KinderCare Learning Companies, Inc.

Previous wording

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 28, 2024 and September 30, 2023 included elsewhere in this Quarterly Report on Form 10-Q and audited consolidated financial statements and notes thereto for the fiscal year ended December 30, 2023 filed with the Securities and Exchange Commission (“SEC”) on October 9, 2024, pursuant to Rule 424(b) under the Securities Act ("Prospectus"). 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.

Current wording

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 months ended March 29, 2025 and March 30, 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.

Previous wording

KinderCare Learning Companies, Inc. ("the Company," "we," "us," and "our") is the largest private provider of high-quality early childhood education ("ECE") in the United States by center capacity. 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 1,573 early childhood education centers with center capacity for 210,972 children and 1,018 before- and after-school sites located in 40 states and the District of Columbia as of September 28, 2024.

Current wording

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 1,582 early childhood education centers with center capacity for 211,767 children and 1,038 before- and after-school sites located in 41 states and the District of Columbia as of March 29, 2025.

Previous wording

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 initial offering 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, our unaudited condensed consolidated financial statements and notes thereto as of September 28, 2024 have been adjusted to retrospectively reflect the Common Stock Conversion. Refer to Note 1 and Note 18 within the unaudited condensed consolidated interim financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.

Current wording

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 months ended March 29, 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.

Previous wording

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 1% of the over 90,000 K-12 schools in the United States, providing significant opportunity to continue to grow our footprint.

Current wording

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 over 64,000 elementary schools in the United States, providing significant opportunity to continue to grow our footprint.

Previous wording

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, the number of open sites may decrease at the end of the second quarter as many sites close temporarily for the summer, and 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.

Current wording

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.

Previous wording

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 as the number of centers at the beginning of the period plus openings and acquisitions, minus any permanent closures for the period. A permanently closed center is a center that has ceased operations as of the end of the reporting period and management does not intend on reopening the center. We define the number of sites as total sites that were operational in the last month of the period, which reflects the seasonal impacts of temporary closures at the beginning of summer.

Current wording

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 as the number of centers at the beginning of the period plus openings and acquisitions, minus any permanent closures for the period. A permanently closed center is a center that has ceased operations as of the end of the reporting period and management does not intend on reopening the center. We define the number of sites as total sites that were operational in the last month of the period.

Previous wording

As of September 28, 2024, we had 1,573 early childhood education centers with a center capacity for 210,972 children as compared to 1,551 early childhood education centers as of September 30, 2023, with a center capacity for 211,164 children. 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. During the nine months ended September 30, 2023, total centers decreased by two due to 13 permanent center closures, partially offset by opening nine centers and acquiring two centers.

Current wording

As of March 29, 2025, we operated 1,582 early childhood education centers with a center capacity for 211,767 children as compared to 1,563 early childhood education centers as of March 30, 2024, with a center capacity for 210,012 children. During the three months ended March 29, 2025, total centers increased by eight due to acquiring five centers and opening five centers, partially offset by two permanent center closures. During the three months ended March 30, 2024, total centers increased by six due to acquiring six centers and opening four centers, partially offset by four permanent center closures.

Previous wording

As of September 28, 2024, we had 1,018 before- and after-school sites, an increase of 77 sites from 941 before- and after-school sites as of September 30, 2023. 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 site closures. Total before- and after-school sites increased by 153 during the nine months ended September 30, 2023 as a result of opening 204 sites, partially offset by 51 site closures.

Current wording

As of March 29, 2025, we operated 1,038 before- and after-school sites, an increase of 88 sites from 950 before- and after-school sites as of March 30, 2024. Total before- and after-school sites increased by 13 during the three months ended March 29, 2025 due to opening 19 sites, partially offset by six site closures. Total before- and after-school sites increased by two during the three months ended March 30, 2024 as a result of opening 12 sites, partially offset by 10 site closures.

Previous wording

Average weekly ECE FTEs for the three months ended September 28, 2024 increased by 955, or 0.7%, as compared to the three months ended September 30, 2023 primarily due to new centers, partially offset by closed centers.

Current wording

Average weekly ECE FTEs for the three months ended March 29, 2025 decreased by 1,104, or 0.8%, as compared to the three months ended March 30, 2024 primarily due to lower FTEs at same-centers and closed centers, partially offset by FTEs at new and acquired centers.

Previous wording

ECE same-center occupancy decreased by 130 basis points for the nine months ended September 28, 2024 as compared to the nine months ended September 30, 2023 primarily due to the inclusion of Crème School centers acquired in fiscal 2022 in ECE same-center occupancy as of September 28, 2024.

Current wording

ECE same-center occupancy decreased by 50 basis points for the three months ended March 29, 2025 as compared to the three months ended March 30, 2024 primarily due to lower enrollment at same-centers.

Previous wording

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 and measures the potential for organic growth. The following table is in thousands.

Current wording

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.

Previous wording

ECE same-center revenue increased by $188.2 million, or 11.3%, for the nine months ended September 28, 2024 as compared to the nine months ended September 30, 2023. Crème School centers, acquired in fiscal 2022 and classified as same-centers as of September 28, 2024, accounted for $94.1 million of the ECE same-center revenue growth. Additionally, $82.0 million, or 5.0%, of the ECE same-center revenue growth was driven by centers that were classified as same-centers as of both September 28, 2024 and September 30, 2023. The remaining $12.0 million increase in ECE same-center revenue growth was driven by the net impact of new and acquired centers, other than Crème School centers, not yet classified as same-centers as of September 30, 2023 and center closures as of September 28, 2024.

Current wording

ECE same-center revenue increased by $8.6 million, or 1.4%, for the three months ended March 29, 2025 as compared to the three months ended March 30, 2024. ECE same-center revenue growth of $4.1 million, or 0.7%, was driven by centers that were classified as same-centers as of both March 29, 2025 and March 30, 2024. The remaining $4.5 million increase in ECE same-center revenue growth was driven by the net impact of new and acquired centers not yet classified as same-centers as of March 30, 2024 and center closures as of March 29, 2025.

Previous wording

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 $242.6 million and $201.4 million during the three months ended September 28, 2024 and September 30, 2023, and $699.8 million and $596.0 million during the nine months ended September 28, 2024 and September 30, 2023, respectively.

Current wording

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 $240.1 million and $215.8 million during the three months ended March 29, 2025 and March 30, 2024, respectively.

Previous wording

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 assets and definite-lived intangibles, such as client relationships, trade names and trademarks, covenants not-to-compete, and software.

Current wording

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 assets and definite-lived intangibles, such as client relationships and trade names and trademarks.

Previous wording

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

Current wording

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.

Previous wording

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

Current wording

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.

Previous wording

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

Current wording

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

Previous wording

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 GAAP and tax income and deductions, and the tax effect from uncertain tax positions, as applicable.

Current wording

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.

Previous wording

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 $16.9 million and $36.9 million during the three months ended September 28, 2024 and September 30, 2023, and $55.9 million and $145.2 million during the nine months ended September 28, 2024 and September 30, 2023, respectively, in funding for reimbursement of center operating expenses in cost of services (excluding depreciation and impairment), as well as $0.2 million and $1.4 million during the three months ended September 28, 2024 and September 30, 2023, and $0.3 million and $3.0 million during the nine months ended September 28, 2024 and September 30, 2023, respectively, in revenue arising from COVID-19 Related Stimulus. The programs funding the COVID-19 Related Stimulus are required to distribute all stimulus funding by December 31, 2024, and we do not expect future 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.

Current wording

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 and $24.1 million during the three months ended March 29, 2025 and March 30, 2024, respectively, in funding for reimbursement of center operating expenses in cost of services (excluding depreciation and impairment). 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.

Previous wording

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 28, 2024, we recognized $23.4 million of ERC in cost of services (excluding depreciation and impairment), along with $0.5 million in interest income. No ERC was recognized during the three months ended September 28, 2024 and the three and nine months ended September 30, 2023. The timing in recognition of ERC has impacted the comparability of our operating results for the periods presented, and recognition of the remaining deferred ERC liabilities will have an impact on the comparability of future periods.

Current wording

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 second quarter of the fiscal year ended December 28, 2024, we recognized $23.4 million of ERC in cost of services (excluding depreciation and impairment), along with $0.5 million in interest income. No ERC was recognized during the three months ended March 29, 2025 and March 30, 2024. The timing in recognition of the remaining deferred ERC liabilities will have an impact on the comparability of future periods.

Previous wording

We operate as a single operating segment to reflect the way our chief operating decision maker reviews and assesses the performance of the business. Our accounting policies are described in Note 1 to both our unaudited condensed consolidated interim financial statements included elsewhere in this Quarterly Report on Form 10-Q and audited consolidated annual financial statements included in the Prospectus. The period-to-period comparisons below of financial results are not necessarily indicative of future results.

Current wording

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 16 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.

Previous wording

Selling, general, and administrative expenses increased by $13.6 million, or 6.1%, for the nine months ended September 28, 2024 as compared to the nine months ended September 30, 2023. This increase was driven by a $8.4 million increase in equity-based compensation expense as a result of the March 2024 distribution to certain employees, officers, managers, directors, and other providers of services to KC Parent, LP ("KC Parent") and its subsidiaries with outstanding profit interest units (collectively, “PIU Recipients”) related to the 2015 Equity Incentive Plan ("PIUs Plan"), partially offset by the remeasurement of restricted stock units ("RSUs") and stock options to fair value each reporting period as a result of the awards becoming liability-classified in fiscal 2023. Additionally, we incurred $5.7 million higher meetings and travel expense attributable to our field leadership summit held during the nine months ended September 28, 2024 and $4.7 million in costs related to our transition to an integrated cloud-based enterprise resource planning system, primarily within computer costs, personnel costs, and professional fees. These increases were partially offset by $3.7 million lower professional, legal, and recruiting fees incurred as a result of investments in talent and transformational initiatives during the nine months ended September 30, 2023.

Current wording

Total revenue increased by $13.6 million, or 2.1%, for the three months ended March 29, 2025 as compared to the three months ended March 30, 2024.

Previous wording

Revenue from early childhood education centers increased by $98.1 million, or 5.5%, for the nine months ended September 28, 2024 as compared to the nine months ended September 30, 2023, of which approximately 5% was from higher tuition rates while enrollment remained relatively consistent.

Current wording

Revenue from early childhood education centers increased by $9.7 million, or 1.6%, for the three months ended March 29, 2025 as compared to the three months ended March 30, 2024, of which approximately 2% was from higher tuition rates, partially offset by slightly lower enrollment.

Previous wording

The increase in revenue from early childhood education centers was driven by an increase in higher ECE same-center revenue. Excluding centers that became classified as same-centers after September 30, 2023, which primarily relates to Crème Schools, ECE same-center growth was $34.0 million. New and acquired centers not yet classified as same-centers contributed $9.1 million in revenue during the three months ended September 28, 2024.

Current wording

The increase in revenue from early childhood education centers was primarily driven by $8.6 million higher ECE same-center revenue. Additionally, revenue from new and acquired centers not yet classified as same-centers increased by $2.0 million during the three months ended March 29, 2025, partially offset by center closures.

Previous wording

Revenue from before- and after-school sites increased by $6.5 million, or 16.8%, for the three months ended September 28, 2024 as compared to the three months ended September 30, 2023 primarily due to opening new sites, offering more summer day camps, and increased tuition rates.

Current wording

Revenue from before- and after-school sites increased by $3.9 million, or 7.8%, for the three months ended March 29, 2025 as compared to the three months ended March 30, 2024 primarily due to opening new sites.

Previous wording

Cost of services (excluding depreciation and impairment) increased by $52.7 million, or 11.2%, for the three months ended September 28, 2024 as compared to the three months ended September 30, 2023. This increase was primarily driven by a $20.0 million decrease in reimbursements from COVID-19 Related Stimulus recognized due to the conclusion of certain stimulus funding. The increase was also attributable to higher personnel costs of $18.0 million due to wage rate and labor hour increases, partially offset by lower grant related bonuses. Additionally, other cost of services increased by $9.9 million primarily as a result of increased marketing spend and insurance costs, and rent expense increased $4.9 million due to new centers.

Current wording

Cost of services (excluding depreciation and impairment) increased by $18.5 million, or 3.7%, for the three months ended March 29, 2025 as compared to the three months ended March 30, 2024. This increase was driven by a $10.7 million decrease in reimbursements from government assistance, primarily related to the conclusion of certain COVID-19 Related Stimulus funding. The increase was also attributable to $4.7 million higher personnel costs due to increased wage rates, partially offset by lower grant-related bonuses and labor hours. Additionally, rent expense increased by $4.0 million primarily due to new and acquired centers.

Previous wording

Depreciation and amortization increased by $2.6 million, or 9.5%, for the three months ended September 28, 2024 as compared to the three months ended September 30, 2023. This increase was primarily due to higher depreciation expense of $2.6 million as a result of additional capital expenditures in fiscal 2023 as well as depreciation of property and equipment at acquired and new centers.

Current wording

Depreciation and amortization increased by $1.4 million, or 5.0%, for the three months ended March 29, 2025 as compared to the three months ended March 30, 2024. This increase was primarily driven by higher depreciation expense as a result of assets placed into service from new and acquired centers as well as from capital expenditures in fiscal 2024.

Previous wording

Interest income decreased by $0.3 million, or 20.3%, for the three months ended September 28, 2024 as compared to the three months ended September 30, 2023. This decrease was primarily driven by lower cash balances held in interest-bearing accounts during the three months ended September 28, 2024.

Current wording

Interest income decreased by $1.4 million, or 68.7%, for the three months ended March 29, 2025 as compared to the three months ended March 30, 2024. This decrease was primarily driven by lower cash balances in interest-bearing accounts held at lower average interest rates.

Previous wording

Other (income) expense, net increased by $4.0 million, or 231.7%, for the nine months ended September 28, 2024 as compared to the nine months ended September 30, 2023. This increase was primarily due to a $2.5 million net change in realized and unrealized holding gains on our deferred compensation plan investment trust assets. The increase was also attributable to a $1.5 million gain recognized from insurance claims. See Note 1 of our audited consolidated annual financial statements included in the Prospectus for further information regarding our deferred compensation plan.

Current wording

Other expense (income), net increased by $3.7 million, or 112.1%, for the three months ended March 29, 2025 as compared to the three months ended March 30, 2024. This increase was primarily due to a $2.1 million net change in realized and unrealized holding losses on deferred compensation plan investment trust assets. The increase was also attributable to $1.5 million in gains recognized on miscellaneous insurance claims during the three months ended March 30, 2024.

Previous wording

Income tax expense decreased by $11.5 million for the nine months ended September 28, 2024 as compared to the nine months ended September 30, 2023. The effective tax rate was 31.7% for the nine months ended September 28, 2024 as compared to 25.7% for the nine months ended September 30, 2023. Compared to the statutory rate, the difference in the effective tax rate for the nine months ended September 28, 2024 was primarily due to the partial release of the receivable related to uncertain tax positions as a result of the portion of ERC recognized, tax expense from equity-based compensation, and state income taxes. Compared to the statutory rate, the difference in the effective tax rate for the nine months ended September 30, 2023 was primarily driven by state income taxes.

Current wording

Income tax expense increased by $3.5 million for the three months ended March 29, 2025 as compared to the three months ended March 30, 2024. The effective tax rate was 27.0% for the three months ended March 29, 2025 as compared to 167.6% for the three months ended March 30, 2024. Compared to the statutory rate, the difference in the effective tax rate for the three months ended March 29, 2025 was primarily due to state income taxes. Compared to the statutory rate, the difference in the effective tax rate for the three months ended March 30, 2024 was primarily driven by tax expense from nondeductible stock-based compensation and state income taxes.

Previous wording

To supplement our consolidated financial statements, which are prepared and presented in accordance with the United States generally accepted accounting principles ("GAAP"), we also provide the below non-GAAP financial measures. EBIT, EBITDA, adjusted EBITDA, adjusted net income (loss), and adjusted net income (loss) 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.

Current wording

To supplement our consolidated financial statements, which are prepared and presented in accordance with the United States generally accepted accounting principles (“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.

Previous wording

We present EBIT, EBITDA, adjusted EBITDA, adjusted net income (loss), and adjusted net income (loss) 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 (loss) allow for an assessment of our operating performance without the effect of charges that do not relate to the core operations of our business.

Current wording

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.

Previous wording

EBIT, EBITDA, adjusted EBITDA, adjusted net income (loss), and adjusted net income (loss) 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:

Current wording

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:

Previous wording

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 (loss), and adjusted net income (loss) per common share do not reflect cash requirements for such replacements;

Current wording

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;

Previous wording

EBIT is defined as net income adjusted for interest and income tax expense (benefit). EBITDA is defined as EBIT adjusted for depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for impairment losses, equity-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.

Current wording

EBIT is defined as net income (loss) 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.

Previous wording

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:

Current wording

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

Previous wording

Adjusted net income (loss) is defined as net income adjusted for income tax expense (benefit), amortization of intangible assets, impairment losses, equity-based compensation, management and advisory fee expenses, acquisition related costs, non-recurring distribution and bonus expense, COVID-19 Related Stimulus, net, other costs, and non-GAAP income tax expense (benefit) because these charges do not relate to the core operations of our business. Adjusted net income (loss) per common share is defined as the amount of adjusted net income (loss) per weighted average number of common shares outstanding. We present adjusted net income (loss) and adjusted net income (loss) 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 (loss) and adjusted net income (loss) 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.

Current wording

Adjusted net income is defined as net income (loss) 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.

Previous wording

The following table shows adjusted net income (loss) and adjusted net income (loss) 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:

Current wording

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 (loss) and net income (loss) per common share, respectively, for the periods presented (in thousands, except per share data):

Previous wording

Represents non-cash equity-based compensation expense in accordance with Accounting Standards Codification ("ASC") 718, Compensation: Stock Compensation.

Current wording

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 three months ended March 30, 2024 excludes $14.3 million in expense included within “Non-recurring distribution and bonus expense” as described in explanation (5) below.

Previous wording

Represents costs incurred in connection with planned and completed acquisitions, including due diligence, transaction, integration, and severance related costs. During the periods presented, these costs were incurred related to the acquisition of Crème School.

Current wording

Represents costs incurred in connection with planned and completed acquisitions, including due diligence, transaction, integration, and severance related costs. During the three months ended March 30, 2024, these costs were incurred related to the acquisition of Crème School.