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]