Core Insights - KinderCare Learning Companies, Inc. (KLC) reported quarterly earnings of $0.13 per share, exceeding the Zacks Consensus Estimate of $0.12 per share, and showing an increase from $0.05 per share a year ago, resulting in an earnings surprise of +8.33% [1] - The company posted revenues of $676.83 million for the quarter ended September 2025, which was slightly below the Zacks Consensus Estimate by 0.63%, but an increase from $671.48 million year-over-year [2] - KLC has surpassed consensus EPS estimates three times over the last four quarters, but has only topped revenue estimates once in the same period [2] Earnings Outlook - The sustainability of KLC's stock price movement will largely depend on management's commentary during the earnings call and future earnings expectations [3][4] - The current consensus EPS estimate for the upcoming quarter is $0.20 on revenues of $707.16 million, and for the current fiscal year, it is $0.76 on revenues of $2.76 billion [7] Industry Context - The Schools industry, to which KLC belongs, is currently ranked in the bottom 32% of over 250 Zacks industries, indicating potential challenges ahead [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact KLC's performance [5][6]

Financial Data and Key Metrics Changes - Revenue for Q3 2025 was $677 million, up nearly 1% from the previous year, with same center revenue at $617 million [5][25] - Same center occupancy was 67%, down 160 basis points from a year ago, reflecting a decline in average weekly full-time enrollments [5][26] - Net income for the quarter was $4.6 million, bringing the year-to-date total to $64 million, a 58% increase over the same period last year [29] - Adjusted EBITDA for Q3 was $66 million, down 7% from last year, with an adjusted EBITDA margin just under 10% [29][30] Business Line Data and Key Metrics Changes - Champions revenue grew 11% year-over-year to $50 million, with 120 net new sites added over the past twelve months [27] - Employer on-site centers maintained average occupancy over 70%, contributing positively to revenue growth [21][27] - Tuition growth was 2% for the quarter, lower than anticipated due to a higher subsidy mix and smaller subsidy rate increases [20][27] Market Data and Key Metrics Changes - The economic environment remains challenging, with elevated inflation and cautious consumer behavior impacting enrollment decisions [9][10] - Enrollment challenges are attributed to both economic factors and state-level subsidy changes, particularly in Indiana where subsidy assistance has decreased significantly [11][56] Company Strategy and Development Direction - The company is focusing on operational efficiency, disciplined execution, and cash management to navigate current economic conditions [10][12] - There is a commitment to expanding access to affordable, high-quality child care through partnerships with state and federal leaders [12][11] - The company plans to accelerate new center openings and tuck-in acquisitions, aiming for mid-20s new center openings per year starting in 2026 [29][37] Management's Comments on Operating Environment and Future Outlook - Management expects enrollment challenges to persist into 2026 but remains confident in returning to historical growth patterns [7][51] - The company anticipates that the recovery in enrollment occupancy will take longer than expected, with updated revenue forecasts for 2025 between $2.72 billion and $2.74 billion [33][34] - There is optimism regarding the long-term outlook for child care funding, supported by historical bipartisan support [7][11] Other Important Information - The company has refined its district leader structure to enhance operational focus and accountability [19] - A new Chief Operating Officer has been appointed to align strategic operational goals with growth initiatives [18] - The company is actively engaging with families to improve retention and satisfaction, evidenced by high engagement survey response rates [16][17] Q&A Session Summary Question: What are the expectations for enrollment heading into 2026? - Management remains optimistic about inquiries at local centers and believes that confidence will return, leading to a return to historical growth patterns [42] Question: Is there any impact from the government shutdown factored into the guidance? - There has been minimal direct impact from the government shutdown, but uncertainty remains regarding state budget decisions [43][44] Question: When does management expect to return to the long-term growth algorithm? - Management anticipates returning to the growth algorithm by 2027, with positive expectations for B2B and new center openings in 2026 [51] Question: What factors contributed to the lower enrollment during the back-to-school period? - A softer starting point for enrollments and economic factors, including consumer confidence, have impacted enrollment [54][56] Question: How is the company addressing potential cost management? - The company is continuously evaluating operational efficiencies and is open to closing underperforming centers if necessary [70][71] Question: What is the expected impact of subsidy changes on the business? - Changes in subsidies have had a significant impact, particularly in states like Indiana, but most states have already budgeted for the upcoming fiscal year [92][93] Question: What are the expectations for pricing in 2026? - Management expects pricing increases to be higher in 2026, driven by local market dynamics and competitive factors [96][98]

Early Childhood Education Centers - As of September 27, 2025, the company operated 1,595 early childhood education centers, an increase from 1,573 centers as of September 28, 2024, with a total capacity for 213,709 children[122] - Average weekly ECE full-time enrollments (FTEs) decreased by 2,783, or 1.9%, for the three months ended September 27, 2025, compared to the same period in 2024[126] - ECE same-center occupancy decreased by 160 basis points to 67.0% for the three months ended September 27, 2025, primarily due to lower enrollment at same-centers[129] - ECE same-center revenue remained relatively stable, increasing by $0.2 million, or 0.0%, for the three months ended September 27, 2025, compared to the same period in 2024[131] - Average weekly ECE FTEs for the nine months ended September 27, 2025, decreased by 1,998, or 1.4%, compared to the same period in 2024[127] - Total before- and after-school sites increased by 120 from 1,018 sites as of September 28, 2024, to 1,138 sites as of September 27, 2025[123] Revenue and Income - Total revenue for the three months ended September 27, 2025, was $676.8 million, an increase of $5.4 million or 0.8% compared to $671.5 million for the same period in 2024[151] - For the nine months ended September 27, 2025, total revenue was $2.045 billion, an increase from $2.016 billion in the same period in 2024[152] - Total revenue increased by $29.1 million, or 1.4%, for the nine months ended September 27, 2025, compared to the same period in 2024[165] - Revenue from early childhood education centers increased by $0.5 million, or 0.1%, driven by higher tuition rates, partially offset by lower enrollment[154] - Revenue from early childhood education centers rose by $16.8 million, or 0.9%, driven by higher tuition rates, partially offset by lower enrollment[166] - Revenue from before- and after-school sites increased by $12.3 million, or 8.6%, primarily due to the opening of new sites[168] - Net income for the three months ended September 27, 2025, was $4.6 million, a decrease from $14.0 million for the same period in 2024[151] - Net income for the nine months ended September 27, 2025, was $64.3 million, compared to $40.7 million for the same period in 2024[152] Costs and Expenses - Cost of services (excluding depreciation and impairment) rose by $22.0 million, or 4.2%, primarily due to lower government assistance and higher personnel costs[156] - Selling, general, and administrative expenses increased by $7.9 million, or 12.2%, attributed to higher professional fees and personnel costs[159] - Impairment losses increased by $2.1 million, or 163.2%, primarily due to property and equipment impairment at certain centers[160] - Cost of services (excluding depreciation and impairment) increased by $60.0 million, or 3.9%, mainly due to lower government assistance and higher personnel costs[169] - Selling, general, and administrative expenses decreased by $10.7 million, or 4.6%, primarily due to lower stock-based compensation and bonus expenses[171] Debt and Liquidity - The company had a total debt of $962.0 million under the First Lien Term Loan Facility and $262.5 million under the First Lien Revolving Credit Facility as of September 27, 2025[192] - The company expects to meet its liquidity requirements for at least the next 12 months through cash generated from operations and available borrowings[190] - The company had an available borrowing capacity of $194.4 million under the First Lien Revolving Credit Facility as of September 27, 2025[196] - Long-term debt obligations total $1.3 billion, with $39.2 million expected to be paid out for the remainder of fiscal 2025[208] Interest and Tax - Interest expense decreased by $15.4 million, or 38.9%, due to lower outstanding principal and interest rates following the repayment of the First Lien Term Loan Facility[161] - Interest expense decreased by $55.5 million, or 46.3%, due to lower outstanding principal and interest rates on the First Lien Term Loan Facility[173] - Effective tax rate for the nine months ended September 27, 2025, was 27.2%, compared to 31.7% for the same period in 2024[176] Cash Flow - Cash provided by operating activities increased by $77.5 million to $234.3 million for the nine months ended September 27, 2025, compared to $156.7 million for the same period in 2024[205] - Cash used in investing activities rose by $5.7 million to $114.4 million, driven by $7.0 million in increased acquisition payments and $2.7 million in higher capital expenditures[206] - Cash used in financing activities decreased by $59.7 million to $7.5 million, primarily due to a $55.7 million distribution to KC Parent in the prior period[207] Adjusted Metrics - Adjusted EBITDA for the nine months ended September 27, 2025, was $232.4 million, compared to $232.1 million for the same period in 2024[182] - Adjusted net income for the three months ended September 27, 2025, was $15,282,000, compared to $4,303,000 for the same period in 2024, representing a 254% increase[185] - Adjusted net income per common share (diluted) for the nine months ended September 27, 2025, was $0.58, up from $0.31 for the same period in 2024, reflecting an increase of 87%[185] Interest Rate Management - The interest rate on the First Lien Term Loan Facility was 7.04% as of September 27, 2025, with a weighted average interest rate of 7.41% for the nine months ended September 27, 2025[197] - The company entered into interest rate swap contracts totaling $1.3 billion to hedge against interest rate risk, with fixed rates ranging from 3.72% to 3.89%[217] Other Financial Information - The company recognized $0.7 million in COVID-19 Related Stimulus funding during the nine months ended September 27, 2025, compared to $16.9 million in the same period in 2024[147] - The company recognized $30.1 million in Employee Retention Credit (ERC) offsetting cost of services during the nine months ended September 27, 2025[191] - There were no impairments of goodwill during the three and nine months ended September 27, 2025, despite a decline in market capitalization[212] - The net changes in operating assets and liabilities resulted in a $49.8 million increase in cash, driven by timing of rent payments and changes in tax positions[205]

Financial Performance - Revenue for Q3 2025 was $676.8 million, compared to $671.5 million in Q3 2024[16, 20], representing a growth of approximately 0.8%[20] - Adjusted EBITDA for Q3 2025 was $66.4 million, while in Q3 2024 it was $71.4 million[20] - Same-center revenue for Early Childhood Education (ECE) was $616.9 million in Q3 2025, nearly the same as $616.7 million in Q3 2024[16], showing a 0.0% change[30] - The company updated its FY25 guidance with revenue projected between $2.72 billion and $2.74 billion, and adjusted EBITDA between $290 million and $295 million[37] Operational Metrics - The number of early childhood education centers increased from 1,573 in September 2024 to 1,595 in September 2025[16], a net increase of 22 centers - Before- and after-school sites increased from 1,018 in September 2024 to 1,138 in September 2025[16], a net increase of 120 sites - Average weekly ECE Full Time Enrollments (FTEs) decreased from 143,298 in Q3 2024 to 140,515 in Q3 2025[16] - ECE same-center occupancy decreased from 68.6% in Q3 2024 to 67.0% in Q3 2025[16], a decrease of 160 basis points[30] Strategic Initiatives - Champions added over 200 new sites year-to-date, bringing the trailing twelve-month (TTM) net total to 120 additional sites[13] - The company signed 20 new employers in Q3, resulting in 317,000 additional employees eligible for the tuition benefit program[14] - The company opened 3 new KinderCare for Employers on-site centers in Q3, with an average employer on-site portfolio occupancy exceeding 70%[13]

Revenue Performance - Total revenue for Q3 2025 increased by $5.4 million, or 0.8%, to $676.8 million compared to Q3 2024[3] - Revenue from before- and after-school sites rose by $4.8 million, or 10.7%, primarily due to the opening of new sites[4] - Revenue for the three months ended September 27, 2025, was $676,830, compared to $671,476 for the same period in 2024, representing a growth of 0.5%[24] - For the nine months ended September 27, 2025, revenue was $2,045,184, a slight increase from $2,016,079 in the prior year, marking a growth of 1.4%[26] - For the full year 2025, revenue is now expected to be approximately $2.72 billion to $2.74 billion[11] Income and Earnings - Net income fell by $9.4 million, or 67.4%, to $4.6 million, with diluted net income per share at $0.04 compared to $0.15 in Q3 2024[6] - Net income for the three months ended September 27, 2025, was $4,550, a decrease of 67.4% from $13,959 in the prior year[24] - Net income for the nine months ended September 27, 2025, was $64,295, an increase of 57.9% compared to $40,743 for the same period in 2024[26] - Adjusted net income for the three months ended September 27, 2025, was $15,282 million, compared to $4,303 million for the same period in 2024, representing a 254% increase[31] - Adjusted net income per common share (diluted) for the nine months ended September 27, 2025, was $0.58, up from $0.31 for the same period in 2024, reflecting an 87% increase[31] Operational Costs - Income from operations decreased by $28.1 million, or 51.6%, to $26.3 million, driven by a $22.0 million increase in cost of services[5] - Total costs and expenses for the three months ended September 27, 2025, were $650,510, up from $617,101 in the same period last year, reflecting an increase of 5.4%[24] - The decrease in income from operations was partially offset by a $15.4 million decrease in interest expense due to lower outstanding principal and interest rates[6] - The company incurred interest expenses of $64,276 for the nine months ended September 27, 2025, down from $119,806 in the previous year, a decrease of 46.3%[26] Cash and Investments - As of September 27, 2025, the company had $174.7 million in cash and cash equivalents and $194.4 million in available borrowing capacity[9] - The company made net investments totaling $114.4 million during the nine months ended September 27, 2025, including $95.9 million in property and equipment[10] - The company reported a cash provided by operating activities of $234,282 for the nine months ended September 27, 2025, compared to $156,736 in the prior year, indicating a significant increase of 49.4%[28] Impairment and Amortization - The company reported a total impairment loss of $7,054 for the nine months ended September 27, 2025, consistent with $7,140 in the prior year[26] - Impairment losses for long-lived assets amounted to $7,054 million for the nine months ended September 27, 2025, compared to $7,140 million for the same period in 2024[31] - The company incurred $2,152 million in amortization of intangible assets for the three months ended September 27, 2025[31] Strategic Focus - Management expects to continue focusing on strategic acquisitions and integration costs, as evidenced by the costs incurred related to the acquisition of Crème School during the nine months ended September 28, 2024[32]

Core Insights - KinderCare Learning Companies has announced the promotion of Lindsay Sorhondo to Chief Operating Officer, effective November 11, 2025, to lead the next phase of growth [1][2] Company Overview - KinderCare is a leading provider of high-quality early childhood education and care, operating more than 2,600 early learning centers across 41 states and the District of Columbia [4][5] - The company partners with employers to provide customized family care benefits, including on-site child care solutions and tuition benefits [4] Leadership and Strategy - In her new role, Sorhondo will oversee strategy, operations, customer experience, marketing, and IT, focusing on alignment and innovation across KinderCare's portfolio [2][3] - Sorhondo has been with KinderCare since 2013, previously serving as Chief Innovation Officer, and has played a key role in enhancing the company's operational capabilities [3] Community Engagement - KinderCare is actively involved in initiatives like Lights On Afterschool, which emphasizes the importance of after-school programs for working families [7] - The company has expressed strong support for the bipartisan Child Care Modernization Act, aimed at improving access and affordability in child care [8] Recent Developments - KinderCare, in collaboration with Maricopa County, has opened a new early learning center for county employees, enhancing child care access for working families [9]

Core Viewpoint - A class action securities fraud lawsuit has been filed against KinderCare Learning Companies, Inc. to recover losses for investors affected by alleged securities fraud related to the company's initial public offering in October 2024 [2][4]. Group 1: Lawsuit Details - The lawsuit alleges that KinderCare made false statements and concealed incidents of child abuse, neglect, and harm at its facilities [3]. - It is claimed that KinderCare failed to provide the "highest quality care possible" and did not meet minimum standards in the child care industry, exposing the company to undisclosed risks of lawsuits and reputational damage [3]. Group 2: Investor Information - Investors who suffered losses in KinderCare stock during the relevant time frame are encouraged to seek information about their rights to recovery, with no cost or obligation to participate [4].

Core Viewpoint - A class action securities fraud lawsuit has been filed against KinderCare Learning Companies, Inc. to recover losses for investors affected by alleged fraudulent activities related to the company's initial public offering in October 2024 [2][3]. Group 1: Lawsuit Details - The lawsuit alleges that KinderCare made false statements and concealed incidents of child abuse, neglect, and harm at its facilities [3]. - It is claimed that KinderCare failed to provide the "highest quality care possible" and did not meet minimum standards in the child care industry, exposing the company to undisclosed risks of lawsuits and reputational damage [3]. Group 2: Investor Information - Investors who suffered losses in KinderCare stock during the relevant timeframe are encouraged to seek information about their rights to recovery, with no cost or obligation to participate [4]. - The lawsuit is on behalf of all purchasers of KinderCare common stock in or traceable to the company's October 2024 initial public offering [2]. Group 3: Legal Representation - Levi & Korsinsky LLP, a nationally recognized securities litigation firm, is representing the plaintiffs and has a strong track record in securing recoveries for shareholders [5].

Core Viewpoint - An investigation is underway regarding KinderCare Learning Companies, focusing on potential breaches of fiduciary duties by its Board of Directors towards the company and its shareholders [1] Group 1: Investigation Details - The investigation is led by Berger Montague and centers on allegations that KinderCare failed to disclose significant safety and compliance failures at its facilities [3] - Specific accusations include the omission of numerous incidents of child abuse, neglect, and harm occurring at KinderCare centers [3] Group 2: Company Background - KinderCare Learning Companies, headquartered in Portland, Oregon, operates as a national provider of early childhood education centers [2]

Core Insights - KinderCare Learning Companies is actively participating in the Lights On Afterschool initiative, emphasizing the importance of after-school programs for working families and communities [1][4] - The company is advocating for affordable, high-quality after-school care through events and site visits, engaging lawmakers and community leaders to demonstrate the benefits of these programs [2][3] - KinderCare aims to strengthen public-private partnerships to enhance access to after-school care and expand opportunities for families [3] Company Initiatives - KinderCare's Champions program provides before- and after-school care, offering engaging learning experiences in a safe environment across the nation [5] - The company has been involved in the Lights On Afterschool initiative since its inception in 2000, highlighting the need for continued investment in out-of-school time learning [4] - KinderCare operates over 2,600 early learning centers and sites, supporting families in 41 states and the District of Columbia [8] Legislative Support - KinderCare supports the bipartisan Child Care Modernization Act, which aims to improve access and affordability of child care in the U.S. [9] - The company is meeting with legislators to advocate for policies that ensure every child has access to safe and enriching after-school care [3][4] Community Engagement - KinderCare is collaborating with Maricopa County to open an on-site child care center for county employees, demonstrating its commitment to providing quality care for working families [10] - The company emphasizes the role of after-school programs in supporting children's learning, safety, and well-being [2][3]