KinderCare Learning Companies, Inc. 2026 Q2 Earnings Call

Thank you, and good afternoon, everyone. Welcome to KinderCare's second quarter 2026 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, and within the supplemental earnings presentation, both of which are posted on our investor relations website at investors.kindercare.com. 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 factor 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 undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future developments, or otherwise. I'll now turn the call over to our Chief Executive Officer, Tom Wyatt.

Thank you, Jason, and good afternoon, everyone. I'm pleased to share updates on our second quarter performance with you today. We delivered results largely in line with expectations, along with a few bright spots that reinforce the progress we are making. During the quarter, we remained focused on the priorities we outlined earlier this year, strengthening execution across our centers, simplifying day-to-day responsibilities of our center leaders, and positioning the business for long-term growth. Revenue was down slightly compared to last year as we began optimizing our footprint during the quarter. This is partially offset by continued growth in Champions and KinderCare for Employers. Our premium brand, Crème de la Crème, continued building on the progress we've seen this year. Same center occupancy for the quarter was just under 69% and benefited from our optimization work.

We're encouraged by the progress we're continuing to make, and we know there's more work ahead. I'll begin with our flagship brand, KinderCare. Improving our enrollment trend within our largest brand is going to be the result of more consistent performance over time. The actions we took to enhance our targeted marketing are helping us connect with more prospective families. At the same time, we are simplifying the responsibilities of our center directors to give them more time to lead their centers, support their teachers, and engage with families in meaningful ways. Those day-to-day interactions are the heart of great family experiences, and over time, they help convert interest into enrollment and retain families longer. That's how operational improvements translate into better results. We put a renewed emphasis on our small group enrichment programs called Learning Adventures.

These incremental programs expand learning in our classrooms in areas like phonics, STEM, and Spanish. Family response continues to exceed our expectations as revenue from these programs has almost doubled from a year ago. We're expanding these offerings across more centers and into additional seasonal programming, giving families even more opportunities to extend their child's learning experience beyond our core curriculum, which we believe is a key differentiator. We're also investing thoughtfully to expand our geographic footprint where we see attractive long-term potential and strong demand for high-quality early education. During the quarter, we entered our 42nd state with a new center in Bentonville, Arkansas. We also opened a center in Ridgefield, Washington, a thriving community often described as a childcare desert. Both centers expand access to childcare where it's needed most.

We're applying that same disciplined approach to Crème de la Crème Schools, our premium brand, expanding into markets where we see growing demand. Just after the quarter ended, we opened the Crème de la Crème School at Great Park in Irvine, our first Crème de la Crème location in California. The school features modern learning environments, elevated amenities, and personalized educational experiences. This is an important milestone and expands Crème de la Crème into a large and very attractive market. We are pleased with enrollment in our summer camp programs at Crème de la Crème, where enrollment increased approximately 26% compared to last year. It's another encouraging sign that our repositioning efforts are gaining traction. As we grow this brand, we're focused on delivering differentiated educational experiences that families value. Turning to Champions, we delivered another strong quarter of double-digit revenue growth, extending our streak to four consecutive quarters.

That growth reflects both the addition of 85 net new sites since Q2 of last year and improved productivity across our existing sites. Summer programming at Champions is going well and reinforces our relationships with families and our school district partners. We're expanding into additional schools within our existing districts while bringing our before and after-school programs to new districts. Within KinderCare for Employers, we're continuing to see organizations look to partner with us to meet their employees' childcare needs. During the quarter, we welcomed several new partners across a range of industries, reflecting continued demand for our employer-sponsored childcare solutions. It's an area of the business we're excited about, and we expect it to remain an important part of our growth strategy. We're also encouraged by the opportunity we see in tuition benefit.

Our large national footprint gives us a clear advantage in offering childcare benefits to employers across 42 states, and we are able to connect more families with high-quality care in the communities where they live and work. We believe that combination positions us well as employer demand for childcare solutions continues to grow. Our breadth and flexible platform allow us to partner with employers in a variety of ways. For example, we have supported public safety employees in Dallas by providing 24-hour childcare during the World Cup this past quarter. Just another example of how we can tailor our childcare solutions to meet the needs of employers and communities. Quickly touching on the policy environment, the overall direction has been encouraging. We continue to see steady bipartisan support at all levels as federal policy has remained supportive, and many states are expanding childcare access.

For instance, New York recently announced a massive investment of $1.7 billion into ECE programs. California announced it will add another $220 million toward 20,000 new mixed-delivery childcare spaces. New Hampshire is creating a childcare tax credit, incentivizing employers to be a part of childcare solutions. We applaud these leaders for listening to the needs of the working parents. As a national provider serving working families across the country, we are continually evaluating how we best serve them. That means expanding into growing communities like Bentonville, Ridgefield, and Irvine. It also means thoughtfully consolidating centers where demand has shifted. This is an important part of how we manage our presence across the country.

As part of the ongoing evaluation of our center footprint, we have identified several consolidation opportunities that we believe will better align our centers with the communities we serve as families' needs and local demand for childcare have evolved over time. While the majority of our centers continue to perform well, some are no longer in the best locations to serve communities. As a result, we are consolidating those centers, and as of today, we are approximately two-thirds of the way through this work, including 49 center closures completed during the second quarter. Those centers represented about 3% of our total center footprint and were primarily from our fourth and fifth quintile, and on average, were below 37% occupied. These decisions are never easy, and we evaluate every center individually. Our priority is minimizing disruption for families, teachers, and the communities we serve.

Wherever possible, we help families and employees transition to nearby locations. We are encouraged that both family and employee retention have exceeded our expectations through this process. We believe that the result will be a center footprint that is better aligned with where our families live and work today, and it will allow us to focus our people, our resources, and investments where they can have the greatest impact for families. As we complete the remaining consolidations this year, you should expect some quarter-to-quarter variability in our financial results. We believe that is a responsible trade-off because these actions will strengthen KinderCare and better position us to serve families, continue investing in high-quality early education, and support long-term access to high-quality childcare. Looking ahead, our priorities remain the same. We will continue improving execution across the business.

We will continue to invest where we see the greatest opportunities, and we will continue supporting our center teams so they can deliver the best possible experiences for our families. We are encouraged by the progress we are making, confident in the actions we are taking, and excited about the opportunities ahead. Tony will now provide more details on our financial results.

Thank you, Tom. I will start with our Q2 results and then discuss our outlook for the remainder of the year. Second quarter revenue was $698 million, down slightly from $700 million the prior year. Enrollment pressure was partially offset by strong performance in Champions and contributions from KinderCare for Employers, Learning Adventures, and our newer centers. While Crème de la Crème performance remains below prior year levels, the year-over-year gap has narrowed significantly, and the underlying trend continues to improve. Overall, same center revenue decreased by $14 million or 2%. This was mainly driven by lower enrollment and an $11 million impact from closures, $5 million of which was our footprint optimization work. Higher tuition rates and strong performance from centers newly included in the same center cohort helped offset a portion of the enrollment headwind.