Navigating headwinds with agility: what Embark Early Education’s 2025 performance means for the ECEC sector

The early childhood education and care (ECEC) sector continues to operate in a complex and shifting environment.

Declining birth rates, increased service supply, workforce cost pressures and heightened regulatory scrutiny have combined to reshape operating conditions across Australia. Participation patterns are evolving, labour remains tight and wage growth is placing pressure on margins in what is a fundamentally labour-intensive sector.

Yet, within this environment, some providers have demonstrated that disciplined operating models and strong governance frameworks can support both stability and growth.

The 2025 Annual Report of Embark Early Education Limited (ASX: EVO) offers insight into how one listed provider is navigating current headwinds.

For the financial year ended 31 December 2025, Embark reported revenue of $104.9 million, representing a 29 per cent increase on the prior year.

Growth was underpinned by a 21 per cent increase in the number of children attending services across its network.

Centre EBITDA rose 16 per cent to $25.1 million, while net profit after tax increased 18 per cent to $10.7 million.

In a sector where small movements in occupancy can materially affect earnings, these results reinforce the importance of disciplined enrolment management, local engagement and cost control.

A defining feature of Embark’s approach is its decentralised operating structure.

Centre managers and local leadership teams are empowered to respond to community needs, while a central support office provides systems, compliance oversight and strategic direction.

This balance between local autonomy and corporate support can support responsiveness in markets where demand conditions vary significantly by location.

Corporate cost management also remains a notable element of the model. In 2025, support office and corporate costs represented 2.5 per cent and 1.1 per cent of revenue respectively, reflecting a lean central structure relative to overall turnover.

Across the ECEC sector, workforce availability and wage inflation continue to influence operating settings.

Embark reported that it actively monitors wage-to-revenue ratios to maintain operating leverage while supporting educator retention.

The company also accessed funding under the ECEC Worker Retention Payment program during the year, assisting in offsetting employee benefit costs and supporting workforce stability.

From a regulatory perspective, all centres reportedly achieved full health and safety compliance in independent regulatory audits during 2025.

In an environment shaped by the National Quality Framework and increased scrutiny of service standards, consistent compliance performance is a key governance indicator for providers of scale.

The Australian ECEC market continues to mature, with consolidation emerging as a strategic lever for expansion.

Embark ended 2025 with 39 centres and 3,562 licensed places following the acquisition of one additional service during the year.

The company also moved to expand its footprint through corporate activity involving Mayfield Childcare Limited(ASX: MFD). In October 2025, Embark acquired a 19.9 per cent stake in Mayfield before launching an off-market takeover bid in January 2026 for the remaining shares.

A $12 million institutional placement completed in December 2025 strengthened the balance sheet to support the strategy.

As at late February 2026, most defeating conditions had reportedly been waived, signalling a potential shift in market structure should the transaction complete.

The experience of Embark Early Education in 2025 highlights several themes relevant to approved providers and investors:

• occupancy remains the primary earnings driver
• disciplined cost control is critical in a wage-sensitive environment
• decentralised leadership models can enhance local responsiveness
• regulatory compliance remains central to sustainable growth
• well-capitalised operators may pursue consolidation as supply rationalises

The broader operating environment remains challenging. Birth rate trends, household cost pressures and evolving funding settings continue to shape demand patterns.

However, the 2025 performance suggests that providers with clear governance structures, strong balance sheets and scalable operating systems may be better positioned to navigate volatility.

For the ECEC sector, the lesson is not that headwinds have disappeared. Rather, it is that operational discipline, strategic capital allocation and consistent compliance frameworks remain decisive factors in long-term sustainability.

As consolidation accelerates and funding reforms continue to evolve, the coming reporting periods will provide further insight into how listed and non-listed providers adapt to Australia’s changing early learning landscape.

Access the annual report here.