KinderCare (KLC) Q4 2025 Earnings Call Transcript

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DATE

Thursday, March 12, 2026 at 5:00 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Tom Wyatt
• Chief Financial Officer — Tony Amandi
• Vice President of Investor Relations — Olivia Kirrer

TAKEAWAYS

• Revenue -- KinderCare Learning Companies (NYSE:KLC) reported $688 million in the fourth quarter, up 6% year over year, with approximately $45 million attributed to the extra fifty-third week; on a comparable basis, revenue was essentially flat.
• Adjusted EBITDA -- $68 million in Q4, including around $12 million from the additional week; full-year adjusted EBITDA was $300 million, a year-over-year increase just under 1%.
• Adjusted EPS -- $0.12 in Q4, up $0.03 from the prior year; $0.70 for the full year, a rise from $0.40 in 2024.
• Net loss -- $177 million in Q4, driven primarily by a non-cash goodwill impairment; full-year net loss was $113 million, also largely attributable to this impairment.
• Same-center occupancy -- 64.5% in Q4, representing a 340 basis-point decline from the prior year; annual same-center occupancy decreased 200 basis points to 67.8%.
• Segment revenue contribution -- KinderCare Learning Companies brand generated 88% of total revenue; Champions contributed 8%, and Crim Schools 4% for the year.
• Champions -- $60 million in Q4 revenue, up 12% year over year, with double-digit revenue expansion and supported by 128 net new site additions, ending above 1,150 sites.
• M&A activity -- Acquired center revenue was $6.2 million in Q4 and $14.9 million for the year; twenty-six tuck-in acquisitions contributed about $23.5 million to annual revenue, with $23 million in cash consideration fully funded from $110 million free cash flow.
• Closures -- Seven centers closed in Q4, totaling nineteen closures for the year, and offsetting revenue growth by about 1%.
• Full-year revenue -- $2.73 billion including the fifty-third week, representing a 2.6% increase, with same-center revenue at $2.49 billion, up 2.5%.
• Tuition growth -- Tuition delivered 2% center growth in Q4, and 2.2% for the year, reflecting lower-than-usual subsidy reimbursement rate increases.
• SG&A to revenue -- 10.7% in Q4, down from the prior year, due to lower IPO-related and normalized public company costs.
• Interest expense -- Declined significantly compared to the prior year, following debt repayments and repricing actions post-IPO.
• Net debt to adjusted EBITDA -- Ended the year at 2.6x, at the lower end of the targeted 2.5x-3.0x range.
• 2026 guidance -- Projected revenue between $2.7 billion and $2.75 billion, adjusted EBITDA of $210 million-$230 million, and adjusted EPS in the $0.10-$0.20 range; guidance assumes tuition will drive roughly 3% revenue growth, fully offset by a 3% decline in same-center occupancy.
• CapEx & free cash flow -- CapEx expected at approximately 5% of revenue, mostly directed towards growth; free cash flow projected at $35 million-$40 million for the year.
• First quarter 2026 outlook -- Revenue anticipated between $664 million-$674 million, adjusted EBITDA of $45 million-$48 million, and adjusted EPS near breakeven.
• Operational initiatives -- Management announced substantial investments in paid search, and changed incentive compensation to focus entirely on profitable enrollment (“FTE”) growth for all employees in the bonus program.
• Leadership change -- Michael Canavan now focuses solely on the KinderCare Learning Companies brand, shifting from multiple business areas.
• Portfolio management -- Management is conducting an aggressive center review and may take additional closures beyond the fifteen to twenty already guided, but specifics are not yet determined.
• Policy & grants -- CFO Tony Amandi said, “we are high-single-digits millions of grant loss by, you know, around seven to nine, actually probably closer to ten, year over year, with most of that being in the first half of the year of our expectations,” indicating a normalization of grant revenue back to pre-COVID levels.

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RISKS

• CFO Tony Amandi stated, “lower occupancy expectation, that is the biggest thing that we are deleveraging, obviously, with that, and that is impacting all the way down to margins,” signaling margin contraction risk driven by declining enrollment.
• Management projects that a 3% decline in same-center occupancy will fully offset expected 3% tuition-driven revenue growth, providing no net top-line improvement from price actions.
• Non-cash goodwill impairment of $177 million in Q4, and related $113 million net loss for the year, reflect ongoing exposure to market-based valuation risk.
• Guidance includes an anticipated $7 million-$10 million year-over-year decline in grant revenue, mostly in the first half, pressuring EBITDA and margins.

SUMMARY

The earnings call delivered detailed, market-relevant disclosures: the 6% reported Q4 revenue gain was entirely due to a fifty-third week, with comparable revenue flat and profitability constrained by lower enrollment and occupancy. Net loss of $177 million for the quarter, and $113 million for the year, resulted from a significant non-cash impairment driven by market valuation, while cash flow, liquidity, and debt metrics remained stable. Management issued 2026 guidance projecting lower adjusted EBITDA and earnings per share, reflecting headwinds from declining occupancy and state grant reductions, despite ongoing tuition increases and disciplined expense control. Strategic focus is now on restoring center-level execution, increasing marketing investment, and aggressively reviewing underperforming locations for potential closure to align the portfolio and cost structure. The company stated that all performance-based compensation now targets measurable profitable enrollment growth, and leadership roles have shifted to ensure direct accountability for turnaround objectives.

• Wyatt said, “I really believe that when we get our centers back to, and our center directors back to, focusing on introducing KinderCare Learning Companies to more families, being a part of the community in a bigger way, doing the,” underscoring management’s confidence in internal execution levers to address enrollment weakness.
• CFO Tony Amandi provided, “Our guide at this point, Andrew, at our 3% down on FTEs assumes a curve that is, for the most part, similar to last year,” clarifying expectations for occupancy recovery are currently baked into standard seasonality trends, with upside possible from new initiatives.
• Management confirmed no anticipated disruption to federal child care block grants for 2026, based on recent legislative action and government reassurances, but expects minor fluctuations among states.
• Wyatt emphasized, “I am an ex-retailer, and you know that when you have a multi-site business, you are always evaluating all your centers. You are building some, you are closing some, and you are renovating some others. All of that is what we do, and I just came back with a heightened awareness of that and wanted to be sure that we were as current as we could be, and Tony has done a phenomenal job with that,” illustrating the proactive and ongoing portfolio management approach amid persistent market and operational headwinds.

INDUSTRY GLOSSARY

• Same-center occupancy: The percentage of available seats filled in centers that have been open continuously through the comparison period, used to assess organic growth excluding acquisitions or closures.
• B2B (Business-to-Business): Company channels involving child care services provided directly to employer partners, including on-site centers and employer-sponsored enrollment benefits.
• FTE (Full-Time Equivalent): A staffing and enrollment metric representing the workload of an employed person or enrolled child in a full-time schedule, used for performance measurement and incentive purposes.
• CCDBG (Child Care and Development Block Grant): A federal funding mechanism supporting child care affordability and access for eligible families, referenced in context of state subsidy programs.
• Tuck-in acquisition: The purchase of smaller centers or operations intended to supplement the existing portfolio for incremental growth.

Full Conference Call Transcript

Operator: Good afternoon, ladies and gentlemen, and welcome to the KinderCare Learning Companies, Inc. fourth quarter 2025 earnings call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. This call is being recorded on Thursday, March 12, 2026. I will now turn the conference over to Olivia Kirrer, Vice President of Investor Relations. Please go ahead.

Olivia Kirrer: Thank you, and good evening, everyone. Welcome to KinderCare Learning Companies, Inc.'s fourth quarter and full fiscal year 2025 earnings call. Joining me from the company are Chief Executive Officer, Tom Wyatt, and Chief Financial Officer, Tony Amandi. Following Tom and Tony's comments today, we will have a question-and-answer session. During this call, we will be discussing non-GAAP financial measures. The most directly comparable GAAP financial measures and a reconciliation of the differences between the GAAP and non-GAAP financial measures are available in our earnings release, which is posted on our Investor Relations website at investors.kindercare.com under the Financials tab. And finally, a reminder that certain statements made today may be forward-looking statements.

These statements are made based upon management's current expectations and beliefs concerning future events impacting the company and involve a number of uncertainties and risks, which are explained in detail in the risk section of our most recent Annual Report on Form 10-K and other filings with the SEC. Please refer to these filings for a more detailed discussion of forward-looking statements and the risks and uncertainties of such statements. The actual results of operations or financial condition of the company could differ materially from those expressed or implied in our forward-looking statements.

All forward-looking statements are made as of today, and except as required by law, KinderCare Learning Companies, Inc. undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future developments, or otherwise. I will now turn the call over to Chief Executive Officer, Tom Wyatt.

Tom Wyatt: I am pleased to be joining you today in my first earnings call since returning as CEO in December. It is wonderful being back at the helm of KinderCare Learning Companies, Inc. and leading this talented team. This company's purpose has been a significant part of my life for a long time. In these first few months back, it has been productive. The work we have begun to redirect our company back to the type of growth I oversaw for twelve years is gratifying, and I am looking forward to sharing more with you today. Let me start with this. Our recent performance has not been where we expected it to be, and that responsibility is ours.

In some areas, we fell short of the consistency and execution that families expect when they choose KinderCare Learning Companies, Inc. That perspective, along with the time I have been spending in our centers with our field teams, with clients, and many of you, has reinforced where we are executing well and where we need to improve. We must move with greater urgency, act more decisively, evolve how we operate, and strengthen accountability across the organization. Beyond our immediate business activities, I have spent time with lawmakers at both the federal and state levels, and I am encouraged by the strong bipartisan support we are seeing for the child care sector overall.

We also continue to receive feedback from public policy officials about KinderCare Learning Companies, Inc.'s industry leadership. I am proud that we continue to support working families in our centers while advocating for policies that strengthen access to quality, affordable child care. That commitment is reflected in our culture, as KinderCare Learning Companies, Inc. was once again named one of Gallup's Exceptional Workplaces for the tenth consecutive year. It is our educators and teams who bring our culture to life every day. Their unwavering dedication has been the cornerstone of our success as they build confidence in children and families across the United States, even in years that test our resilience.

Last year was one of those years, as KinderCare Learning Companies, Inc. delivered a mixed performance in the fourth quarter and overall throughout 2025. Concerns about inflation and the broader economy and declining consumer confidence magnified affordability concerns for some of our customers, creating a challenging environment. Confusion around federal and state grants further tested the child care sector, although continued bipartisan support for child care underscores the long-term importance of access to quality child care. The economic and policy landscape will continue to evolve as it has over our nearly sixty years in business, but our commitment to serving working families remains at the core of who we are. With that context, let me turn to our results.

Overall, we finished 2025 slightly better than at the end of Q3. Including an extra week in the fourth quarter this year, revenue was $688,000,000, up 6% from last year. Adjusted EBITDA in Q4 was $68,000,000. Adjusted earnings per share was $0.12, and same-center occupancy was 64.5%, down 340 basis points from last year. Tony will walk you through the extra week impacts during his remarks. While 2025 presented some areas of pressure, we made progress across our brands during the year. KinderCare Learning Companies, Inc., which accounted for 88% of our total revenue, continues to be the core driver of our overall performance.

Our top quintile centers felt some of the headwinds during the year, while performance in our lowest quintile showed encouraging improvement. Much of that progress reflects the work underway in our opportunity region, which is a focus group of centers in our fourth and fifth quintiles receiving individualized leadership support to help unlock their growth potential. At the same time, we continue to expand the portfolio through new center openings and acquisitions, including expanding into Idaho and extending our high-quality classrooms to more families and communities.

In a market that remains highly fragmented, and where the three largest providers make up less than 5% of the total market, our national network gives us a unique ability to responsibly expand access to high-quality child care over time. Our Champions before- and after-school brand continued to drive purposeful growth through an aggressive pace of new site openings and contributed 8% to total revenue in 2025. Our newest brand, Crim Schools, contributed 4% to total revenue during the year. In 2025, we executed a focused reset of the brand, refined its positioning, and strengthened operational and program consistency while opening two new schools. Early indicators this year are encouraging, and we are intent on building from that progress.

We expanded our B2B partnerships in 2025, providing flexible child care solutions to more working families while opening six new on-sites, the most in a single year for our company, and bringing our total to 77 employer-sponsored centers. During the year, we opened new sites for government clients in Maricopa and Montgomery Counties, for energy sector employees at Halliburton, and most recently for health care professionals at UNC Health Johnston. As we deepen relationships with more than a thousand employers, we see continued opportunity for steady organic growth in our B2B business. Overall, we continue to build on the capabilities in our brands that have long defined KinderCare Learning Companies, Inc. when we operate at our best.

But this is not about looking backward. It is about moving forward with urgency, reaffirming the important role we play in supporting working families across the country. How we ended 2025 is how we began this year. We are approaching this year with a clear understanding of what needs to be improved. This year is about raising the standard of execution across the business. That means improving how our centers operate, aligning spending with our highest priorities, and taking deliberate portfolio actions among underperforming centers when needed, while continuing to grow responsibly through new center openings and acquisitions.

To reinforce that focus, we changed our short-term incentive plan so incentive compensation is more directly tied to the financial and operational outcomes we expect to deliver. Going forward, all employees eligible for a performance bonus will share responsibility for achieving our growth targets. For the KinderCare Learning Companies, Inc. brand, we are increasing marketing investments and expanding proven operational practices from our opportunity region. The path ahead for this brand reflects what we know and what we have learned, which will drive the next phase of our growth in our centers. What will be different begins with clarity about who we are and the experience families expect when they choose KinderCare Learning Companies, Inc.

From there, it is about reaching new families, deepening engagement with those already enrolled, and ensuring that we continue to earn their confidence every day, from their first inquiry to the day their child graduates into kindergarten. To help navigate this path, we have simplified some of our management priorities, as Michael Canavan, President of KinderCare Learning Companies, Inc., who previously led the brand through a period of sustained growth, has shifted from overseeing multiple areas of the business to a single focus on driving only KinderCare Learning Companies, Inc. Crim schools underperformed our expectations last year as we implemented significant brand repositioning.

With that work behind us, Crem is now focused on translating those efforts into sustained enrollment growth through the refreshed curriculum we recently announced and targeted enrollment initiatives. Champions is set for another year of strong new site openings, alongside an increased emphasis on growing site-level enrollment. Across our B2B business, tuition benefit is as strong as ever, supported by our national network of centers that allows employees to access care at locations convenient to them. We are going to continue building on this momentum by expanding employer relationships, deepening client advocacy, and improving utilization to drive stronger partnerships and long-term growth.

At our best, KinderCare Learning Companies, Inc. is defined by strong leadership in our centers and sites, high standards in our classrooms, a differentiated educational experience, deep engagement with families, and the strength of our national network. Our expectations for this year reflect enrollment trends coming into the new year and the actions underway to strengthen execution and center-level performance. We expect this year to come with its own challenges. We will meet those challenges by building greater consistency across the business, addressing areas that have underperformed, and working hard to reinvigorate our enrollment trajectory. Tony will go over our 2026 outlook in detail.

I am encouraged by the progress we are making, the opportunities ahead, and the dedication of our people. Our enduring commitment to families is what differentiates KinderCare Learning Companies, Inc. within our industry. I look forward to the impact we will continue to make together. If there is one message I want to leave you with today, it is this: We understand where KinderCare Learning Companies, Inc. needs to improve, and we are taking action. That work starts with growing enrollment, improving how our centers and sites perform each day, and making decisive portfolio adjustments when needed. Results are going to take some time, but we are excited to do what it takes, and the work has already begun.

I will turn the call over to Tony now to walk through the financial results and guidance in more detail.

Tony Amandi: Thank you, Tom. Starting with a review of the fourth quarter, revenue was $688,000,000, up 6% year over year. This primarily reflects the incremental $45,000,000 contribution from the fifty-third week. On a comparable basis, revenue is essentially flat year over year. Tuition contributed 2% growth in our centers, and Champions delivered double-digit expansion, while lower center enrollment offset those gains. Enrollment trends in the quarter were consistent with our expectation exiting the third quarter. At the center level, we saw the same dynamics. Same-center revenue increased 6% to $618,000,000, driven by the extra week, tuition increases, and incremental contribution of new centers entering the same-center pool, partially offset by lower overall enrollment.

Same-center occupancy for the quarter was 64.5%, approximately 340 basis points below the prior year, in line with our revised guidance. Champions generated $60,000,000 of revenue in Q4, up 12% year over year, approximately $800,000 of which was from the extra week. The performance was supported by incremental site additions during the year and continued client growth. In total, we added 128 net new sites compared to last year and finished with over 1,150 sites. Champions and our broader B2B initiatives continue to diversify our portfolio and complement our community-based centers. We see them as important long-term growth drivers.

During the quarter, we expanded our B2B footprint with a new KinderCare for Employers on-site opening, completing a record year of employer-sponsored site growth. We also made progress across our other growth drivers. In addition to the on-site center, we opened six new community centers and added six centers through acquisition during the quarter. Alongside these growth priorities, we also closed seven centers in Q4 as part of our regular portfolio management activities. Due primarily to a non-cash goodwill impairment charge recorded during the quarter, we reported a net loss of $177,000,000 in Q4. The impairment was precipitated by market-based valuation inputs rather than changes in operating cash flows.

It had no impact to our liquidity, debt covenants, or ability to generate cash. Adjusted EBITDA totaled $68,000,000 for the quarter, which includes approximately $12,000,000 from the additional week and was helped by some incremental labor savings during the holiday period. Adjusted EPS was $0.12, up $0.03 from the prior year. SG&A to revenue was 10.7%, down compared to the prior year, which included some elevated IPO-related costs. We are now starting to lap additional ongoing public company costs and will begin to have more normalized comps in the coming quarters, as we remain focused on disciplined cost management and operational efficiency. Interest expense declined significantly year over year, reflecting debt repayment and repricing actions completed following the IPO.

These actions have lowered our structural financing costs and position us with a stronger and more resilient capital structure as we enter 2026. Looking at the full year, including the fifty-third week, revenue increased 2.6% to $2,730,000,000. Adjusted EBITDA increased just under 1% to $300,000,000. Adjusted EPS was $0.70, up from $0.40 in 2024. Same-center revenue increased 2.5% to $2,490,000,000, reflecting tuition increases, centers entering the same-center base, and the extra week in the year, partially offset by lower enrollment. For our long-term growth levers, tuition growth for the year was 2.2%. This reflected lower-than-usual increases in subsidy reimbursement rates along with the underwhelming performance at Crem.

Same-center occupancy declined 200 basis points for the year to 67.8%, as the early softness we experienced last year persisted through the back-to-school season and into year-end. We ended the fourth quarter at 64.5%, which forms a starting point for 2026. As many of you are aware, we group our centers in quintiles by EBITDA in order to better evaluate performance during the year. Centers in our top three quintiles continue to hold a high average occupancy of almost 79%. Additionally, in 2025, as in 2024, about 60% of our centers were over 70% occupied. Champions and B2B initiatives contributed about 1% to revenue growth.

We opened 14 new centers during the year, which contributed 20 basis points to revenue growth. We also acquired 26 tuck-ins during the year, which contributed about 60 basis points. The revenue contribution from new and acquired centers, including new on-sites, for the year was $23,500,000. Cash consideration for the 26 acquisitions was $23,000,000 and was funded completely out of the $110,000,000 in free cash flow generated over the year. Partially offsetting our center growth were 19 closures, which came out to about a 1% impact to overall revenue growth. The primary drivers of the income statement were consistent with what we saw in the fourth quarter.

SG&A was more in line with our ongoing run rate compared to 2024, and interest expense declined substantially over the year following the balance sheet actions taken post-IPO. For the full year, we reported a net loss of $113,000,000, largely attributable to the non-cash impairment recorded in the fourth quarter. Adjusted EBITDA margin for the year was 11%. While enrollment softness created top-line pressure throughout the year, disciplined expense management helped preserve overall margin performance and better align our cost structure with our current enrollment trends. Adjusted net income increased to $83,000,000 from $39,000,000 in 2024.

We ended the year with net debt to adjusted EBITDA of 2.6x, at the lower end of our targeted range of 2.5x to 3.0x, which we believe provides a stable and resilient financial foundation. While enrollment remains below prior-year levels, the operational discipline implemented through 2025, particularly in our opportunity region, positions us to operate with greater consistency and control. Looking forward to 2026, our outlook is informed by the enrollment patterns exiting last year and our initial read on first-quarter performance. We expect revenue of $2,700,000,000 to $2,750,000,000 for the full year, as compared to $2,690,000,000 on a fifty-two week basis in 2025.

As the Q4 trends have carried over into the new year, lower enrollment in our largest brand is weighing on our top line, offsetting benefits from tuition increases that began taking effect in early January. The enrollment outlook is driven by year-over-year challenges overall in both private pay and subsidy enrollments. We expect enrollment to improve gradually as we move towards our summer-out period, although we do not expect that growth rate to surpass the rate we saw in the first half last year, given our current trends.

Therefore, our full-year expectations reflect regular seasonality from a lower starting base, as the actions we have taken to stabilize occupancy and improve performance have an opportunity to drive comparable enrollment and occupancy improvements in the second half.

Tom Wyatt: We will continue to maintain a healthy spread between tuition and wages.

Tony Amandi: Adjusted EBITDA is expected to be $210,000,000 to $230,000,000 this year, down from $288,000,000 for the comparable fifty-two week period, driven mostly by lower occupancy, a reduction in grants versus 2025, and increased marketing investment aimed at driving our top-funnel activity for targeted centers. Consequently, we are projecting adjusted EPS to be $0.10 to $0.20, down from $0.62 for the comparable fifty-two weeks in 2025. Our full-year guide assumes tuition to drive approximately 3% of revenue growth and be fully offset by a 3% decline in same-center occupancy. Our other growth lever assumptions are expected to continue with their growth trajectories: Champions and B2B contributing about 1%, and new center openings and acquisitions contributing approximately 0.5% to revenue growth each.

Additionally, we expect revenue growth to be impacted by about 1% for the 15 to 20 closures, which normally act as an offset each year. Our guide does not assume any closures beyond that, although we will likely take additional targeted actions where appropriate. We expect free cash flow to be between $35,000,000 and $40,000,000 and CapEx to run about 5% of revenue for the year, with most of that CapEx directed towards growth. For modeling, you can assume our effective tax rate to be around 27%. We do not plan on regularly providing quarterly guidance. However, since we are so close to quarter end, additional color will be helpful.

For the first quarter, we expect revenue to be in the range of $664,000,000 to $674,000,000, adjusted EBITDA to be between $45,000,000 to $48,000,000, and adjusted EPS to be about breakeven. These expectations are underpinned by the drivers we have outlined for you already. As a lower base and enrollment trend carries over from the second half of last year and creates an unfavorable comp versus the first quarter last year, enrollment remains below prior-year levels. Our outlook reflects that starting point. Actions taken last year and those underway now are intended to position the business to exit the year on a better trajectory.

Our priorities for 2026 are clear: stabilize occupancy, improve performance in lower-performing centers, and take decisive portfolio actions where needed, while maintaining financial discipline. Operator, we will now open for questions. Thank you.

Operator: Ladies and gentlemen, we will now begin the question-and-answer session. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then the number two. Our first question comes from the line of George Tong from Goldman Sachs. Your line is open.

George Tong: Hi, thanks. Good afternoon. You are guiding to 8% EBITDA margins in 2026 at the midpoint. That is a pretty significant drop from 11% in 2025. Can you elaborate on some of the key factors causing this sharp drop in margins?

Tony Amandi: Yes, of course. Hey, George. Look, the first thing I would start with from your 11% is the extra $12,000,000 we have in the fifty-third week. Right? So that is not going to duplicate, and that fifty-third week is always a lot more profitable given the time of the year. From there, the big call-out is really all about those FTEs, George. Obviously, the top line is impacting us, but as we have that lower occupancy expectation, that is the biggest thing that we are deleveraging, obviously, with that, and that is impacting all the way down to margins. The other call-out I kind of made there was grants.

We knew in 2025 that was going to be the peak of the year, and it turned out that way, as the states were reacting to their funds rolling off, and we are seeing that in the back half of last year and expecting it to stabilize back to normal pre-COVID levels this year as well. So we are seeing that. But it is all about FTEs and KinderCare Learning Companies, Inc., George, really, and that is the biggest impact on margin.

George Tong: Got it. That is helpful. And I know you mentioned goals to move with more urgency, act with decisiveness, and strengthen accountability. Can you talk at a high level about your top priorities to achieve those initiatives for the upcoming year?

Tom Wyatt: Yeah. George, this is Tom. Good to talk to you. We have done a number of things. One of the specific things that we did—well, let me start with—we feel really good about the business we have in the at-work space. That business is growing for us. It saw that nice momentum last year, and it is on plan this year as well. We feel the same way about Champions. Champions had a great year last year. They are on track to have a great year this year, double-digit increase as well. So this is all focused on KinderCare Learning Companies, Inc., and it is all focused, as Tony just mentioned, on enrollment.

What I would tell you we have done is we have taken Michael Canavan, who is the President of KinderCare Learning Companies, Inc., who was also managing other businesses for us in 2024 and 2025, and we moved Michael back to just KinderCare Learning Companies, Inc. And when Michael joined me, quite frankly, back in 2012, 2013, he was totally responsible for KinderCare Learning Companies, Inc., and he enjoyed, and led, frankly, the growth that we had during those years. So that is number one. We want to put Michael back in charge. Michael will not have any distractions from KinderCare Learning Companies, Inc. and will work on enrollment.

The second thing we did is we cleared the distractions of the center directors, which were many. When I got back to the company, there were a number of activities going on in the centers that were distracting, candidly, and we have taken those out, and we have actually seen already some improvement from that in activities including enrollment. So we feel better about the role of the center director, making them the center director they want to be, and that is introducing KinderCare Learning Companies, Inc. to more families, more children, and going from that standpoint.

The third is that we added significant investment in paid search for the first half of this year, and we are contemplating doing the same thing in the second half. We are seeing trajectories there we have not seen in a while. We actually have an increase in number of inquiries year over year, which is positive and feels good to us, and that is something that we are going to continue to build upon. The last thing I would tell you is that we changed our incentive compensation program.

It has always had growth as a part of it, but we, this year, made it literally 100% focused on growth, on profitable and FTE growth, for all aspects of anyone that is in an incentive program. So those are the key components that we have done. The big ones being Michael to me, obviously, paid search is already showing signs of life, and clearing the distractions. We are allowing our center directors to be center directors, candidly, and they have not been for about a year and a half.

George Tong: Very helpful. Thank you.

Tom Wyatt: You bet.

Operator: Our next question is from Andrew Steinerman from JPMorgan. Your line is open.

Andrew Steinerman: Hi, Tony. You moved a little quick for me on the prepared remarks. Could you just give us, for the quarter just reported, the M&A revenue contribution? And then within the context of the full-year guide on occupancy being down—and, obviously, you cannot really do anything at the immediate front because that is kind of where we are going into the year—my question is about the pacing throughout the year. For example, by the time we get to September enrollments, is there an expectation that occupancy could be flat by then or by the end of the year? Just to get a sense of the pacing of the year.

Tony Amandi: You bet, Andrew. So revenue from acquired centers was $6,200,000 in the fourth quarter, totaling $14,900,000 for the full year. Let me give you a little commentary on just how the year trends, and then, Tom, if you want to add anything on where we could go. Our guide at this point, Andrew, at our 3% down on FTEs assumes a curve that is, for the most part, similar to last year and what we have seen historically—really primarily last year and a little bit of the back half of 2024. Utilizing that guide—what do I mean by that?

We will continue to grow incrementally, and we have been even this year, and we did from week two all the way until about week twenty. It was kind of towards May, and we will grow incrementally every week up until that point where May is usually our high point. At that point, we call it summer’s out, and that is an inflection point for us. We will lose a handful of families to some different summer decisions and also get a lot more incoming families from some of their summer decisions.

That is a big inflection point that we are building into now with our marketing and outreach with our families as early as right now, and that is an inflection point to start to hopefully add some more students at that point. We will hold those students over the summer, and then back to school is obviously the big one. They have a big inflection point. I think you are all aware of that. The current guide assumes pretty consistent performance to last year, but both those inflection points give us the ability to break those curves. And so—

Tom Wyatt: I would like to add this. Number one, I do not accept that curve, just to be honest with you. Call me optimistic, but when I came to this company in 2012, the company had experienced thirteen quarters in a row of negative top and bottom line. I joined in February 2012, and in July of that year, we went positive, and we stayed positive up to and including COVID. So this opportunity for us to change the trajectory of this business is significant.

By offering opportunity for our center directors to be more focused on enrollment, to add paid search—which we did not do back in 2012; we just did it organically—and to bring Michael back into the fold as the head and the driver, the leader he was back then, are significant. So we are being thoughtful with using the curve from 2025, but I will be very disappointed if we stay with that.

Andrew Steinerman: Okay. Thanks, Tom.

Operator: The next question is from Jeffrey Meuler from Baird. Your line is open.

Jeffrey Meuler: Yeah, thanks. I guess it is going to be a similar question to what I asked last quarter, but maybe, Tom, in the context of just comparing how you view the industry structurally today to when you joined in 2012. KinderCare Learning Companies, Inc. is not the only player in the market that has had tougher enrollment trends over the last year, and we are always trying to sort through to what extent that is cyclical and to what extent that is structural and to what extent execution plays a role.

I would just love your views on the structural health of the industry or what has evolved either since you last joined or since you last stepped out of the CEO seat. Thanks.

Tom Wyatt: Yeah. Happy to. When I joined in 2012, the business was as it had been for, quite frankly, decades, growing at a moderate rate of 1% to 3% a year in occupancy and, quite frankly, in just FTEs naturally. It was only after the pandemic that we saw this pressure on growth. As far as the industry is concerned, what I see happening is this: the strong, scaled larger providers are staying strong, although they are obviously challenged by enrollment and occupancy.

But the issue I see now that money from the pandemic—if you will, ARPA monies, that kind of thing—are gone, we are starting to see a contraction of the mom-and-pops, the smaller providers, and quite frankly, we are seeing that even in the opportunities that are offered up to us to purchase. So I believe you are going to see this year—and quite frankly, we have asked Parthenon to do some work for us because I believe that you are going to see a contraction of smaller players in 2026—and you are going to see us as the providers, us being the larger providers, continue to scale and continue to find ways to potentially gain share.

I gave you an example of that. I said this to my team yesterday: If you look at the top three players in this business, it is obviously us in the number one slot, it is Learning Care Group as number two, and then Bright Horizons. If you look at all three of those, they barely come to 5% of the entire share of market of early childhood education, and we are at, like, 1.8%, 1.9%.

It baffles me that with aggressive approaches to marketing, aggressive approaches to the quality that we do, aggressive approaches to allowing our center directors to be high-quality providers of the relationship that they have, the effort they are making, the tours that they are taking, the time they are giving families, I feel like we will continue to grow. And I think there will be a few of us that emerge in 2026 doing just that. I do not think the entire market is going to grow in 2026. I think we are going to see more of what we saw in 2025 because of the economy, because of the instability of things that are going on in our environment.

But I do believe the opportunity for some of us to get in another lane, make an effort at what we are doing, put more emphasis on growth—we will get there. It is my opinion.

Jeffrey Meuler: And then I think you said twice in your prepared remarks that you fell short of the consistency that families expect. My prior understanding was the challenges were more on demand or inquiry conversion, but existing family retention was good. Can you go into more detail on what you meant by fell short of the consistency families expect, and was that directed at existing families and retention, or was that more on inquiry conversion?

Tom Wyatt: No. Our retention I am pretty happy with. It has been stable and actually grown a tiny bit, so we are fine there. We have not seen any slippage, per se. Where I was speaking to specifically there is—and I go back to my comments earlier—is that we did not allow our center directors to be center directors. They were bombarded with a number of things that really distracted them from the core effort of what they do, and that is taking care of families, being in the classroom, recruiting great teachers, and creating the environment they have.

They were not able to do the tours and do them in the quality way that they have done in the past because they were busy. They were distracted. And the opportunity for us to give them back the time to do a high-quality tour, to be in the classroom, to empower their teachers, to do all of that, is what we do well, and quite frankly, we are getting back to that.

Jeffrey Meuler: Okay. Thank you.

Tom Wyatt: You bet.

Operator: Our next question is from Ronan Kennedy from Barclays. Your line is open.

Ronan Kennedy: Hi. Good afternoon. This is Ron Kennedy on for Manav. Thank you for taking my questions. You spoke of bipartisan support, but also acknowledged confusion around the federal and state grants further testing the child care sector. There have been headlines early in the first quarter and throughout, whether it is the HHS defend the spend or state-level budget cuts, administrative throttling, or reimbursement rates. Can you talk about those dynamics and the impacts for first quarter and what is contemplated in the guide?

Tom Wyatt: Happy to. I have only been here ninety days. But in those first ninety days, I have been to Washington and visited with senators and congressmen and women, basically combating, if you will, and defending our approach to CCDBG and our integrity around that. Minnesota was a curveball, and it happened right at the December into January period, and the second, maybe third week, six CEOs and I flew to DC to ensure the government officials that we were not the problem—we were the solution.

And candidly, they agreed with us, and we have worked with them to be sure that they are looking at things, that they are setting up the right corrective actions to weed out and flesh out any possible fraud that may occur or might occur in that part of our business. What I came out of that meeting with—we met with the head of that, Alex, and forgive me, I do not remember his last name, but a great guy who works for RFK and literally is the top player in that arena—he feels very good about where the major providers are and has no intentions of freezing any funds or slowing any funds down.

For the first quarter, we will see no impact to that, and quite frankly, we do not see an impact to it this year. I would also tell you that a week after we were in Washington, they actually raised the block grant $85,000,000 more, about 1%—not a lot, but it is a lot better than freezing the funds, candidly, and it was a lot better to see a bipartisan support function increasing, although a little, increasing the CCDBG, the block grant. I also spent time in February in Colorado, and I will be spending time next week in Massachusetts.

I will visit with the governors there and the lieutenant governors there and also the heads of education in both states, and I have done this all my career in this world. I have always wanted to get out and meet with them and be sure they realize the emphasis and impact that we have on hardworking families and, quite frankly, the development that we have on children. So we are taking a very strong offensive stance to that. I have a meeting in May with eight of the CEOs, the top CEOs in the country, just those folks, to have a strategic session with them as well. All of that to say, I feel good about the block grant.

I feel good about subsidy in total. We do not see any interruptions to it. Frankly, we feel good. Now I will tell you we have had some manipulations in state funding, and so some states are allocated more, some states are allocated less, but for us being in forty-one states around the country, we may see an interruption of a couple of funds or dollars in one state, but we pick them up in the following state. So all in all, it is something we have to be all over.

Quite frankly, we have a staff of a few hundred that administer the subsidy disbursements in our company, and that is, quite frankly, a competitive advantage we have in that space.

Ronan Kennedy: Thank you very much. Appreciate the insights there. If I may, I will shift gears. You referenced being willing to take deliberate portfolio actions among the underperforming centers. I do not think the guidance contemplates that; it was referred to as a possibility. Can you help us understand that decision framework? Is there a level of low occupancy, margin, or trajectory that would trigger a center-specific targeted initiative for improvement or potential exit? And then what the total impacts of those could be for 2026, please.

Tony Amandi: Yes. So, Ronan, look, in the guide we have been doing 15 to 20 per year the last few years, and you all know that, and so as we build out our guide and where we are going for this year, we did that. One of the things that Tom has asked myself and others, as he has been here and taken things in, is to do another hard look at all of our centers and revalidate that all of our centers are the ones that are going to take us through 2026 and into 2027 as we get all the FTEs back across this fleet.

So we are, frankly, in the middle of taking a hard look at all of our centers, and the things you are talking about are the ones that are important: demographics, occupancy, engagement, and all of their trends. We are taking a hard look at that now so that we can come back and look ourselves in the mirror that we have the right centers going forward, and that is likely going to be a higher number than 15 to 20. We are just not at the point now where we can give you that number because I do not even have it, but we are working through it.

Tom Wyatt: And I will just add one comment. I am an ex-retailer, and you know that when you have a multi-site business, you are always evaluating all your centers. You are building some, you are closing some, and you are renovating some others. All of that is what we do, and I just came back with a heightened awareness of that and wanted to be sure that we were as current as we could be, and Tony has done a phenomenal job with that.

But I did want to take a little bit more of an aggressive approach, candidly, from looking at it, given the enrollment trends of the last year, year and a half, and just be sure that we were where we needed to be.

Ronan Kennedy: Thank you very much. Appreciate it.

Operator: Our next question is from Toni Kaplan from Morgan Stanley. Your line is open.

Toni Kaplan: Thanks so much. I was hoping that you could delve a little bit more into the enrollment issues. It has been asked in a couple of different ways, but how much of it do you think is market-driven versus self-inflicted? What could drive enrollment better or worse than the down three in the guide? And I know the specific things that you are doing to try to stem the decline here—you talked about personnel and paid search and incentive comp changes—but any very specific things you are doing to try to drive enrollment, and what you see as the real core issues on the enrollment side?

Tom Wyatt: Happy to, Toni. I will start with something we have not yet, and that is, as you know, we have had some very good success and solid success in our opportunity region in 2025, and I can tell you that 2026 is still performing above where it was before, and we are very excited about that. As a matter of fact, we have taken many of the best practices out of the opportunity region, if you will, and we have actually implemented those in all of our centers for 2026. Other than that, I would say that there are macro situations that we are in.

I go back to inflation, just the economy in general, the instability of our country right now. Even the work environment—people are still figuring that out. All those have played, or have been noise in, the aspects of enrollment. But I will tell you, to me, enrollment for us has been self-inflicted for the most part—not totally, but for the most part. I actually believe when I look at the amount of activities that are going on in the center that do not pertain to enrollment, it has been significant.

I really believe that when we get our centers back to, and our center directors back to, focusing on introducing KinderCare Learning Companies, Inc. to more families, being a part of the community in a bigger way, doing the things that they need to do to create that kind of interest and enthusiasm, we will do much better. On top of that, please do not take anything away from the paid search that we have spent. We have spent millions of dollars there that we have not spent in the past, and it is showing increases in the number of inquiries we get—not only the number, but also the quality of inquiries. They are coming to us.

They are literally, if you will, in real time being spoken to. I mentioned earlier about the distractions we had. If someone inquires to KinderCare Learning Companies, Inc., obviously they are likely looking at other centers or inquiring at other centers. If we do not get back to them quickly, they may make a decision based on somebody else’s proactivity. Our centers today now have time and the effort and the focus and priority to go after those inquiries as quickly as they possibly can. And I mentioned Michael earlier—getting Michael back into that.

He is an operations guru, and the opportunity for him to be at the centers, be sure that they are focused on these things, reliving all the things that he accomplished in the years past, I believe is going to make it all come together. The fact that we started the year literally communicating that growth is priority one, including the change in our compensation program for the whole company, I think those are the right signals to send, and I hope they are going to bear fruit.

Toni Kaplan: Great. And then thank you for the update on the quintiles chart. I noticed the top four quintiles had deteriorated a little bit year over year, and the fifth got better. When you think about those top four, are you concerned that those are going down? What is the right level there? And when you think about the quintiles, are there different problems in the first quintile versus the third quintile, or would you generally put quintiles one to four in the same bucket of suffering from the same trends?

Tom Wyatt: No. I would say to you, quite frankly, the top quintile is our highest quality center. It is the center that has the most stability in it. It is the center that, quite frankly, has the highest family engagement and the highest employee engagement, and it goes down from there. I would say to you, each one of them has individual challenges, but for the most part, the reason those higher quintile centers were down goes back to the distraction of the center director, in my opinion. They did not have the opportunity to do what they needed to do, and they were highly occupied to begin with.

So the opportunity to take the opportunity region’s best practices to those other quintiles, if you will, is going to help them. That, along with the paid search, that, along with clearing the decks for the center directors to be center directors, all of that is going to help those grow. I am not at all concerned about those quintiles going forward. Quite frankly, they are the ones that we have poured the marketing towards, and that is where we are going to go.

Toni Kaplan: Thank you.

Operator: Our next question is from Jeff Silber from BMO Capital Markets. Your line is open.

Ryan (for Jeff Silber): Hey. Good afternoon. This is Ryan on for Jeff. Just on the pricing algorithm, I understand the age-up methodology, but it looks like you were around 2% for 2025. From the conversations with parents, what is the appetite for the 3% price increase you are layering in this year? Thank you.

Tony Amandi: Yeah. Of course. As a reminder, the tuition that we talk about as a company is the mix of approximately two-thirds private pay, one-third subsidy family. So our rate was actually higher than 3% last year as well on the private pay side, and really what pulled us down this year was some of those states—Indiana being the big one, but a few others too—in really that back half of the year where we saw additional displacement from those private pay rates with what we are getting from subsidies. So far, we are, what, nine weeks into the year, and it has been really quiet as far as our new rates, and so we are feeling good about that.

Again, as a reminder for everyone, when we put those new rates in January, they are for new students and age-ups, and so it is not really as much of a price-increase conversation. Virtually all of those families that age up are still actually going to be paying less than they did the prior week, even with that embedded price. So the way we do that really helps with those conversations and helps the families feel solid about it, and we are making sure we are living up to the value we need to give those families. Even with those price increases, they are not feeling them.

We need to be able to speak to the value they are getting from us.

Tom Wyatt: I appreciate it.

Ryan (for Jeff Silber): And then you talked about some early wins on the selective marketing fund. How are you measuring that, and when do you expect to see some of those results come to fruition that will feed into the P&L?

Tom Wyatt: The great thing about paid search, and I am sure you know this, is that you can track it all the way from inquiry to tour to actual enrollment, and we are doing every bit of that. Quite frankly, with AI, the amount of data we are getting and capturing is phenomenal. What I was speaking to earlier, quite frankly, was just year-over-year growth in inquiries. If we have more people inquiring for KinderCare Learning Companies, Inc., and we are giving our center directors more time to generate a tour and generate the opportunity and conversation around enrollment, we will win, and that is the approach we are taking to it.

So it starts with just getting traction in the number of inquiries that we have year over year, and that has shown up. It has shown up significantly for our smaller brands, and it has shown up in an increase in KinderCare Learning Companies, Inc. as well. So, all in all, that is encouraging to me. I go back to my comment earlier about we are less than 2% of the share of market in this business.

If we are going to be aggressive, and we are going to increase inquiries, and we are going to give center directors the opportunity to do their job, the opportunity for us to grow enrollment is there, and so the opportunity now is all about execution. That is the approach that we are taking.

Operator: Our next question is from Josh Chan from UBS. Your line is open.

Josh Chan: Hi. Good afternoon. Thanks for taking my questions. Hey, Tom, if somebody suggests or asks you whether growing enrollment is tougher now than it was ten years ago, how would you agree or disagree with that?

Tom Wyatt: No. Let me explain to you why I am going to say what I am going to say. Enrollment, after a family decides, one, that they are proud of the brand—this is a brand they want to be associated with—inquires about potential openings in their child's age group, and then shows up for a tour, the actual opportunity to enroll them has not changed. We are one of the very few companies that actually show them how much KinderCare Learning Companies, Inc. costs for their child in the classroom in their community, so they come to our center knowing that. Quite frankly, this industry does not do that as a practice.

We felt like we should be transparent so we do not waste someone's time. If they can afford KinderCare Learning Companies, Inc. and they want to see the actual experiences a child has in the center, please come. I can tell you that by doing that, we have seen better enrollment as a percent of the total inquiries and tours than we saw prior to that. So it is not a problem.

You have to understand that if a family is, one, in need, and, secondly, has chosen the number one brand in the country, KinderCare Learning Companies, Inc., and then has come in to take a tour and be with our center director and spend some time in the classroom, we are pretty confident we can win that tour.

Josh Chan: Okay. That makes a lot of sense. Thank you for that color. And then kind of a financial question. If you take out the fifty-third week in 2025, then your guidance assumes slight revenue growth in 2026, but then a $60,000,000-plus EBITDA drop. Does that contrast surprise you? I know that there is enrollment and deleverage and things like that, but that just seems like a very large contrast between the top and the bottom line. Is there a way to kind of conceptualize that?

Tony Amandi: Yeah. A little bit to what I think George asked too as well. The biggest driver there truly, Josh, is the deleveraging in what you see as those enrollments go down. The basic fixed costs—rent, center directors, and some of the other fixed costs—obviously you are getting no leverage off of that at all, and it is harder as you drop down, especially kind of into the sixties where we are at on average across the fleet, to make up the teacher hours. You are not making up many teacher hours by dropping enrollment, and so that is really falling off, and that is the biggest impact that is really happening.

We are high-single-digits millions of grant loss by, you know, around seven to nine, actually probably closer to ten, year over year, with most of that being in the first half of the year of our expectations of what states are going to do to grants, which really normalizes 2026 back to where it was pre-COVID, in our expectation. And then the other one is some of this increased marketing as well is in our expectation there. Now, that should pay off for us over time and even in 2026, but at this point, kind of factoring that in, it is more weighted towards cost than the upside we will see from it.

Tom Wyatt: Okay.

Josh Chan: Appreciate the color, Tony, and thank you both for the time.

Operator: Are there any further questions at this time?

Tom Wyatt: Thank you, everyone, for your time today. We look forward to talking to you again very, very soon. Thank you so much.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

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