KinderCare Learning Companies, Inc. Q4 FY2025 earnings call

Chief Executive Officer Tom Wyatt returned in December and emphasized the need to move with greater urgency, act decisively, evolve operations, and strengthen accountability. KinderCare had mixed performance in 2025 with revenue up but same center occupancy down. Work underway in opportunity region for underperforming centers. Champions brand had purposeful growth with new site openings. B2B partnership expanded with flexible childcare solutions. Michael Canavan shifted focus to driving KinderCare. CRIM Schools repositioned and focused on enrollment growth. Champions to focus on new site openings and site-level enrollment growth. B2B business sees opportunity for growth.

KinderCare brand accounted for 88% of total revenue, with revenue of $688 million, up 6% from last year. Champions brand contributed 8% to total revenue in 2025. Crim Schools brand contributed 4% to total revenue during 2025.

Full year 2026 revenue expected to be 2.7 to 2.75 billion. Adjusted EBITDA expected to be $210 to $230 million. Adjusted EPS projected to be $0.10 to $0.20. First quarter 2026 revenue expected in range of $664 to $674 million, adjusted EBITDA between $45 to $48 million, adjusted EPS about break-even.

Economic and policy landscape uncertainties, confusion around federal and state grants testing the childcare sector, potential underperformance of underperforming centers, enrollment trends impacting financial results.

Q: You're guiding to 8% EBITDA margins in 2026 at the midpoint. Can you elaborate on key factors causing sharp drop in margins?

A: Big factor is lower occupancy, also grants normalization and increased marketing investment.

Q: What are top priorities to achieve initiatives for upcoming year?

A: Put Michael Canavan back in charge of KinderCare, clear distractions for center directors, add significant investment in paid search, change incentive compensation program to focus on growth.

Q: Can you give M&A revenue contribution for quarter and pacing of occupancy in year?

A: Revenue from acquired centers was $6.2 million in Q4, full year $14.9 million. Guide assumes curve similar to last year with inflection points like summer's out and back to school.

Q: Views on industry structure and where fell short of consistency families expect?

A: Industry has scaled providers but small players contracting. Fell short due to distractions preventing center directors from focusing on core enrollment efforts.

Q: Talk about bipartisan support and impacts on first quarter and guidance?

A: Bipartisan support for CCDBG, no impact to first quarter, see no impact this year.

Q: Decision framework for deliberate portfolio actions on underperforming centers?

A: Evaluating centers based on demographics, occupancy, engagement, likely to have higher number than 15-20 in past.

Q: How much of enrollment issues are market-driven vs self-inflicted and specific things to stem decline?

A: Mostly self-inflicted due to distractions, using opportunity region best practices, paid search, getting center directors back to focus on enrollment.

Q: Appetite for 3% price increase and measurement of selective marketing results?

A: Appetite quiet so far, paid search tracks from inquiry to tour to enrollment, showing year-over-year growth in inquiries.

Q: Whether growing enrollment is tougher now than 10 years ago and conceptualizing top and bottom line contrast?

A: Enrollment process after inquiry hasn't changed, big driver is deleveraging with lower enrollment, grant loss and marketing investment impacting.