Kindercare Learning Companies, Inc.(KLC) - 2026 Q4 - Annual Report

Financial Performance - For fiscal 2025, the company reported an additional $45.1 million in revenue due to the 53rd week, contributing an estimated $12 million to adjusted EBITDA[207]. - Total revenue for fiscal 2025 was $2,733.3 million, an increase of $70.3 million or 2.6% compared to fiscal 2024[225]. - Adjusted EBITDA for fiscal 2025 was $300.1 million, compared to $298.1 million in fiscal 2024[243]. - Net loss for fiscal 2025 was $112.9 million, compared to a net loss of $92.8 million in fiscal 2024[243]. - Adjusted net income for fiscal year ended January 3, 2026, was $82.5 million, compared to $38.8 million for the fiscal year ended December 28, 2024, representing a 113% increase[245]. Enrollment and Capacity - As of January 3, 2026, the company operated 1,601 early childhood education centers, an increase from 1,574 centers in the previous year, with a total capacity for 214,803 children[215]. - Average weekly ECE full-time enrollment (FTEs) decreased by 2,901, or 2.0%, to 142,248 for fiscal 2025 compared to fiscal 2024[218]. - ECE same-center occupancy declined by 200 basis points to 67.8% for fiscal 2025, primarily due to lower enrollment at same-centers[220]. Revenue Sources - Revenue from early childhood education centers increased by $51.6 million, or 2.1%, primarily due to the impact of the 53rd week in fiscal 2025[226]. - ECE same-center revenue increased by $61.2 million, or 2.5%, to $2,488,829 for fiscal 2025, driven by the impact of the 53rd week[221]. - Revenue from before- and after-school sites increased by $18.7 million, or 9.5%, primarily due to the opening of new sites[227]. Expenses and Costs - Cost of services (excluding depreciation and impairment) rose by $95.6 million, or 4.7%, driven by higher personnel costs and rent expenses[228]. - Selling, general, and administrative expenses decreased by $125.8 million, or 29.7%, primarily due to lower stock-based compensation and bonus expenses[231]. - Stock-based compensation expense increased by $113.1 million due to modifications in stock-based award plans in conjunction with the IPO[209]. - Impairment losses surged by $193.5 million, or 1836.9%, due to a significant goodwill impairment related to market capitalization decline[232]. Cash Flow and Liquidity - Cash provided by operating activities increased by $122.6 million in fiscal 2025, driven by a change in net loss adjusted for non-cash items and higher accrued compensation[266]. - Cash used in investing activities increased by $7.2 million in fiscal 2025, primarily due to a $12.2 million increase in payments for acquisitions[267]. - The company had cash, cash equivalents, and restricted cash of $133.3 million at the end of fiscal year 2026, up from $62.4 million at the end of fiscal year 2024[265]. - The company expects to meet its liquidity requirements for at least the next 12 months through cash generated from operations and available borrowings[250]. Debt and Obligations - Long-term debt obligations, including interest, total $1.2 billion, with expected payments of $71.1 million in fiscal 2026 and $1.0 billion in four to five years[270]. - Total lease obligations amount to $2.4 billion, with expected payments of $285.8 million in fiscal 2026, $576.3 million in two to three years, $497.0 million in four to five years, and $1.0 billion thereafter[269]. - The First Lien Term Loan Facility bears interest at a variable rate equal to SOFR plus 2.75% per annum following a repricing amendment in July 2025[253]. - As of January 3, 2026, the company had no outstanding borrowings under the First Lien Revolving Credit Facility, with an available borrowing capacity of $189.7 million[257]. Interest Rate Management - The weighted average interest rate for the First Lien Term Loan Facility during fiscal 2025 was 7.24%[259]. - An estimated increase of 100 basis points in average interest rates on variable rate borrowings would result in an approximate $1.7 million increase in interest expense for fiscal 2025[305]. - The company entered into two forward starting pay-fixed-receive-float interest rate swap contracts in March 2025 with a combined notional amount of $500.0 million, one at 3.72% and the other at 3.74% fixed interest rates[306]. - The interest rate swap contracts are designed to hedge interest rate risk on a portion of the variable rate debt under the Credit Agreement[306]. Tax and Deferred Tax - The effective tax rate for fiscal 2025 was (20.9)%, compared to (18.7)% for fiscal 2024[236]. - The company does not anticipate the need for a valuation allowance against deferred tax assets as of January 3, 2026[301]. - The company reevaluates uncertain tax positions on a quarterly basis, which may result in recognition of a tax benefit or additional charge to the tax provision[302].