with Morgan Stanley.
Toni Kaplan: I was hoping you could start maybe giving additional color on the closures. Just wondering if there are any sort of commonalities on why the centers got up to a higher level of utilization and I'm sure there were a number of things that you tried. And so just wanted to understand the reason for that. But were there a number of leases that came up this year? Just trying to understand also like how to think about closures for maybe '27 as well.
Elizabeth Boland: Yes. Yes. So I think the common theme is probably the centers that have been circled up for closure. And in fact, we have closed already in '26 close to half of what we would expect to close for the year. we'd expect to be in the range of 45 to 50 or so closures this year overall, and we've closed more than 20 already in this quarter. And that the circling up of those has been a combination of the things that you mentioned, Toni, which is some were within a year or 2 or 3 of the end of their lease. And so the underperformance, the lagging enrollment and the overall economics of operating compared to covering the fixed cost was not sensible. And so we were able to in many cases, move the families and the staff to other nearby centers and to accommodate the needs of everyone in that way. And so that's obviously the best case scenario where we can rationalize portfolio and retain the enrollment and the staff as well. Also, there certainly were some cases where the underperformance is so significant and there is no particular lease action, the lease is not coming up for still several more years, but we have elected to stop operations and do this either combine or just stop operations because the demand is not sufficient. The operations are quite -- the operating performance is quite low, and therefore, we are shutting down operations and may have some tail of costs that carries on for a couple of years if we are not able to sublease the space, we will certainly work to do that, but it's not the most amenable market for that. But I think it's just a decision point of persisting looking at the client relationships, is there client interest in full-time care? Is there a client interest in back-up care? Is there a landlord negotiation that can get us a more tolerable occupancy cost? Are there other -- and of course, the main ones, which are can we enlist more enrollment by more parent awareness and more marketing conversion, but that's all of those things go into a decision, which is a tough one to make.
Toni Kaplan: Great. And then for my follow-up on back-up care, I guess, anecdotally, we're aware of at least one employer who added days during COVID and now is cutting back on days going back to sort of pre-COVID levels. And so I wanted to understand if that is just a one-off situation or if they're is sort of a larger trend of cutting back on days? And what I'm trying to get at is if you're seeing any changes in the drivers of growth in back-up care like going forward versus like recent years, are you seeing sort of more growth from new employers signing on as opposed to those adding days or any difference in usage, et cetera. I just wanted to understand directionally the back-up care drivers and if that is something that is changing.
Stephen Kramer: So Toni, what I would say is now the drivers in 2026. And moving forward, we expect actually will look very similar to the last several years. So the vast, vast majority of the growth comes from the existing client base. Of course, we continue to add clients, but that is not a large source of growth given the maturation that is required of a new client, and it takes time for the benefits to become known and then ultimately used in a more mature way. So when we think about the drivers, number one, is continuing to increase the number of unique users. And so as I shared, we grew that at sort of mid-double-digit rate and so getting more penetration within our existing base is a really critical component. I would say that to the question around program design and policy changes, it was not actually the norm for most of our employers to change their program parameters even during COVID. We had a select number that really had some outsized programs that have come back into more of our normalized program policy. But the reality is in the current operating environment, most of those who use do not use their full bank, whether it be an outsized bank or even a more traditional sized bank. So again, it's this combination of continuing to drive users continuing to drive their frequency of use, understanding that most do not use their full bank, and those become the two most important determinants of the continued growth algorithm.
Operator: [Operator Instructions] Our next question is from Josh Chan with UBS.
Joshua Chan: I guess, around your expectation to grow enrollment 100 basis points which is similar to kind of the exit rate in Q4. Have you seen kind of a solid or pretty stable fall enrollment season during Q4 to kind of inform you of that? Just I'm just wondering how the enrollment season kind of progressed.
Elizabeth Boland: Yes. It was -- I would say that we had a bit of a slowdown in the second half of the year. We were a little faster growth in 1H of '25, and then it tapered in the second half. So it was -- the momentum coming through the fall was and into the rest of the year was similar to what we had expected and stable going into next year. I'd say that the maybe the notable element as we're looking ahead is a little bit of an uptick in younger age group enrollment. The mix is it's not dramatically different, but it's an uptick in younger age interest. And so that's always a positive, of course, for just growing the younger children into the older age groups as they stay with us. So that's one of the elements of positive outlook that we are seeing. And we talked last -- throughout 2025, it is last year, and we're talking about Q4, but some of the supports that we are seeing outside the U.S. has certainly helped to improve affordability to families in the countries that we operate, where government funding for child care is available to all families. It's means tested, but it's available to all families at some level, and that enables more families to afford care. So that has driven some good stability also in the enrollment outlook.
Joshua Chan: Okay. That makes sense. And then in terms of your center count, I guess, how many centers are you aiming to open next year? And at what point do you feel like you can get to kind of net neutral center count in the future? .
Elizabeth Boland: Yes. So in '26, we'd look to be opening plus/minus 20 or so. And I think I mentioned closing 45 to 50. So we would be in the net closure position as you say, in '26. It will go a long way, closing getting underperformers closed throughout the rest of this year. We'll go a long way toward addressing that bottom cohort. We mentioned there's 12% of centers in the bottom cohort about just under 90 of those or so are P&L centers that we control the bottom line. And even after the closures in the early part of this year, it's already ticked down meaningfully to -- in the neighborhood of 70. So we will be in a good position to have made progress through many of the centers, but I'd still say we would -- we'd probably be in another year beyond '26, '27 before we're meaningfully net positive. .
Operator: Our next question is from Stephanie Moore with Jefferies.
Stephanie Benjamin Moore: Hi, good afternoon. Thank you. I was hoping you could talk a little bit about what you're seeing from just an overall pricing standpoint, general appetite from parents and customers on tuition increases, how you view kind of pricing going forward now that inflation is kind of arguably a bit under control, labor is in a little bit better positioned. So I would just love to get your kind of updated view on general pricing trends.
Elizabeth Boland: Yes. I mean it's obviously the economy has been in many families have been quite stressed with the whole of inflation in general over the last many years. Child Care has, for many years, been a higher than inflation cost service, mainly because of the labor intensity that goes into it and the pandemic really added some fuel to that with significant increases to the labor cost as some significant wage steps were made early on in the pandemic. And then we continue to do increases, but they're much more market level increases over the last couple of years. So I think the parents are understanding that the cost of care is very much driven by personnel costs. We mentioned benefits costs on this call, in particular, because it is one of the important cost wage and benefits is an important element of the total rewards package for our teachers. It's one of the things that's attractive to them about our employee value proposition and why they work here, but it is a cost that we need to be continuing to bake into the overall cost structure and the tuition recovery over time. So we feel like our algorithm will continue to hold. Parents understand where the increases are coming from and the I think that our measured approach to tuition increases that tries to balance the economics, covering costs in the center as well as attracting enrollment, retaining enrollment and bringing as economic value to families and to our client partners as we can will ultimately carry the day. So we're always looking for ways that we can be effective in making the cost of care affordable to families but transparent about the fact that it does increase with -- primarily with those personnel costs each year.
Stephanie Benjamin Moore: Absolutely. No, I think that's fair. And just as a follow-up, and I do apologize if I missed this, but wondering if you guys could give an update on getting back to 70% enrollment or what you view as an optimal enrollment level, just kind of update and time line there? .
Elizabeth Boland: Sure. So we're in the mid-60s right now across the portfolio and about half of our centers operate above 70%. And actually, they operate above 80% on average. And so I would say that our target would still be to aim for 70% many centers performed just fine below that, 60%, 70%, it doesn't -- it's not a magic number, but it is certainly one that we aspire to in terms of critical mass in the center of the right kind of mix of age groups that bring the operating efficiency that is natural in a childhood center where this labor intensity is as high as it is. And so our view at 100 basis points a year of enrollment gain, we will be making headway on that and getting closer to 70%. But the other factor there is as we continue to rationalize the portfolio, and we have fewer centers that are operating sub 40%. We will naturally be drifting up, if you will. But it's really having the enrollment that's the most important factor. And it's -- the top group is doing well. It's doing great. They're sustaining enrollment above 80% even as the natural age up and cycling happens. So that is the most heartening part of it. It's that middle cohort of, call it, 40% of our centers that have the real opportunity to be adding 5, 10, 15 basis points of children -- 5, 10, 15 percentage points of enrollment to really get us closer to that 70% average.
Stephen Kramer: Great. Well, thanks again for joining us on the call and wishing you all a good night. .
Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation.