Kindercare Learning Companies, Inc.(US:KLC)2025-05-13 22:02Financial Data and Key Metrics Changes - KinderCare reported Q1 2025 revenue of $668 million, a 2% increase year-over-year, driven by stable tuition growth and an increased number of centers and sites [6][26] - Adjusted EBITDA for the quarter was $84 million, reflecting a 12% growth year-over-year, with an adjusted EBITDA margin of 13% [31] - Net income increased to $27 million from $10 million a year ago, with adjusted EPS rising to $0.23 from $0.11 [32] Business Line Data and Key Metrics Changes - Same center revenue grew to $600 million, up from $598 million, driven by tuition rates [28] - Champions revenue grew by 7.8% to $53 million, with 88 net new sites added over the past twelve months [29] - The company added 10 centers in Q1, including two CREM schools and expanded into Idaho through an acquisition [10][14] Market Data and Key Metrics Changes - Same center occupancy ended Q1 at 69.1%, down from 69.6% year-over-year, primarily due to lower enrollment at same centers [26][27] - The demand for high-quality care continues to outpace supply, supporting KinderCare's market position [8] Company Strategy and Development Direction - KinderCare's strategy focuses on driving profitability and expanding its footprint through acquisitions and new center openings, with a target of increasing new center openings to the mid-twenties per year [30][14] - The company emphasizes operational efficiency and maintaining a healthy spread between wage and tuition increases to support long-term profitability [17][18] Management's Comments on Operating Environment and Future Outlook - Management remains confident in the long-term growth algorithm, expecting 1% to 2% annual occupancy growth despite current macroeconomic challenges [6][44] - The company anticipates continued demand for childcare services, viewing it as an essential service for working families [6][23] Other Important Information - KinderCare's adjusted net income for Q1 was $27 million, and the company ended the quarter with a net debt to adjusted EBITDA ratio of 2.6 times, within its targeted leverage range [32] - The company has seen a strong level of inquiries and tours, indicating a potential for future enrollment growth despite current delays [56] Q&A Session Summary Question: What are parents doing with their kids as alternatives to enrolling in centers? - Management noted that parents may be delaying enrollment due to taking longer time off work, leading to later enrollment decisions [37] Question: How does the Champions business perform during economic uncertainty? - Management indicated that Champions remains resilient as the cost is significantly lower than early childhood education, making it a viable option for parents [40] Question: What is the expected occupancy growth in the medium term? - Management confirmed confidence in a 1% to 2% occupancy growth in the medium term, with tools in place to support this [44] Question: How much revenue came from M&A in the last twelve months? - Acquisition revenue from tuck-ins was reported at $5.5 million for the trailing twelve months [46] Question: How does the guidance account for varying demand levels? - Management expressed confidence in the guidance provided, emphasizing the ability to manage expenses regardless of macroeconomic conditions [50] Question: Are there differences in enrollment between subsidy and private pay families? - Management clarified that subsidy families are less hesitant once approved, while private pay families may delay decisions based on personal financial situations [76]