KinderCare Learning Companies, Inc. Q3 FY2025 earnings call

Key Points

• Revenue for Q3 was $677 million, up nearly 1% from last year, with same center revenue $617 million. Same center occupancy was 67% due to summer seasonality.
• Back-to-school season had a cautious consumer backdrop, affecting enrollments. Subsidy business had softness in some states.
• Operational initiatives included center-level improvements, using digital tools for enrollment, evolving leadership, and leveraging diagnostic tools in opportunity regions. An example: a Michigan center went from 48% to 95% occupancy using tools.
• Annual engagement survey with over 130,000 family responses showed high engagement and retention. Lindsay Sarhondo promoted to COO, district leader structure refined. Opened new centers and acquired six tuck-in centers.

Revenue was $677 million, up nearly 1% from last year, with same center revenue of $617 million. Same center occupancy was 67%, at the lower end of the expected range. Champions revenue grew 11% in the third quarter versus last year, to $50 million. Employer on-site centers averaged over 70% occupancy. Early childhood education revenue softened due to slower enrollment activity, while Champions and Employer on-site centers continued to show solid growth.

2025 Guidance

• Full-year revenue expected $2.72B - $2.74B, adjusted EBITDA $290M - $295M, adjusted EPS $0.64 - $0.67.
• Tuition growth 2% lower than 2024 due to higher subsidy mix and state rate reductions.
• Same center occupancy expected to continue week-to-week growth but full-year lower than 2024.
• 2025 contribution from B2B, new centers, and tuck-ins each ~1%.

2026 Guidance

• Tuition increases to be larger contributor. B2B, NCOs, and tuck-ins expected to contribute ~1% each.

• Economic uncertainties impacting consumer confidence in child care decisions.
• Government shutdown and its downstream effects on state budgets and subsidy rates.
• Softness in subsidy business in some states, including reduced reimbursement rates and fewer new student authorizations.

Q: What are your expectations for enrollment heading into 2026?

A: We still see good local inquiries, and expect to return to historical growth algorithm long term as consumer confidence returns.

Q: Was the government shutdown factored into the guide?

A: Very few families were directly impacted, but uncertainty from shutdown affects state budget thoughts.

Q: When do you expect to get back to the long-term algorithm?

A: Overall, expect to get back to the algorithm in 2027.

Q: What's driving the expectation of higher pricing in 2026?

A: Wage expectations are set, and center-level factors like engagement and occupancy drive pricing decisions.