[music] What if I told you that a three-year-old can already associate skin color with power, beauty, or worth. Now, it's not because they're born that way, but because weeds of racial bias and inequality start growing early on. And see, if we're not careful, those weeds will eventually take over before our black children even know how to spell their names.as an early childhood educator with a background in psychology, neuroscience, diversity, equity, and inclusion, as well as ministry. I've seen firsthand ...

[applause] Every day, more than 350,000 of the world's most powerful learning machines take their first breath. Each of these can absorb multiple languages, decode emotions, and form more than 1 million connections every second. It's not artificial intelligence. It's human intelligence.It is a baby. Yet, while we spend billions of dollars teaching machines how to think like humans, we spend almost nothing teaching humans to be more like humans. We celebrate AI, but the real frontier of innovation isn't made ...

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]

Policy & Funding - New Mexico becomes the first state in the US to launch free childcare for all residents, regardless of income [1] - The program is funded by a trust fund that has grown to $10 billion, primarily through investment in the stock market and oil and gas leases [8][9] - In 2020, $300 million was appropriated and invested, leading to significant growth of the fund [8] Program Details - Families can access both private and public childcare options [1] - Parents must enroll their children in the program, and children must attend a state-licensed or registered provider [7] - The state will reimburse the providers directly [7] Educational Impact & Goals - The initiative aims to improve New Mexico's education levels, which are currently ranked among the lowest in the country [2][10] - The state aims to create a diverse childcare sector that supports families and prepares children for kindergarten [6][11] - The program is expected to save families approximately $12,000 per year in childcare costs [2] National Implications - New Mexico hopes to serve as a blueprint for other states to implement similar universal childcare programs [6][13] - Connecticut has already passed a bill making childcare free for families earning under $100,000 per year [3] - New York's Mayor is proposing universal childcare as a key policy initiative [4] Economic Impact - The program is expected to allow parents to focus on their careers and increase their income [12] - It is anticipated to improve overall family well-being and address negative statistics in New Mexico [12]

Early Childhood Education Importance - Research indicates that 90% of brain development occurs before the age of five [1] - Early childhood education is not just about ABCs and 123s, but about nurturing the mind, brain, heart, and spirit [1] Teaching Methodologies - The industry utilizes play as a natural language for children, incorporating beads, puppets, rice, and role play to teach problem-solving skills, teamwork, and creativity [1] - The company introduces Jolly Phonics from the UK, teaching 44 unique sounds to improve reading confidence, pronunciation, and love for literacy [1] - The company follows a Singaporean CPA (Concrete, Pictorial, Abstract) approach to teaching math, using tangible tools like beads and blocks in the concrete stage [1] - Montessori methods are embraced in pre-primary teaching to build students' minds and bodies [1] Curriculum Innovation - Introduction of Australian Fitzroy Readers to strengthen decoding, reading, and comprehension skills [1] - Teaching simple rules in phonics, such as the 'c' sound variations based on following vowels, to enable students to decode words correctly [1] Future of Education - The company envisions spaces where technology and traditions blend, using smart boards for storytelling and puppets for classroom role play [1] - The company aims to blend international concepts with local values and ethics to provide students with skills for success and grounded roots [1]