KinderCare Learning Companies, Inc.: Form 10-Q for the period ended Sep 27, 2025

The following discussion and analysis should be read in conjunction with, and is qualified in its entirety by reference to, our unaudited condensed consolidated financial statements and notes thereto for the three and nine months ended September 27, 2025 and September 28, 2024 included elsewhere in this Quarterly Report on Form 10-Q and audited consolidated financial statements and notes thereto for the fiscal year ended December 28, 2024 included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 21, 2025. Some of the information included in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” sections of this Quarterly Report on Form 10-Q for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Our Company

KinderCare Learning Companies, Inc. (“the Company,” “we,” “us,” and “our”) is a leading provider of high-quality early childhood education (“ECE”) in the United States. We are a mission-driven organization, rooted in a commitment to providing all children with the very best start in life. We serve children ranging from six weeks to 12 years of age across our market-leading footprint of 1,595 early childhood education centers with center capacity for 213,709 children and 1,138 before- and after-school sites located in 41 states and the District of Columbia as of September 27, 2025.

On October 8, 2024, our registration statement on Form S-1, as amended (File No. 333-281971) (“Form S-1”) related to our initial public offering (“IPO”), was declared effective by the SEC, and our IPO was completed on October 10, 2024. In connection with our IPO, the Company converted Class A and Class B common stock, both with a par value of $0.0001 per share, to common stock, with a par value of $0.01 per share, at a ratio of 8.375 shares of Class A and Class B common stock to one share of common stock, which became effective immediately following the effectiveness of our registration statement on Form S-1 for our IPO (“Common Stock Conversion”). As a result, prior periods presented in our unaudited condensed consolidated financial statements and notes thereto as of and for the three and nine months ended September 27, 2025 have been adjusted to retrospectively reflect the Common Stock Conversion. Refer to Note 1 within the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and Note 17 within the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 2024 for further information.

Factors Affecting Results of Operations

The following factors, among others described herein, have been important to our business and we expect them to impact our results of operations and financial condition in future periods:

• Increase revenues through improved occupancy and consistent price increases. Our future revenue growth is in part dependent on us continuing to grow revenues across our portfolio of centers. We invest in developing our brands, which have become widely recognized in the ECE market. Although we expect marketing activities to increase our cost of services, we expect them to positively impact our results of operations in the future.

Occupancy improvement: We aim to improve occupancy rates across our portfolio. Historically, we increased our average occupancy through a combination of strategic investments in technology and talent, as well as implementing best practices at our centers to improve timely response to inquiring families and enhance quality tours. We invest significant resources into our technology infrastructure to support our center and site operations and interactions with families. As our occupancy grows, we have an opportunity to gain further operating leverage and improve profitability as we allocate fixed costs over more enrollments.

Pricing model designed for continued growth: We expect to implement regular price increases to support center re-investment and enhance our operational performance. Tuition increases are standard across the industry, and we view them as a reliable component of our business model. Additionally, while we expect rates to increase each year, the out-of-pocket costs paid by parents with children who continue to enroll in our programs decline on an annual basis as tuition costs decrease as children age-up (e.g., three-year olds have lower tuition costs than two-year olds). Assuming consistent enrollment across ages, tuition increases have an immediate positive impact to revenue.

• Expand footprint through greenfield development and strategic acquisitions. Our long-term revenue growth depends on the expansion of our footprint, either through opening new greenfield centers or acquiring centers. We have a rigorous integration approach to transition acquired centers into our portfolio that allows us to deliver a consistent level of quality,

as expected by our clients and accreditors. Given the significant fragmentation in our industry, we expect to continue to pursue acquisitions complementary to our existing portfolio. Expansion will require cash investment, but we anticipate a long-term increase in both revenue and profit.

• Develop and nurture other revenue streams and expand service offerings. Supporting services adjacent to our ECE business provide diversification and drives incremental revenue. Leveraging our employer relationships, our business-to-business offerings, which include tuition benefits programs and employer-sponsored centers, are poised for growth as employers are increasingly recognizing the importance of supporting their employees with access to quality ECE programs. In the before- and after-school programs market we have contracts with approximately 2% of the nearly 64,000 elementary schools in the United States, providing significant opportunity to continue to grow our footprint.
• Access to governmental funding and advocacy to support the ECE industry. We receive various forms of federal, state, and local governmental funding to support our operations and serve more families including reimbursements for food costs through the federal Child and Adult Food Care Program as well as grants for capital purchases, teacher compensation, and other center operating costs. In addition, we proactively work with prospective and current families to help them access public subsidy funding. As a market leader, we believe we are well positioned to advocate for continued and increased government support for the broader ECE industry.
• Adapt to changes in seasonal demand for child care and other services. Enrollments at centers and before- and after-school sites are generally higher in the spring and fall back-to-school period and lower during the summer and calendar year-end holidays when families may be on vacation or utilizing alternative child care arrangements. As a result, revenue at centers and sites may decline during the third quarter, which overlaps with most of the summer season. To adapt to the changes in seasonal demand, centers offer summer programs and Champions offers day camps for school-age children during the summer and calendar year-end holidays.

Key Performance Metrics

Total centers and sites

We measure and track the number of centers and sites because, as our number of centers and sites grow, it highlights our geographic expansion and potential growth in revenue. We believe this information is useful to investors as an indicator of revenue growth and operational expansion and can be used to measure and track our performance over time. We define the number of centers and sites as the number of centers and sites at the beginning of the period plus openings and acquisitions, minus any permanent closures for the period. A permanently closed center or site is a center or site that has ceased operations as of the end of the reporting period that management does not intend on reopening. During the three months ended June 28, 2025, management updated the definition of total before- and after-school sites to include sites that are temporarily closed as a result of the summer season to more accurately reflect the total sites that were operating during the year. Prior periods presented were adjusted to reflect the updated definition for comparative purposes.

As of September 27, 2025, we operated 1,595 early childhood education centers with a center capacity for 213,709 children as compared to 1,573 early childhood education centers as of September 28, 2024, with a center capacity for 210,972 children. During the nine months ended September 27, 2025, total centers increased by 21 due to acquiring 20 centers and opening 13 centers, partially offset by 12 permanent center closures. During the nine months ended September 28, 2024, total centers increased by 16 due to acquiring 16 centers and opening 10 centers, partially offset by 10 permanent center closures.

As of September 27, 2025, we operated 1,138 before- and after-school sites, an increase of 120 sites from 1,018 before- and after-school sites as of September 28, 2024. Total before- and after-school sites increased by 113 during the nine months ended September 27, 2025 due to opening 212 sites, partially offset by 99 permanent site closures. Total before- and after-school sites increased by 70 during the nine months ended September 28, 2024 due to opening 155 sites, partially offset by 85 permanent site closures.

Average weekly ECE FTEs

Average weekly ECE full-time enrollment (“FTEs”) is a measure of the number of full-time children enrolled and charged tuition weekly in our centers. We calculate average weekly ECE FTEs based on weighted averages; for example, an enrolled full-time child equates to one average weekly ECE FTE, while a child enrolled for three full days equates to 0.6 average weekly ECE FTE. This metric is used by management and we believe is useful to investors as it is the key driver of revenue generated and variable costs incurred in our operations.

Average weekly ECE FTEs for the three months ended September 27, 2025 decreased by 2,783, or 1.9%, as compared to the three months ended September 28, 2024 primarily due to lower FTEs at same-centers.

Average weekly ECE FTEs for the nine months ended September 27, 2025 decreased by 1,998, or 1.4%, as compared to the nine months ended September 28, 2024 primarily due to lower FTEs at same-centers.

ECE same-center occupancy

ECE same-center occupancy is a measure of the utilization of center capacity. We define same-center to be centers that have been operated by us for at least 12 months as of the period end date or, in other words, centers that are starting their second year of operation. Excluded from same-centers are any closed centers at the end of the reporting period and any new or acquired centers that have not yet met the same-center criteria. We calculate ECE same-center occupancy as the average weekly ECE same-center full-time enrollment divided by the total of the ECE same-centers’ capacity during the period. Center capacity is determined by regulatory and operational parameters and can fluctuate due to changes in these parameters, such as changing center structures to meet the demands of enrollment or changes in regulatory standards. This metric is used by management and we believe is useful to investors as it measures the utilization of our centers’ capacity in generating revenue.

ECE same-center occupancy decreased by 160 basis points for the three months ended September 27, 2025 as compared to the three months ended September 28, 2024 primarily due to lower enrollment at same-centers.

ECE same-center occupancy decreased by 120 basis points for the nine months ended September 27, 2025 as compared to the nine months ended September 28, 2024 primarily due to lower enrollment at same-centers.

ECE same-center revenue

ECE same-center revenue is revenues earned from centers that have been operated by us for at least 12 months as of the period end date and is a measure used by management to attribute a portion of our revenue to mature centers as compared to new or acquired centers. This metric is used by management and we believe is useful to investors as it highlights trends in our core operating performance. The following table is in thousands:

ECE same-center revenue increased by $0.2 million, or 0.0%, for the three months ended September 27, 2025 as compared to the three months ended September 28, 2024. ECE same-center revenue growth of $5.8 million was driven by the net impact of new and acquired centers not yet classified as same-centers as of September 28, 2024 and center closures as of September 27, 2025. This growth was partially offset by a decrease of $5.6 million, or 0.9%, in revenue at centers that were classified as same-centers as of both September 27, 2025 and September 28, 2024.

ECE same-center revenue increased by $16.6 million, or 0.9%, for the nine months ended September 27, 2025 as compared to the nine months ended September 28, 2024. ECE same-center revenue growth of $0.7 million, or 0.0%, was driven by centers that were classified as same-centers as of both September 27, 2025 and September 28, 2024. Additionally, $15.8 million of the increase in ECE same-center revenue was driven by the net impact of new and acquired centers not yet classified as same-centers as of September 28, 2024 and center closures as of September 27, 2025.

Components of Results of Operations

Revenue

Our revenue is derived primarily from tuition charged for providing early childhood education and care services at our centers and sites. The majority of tuition is paid by individual families and may be partially subsidized by amounts received from government agencies or employer sponsors. Subsidy revenue from government agencies was $252.2 million and $242.6 million during the three months ended September 27, 2025 and September 28, 2024, and $751.2 million and $699.8 million during the nine months ended September 27, 2025 and September 28, 2024, respectively.

Cost of services (excluding depreciation and impairment)

Our cost of services includes the direct costs related to the operation of our centers and sites and excludes depreciation and impairment. Cost of services consists primarily of personnel costs, rent, food, costs of operating and maintaining facilities, taxes and licenses, marketing, transportation, classroom and office supplies, and insurance. Government assistance, consisting of reimbursements from federal, state, and local agencies, offsets certain operating expenses.

Depreciation and amortization

Our depreciation and amortization includes depreciation relating to centers and sites, field management, and corporate facilities as well as amortization related to finance lease right-of-use (“ROU”) assets and definite-lived intangibles, such as client relationships and trade names and trademarks.

Selling, general, and administrative expenses

Selling, general, and administrative expenses include costs, primarily personnel related, associated with field management, corporate oversight, support of our centers and sites, and stock-based compensation.

Impairment losses

Our impairment losses relate to property and equipment, operating ROU assets, and definite-lived intangible assets.

Interest expense

Interest expense includes long-term debt interest, gain or loss on interest rate derivatives, amortization of debt issuance costs, and gain or loss on extinguishment of debt.

Interest income

Interest income includes interest earned on cash held in interest-bearing accounts.

Other income, net

Other income, net includes sub-lease income, miscellaneous insurance proceeds, contract settlements, and realized and unrealized gains and losses related to investment trust assets.

Income tax expense

Income taxes primarily consist of an estimate of federal and state income taxes based on enacted federal and state tax rates, as adjusted for allowable credits, differences between the United States generally accepted accounting principles (“GAAP”) and tax income and deductions, and the tax effect from uncertain tax positions, as applicable.

Factors Affecting the Comparability of our Results of Operations

As a result of certain factors, our historical results of operations may not be comparable from period to period and may not be comparable to our financial results of operations in future periods. Set forth below is a brief discussion of the key factors impacting the comparability of our results of operations.

IPO and Related Transactions

In October 2024, our IPO was completed. Net proceeds from the IPO were primarily utilized to repay $608.0 million of outstanding principal on our first lien term loan (“First Lien Term Loan Facility”), which provided us the ability to enter into a repricing amendment to the credit agreement, dated as of June 12, 2023 (as subsequently amended and restated) (the “Credit Agreement”), to reduce the interest rates on our senior secured credit facilities. Additionally, we have incurred expenses during our transition to a public company that we had not previously incurred as a private company, including costs associated with public company reporting requirements of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), which have impacted our results of operations.

Our IPO, as well as the transactions we entered into in connection with our IPO, have affected the comparability of our operating results for the periods presented and are expected to have an impact on the comparability of future periods. Refer to Note 13 and Note 17 within our audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 2024 for further information.

COVID-19 Related Stimulus

During 2020 and 2021, the United States government approved several incremental stimulus funding programs for ECE providers in response to the coronavirus disease 2019 (“COVID-19”) pandemic, and as a result, we have received grants in the form of revenue or cost reimbursements (“COVID-19 Related Stimulus”). We recognized $0.7 million during the nine months ended September 27, 2025 and $16.9 million and $55.9 million during the three and nine months ended September 28, 2024, respectively, in funding for reimbursement of center operating expenses in cost of services (excluding depreciation and impairment). There were no amounts recognized during the three months ended September 27, 2025. The federal programs funding the COVID-19 Related Stimulus were required to distribute all stimulus funding for stabilization of the child care industry by December 31, 2024, and we do not expect to receive a material amount of funding after that date. The variability of funding provided by COVID-19 Related Stimulus has impacted the comparability of our operating results for the periods presented, and the conclusion of the programs will have an impact on the comparability of future periods.

The Employee Retention Credit (“ERC”), established by the Coronavirus Aid, Relief and Economic Security Act and extended and expanded by several subsequent governmental acts, allows eligible businesses to claim a per employee payroll tax credit based on a percentage of qualified wages, including health care expenses, paid during calendar year 2020 through September 2021. During the fiscal year ended December 31, 2022, we applied for ERC for qualified wages and benefits paid throughout the fiscal years ended January 1, 2022 and January 2, 2021. Reimbursements of $62.0 million in cash tax refunds for ERC claimed, along with $2.3 million in interest income, were received during the fiscal year ended December 30, 2023. Due to the unprecedented nature of ERC legislation and the changing administrative guidance, not all of the ERC reimbursements received have met our recognition criteria. During the nine months ended September 27, 2025 and September 28, 2024, we recognized $30.1 million and $23.4 million of ERC in cost of services (excluding depreciation and impairment), along with $1.3 million and $0.5 million in interest income, respectively. No ERC was recognized during the three months ended September 27, 2025 and September 28, 2024. The timing in recognition of the remaining deferred ERC liabilities will have an impact on the comparability of future periods.

Results of Operations

We operate as a single operating segment to reflect the way our chief operating decision maker reviews and assesses the performance of the business. Refer to Note 1 and Note 17 of our unaudited condensed consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q, and Note 1 and Note 23 of our audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 2024 for additional information regarding the Company's accounting policies and segment disclosures. The period-to-period comparisons below of financial results are not necessarily indicative of future results.

The following table sets forth our results of operations including as a percentage of revenue for the three months ended September 27, 2025 and September 28, 2024 (in thousands, except per share data and percentages):

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The following table sets forth our results of operations including as a percentage of revenue for the nine months ended September 27, 2025 and September 28, 2024 (in thousands, except per share data and percentages):

Comparison of the Three Months Ended September 27, 2025 and September 28, 2024

Revenue

Total revenue increased by $5.4 million, or 0.8%, for the three months ended September 27, 2025 as compared to the three months ended September 28, 2024.

Revenue from early childhood education centers increased by $0.5 million, or 0.1%, for the three months ended September 27, 2025 as compared to the three months ended September 28, 2024, of which approximately 2% was from higher tuition rates, partially offset by approximately 2% from lower enrollment.

The increase in revenue from early childhood education centers was driven by $0.2 million higher ECE same-center revenue and $0.3 million in revenue from closed centers and new and acquired centers that were not classified as same-centers as of each respective three month period.

Revenue from before- and after-school sites increased by $4.8 million, or 10.7%, for the three months ended September 27, 2025 as compared to the three months ended September 28, 2024 primarily due to opening new sites.

Cost of services (excluding depreciation and impairment)

Cost of services (excluding depreciation and impairment) increased by $22.0 million, or 4.2%, for the three months ended September 27, 2025 as compared to the three months ended September 28, 2024. This increase was driven by $8.0 million lower government assistance due to a decrease in cost reimbursements, primarily related to the conclusion of certain COVID-19 Related Stimulus funding. The increase was also attributable to $6.0 million higher personnel costs due to increased wage rates and health insurance costs, partially offset by lower labor hours and grant-related bonuses. Additionally, rent expense increased $5.2 million primarily due to new and acquired centers.

Depreciation and amortization

Depreciation and amortization increased by $1.4 million, or 4.6%, for the three months ended September 27, 2025 as compared to the three months ended September 28, 2024. This increase was primarily driven by higher depreciation expense as a result of assets placed into service from new and acquired centers.

Selling, general, and administrative expenses

Selling, general, and administrative expenses increased by $7.9 million, or 12.2%, for the three months ended September 27, 2025 as compared to the three months ended September 28, 2024. This increase was driven by $3.9 million higher professional fees primarily related to investments in new technology and digital solutions as well as the July 2025 repricing amendment to the Credit Agreement. The increase was also attributable to $2.8 million higher personnel costs from salary and wage rate increases, partially offset by optimized headcount. Lastly, computer costs increased by $2.0 million due to software license fees and amortization of deferred cloud computing costs in the current period.

Impairment losses

Impairment losses increased by $2.1 million, or 163.2%, for the three months ended September 27, 2025 as compared to the three months ended September 28, 2024, primarily driven by property and equipment impairment at certain centers with higher carrying values.

Interest expense

Interest expense decreased by $15.4 million, or 38.9%, for the three months ended September 27, 2025 as compared to the three months ended September 28, 2024. This decrease was primarily driven by lower outstanding principal and interest rates on the First Lien Term Loan Facility as a result of the October 2024 repayment and subsequent repricing amendments in October 2024 and July 2025, partially offset by a loss on extinguishment of debt recognized in connection with the July 2025 repricing.

Interest income

Interest income remained relatively consistent for the three months ended September 27, 2025 as compared to the three months ended September 28, 2024.

Other income, net

Other income, net remained relatively consistent for the three months ended September 27, 2025 as compared to the three months ended September 28, 2024 and was primarily comprised of net changes in realized and unrealized holding gains on deferred compensation plan investment trust assets.

Income tax expense

Income tax expense decreased by $2.5 million for the three months ended September 27, 2025 as compared to the three months ended September 28, 2024. The effective tax rate was 26.7% for the three months ended September 27, 2025 as compared to 22.9% for the three months ended September 28, 2024. Compared to the statutory rate, the differences in the effective tax rates for both the three months ended September 27, 2025 and September 28, 2024 were primarily due to state income taxes. Additionally, the effective tax rate for the three months ended September 28, 2024 was partially offset by the benefit of tax credits.

Comparison of the Nine Months Ended September 27, 2025 and September 28, 2024

Revenue

Total revenue increased by $29.1 million, or 1.4%, for the nine months ended September 27, 2025 as compared to the nine months ended September 28, 2024.

Revenue from early childhood education centers increased by $16.8 million, or 0.9%, for the nine months ended September 27, 2025 as compared to the nine months ended September 28, 2024, of which approximately 2% was from higher tuition rates, partially offset by approximately 1% from lower enrollment.

The increase in revenue from early childhood education centers was driven by $16.6 million higher ECE same-center revenue as well as $0.2 million higher revenue from the net impact of closed centers and new and acquired centers that were not classified as same-centers as of each respective nine month period.

Revenue from before- and after-school sites increased by $12.3 million, or 8.6%, for the nine months ended September 27, 2025 as compared to the nine months ended September 28, 2024 primarily due to opening new sites.

Cost of services (excluding depreciation and impairment)

Cost of services (excluding depreciation and impairment) increased by $60.0 million, or 3.9%, for the nine months ended September 27, 2025 as compared to the nine months ended September 28, 2024. This increase was driven by $19.6 million lower government assistance due to a decrease in cost reimbursements, primarily related to the conclusion of certain COVID-19 Related Stimulus funding, partially offset by higher ERC recognized in connection with the timing of tax statute of limitations and qualifying creditable wages. The increase was also attributable to $18.7 million higher personnel costs due to increased wage rates and health insurance costs, partially offset by lower labor hours and grant-related bonuses. Additionally, rent expense increased $12.9 million mainly due to new and acquired centers. Lastly, other center operating expenses increased by $8.8 million as a result of operating more centers and sites, driven by higher janitorial and utilities costs, food and supplies, as well as property taxes.

Depreciation and amortization

Depreciation and amortization increased by $4.7 million, or 5.4%, for the nine months ended September 27, 2025 as compared to the nine months ended September 28, 2024. This increase was primarily due to higher depreciation expense as a result of assets placed into service from new and acquired centers.

Selling, general, and administrative expenses

Selling, general, and administrative expenses decreased by $10.7 million, or 4.6%, for the nine months ended September 27, 2025 as compared to the nine months ended September 28, 2024. This decrease was primarily driven by lower stock-based compensation expense and bonus expense of $17.3 million due to the March 2024 distribution to holders of Class B profit interest units (“PIUs”) of KC Parent, LP (“KC Parent”), our direct parent prior to our IPO, and a related bonus to holders of restricted stock units (“RSUs”) and stock options during the nine months ended September 28, 2024, partially offset by expense from additional awards granted under the 2022 Incentive Award Plan. Additionally, meeting and travel expenses decreased by $5.9 million primarily attributable to our field leadership summit held during the nine months ended September 28, 2024. These decreases were partially offset by $5.1 million higher computer costs due to software license fees and amortization of deferred cloud computing costs. Lastly, personnel costs increased $5.1 million due to salary and wage rate increases, partially offset by optimized headcount.

Impairment losses

Impairment losses remained relatively consistent for the nine months ended September 27, 2025 as compared to the nine months ended September 28, 2024.

Interest expense

Interest expense decreased by $55.5 million, or 46.3%, for the nine months ended September 27, 2025 as compared to the nine months ended September 28, 2024. This decrease was primarily driven by lower outstanding principal and interest rates on the First Lien Term Loan Facility as a result of the October 2024 repayment and subsequent repricing amendments in October 2024 and July 2025, partially offset by a loss on extinguishment of debt recognized in connection with the July 2025 repricing.

Interest income

Interest income decreased by $1.3 million, or 25.5%, for the nine months ended September 27, 2025 as compared to the nine months ended September 28, 2024. This decrease was primarily driven by lower cash balances in interest-bearing accounts held at lower average interest rates, partially offset by higher interest income from ERC recognition.

Other income, net

Other income, net decreased by $0.8 million, or 14.4%, for the nine months ended September 27, 2025 as compared to the nine months ended September 28, 2024, primarily due to $1.5 million in gains recognized on miscellaneous insurance claims during the nine months ended September 28, 2024, partially offset by a $0.6 million net change in realized and unrealized holding gains on deferred compensation plan investment trust assets.

Income tax expense

Income tax expense increased by $5.1 million for the nine months ended September 27, 2025 as compared to the nine months ended September 28, 2024. The effective tax rate was 27.2% for the nine months ended September 27, 2025 as compared to 31.7% for the nine months ended September 28, 2024. Compared to the statutory rate, the differences in the effective tax rates for both the nine months ended September 27, 2025 and September 28, 2024 were primarily due to the partial release of the receivable related to uncertain tax positions as a result of the portion of ERC recognized during the respective nine month period and state income taxes, partially offset by the impact of ERC recognized during the respective nine month period. Additionally, the effective tax rate for the nine months ended September 28, 2024 was further impacted by tax expense related to nondeductible equity-based compensation.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we also provide the below non-GAAP financial measures. EBIT, EBITDA, adjusted EBITDA, adjusted net income, and adjusted net income per common share (collectively referred to as the “non-GAAP financial measures”) are not presentations made in accordance with GAAP, and should not be considered as an alternative to net income or loss, income or loss from operations, or any other performance measure in accordance with GAAP, or as an alternative to cash provided by operating activities as a measure of our liquidity. Consequently, our non-GAAP financial measures should be considered together with our consolidated financial statements, which are prepared in accordance with GAAP.

We present EBIT, EBITDA, adjusted EBITDA, adjusted net income, and adjusted net income per common share because we consider them to be important supplemental measures of our performance and believe they are useful to securities analysts, investors, and other interested parties. Specifically, adjusted EBITDA and adjusted net income allow for an assessment of our operating performance without the effect of charges that do not relate to the core operations of our business. We also use these non-GAAP financial measures for budgeting and compensation purposes.

EBIT, EBITDA, adjusted EBITDA, adjusted net income, and adjusted net income per common share have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

• they do not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments on indebtedness;
• they do not reflect income tax expense or the cash requirements for income tax liabilities;
• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will have to be replaced in the future, and EBIT, EBITDA, adjusted EBITDA, adjusted net income, and adjusted net income per common share do not reflect cash requirements for such replacements;
• they do not reflect our cash used for capital expenditures or contractual commitments;
• they do not reflect changes in or cash requirements for working capital; and
• other companies, including other companies in our industry, may calculate these measures differently than we do, limiting their usefulness as comparative measures.

EBIT, EBITDA, and Adjusted EBITDA

EBIT is defined as net income adjusted for interest and income tax expense. EBITDA is defined as EBIT adjusted for depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for impairment losses, stock-based compensation, management and advisory fee expenses, acquisition related costs, non-recurring distribution and bonus expense, COVID-19 Related Stimulus, net, and other costs because these charges do not relate to the core operations of our business. We present EBIT, EBITDA, and adjusted EBITDA because we consider them to be important supplemental measures of our performance and believe they are useful to securities analysts, investors, and other interested parties. We believe adjusted EBITDA is helpful to investors in highlighting trends in our core operating performance compared to other measures, which can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate, and capital investments.

The following table shows EBIT, EBITDA, and adjusted EBITDA for the periods presented, and the reconciliation to its most comparable GAAP measure, net income, for the periods presented (in thousands):

Adjusted net income and adjusted net income per common share

Adjusted net income is defined as net income adjusted for income tax expense, amortization of intangible assets, impairment losses, stock-based compensation, management and advisory fee expenses, acquisition related costs, non-recurring distribution and bonus expense, COVID-19 Related Stimulus, net, loss on extinguishment of long-term debt, net, other costs, and non-GAAP income tax expense because these charges do not relate to the core operations of our business. Adjusted net income per common share is defined as the amount of adjusted net income per weighted average number of common shares outstanding. We present adjusted net income and adjusted net income per common share because we consider them to be important measures used to evaluate our operating performance internally. We believe the use of adjusted net income and adjusted net income per common share provides investors with consistency in the evaluation of the Company as they offer a meaningful comparison of past, present, and future operating results, as well as more useful financial comparisons to our peers. We believe these supplemental measures can be used to assess the financial performance of our business without regard to certain costs that are not representative of our continuing operations.

The following table shows adjusted net income and adjusted net income per common share for the periods presented and the reconciliation to the most comparable GAAP measure, net income and net income per common share, respectively, for the periods presented (in thousands, except per share data):

Explanation of add backs:

(1) Represents impairment charges for long-lived assets as a result of center closures and reduced operating performance at certain centers due to the impact of changing demographics in certain locations in which we operate and current macroeconomic conditions on our overall operations.

(2) Represents non-cash stock-based compensation expense in accordance with Accounting Standards Codification (“ASC”) 718, Compensation: Stock Compensation, and excludes cash-settled, liability-classified stock-based compensation expense. The nine months ended September 28, 2024 excludes $14.3 million in expense included within “Non-recurring distribution and bonus expense” as described in explanation (5) below.

(3) Represents amounts incurred for management and advisory fees with related parties in connection with a management services agreement with Partners Group (USA), Inc., a related party of the Company’s ultimate parent, which was terminated upon completion of our IPO.

(4) Represents costs incurred in connection with planned and completed acquisitions, including due diligence, transaction, integration, and severance related costs. During the nine months ended September 28, 2024, these costs were incurred related to the acquisition of Crème School.

(5) During March 2024, we recognized a $14.3 million one-time expense related to an advance distribution to holders of Class B PIUs. In connection with this distribution, we recognized a $5.0 million one-time bonus expense for holders of RSUs and stock options to account for the change in value associated with the March 2024 distribution for Class B PIUs. We do not routinely make distributions to Class B PIU holders in advance of a liquidity event or pay bonuses to RSU or stock option holders outside of normal vesting and we do not expect to do so in the future. In connection with our IPO, KC Parent distributed shares of our common stock then held by KC Parent to unitholders of KC Parent in proportion to their interests in KC Parent. Refer to Note 17 within the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 2024 for further information.

(6) Includes expense reimbursements and revenue arising from the COVID-19 pandemic, net of pass-through expenses incurred as a result of certain grant requirements. We recognized $0.7 million during the nine months ended September 27, 2025 and $16.9 million and $55.9 million during the three and nine months ended September 28, 2024, respectively, in funding for reimbursement of center operating expenses in cost of services (excluding depreciation and impairment). Additionally, during the nine months ended September 27, 2025 and September 28, 2024, we recognized $30.1 million and $23.4 million of ERC offsetting cost of services (excluding depreciation and impairment) as well as $2.1 million and $2.6 million in professional fees in selling, general, and administrative expenses, respectively, as a result of calculating and filing for ERC. COVID-19 Related Stimulus is net of pass-through expenses incurred as stipulated within certain grants of $1.9 million during the nine months ended September 27, 2025 and $2.3 million and $11.4 million during the three and nine months ended September 28, 2024, respectively.

(7) Includes certain professional fees incurred for both contemplated and completed debt and equity transactions, as well as costs expensed in connection with prior contemplated offerings. For both the three and nine months ended September 27, 2025, other costs includes $0.7 million in transaction costs associated with repricing our First Lien Term Loan Facility and for the nine months ended September 27, 2025, other costs also includes $0.2 million in costs related to our IPO. For the three months ended September 28, 2024, other costs includes expenses incurred, offset by a refund for costs expensed in a prior period resulting in a net credit to expense, for professional fees related to our IPO. For the nine months ended September 28, 2024, other costs includes $2.9 million in transaction costs associated with our incremental first lien term loan and repricing on our senior secured credit facilities and $0.7 million in costs related to our IPO. These costs represent items management believes are not indicative of core operating performance.

(8) Includes the unamortized original issue discount and deferred financing costs that were written off in connection with certain lenders that had reduced principal holdings or did not participate in the loan syndication as a result of certain amendments to our senior secured credit facilities. For the three and nine months ended September 27, 2025, the loss on extinguishment of long-term debt is the result of the July 2025 repricing amendment to the Credit Agreement. For the nine months ended September 28, 2024, the loss on extinguishment of long-term debt is the result of the April 2024 repricing amendment to the Credit Agreement. During the three months ended December 28, 2024, management updated the definition of adjusted net income to include loss on extinguishment of long-term debt, net and has adjusted prior periods presented to reflect the updated definition for comparative purposes. Loss on extinguishment of long-term debt, net is not considered by management to be indicative of core operating performance.

(9) Includes the tax effect of the non-GAAP adjustments, calculated using the appropriate federal and state statutory tax rate and the applicable tax treatment for each adjustment. The non-GAAP tax rate was 25.8% for the three and nine months ended September 27, 2025 and September 28, 2024. Our statutory rate is re-evaluated at least annually.

(10) The outstanding shares and per share amounts for the three and nine months ended September 28, 2024 have been retrospectively adjusted to reflect the Common Stock Conversion. Refer to Note 1 within the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.

Liquidity and Capital Resources

Our primary sources of cash are cash provided by operations, current cash balances, and borrowings available under our revolving credit facility (the “First Lien Revolving Credit Facility”). Our principal uses of cash are payments of our operating expenses, such as personnel salaries and benefits, debt service, and rents paid to landlords, as well as capital expenditures.

We expect to continue to meet our liquidity requirements for at least the next 12 months under current operating conditions with cash generated from operations, cash on hand, and to the extent necessary and available, through borrowings under the Credit Agreement. If the need arises for additional expenditures, we may seek additional funding. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth under “Risk Factors” included in Part II, Item 1A of this Quarterly Report on Form 10-Q as well as “Risk Factors” included in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 28, 2024. In the future, we may attempt to raise additional capital through the sale of equity securities or debt financing arrangements. Any future indebtedness we incur may result in terms that could be unfavorable to equity investors. We cannot provide assurance that we will be able to raise additional capital in the future on favorable terms, or at all. Any inability to raise capital could adversely affect our ability to achieve our business objectives.

Debt facilities

As of September 27, 2025, our Credit Agreement consists of a $962.0 million First Lien Term Loan Facility and a $262.5 million First Lien Revolving Credit Facility.

In July 2025, we entered into a repricing amendment to the Credit Agreement. As of the effective date of the amendment, the applicable rates for the First Lien Term Loan Facility and for amounts drawn under the First Lien Revolving Credit Facility were reduced by 0.50%. As a result of the amendment, the First Lien Term Loan Facility bears interest at a variable rate equal to the Secured Overnight Financing Rate (“SOFR”) plus 2.75% per annum. In addition, amounts drawn under the First Lien Revolving Credit Facility bear interest at SOFR plus an applicable rate between 2.00% and 2.50% per annum, based on a pricing grid of the Company's First Lien Term Loan Facility net leverage ratio. All other terms under the Credit Agreement remain unchanged as a result of the amendment.

In February 2025, the Company entered into an amendment to the Credit Agreement to increase the total commitments under the First Lien Revolving Credit Facility by a net amount of $22.5 million as well as reclassify and extend $5.0 million of the previously non-extended commitments, increasing the total borrowing capacity of the First Lien Revolving Credit Facility to $262.5 million. All other terms under the Credit Agreement remain unchanged as a result of the amendment.

The Credit Agreement allows for letters of credit to be drawn against the current borrowing capacity of the First Lien Revolving Credit Facility, capped at $172.5 million. The Company pays certain fees under the First Lien Revolving Credit Facility, including a fronting fee on outstanding letters of credit of 0.125% per annum and a commitment fee on the unused portion of the First Lien Revolving Credit Facility at a rate between 0.25% and 0.50% per annum, based on a pricing grid of the Company's First Lien Term Loan Facility net leverage ratio. Additionally, fees on the outstanding letters of credit bear interest at a rate equal to the applicable rate for amounts drawn under the First Lien Revolving Credit Facility.

As of September 27, 2025, there were no outstanding borrowings under the First Lien Revolving Credit Facility and we had an available borrowing capacity of $194.4 million after giving effect to the outstanding letters of credit under the Credit Agreement of $68.1 million.

The interest rates effective as of September 27, 2025 were 7.04% on the First Lien Term Loan Facility, 2.00% on outstanding letters of credit as well as a 0.125% fronting fee on outstanding letters of credit, and 0.25% on the unused portion of the First Lien Revolving Credit Facility.

The weighted average interest rate during the nine months ended September 27, 2025 for the First Lien Term Loan Facility was 7.41%.

All obligations under the Credit Agreement are secured by substantially all of our assets. The Credit Agreement contains various financial and nonfinancial loan covenants and provisions.

Under the Credit Agreement, the financial loan covenant is a quarterly maximum First Lien Term Loan Facility net leverage ratio (as defined in the Credit Agreement) to be tested only if, on the last day of each fiscal quarter, the amount of revolving loans outstanding on the First Lien Revolving Credit Facility (excluding all letters of credit) exceeds 35% of total revolving commitments on such date. As this threshold was not met as of September 27, 2025 the quarterly maximum First Lien Term Loan Facility net leverage ratio financial covenant was not in effect. Nonfinancial loan covenants restrict our ability to, among other things, incur additional debt; make fundamental changes to the business; make certain restricted payments, investments, acquisitions, and dispositions; or engage in certain transactions with affiliates.

An annual calculation of excess cash flows determines if the Company will be required to make a mandatory prepayment on the First Lien Term Loan Facility. Mandatory prepayments would reduce future required quarterly principal payments.

The First Lien Term Loan Facility matures in June 2030. The $252.5 million of extended commitments under the First Lien Revolving Credit Facility mature in October 2029, while the $10.0 million of non-extended commitments have a maturity date of June 2028.

As of September 27, 2025, we were in compliance with all covenants of the Credit Agreement.

In February 2024, we entered into a credit facilities agreement, dated as of February 1, 2024, which allows for $20.0 million in letters of credit to be issued (“LOC Agreement”). We pay an interest rate of 5.95% on any outstanding balance and 0.25% on any unused portion. The LOC Agreement matures in December 2026. Upon entering into the LOC Agreement, we issued $20.0 million in letters of credit and cancelled $16.7 million of outstanding letters of credit under the First Lien Revolving Credit Facility. As of September 27, 2025, there were $20.0 million outstanding letters of credit under the LOC Agreement.

We do not engage in off-balance sheet financing arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.

Refer to Note 9 of our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further information regarding our debt facilities.

Cash flows

The following table summarizes our cash flows (in thousands) for the periods presented:

Net cash provided by operating activities

Cash provided by operating activities increased by $77.5 million for the nine months ended September 27, 2025 as compared to the nine months ended September 28, 2024. Net income, adjusted for non-cash items, increased by $27.7 million primarily driven by lower interest expense, partially offset by a decrease in cost reimbursements from government assistance. The net changes in operating assets and liabilities resulted in a $49.8 million increase in cash primarily due to the timing of rent payments combined with a change in tax position from prior periods. Additionally, the increase was driven by lower spend on our enterprise resource planning software system due to implementation in early fiscal 2025 and increased collections on subsidy accounts receivable balances. These increases were partially offset by lower accrued interest compared to prior periods.

Net cash used in investing activities

Cash used in investing activities increased by $5.7 million for the nine months ended September 27, 2025 as compared to the nine months ended September 28, 2024. The increase was driven by $7.0 million increased payments for acquisitions and $2.7 million higher capital expenditures net of proceeds from disposals. These increases were partially offset by a $4.0 million change in deferred compensation asset trusts as a result of decreased deposits and increased redemptions.

Net cash used in financing activities

Cash used in financing activities decreased by $59.7 million for the nine months ended September 27, 2025 as compared to the nine months ended September 28, 2024. The decrease was primarily due to $55.7 million net cash used for the March 2024 distribution to KC Parent in the prior period as well as $3.1 million lower principal payments on the First Lien Term Loan Facility driven by reduced quarterly principal payments required as a result of the October 2024 repayment.

Cash requirements

As of September 27, 2025, we had the following obligations:

• Total lease obligations, including imputed interest, of $2.3 billion expected to be paid out as follows: $73.9 million for the remainder of fiscal 2025, $592.3 million in two to three years, $517.8 million in four to five years, and $1.2 billion thereafter through the maturity of our lease agreements. Refer to Note 6 of our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information.
• Long-term debt obligations, including interest, of $1.3 billion expected to be paid out as follows: $39.2 million for the remainder of fiscal 2025, $139.0 million in two to three years, $118.4 million in four to five years, and $960.2 million thereafter through June 2030 when the First Lien Term Loan Facility matures. Refer to Note 9 of our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information.
• Self-insurance obligations of $77.0 million expected to be paid out as claims are settled and cash outflows cannot be estimated reliably.
• Deferred compensation plan of $42.5 million expected to be paid out based on the individual plan participant and cash outflows cannot be estimated reliably.
• Contingent consideration payable of $1.2 million expected to be paid out in six to nine years based on the probability and timing of the continuation of the lease of the related acquired center.
• Promissory notes, including interest, of $0.4 million expected to be paid out as follows: $0.1 million for the remainder of fiscal 2025 and $0.3 million in two to three years.
• Other liabilities of $3.1 million comprised of various payables expected to be paid out based on the contractual terms.
• Service arrangements which include certain information technology (“IT”), labor software, and maintenance services of $57.7 million expected to be paid out as follows: $3.8 million for the remainder of fiscal 2025, $23.1 million in two to three years, $17.1 million in four to five years, and $13.7 million thereafter.

Certain agreements may have cancellation penalties for which, if we were to cancel, we would be required to pay up to approximately $5.6 million. Other cancellation penalties cannot be estimated as we cannot predict the occurrence of future agreement cancellations. Refer to Note 11 and Note 14 of our audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 2024 for additional detail related to our contractual obligations.

Critical Accounting Estimates and Significant Judgments

The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates and judgments that affect our consolidated financial statements and accompanying notes. Amounts recorded in our consolidated financial statements are, in some cases, estimates based on our management’s judgment and input from actuaries and other third parties and are developed from information available at the time. We evaluate the appropriateness of these estimates on an ongoing basis. Actual outcomes may vary from the estimates, and changes, if any, are reflected in current period earnings.

We test goodwill for impairment on an annual basis in the fourth quarter, or more frequently if impairment indicators exist. During the three months ended September 27, 2025, our publicly traded share price experienced continued decline resulting in a decrease in market capitalization. Accordingly, management completed an interim goodwill impairment assessment and concluded that it was not more likely than not that the fair values of its reporting units were less than the respective carrying amounts. There was no impairment of goodwill during both the three and nine months ended September 27, 2025 and September 28, 2024. Adverse changes in key assumptions, including sustained share price declines, higher discount rates, or weaker operating results, could reduce the excess of fair values over the carrying amounts and result in impairment in future periods.

There have been no changes to our critical accounting policies described within Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 2024. For a description of our other significant accounting policies, refer to Note 1 in both our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 2024.

We are exposed to market risk in the ordinary course of business. Market risk represents the risk of loss that may impact our results of operations or financial condition due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in interest rates.

Interest Rate Risk

As of September 27, 2025, we had $930.9 million of variable-rate debt, net of debt issuance costs. We estimate that had the average interest rates on our borrowings outstanding under the Credit Agreement increased by 100 basis points, our interest expense would have increased by approximately $0.4 million during the three months ended September 27, 2025 and increased by approximately $1.2 million during the nine months ended September 27, 2025, net of the effects of our interest rate derivatives.

We may enter into interest rate derivative contracts that are designated as cash flow hedges under ASC 815, Derivatives and Hedging, to effectively manage variable interest rates on the First Lien Term Loan Facility and convert a portion of our variable-rate debt to a fixed-rate basis. We do not hold or issue derivatives for trading or speculative purposes. In January 2024, we entered into a pay-fixed-receive-float interest rate swap with a notional amount of $400.0 million through its maturity and a fixed interest rate of 3.85% per annum. Additionally, in February 2024, we entered into two pay-fixed-receive-float interest rate swaps with a combined notional amount of $400.0 million through their maturity and a fixed interest rate of 3.89% per annum. These interest rate swap contracts commenced in June 2024 and will mature in December 2026. In March 2025, we entered into two forward starting pay-fixed-receive-float interest rate swap contracts with a combined notional amount of $500.0 million through their maturity, one with a fixed interest rate of 3.72% per annum and the other with a fixed interest rate of 3.74% per annum. These interest rate swap contracts will commence in December 2026, when our current swaps expire, and will mature in December 2027. The interest rate swap contracts were executed in order to hedge the interest rate risk on a portion of the variable debt under the Credit Agreement and we will receive variable amounts of interest from a counterparty at the greater of three-month SOFR or 0.50% per annum. As of September 27, 2025, the derivatives are considered highly effective.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial disclosure. As of the end of the period covered by this Quarterly Report on Form 10-Q, our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e) and 15d-15(e). Based upon this evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were not effective as of September 27, 2025, due to a previously-disclosed material weakness in our internal control over financial reporting as described below.

Previously Reported Material Weaknesses in Internal Control Over Financial Reporting

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

We previously identified a material weakness that continues to exist, which relates to the lack of effectively designed and maintained IT general controls for information systems that are relevant to the preparation of our consolidated financial statements. Specifically, we did not design and maintain: (i) program change management controls to ensure that program and data changes are identified, tested, authorized and implemented appropriately; (ii) user access controls to ensure appropriate segregation of duties and to adequately restrict user and privileged access to appropriate personnel; and (iii) computer operations controls to ensure that processing and transfer of data, and data backups and recovery are monitored.

This material weakness did not result in a misstatement to the consolidated financial statements, however, it could result in misstatements potentially impacting the annual or interim financial statements that would result in a material misstatement to the financial statements that would not be prevented or detected.

Remediation Plan for Material Weakness

We are in the process of designing and implementing controls and taking other actions to remediate the material weakness described above, including implementing an enterprise resource planning software system. Specifically, we implemented new IT tools as well as enhanced existing controls in all domains of IT, including those related to program change management, user access and segregation of duties, and computer operations. We also continued to design, implement and operate manual and automated controls and standardize business processes and reporting during the third quarter of 2025.

The material weakness will not be considered remediated until we complete the design and implementation of controls, the controls operate for a sufficient period of time, and management has concluded, through testing, that the controls are effective. We cannot assure you that the measures we have taken to date, and actions we may take in the future, will be sufficient to remediate the control deficiencies that led to the material weakness in our internal control over financial reporting or that they will prevent or avoid potential future material weaknesses. Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business.

Changes in Internal Control Over Financial Reporting

As noted in Remediation Plan for Material Weakness above, there were changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the third quarter of 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Investing in our common stock involves a high degree of risk. You should carefully review and consider the information regarding certain factors that could materially affect our business, financial condition or future results set forth under Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 28, 2024 as filed with the SEC on March 21, 2025 and as set forth below.

Our business may be affected by any disruptions to federally funded childcare subsidies or tuition reimbursements.

A portion of our revenue and reimbursement of certain center operating expenses are derived from various federal, state and local government programs. When the federal government funds such programs, it directs funds to state and local governments for specified purposes, such as full or partial tuition subsidies, funding for certain universal pre-K programs and support for food programs. Some families depend on these programs to be able to afford to use our centers. During a United States federal government shutdown, appropriations may lapse, and the administration of grant and reimbursement programs may be delayed, curtailed or suspended. A government shutdown may result in delayed or reduced pass-through funding to the state and local child care and education programs. Because a portion of our business depends, directly and indirectly, on the continued availability and timely disbursement of these federal government funds, a prolonged United States government shutdown or continued delays in funding these programs even after the end of a shutdown may negatively impact enrollment at our centers, our tuition revenue or our costs to operate our centers. In general, the alteration, suspension or pause of government assistance programs, particularly those related to child care, could affect the ability of some families to use our centers.

While we strive to mitigate these risks through contingency planning and industry government affairs efforts, the duration, scope and ultimate impact of any government shutdown is difficult to predict and largely outside our control. Adverse effects resulting from a prolonged government shutdown could have a negative impact on our business, financial position, and results of operations.