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 six months ended June 28, 2025 and June 29, 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.

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 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.

Previous 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 1,589 early childhood education centers with center capacity for 212,901 children and 1,043 before- and after-school sites located in 41 states and the District of Columbia as of June 28, 2025.

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 1,595 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.

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 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 six months ended June 28, 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.

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 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.

Previous wording

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 brand, which has 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.

Current wording

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.

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 2% of the over 64,000 elementary 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 nearly 64,000 elementary schools in the United States, providing significant opportunity to continue to grow our footprint.

Previous wording

As of June 28, 2025, we operated 1,589 early childhood education centers with a center capacity for 212,901 children as compared to 1,568 early childhood education centers as of June 29, 2024, with a center capacity for 210,618 children. During the six months ended June 28, 2025, total centers increased by 15 due to acquiring 14 centers and opening eight centers, partially offset by seven permanent center closures. During the six months ended June 29, 2024, total centers increased by 11 due to acquiring 15 centers and opening five centers, partially offset by nine permanent center closures.

Current wording

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.

Previous wording

As of June 28, 2025, we operated 1,043 before- and after-school sites, an increase of 99 sites from 944 before- and after-school sites as of June 29, 2024. Total before- and after-school sites increased by 18 during the six months ended June 28, 2025 due to opening 47 sites, partially offset by 29 permanent site closures. Total before- and after-school sites decreased by four during the six months ended June 29, 2024 due to permanently closing 33 sites, partially offset by 29 site openings.

Current wording

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.

Previous wording

Average weekly ECE FTEs for the three months ended June 28, 2025 decreased by 2,107, or 1.4%, as compared to the three months ended June 29, 2024 primarily due to lower FTEs at same-centers, partially offset by FTEs at new and acquired centers.

Current wording

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.

Previous wording

Average weekly ECE FTEs for the six months ended June 28, 2025 decreased by 1,605, or 1.1%, as compared to the six months ended June 29, 2024 primarily due to lower FTEs at same-centers, partially offset by FTEs at new and acquired centers.

Current wording

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.

Previous wording

ECE same-center occupancy decreased by 130 basis points for the three months ended June 28, 2025 as compared to the three months ended June 29, 2024 primarily due to lower enrollment at same-centers.

Current wording

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.

Previous wording

ECE same-center occupancy decreased by 100 basis points for the six months ended June 28, 2025 as compared to the six months ended June 29, 2024 primarily due to lower enrollment at same-centers.

Current wording

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.

Previous wording

ECE same-center revenue increased by $14.4 million, or 1.2%, for the six months ended June 28, 2025 as compared to the six months ended June 29, 2024. ECE same-center revenue growth of $5.6 million, or 0.5%, was driven by centers that were classified as same-centers as of both June 28, 2025 and June 29, 2024. Additionally, $8.8 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 June 29, 2024 and center closures as of June 28, 2025.

Current wording

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.

Previous wording

ECE same-center revenue increased by $5.4 million, or 0.9%, for the three months ended June 28, 2025 as compared to the three months ended June 29, 2024. ECE same-center revenue growth of $0.7 million, or 0.1%, was driven by centers that were classified as same-centers as of both June 28, 2025 and June 29, 2024. Additionally, $4.7 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 June 29, 2024 and center closures as of June 28, 2025.

Current wording

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.

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 $258.9 million and $241.4 million during the three months ended June 28, 2025 and June 29, 2024, and $499.0 million and $457.2 million during the six months ended June 28, 2025 and June 29, 2024, 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 $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.

Previous wording

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. Offsetting certain center operating expenses are reimbursements from federal, state, and local agencies.

Current wording

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.

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 $0.7 million during the six months ended June 28, 2025 and $14.9 million and $39.0 million during the three and six months ended June 29, 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 June 28, 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.

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 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.

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 both the three and six months ended June 28, 2025 and June 29, 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. The timing in 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 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.

Previous wording

The following table sets forth our results of operations including as a percentage of revenue for the six months ended June 28, 2025 and June 29, 2024 (in thousands, except per share data and percentages):

Current wording

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):

Previous wording

Revenue from early childhood education centers increased by $6.5 million, or 1.0%, for the three months ended June 28, 2025 as compared to the three months ended June 29, 2024, of which approximately 2% was from higher tuition rates, partially offset by approximately 1% from lower enrollment.

Current wording

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.

Previous wording

The increase in revenue from early childhood education centers was primarily driven by $5.4 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 June 28, 2025, partially offset by center closures.

Current wording

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.

Previous wording

Revenue from before- and after-school sites increased by $3.7 million, or 7.5%, for the three months ended June 28, 2025 as compared to the three months ended June 29, 2024 primarily due to opening new sites.

Current wording

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.

Previous wording

Cost of services (excluding depreciation and impairment) increased by $37.9 million, or 3.8%, for the six months ended June 28, 2025 as compared to the six months ended June 29, 2024. This increase was driven by $12.7 million higher personnel costs due to increased wage rates, partially offset by lower grant-related bonuses and labor hours. The increase was also attributable to $11.6 million lower government assistance driven by a decrease in cost reimbursements, primarily related to the conclusion of certain COVID-19 Related Stimulus funding, partially offset by higher ERC recognized due to the timing of tax statute of limitations and qualifying creditable wages. Additionally, rent expense increased $7.7 million primarily due to new and acquired centers. Lastly, other center operating expenses increased by $6.0 million primarily as a result of operating more centers and sites, driven by higher janitorial and utilities costs, property taxes, as well as food and supplies.

Current wording

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.

Previous wording

Depreciation and amortization increased by $1.9 million, or 6.4%, for the three months ended June 28, 2025 as compared to the three months ended June 29, 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.

Current wording

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.

Previous wording

Impairment losses increased by $0.7 million, or 46.9%, for the three months ended June 28, 2025 as compared to the three months ended June 29, 2024, primarily driven by higher fixed asset impairment due to more centers impaired.

Current wording

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.

Previous wording

Interest expense decreased by $23.9 million, or 54.3%, for the three months ended June 28, 2025 as compared to the three months ended June 29, 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 repricing amendment executed in conjunction with the IPO.

Current wording

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.

Previous wording

Other income, net increased by $2.5 million, or 509.8%, for the three months ended June 28, 2025 as compared to the three months ended June 29, 2024, primarily due to a $2.6 million net change in realized and unrealized holding gains on deferred compensation plan investment trust assets.

Current wording

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.

Previous wording

Income tax expense increased by $4.1 million for the three months ended June 28, 2025 as compared to the three months ended June 29, 2024. The effective tax rate was 27.3% for the three months ended June 28, 2025 as compared to 26.7% for the three months ended June 29, 2024. Compared to the statutory rate, the differences in the effective tax rates for both the three months ended June 28, 2025 and June 29, 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 three months, as well as state income taxes. These impacts were partially offset by the recognition of ERC refunds during the respective three months for which the income tax expense had been previously recognized.

Current wording

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.

Previous wording

Revenue from early childhood education centers increased by $16.2 million, or 1.3%, for the six months ended June 28, 2025 as compared to the six months ended June 29, 2024, of which approximately 2% was from higher tuition rates, partially offset by approximately 1% from lower enrollment.

Current wording

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.

Previous wording

The increase in revenue from early childhood education centers was primarily driven by $14.4 million higher ECE same-center revenue. Additionally, revenue from new and acquired centers not yet classified as same-centers increased by $3.1 million during the six months ended June 28, 2025, partially offset by center closures.

Current wording

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.

Previous wording

Revenue from before- and after-school sites increased by $7.5 million, or 7.7%, for the six months ended June 28, 2025 as compared to the six months ended June 29, 2024 primarily due to opening new sites.

Current wording

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.

Previous wording

Cost of services (excluding depreciation and impairment) increased by $19.4 million, or 3.9%, for the three months ended June 28, 2025 as compared to the three months ended June 29, 2024. This increase was driven by $7.9 million higher personnel costs due to increased wage rates, partially offset by lower grant-related bonuses and labor hours. Other center operating expenses increased by $7.0 million primarily as a result of operating more centers and sites, driven by higher food and supplies, janitorial and utilities costs, and property taxes. Additionally, rent expense increased $3.7 million primarily due to new and acquired centers. Lastly, the increase was also attributable to $0.8 million lower government assistance driven by a decrease in cost reimbursements, primarily related to the conclusion of certain COVID-19 Related Stimulus funding, partially offset by higher ERC recognized due to the timing of tax statute of limitations and qualifying creditable wages.

Current wording

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.

Previous wording

Depreciation and amortization increased by $3.3 million, or 5.7%, for the six months ended June 28, 2025 as compared to the six months ended June 29, 2024. This increase was primarily due to 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.

Current wording

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.

Previous wording

Selling, general, and administrative expenses decreased by $18.7 million, or 11.0%, for the six months ended June 28, 2025 as compared to the six months ended June 29, 2024. This decrease was primarily driven by lower stock-based compensation expense and bonus expense of $16.5 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 six months ended June 30, 2024, partially offset by expense from additional awards granted under the 2022 Plan. Additionally, meeting and travel expenses decreased by $6.1 million primarily attributable to our field leadership summit held during the six months ended June 29, 2024.

Current wording

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.

Previous wording

Interest expense decreased by $40.2 million, or 50.0%, for the six months ended June 28, 2025 as compared to the six months ended June 29, 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 repricing amendment executed in conjunction with the IPO.

Current wording

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.

Previous wording

Interest income decreased by $1.8 million, or 46.0%, for the six months ended June 28, 2025 as compared to the six months ended June 29, 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.

Current wording

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.

Previous wording

Other income, net decreased by $1.1 million, or 29.9%, for the six months ended June 28, 2025 as compared to the six months ended June 29, 2024, primarily due to $1.5 million in gains recognized on miscellaneous insurance claims during the six months ended June 29, 2024.

Current wording

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.

Previous wording

Income tax expense increased by $7.6 million for the six months ended June 28, 2025 as compared to the six months ended June 29, 2024. The effective tax rate was 27.2% for the six months ended June 28, 2025 as compared to 35.5% for the six months ended June 29, 2024. Compared to the statutory rate, the differences in the effective tax rates for both the six months ended June 28, 2025 and June 29, 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 six months, as well as state income taxes. These impacts were partially offset by the recognition of ERC refunds during the respective six months for which the income tax expense had been previously recognized. The effective tax rate for the six months ended June 29, 2024 was further impacted by additional tax expense related to nondeductible stock-based compensation.

Current wording

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.

Previous 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.

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. We also use these non-GAAP financial measures for budgeting and compensation purposes.

Previous 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 six months ended June 29, 2024 excludes $14.3 million in expense included within “Non-recurring distribution and bonus expense” as described in explanation (5) below.

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 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.

Previous wording

Represents costs incurred in connection with planned and completed acquisitions, including due diligence, transaction, integration, and severance related costs. During the six months ended June 29, 2024, 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 nine months ended September 28, 2024, these costs were incurred related to the acquisition of Crème School.