Greetings. Welcome to the Bright Horizons Family Solutions second quarter, 2026 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the form of 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 will now turn the conference over to Michael Flanagan, Group Vice President, Strategic Finance at Bright Horizons Family Solutions. Thank you, Michael. You may begin.

Thanks, Liz, and welcome to Bright Horizons' second 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 at 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, our 2025 Form 10-K and other SEC filings. Any forward-looking statement speaks only as of the data in 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 on the IR section of our website at investors.brighthorizance.com. Joining me on today's call is our Chief Executive Officer, Stephen Kramer, and our Chief Financial Officer, Elizabeth Bolin. Stephen will start by reviewing our results and provide an update on the business, and Elizabeth will follow a more detailed review of the numbers before we open it up to your questions. So with that, let me turn the call over to Stephen.

Thanks, Mike, and thank you to everyone joining us this afternoon. I am pleased with our performance in the second quarter and through the first half of 2026. Revenue expanded by 7% to $779 million, with growth across both backup care and full service. And adjusted EPS increased 20% to $1.28, both ahead of our expectations. Backup care again led our growth, while improving operating efficiency drove margin expansion in both segments. These results reinforce the strength and durability of our employer-sponsored model and the value of our differentiated portfolio of care and education solutions. On our first quarter call, we introduced a new investor presentation highlighting our client-centric business model, our competitive advantages, and the breadth of our long-term growth opportunities. Within Backup Care, our largest segment by earnings contribution, we outlined three key growth drivers. Deepening penetration within our existing clients, expanding our ecosystem of care and education solutions, and winning new logos. Let me update you on our progress on all three fronts. Starting with deeper penetration, Backup Care revenue grew 19% to $194 million in the quarter, accelerating from 12% growth in the first quarter. Usage growth was strong across care types and was largely driven by more unique users, as well as an uptick in frequency of use. Key to driving deeper penetration within our clients is the breadth and quality of our care network and our technology platform. We have made significant investments over the past several years to both enhance the booking process and expand access to care solutions. Today, families can confirm care in real time through our instant book capability, and we now see the majority of our network care in backup secured this way. Combined with our broader service network, this creates a seamless on-demand experience that allows us to reliably connect families with trusted care across care types and geographies. Our ability to deliver quality care with this level of ease, reliability, and scale drives deeper engagement and is a true competitive advantage. Turning to the expansion of our ecosystem, employer camps have become a natural extension of how we support clients to address their evolving workforce needs. This summer, we expanded our on-site Stephen Cates camp for AT&T to its Atlanta campus, building on last year's successful pilot at its Dallas headquarters. We are also operating five camps for a leading multi-site hospital system, one camp serving an energy company in Texas, and a consortium camp serving two large banking employers in North Carolina. These camps demonstrate how we use our unique delivery capabilities and client relationships to develop additional ways to serve the increasing range of needs of employer clients and working parents. Turning to our third backup growth lever, new and ramping clients, utilization continues to build among recently launched clients. Some additions include a Fortune 500 global consumer company and a Fortune 500 global industrial company. These relationships demonstrate the broad relevance of our care solutions and provide an additional source of growth as they launch and mature. Overall, BackupCare continues to deliver solid double-digit revenue growth, extending an impressive 15-year track record. This is a high-margin, capital-like business serving a large and under-penetrated market. With meaningful runway across each of our three growth avenues, we believe backup care is well positioned to remain a durable driver of revenue and earnings growth. Turning to full service, revenue grew 3% to $557 million, in line with our expectations. Growth was driven by tuition increases and a favorable impact from foreign exchange, partially offset by continued enrollment headwinds in Australia and the impact of center closures as we continue to optimize the portfolio. We opened seven centers in the quarter, including five for employer clients here in the U.S. Three centers were for a leading academic medical center that had self-operated their centers for more than 20 years before making the decision to have Bright Horizons assume the management of these programs with their ongoing financial support. This illustrates the transition opportunity that continues to exist within employer-sponsored care, especially within health care and higher education institutions. A decision by an employer to self-operate is not necessarily permanent. When employers' needs and circumstances change, our market leadership expertise and operating scale make us the partner of choice for leading employers to transition the management of their centers. The other two employer-funded client centers opened in the quarter are new worksite locations developed around these employers' specific needs exclusive to their employees and reflective of these clients' HR strategy and desire to meet employee needs. Together, these center openings illustrate the opportunity to grow our employer-sponsored center footprint through transitioning established programs to Bright Horizons Management and partnering with employers on new centers for their employees. Occupancy averaged in the high 60% range in the quarter, in fact 70% excluding Australia, up sequentially and reflecting continued recovery across the broader portfolio. Enrollment in centers open for more than one year increased approximately 1%, excluding the impact of enrollment contraction in Australia, which was roughly 100 basis point headwind. The pressure in Australia remained broadly consistent with what we discussed in the first quarter, while the balance of the portfolio continued to progress. Looking ahead, our focus is on building on the enrollment progress we have made, converting more inquiries into enrollments, translating higher occupancy into continued operating leverage, and shaping the portfolio around centers and markets with the strongest long-term demand and strategic value to our clients. As we build on this progress, our commitment to delivering the highest quality care in a safe and nurturing environment remains foundational to everything we do. Over 40 years, we have built rigorous policies, training, and oversight across our centers, and we continue to invest in the people, systems, and practices that support consistent quality service delivery. We also recognize that this work is never finished, and we continually learn, evaluate, and strengthen our approach. That discipline and our commitment to transparency and improvement is fundamental to the trust families and employers place in Bright Horizons. In educational advisory, revenue of $28 million was consistent with the prior year, as continued growth in College Coach was offset by lower participant engagement in EdAssist. Demand for College Coaches advising services is underpinned by the quality and experience of our college admissions and financial aid experts, who provide highly personalized guidance to navigate the complex and high-stakes college landscape. In EdAssist, our focus is on increasing engagement by strengthening the technology platform, expanding the relevance of our solutions, and making it easier for working learners to take advantage of the education benefits available to them. Tying all this together is one bright horizons. Our growth strategy to extend the reach and value of our service portfolio by engaging more employees and employers across the full spectrum of our solutions. At the employer level, that means building on the trust we have established through one service to expand relationships across our broader portfolio. Just as importantly, it means helping more eligible employees discover and engage with the range of care and education benefits available to them. By creating a more connected experience across our services, we can support more of their needs while delivering greater value to our employer clients. We again saw the impact of this strategy during this past quarter. The academic medical center behind the three full-service centers we transition first started as an ed assistant college coach client. Separately, a leading financial services company that has long utilized backup care added college coach to support employees and their families through the college planning process. Examples like these, together with growing employee engagement across our services, demonstrate the power of our employer-sponsored model and our ability to deepen relationships and penetration at both the employer and employee level. In summary, we continue to demonstrate the strength and durability of our employer-sponsored model through the first half of 2026. As we look ahead to the remainder of the year, we are narrowing our full-year revenue outlook to a range of $3.085 billion to $3.115 billion and raising adjusted EPS outlook to $5.05 to $5.15 per share. With that, I'll turn the call over to Elizabeth to walk through the quarter in more detail and show more on our outlook.

Thank you, Stephen, and hello to everyone who's been able to join the call tonight. I'll begin with some overall financial highlights. Revenue for the second quarter grew 7% to $779 million, driven by continued top-line growth in both our full service and backup segments. Adjusted operating income increased 15% to $99 million, as adjusted operating margins expanded 95 basis points over the prior year quarter to 12.7%. Adjusted EBITDA increased 13% to $131 million, representing an adjusted EBITDA margin of 17%. And on the bottom line, adjusted EPS of $1.28 increased 20%. Taking a closer look at each of our three business lines, backup revenue grew 19% in the quarter to $194 million, driven by the strong utilization Stephen talked about across care types. Adjusted operating income of $50 million grew 23% versus the prior year, as the associated operating margin expanded 80 basis points to 26%. In full service, revenue of $557 million grew 3% over the prior year quarter, driven primarily by tuition increases, growth in occupancy, and a favorable impact from foreign exchange. These benefits were partially offset by an approximately 250 basis point headwind from center closures, and to a lesser extent, to enrollment declines in our Australia operations. We ended the quarter with 988 centers, opening seven, as Stephen mentioned, while also closing seven lease model centers. Enrollment in centers that are open for the last year was approximately flat in the second quarter after taking into account the roughly 100 basis points of headwind from the enrollment contraction in Australia. Occupancy increased sequentially from the first quarter and averaged in the high 60% range and was about 70% excluding Australia. With respect to the center cohorts we have discussed on prior calls, the overall mix continued to improve, driven by a significant reduction in our lowest occupied centers. Our top performing cohort, centers above 70% occupancy, represent 53% of these centers in the second quarter, roughly in line with what we reported in the second quarter of 2025. More notably, our bottom cohort, that is centers below 40% occupied, declined to 5% of these centers from 10% in the prior year, reflecting both the enrollment progress and the impact of closing underperforming centers. Total full-service adjusted operating income increased 10% to $44 million and represented an adjusted operating margin of 7.9%, an expansion of 50 basis points over the prior year. Tuition increases ahead of average wage growth across the portfolio and continued improvement in our UK operations drove the margin expansion. Excluding our challenged Australia operations, full service adjusted operating margin would have expanded by more than 75 basis points over the prior year. Educational advisory revenue of $28 million was consistent with the prior year quarter and adjusted operating margin was 16%. Turning to a couple of other items on the P&L, our net interest expense of $14 million increased $3 million over the prior year and was up $2 million sequentially, due primarily to higher average borrowings as well as modestly higher average effective borrowing rates. The structural effective tax rate on adjusted net income was 28.75% in the second quarter, higher than in 2025 due primarily to losses in Australia that are not currently deductible. Turning to the balance sheet and cash flow, we generated $95 million in cash from operations in the second quarter and made fixed asset investments of about $19 million. We also made share repurchases totaling approximately $250 million during the quarter, At quarter end, we had $164 million of cash and approximately $1.3 billion of gross debt. Our trailing net leverage ratio was 2.2 times net debt to adjusted EBITDA at the end of the quarter, reflecting that share repurchase activity over the last year. Now, moving on to our updated full-year outlook. On the revenue side, as Stephen previewed, we are narrowing our reported revenue to a range of $3.085 billion to $3.115 billion and raising our adjusted EPS outlook to a range of $5.05 to $5.15. Looking now at each segment for the full year, in full service, we expect reported revenue to grow in the range of 2.5% to 3% on enrollment gains and tuition increases offset by approximately 200 basis points of headwind from net center closings and approximately 100 basis points of headwind from Australia. In backup care, we have increased our expectations to 13% to 15% revenue growth for the full year, driven by the continued expansion of use. And in ed advisory, we expect to grow in the low single digits. We are now expecting $58 to $60 million of interest expense for the year, an adjusted effective tax rate of 28.5%, and a diluted share count of 51.5 million shares for the Looking now to Q3, our outlook is for total revenue of $835 to $845 million, or growth of approximately 4% to 5%. We expect full service to grow reported revenue of 50 to 100 basis points, including an approximate 225 basis point headwind from net center closings over the last year and 100 basis points of headwind from Australia. In backup care, we expect revenue growth in the quarter of 12 to 14 percent, and again, ed advisory to grow in the low single digits. In terms of earnings, we expect Q3 adjusted EPS to be in the range of $1.73 to $1.78 per share. So with that, Felice, 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.

One moment, please, while we poll for questions. Our first question is from Andrew Steinemann from JPMorgan.

Please go ahead with your question.

Hi, two quick questions, some of this like seasonal. With the strong backup growth in the quarter and into next quarter, could you just give us a sense how much summer camp usage is driving those results. I'm sure you're interested in summer camp because you've had a lot of success there. And then also, I know it's early. We're still in July. But as you think about the guide that you gave for the year, what are you assuming in terms of kind of back-to-school enrollment on the full-service side?

Thank you for the question, Andrew. I'll start with the summer camp question. So first of all, we're obviously very pleased with the 19% in growth in the quarter. And that use was really across all care types. And it really was reflective of strong growth in both users and then a slight uptick in frequency. In terms of isolating summer camp in particular, obviously in the summer months, that is the highest. But again, And for the overall year, we generally see summer camp use in sort of the 25% to 30% of total use. So it is still just one of the components of our network use air types.

Yeah, and then on the enrollment front, Andrew, so we had seen, you know, enrollment in the first half of the year relatively stable as we had previewed at the beginning of the year with a little bit lighter growth in the second quarter that we would expect to see as we turn over in the fall here. We have a little bit of positive growth offset by the Australia headwind. So we're looking at a slightly positive ex-Australia growth, sub 1%, but still positive with Australia putting us with another 100 basis points of headwind on top of that. But it's been an important cycle. Of course, we have had, as we've stabilized enrollment in some of our larger or higher enrolled centers, they see more turnover in the older age groups as we come into the fall. So that backfill takes a bit of time. And we also just have the natural comparison against a very strong year over year in our UK operation. So a couple of things that come into how we're growing Q2 versus Q3 and Q4, but we're still looking at something that's pretty close to our original guide for the full year. Okay, thank you.

Our next question is from Manav Patnaik with Barclays.

Please proceed with your question.

Hi, this is Ronan Kennedy.

I'm from Manav. Thank you for taking our questions. If I may, I'll start with a follow-up on backup. You highlighted both new logos and increasing utilization amongst recently launched clients? Are newer clients wrapping faster than what you've seen in the past? If so, what's driving that behavior? And then you also continue to discuss substantial penetration opportunities within existing. What gives you confidence that the employee participation rates can continue moving higher from here?

Yeah, thank you for the question. So I'll start with the second question since, again, And the vast majority of growth that we experience is within the existing client base. And so, you know, we are now into a multi-year demonstration of continuing to drive users and use. What I would say is that we continue to work with our client partners to provide increasing amounts of outreach so that we can ultimately continue to garner more unique users. because ultimately that is the key determinant of continuing to see the kind of growth that we have been able to achieve. Certainly in the near term, we can look at reservation volumes and gain confidence, which is what gave us the ability to increase our guide. But ultimately, it's really down to continuing to identify and secure new users and then a small uptake on frequency. In terms of new and ramping clients, that is obviously a much smaller component of it, given the fact that we have more than 1,000 clients to take advantage of our backup service. That said, they are important to the long term in this business. And I would say that the maturation process of these clients actually looks quite similar to what we've experienced. So it is not outsized compared to what it has been in the past, but rather just an important element. And then the final component of your question was really around, you know, what the white space looks like. And I think as we articulated in the investor presentation, we see a lot of white space as it relates to, you know, the possibility of garnering new logos. And so I believe that that will continue to be a component of our growth algorithm within BackupCare.

Thank you for that. With the strong margin expansion and backup to 26 versus 25 last year, how much of that margin expansion was utilization versus mix? And how should we think about what are sustainable levels of margins for backup care?

We believe the backup margins are sustainable. We're, you know, looking at we've been at 28 to 30 percent as our outlook for operating margins for backup for a while. We would continue to expect to see that this year. So the third quarter, you know, even has a with more volume even coming in the third quarter than the second quarter. The overall conversion of that is the margin conversion does come down to utilization against the portion of the backup care cost supports that are fixed. And so we would expect it to, you know, to tick up in the third quarter from where we see, third and fourth quarter from where we see the first half of the year and be able to sustain that 28 to 30 percent given the, you know, the strong, the sentiment of both the mix of use and the volume conversion that we're able to have. Thank you. Appreciate it.

Our next question is from Jeff Mueller with Baird. Please proceed with your question.

Yeah, thank you. I know you've had the greater than 70, less than 40, 40 to 70 buckets for a while, but just on full service, can you just help us think through like what percentage you kind of characterize as like high margin, maybe near full occupancy, not really growing?

And then, like, what percentage are kind of, like, ramping well at this point?

And then just of the lower utilization are those that are maybe not ramping are kind of in the assessment for closures bucket?

Yeah. I appreciate the question because there is some nuance in there, Jeff. the, you know, broadly speaking, the group of centers that are operating above 70% are in that category of sustaining enrollment, not necessarily from quarter to quarter. At the time we're in right now, those centers will be naturally cycling enrollment, particularly the older preschoolers who are graduating out to elementary school. So there's, that group is not necessarily growing much. It's sustaining enrollment, and we've been really pleased to see how much, you know, know, sustainability they have had through the last couple of years because that group has been steady. And between the, you know, the overall aggregate price increases and the conversion of that to earnings in those centers, we're earning more even as the margin is, you know, is getting back to our target of 10 percent or so. Those centers are really very much there. The group in the middle, the 40% to 70% cohort, there certainly are some centers in that group that are running very well. They may be anywhere from 60% to 70% occupied. They may be 55% to 65% occupied. They do very well at that level. And so they are also in that, you know, maybe not going to improve meaningfully from that level. But there are many, that group is, you know, call it 40%, 45% or so of our overall mix. So there is still a good quarter of those centers to 35% of our, you know, 25 to 35% of the overall mix still have opportunity, but some are at steady state. The sub 40% occupied group, I would characterize, you know, we're at 5% this quarter. That's, you know, that's an optimized time period because as we do cycle enrollment that, you know, will move around. But probably in that group where we have anywhere from 60 to 70 centers that might be candidates for deep consideration of whether they should close, we'd probably look at maybe 25 to 50 of those that we would have circled up as not likely to be viable over the long term and be candidates for closure beyond this year and maybe, you know, into 28. So that's how I'd characterize the overall mix. I think the one additional consideration that I put out there is, of course, Australia has been underperforming and the deep dive that we are looking to do on that portfolio might increase that a little bit, but just trying to characterize the rest of the portfolio.

And help me with that deep dive, just like how close are you or what actions have you taken or how close are you to taking more aggressive action in Australia?

Yeah, so what I would say is obviously we shared in the last call sort of the degradation that we saw in the enrollment. And so our focus at this point really is on aligning the staffing with the enrollment levels that we have, and then obviously trying to improve enrollment from where we are. As Elizabeth just shared, the other action that we are looking at and circling up is around closures, right, to make sure that we're optimizing the portfolio for the future. And then ultimately, as we think about, you know, Australia, we're trying to think broadly about how to make sure that we can get that back on track in the way that we were able to accomplish in the UK. And so, you know, that's our sort of immediate action. And then, you know, over the intermediate term, we obviously are looking at strategic options as it relates to how we think about that particular geography broadly.

Thank you both.

Thanks, Jeff. Our next question is from Jeff Silber with BMO Capital Markets. Please proceed with your question.

Thank you so much. I believe on your prior call, you gave us operating or adjusted operating margin guidance by segment. Can we just revisit that again?

Yeah. So operating margin, I think I just mentioned from a backup care standpoint, we're looking at 28 to 30 for the year. On full service, overall, we expect to be flat for the year, flat-ish, and the Australia headwind there As we talked about last quarter and this quarter, it's expected to be 50, 75 basis points. So we would be positive, certainly excluding that headwind. But at this point, we're looking to be relatively flattish in full service. And then our ed advising would be in the 20% range.

Okay, great. That's really helpful. And then a completely different question. A number of us cover some of the higher education companies, and I know it's a different business, but many of them have been talking about changes in the way that students are searching or finding schools that they want to attend, moving from traditional search engines, going to LLMs. I'm just wondering, are you seeing that at all? And if so, are you changing your marketing strategy accordingly?

Sure, happy to answer that. So, clearly, your question is focused around the advisory aspect of what we do. And so, when we think about the college coach aspect, those are, you know, dependents of our clients' employees. They are traditional learners as opposed to adult learners. And so, those traditional learners really are seeking out both information through AI and that type of support. But at the same time, these are very high stakes decisions that they're making. And so therefore, the expertise that our counselors provide is still an incredibly valuable aspect of their search process. And so when we think about our advisory business, you'll note that on the college coach side of the business, we continue to see participant growth. and that is really reflective of the fact that, you know, those employees and their dependents are highly interested in seeking expert advice from former college admissions and financial aid professionals.

Yeah, I'm sorry. I was actually thinking about your full service center business. I don't know if that's impacted at all.

Yeah, I'm not sure that we've seen that kind of a shift, but, you know, happy to inquire more about that.

Okay, appreciate the caller. Thanks so much.

Our next question is from George Tong with Golden Sacks. Please proceed with your question.

Hi, thanks. Good afternoon. Occupancy outside of Australia reached roughly 70% in the quarter. As occupancy rates continue to recover, where would you say you are in the margin expansion journey within full service and how much operating leverage remains available before you reach a more normalized utilization level?

So if I'm understanding your question right, it's, you know, the sort of opportunity to get back to a 10% EBIT margin, which is where we have historically operated. And, you know, we certainly see a pathway to that, both with sustaining the enrollment and the performance in our top cohort enrolled group. But just to maybe to walk through what we currently have in the headwind category of our business. So last year, we reported about five and a half percent in full service. And as I mentioned, we would expect it to be relatively stable with that in 2026. Looking at Australia in the round as a whole, that underperformance, the $20 to $25 million we expect to be losing in that geography is roughly 150 basis points of headwind. And then we also have a group of centers as we have closed centers, and some of them we are working to completely exit the leases and the facility costs in them. And that period of time to fully run off, either run off the lease or to exit is another 50 basis points or so of headwind. So just coming in, we are at about 7.5% without those two component pieces. So you take the centers that are sub-70% occupied, and we have a group of them that on the earlier question we expect will also be candidates for closure that are affecting the overall performance, and then just gaining the enrollment in the middle cohort and getting that operating leverage. We certainly see a path to getting back to 10% and honestly beyond that. But step one is getting back to 10%, and then we'll be commenting later on that. It's been, I think, a process, but we are very heartened by how the top performers continue to deliver and how we've been able to move centers out of the bottom cohort into the middle cohort.

Got it. That's very helpful. And then switching to backup care, growth accelerated in the quarter even against tougher comps. Can you discuss whether there were unusual tailwinds that you saw this quarter, or is there reason to believe that these growth rates are, in fact, sustainable?

Yeah, so I think that there were no anomalies, if that's the question. So I think that really the performance was down to continuing to increase the number of users and, as I said, a slight uptick in frequency. That said, Q3 is obviously the largest quarter. And so, ultimately, we start to moderate a little bit as compared to the Q2 in Q3 in terms of what we called for in terms of guidance. And that really becomes just a very high peak within the overall year. But overall, to answer your question very directly, you know, we continue to see an opportunity for us to get to, you know, sort of a 13 to 15 percent growth for the full year and then continue to sustain double digit growth for many years to come.

Very helpful. Thank you.

Our next question is from Tony Kaplan with Morgan Stanley. Please proceed with your question.

Thanks so much. I wanted to go back to the center closures topic. We've sort of been in net closures mode for a couple of years. Is there anything that when you think about the go forward of your lease consortium strategy, are there any changes that you're planning to make in terms of thinking about where to open new centers and things like that? I know it used to be more targeted towards urban areas because of the employer concentration, but is there anything sort of different that you're thinking about now?

Yeah, thank you for the question, Tony. So what I would say is in the near term, we continue to be focused on opening new centers in collaboration and in partnership with clients. So that's our first priority in the near term is to continue to either transition the management of centers for self-operated centers, and in addition to that, open new greenfield opportunities with clients' financial support. I would say longer term, again, hearkening back to this client centricity, our lease consortium models will really be driven by where our clients and their employees live and work, and where we can garner support from our client partners in order to create additional sustainability for the model. So, again, I would say overall, very client-centric, first and foremost, in the near term with client centers. And then, you know, beyond that, thinking about lease consortiums that, again, garner support through our client partners and their employees.

Yep, got it. And then, Elizabeth, if you could help us for modeling purposes on what the FX was in the quarter for full service, and if you have an updated expectation for FX for the full year, that'd be great as well.

Yeah, that's an important point, Tony, because it was a good guy, if you will, in the second quarter. The overall contribution in full service specifically, which is where it affects most effects. It was about 100 basis points of tailwind. For the full year, it will also be relatively higher, around 125 basis points. But in the second half, it's going to taper. We would expect it to taper significantly. So the swing between Q2 and Q3, part of the guide of 50 to 100 basis points in full service is reflective of a swing of 125 basis points from a plus 100 to negative 25 sort of as an effect on the overall growth rate.

Thank you.

You're welcome.

Once again, if you would like to ask a question, please press star 1 on your telephone keypad. Our next question is from Josh Chan with UBS. Please proceed with your question.

Good afternoon. Thanks for taking my question. And maybe jumping off of the prior point about the moderation in full service from Q2 to Q3, so recognizing FX is a part of that, but there's also a further moderation. So I'm wondering what of the main factors is causing that. Is it a greater impact on Australia? Any other dynamics affecting that?

Yeah, so a little bit more of an effect from closures. So FX is the largest sort of sequential effect. Closures in terms of gross or net closures, because the openings are about the same, but the impact of net closures is another 75 basis points or so. So it was around 150 basis points in Q2. we'd expect it to be 225 net net center closings in Q3 and then the other factor I mean there's a little bit of mix that goes on but the other factor to call out is on the overall enrollment just a little bit Australia is you know at the margins is probably a little bit of a factor but also we we just tapered the enrollment growth a bit overall in the core enrollment excluding Australia so So, enrollment, rather than being flat in the quarter, we'd expect it to be slightly down, including the effects of Australia of 100 basis points plus.

Okay. That makes a lot of sense. Thanks, Elizabeth. And then maybe on the repurchase, obviously, you took advantage of the opportunity in Q2 again. And so could you talk to the willingness to buy back stock, you know, I guess, how do you balance that between leverage and opportunistic buybacks? How do you think about that from here?

I mean, the business generates a lot of cash, as you know, and we have leaned in pretty strong on the repurchase the first half of the year. So a total, you know, $250 million this quarter on top of, you know, two and a quarter in the first quarter. So we have been active and feel like that's been a good capital allocation against the modest additional revolver that we have used to affect that. At 2.2 times net leverage, you know, we've been much more levered than that in the past. as I say, replenishing cash generation in the business. And we feel comfortable certainly at these ratios and would be, you know, we want to be opportunistic as needed. The guidance doesn't contemplate, you know, further repurchases from now. Our steer on the overall share count is just reflective, similar to, you know, to other times as what we've done to date.

Thank you so much for the color and good luck in the second half.

Thank you.

Thank you.

Our next question is from Stephanie Moore with Jeffries. Please proceed with your question.

Yes, great. Good afternoon. Thank you. I wanted to touch a little bit about maybe price and volume contribution during the quarter, if you could break that out. Sorry if I missed that. It's just a clarification there. And then if you could also talk for the expected occupancy improvement in full service in the back half of the year. I think it's a lot of moving pieces. I just wanted to make sure I was level setting the expectations there. Thank you.

Sure. So overall price, our average price increase for the year has been about 4%. So that's consistent, relatively consistent across all four quarters of the year and for the full year. Core enrollment, so excluding Australia, our enrollment in the quarter was up roughly 100 basis points. Australia was a headwind of around 100 basis points. So in terms of volume, that net volume would be relatively flat. And then I mentioned that the net closures was around 150 basis points. FX was an addition to the overall reported revenue of 100 basis points. And then a little bit of mix is the sort of the overall difference to the full service growth rate. And then I think I might have missed one additional question that you had, Stephanie.

No, I think you got it. I was mostly just trying to get a sense of just the occupancy trends in the back half of the year and enrollment trends.

Yeah, so the second quarter, of course, is the high watermark in terms of the seasonality, cyclicality of our full service enrollment business. We were high 60s in the quarter. We would expect that to be stepping down to mid-60s or so and be reporting a little bit of occupancy gain compared to last year, but at the margin still in the mid-60s plus. And so that's where we'd expect to end the year. It steps down as we're cycling the third quarter and then just as a moderate, modest increase to the fourth quarter.

Okay. Thank you so much. You're welcome.

Thank you. Okay. Well, thanks everyone for joining the call and wishing everyone a good night.

Thanks, everyone.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.