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 audited consolidated financial statements and notes thereto for the fiscal years ended December 28, 2024, December 30, 2023, and December 31, 2022 included elsewhere in this Annual Report on Form 10-K. This discussion primarily addresses the fiscal years ended December 28, 2024 and December 30, 2023 and comparisons between these years. Discussion and analysis of the fiscal year ended December 31, 2022 and comparison of the fiscal years ended December 30, 2023 and December 31, 2022 that are not included elsewhere in this Annual Report on Form 10-K can be found within "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our final prospectus filed with the SEC on October 9, 2024 pursuant to Rule 424(b)(4). Some of the information included in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, 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 included elsewhere in this Annual Report on Form

Current wording

The following discussion and analysis should be read in conjunction with, and is qualified in its entirety by reference to, our audited consolidated financial statements and notes thereto for the fiscal year ended January 3, 2026 included in Item 8 of this Annual Report on Form 10-K. This discussion and analysis primarily addresses the 53-week fiscal year ended January 3, 2026 ("fiscal 2025") and the 52-week fiscal year ended December 28, 2024 ("fiscal 2024") and comparisons between these years. Discussion and analysis as well as comparisons of the fiscal years ended December 28, 2024 and December 30, 2023 can be found within "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our previous Annual Report on Form 10-K for the fiscal year ended December 28, 2024 filed with the SEC on March 21, 2025. Some of the information included in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, 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 included elsewhere in this Annual Report on Form 10-K 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. is the largest private provider of high-quality 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 1,574 early childhood education centers with center capacity for 210,135 children and 1,025 before- and after-school sites located in 40 states and the District of Columbia as of December 28, 2024.

Current wording

KinderCare Learning Companies, Inc. is a leading provider of high-quality 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 1,601 early childhood education centers with center capacity for 214,803 children and 1,153 before- and after-school sites located in 41 states and the District of Columbia as of January 3, 2026.

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 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, our consolidated financial statements and notes thereto as of December 28, 2024 have been adjusted to retrospectively reflect the Common Stock Conversion. Refer to Note 1 and Note 17 within the consolidated financial statements included elsewhere in this Annual Report on Form 10-K 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 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 consolidated financial statements and notes thereto as of and for the fiscal year ended January 3, 2026 have been adjusted to retrospectively reflect the Common Stock Conversion. Refer to Note 17 within the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information.

Previous wording

In October 2024, we sold 27.6 million shares of our common stock through our IPO, including 3.6 million shares sold pursuant to the underwriters' exercise in full of their option to purchase additional shares. Net proceeds of $616.1 million, after underwriting discounts and offering costs, were recognized within additional paid-in capital on the consolidated financial statements. These net proceeds were primarily utilized to repay $608.0 million of outstanding principal on our first lien term loan ("First Lien Term Loan Facility"), which provided us the ability to enter into a refinancing amendment to the credit agreement, dated as of June 12, 2023 (as subsequently amended and restated) (the "Credit Agreement") to reduce the interest rates on our senior secured credit facilities. We recognized a loss on extinguishment of debt of $24.8 million within interest expense as a result of the partial repayment and refinancing of our senior secured credit facilities. We have incurred expenses during our transition to a public company that we had not previously incurred as a private company, including costs associated with public company reporting requirements of the Securities Exchange Act of 1934, which have impacted our results of operations.

Current wording

In October 2024, we sold 27.6 million shares of our common stock through our IPO, including 3.6 million shares sold pursuant to the underwriters' exercise in full of their option to purchase additional shares. Net proceeds of $616.1 million, after underwriting discounts and offering costs, were recognized within additional paid-in capital on the consolidated financial statements. These net proceeds were primarily utilized to repay $608.0 million of outstanding principal on our first lien term loan ("First Lien Term Loan Facility"), which provided us the ability to enter into a refinancing amendment to the credit agreement, dated as of June 12, 2023 (as subsequently amended and restated) (the "Credit Agreement") to reduce the interest rates on our senior secured credit facilities. We recognized a loss on extinguishment of debt of $24.8 million within interest expense as a result of the partial repayment and refinancing of our senior secured credit facilities.

Previous wording

In conjunction with our IPO, we modified the terms of our equity-based award plans. The 2022 Incentive Award Plan ("2022 Plan") was amended to provide for share settlement of all unexercised stock options and unvested restricted stock units ("RSUs") when stock options are exercised and RSUs vest according to their original vesting schedules. As a result of this modification, the previously liability-classified stock options and RSUs were reclassified as equity and the awards will not be remeasured at fair value each reporting period. The 2015 Equity Incentive Plan ("PIUs Plan") was modified to accelerate the vesting of all outstanding PIUs. As certain profit interest units ("PIUs") were improbable to vest prior to the modification and became probable to vest subsequent to the modification, we recognized the full fair value of the awards at the date of modification. As a result of the modification, we recognized $113.1 million as equity-based compensation expense within selling, general, and administrative expenses. The PIUs were settled in shares of our common stock in accordance with the plan of dissolution and liquidation of our parent company effectively terminating the PIUs Plan.

Current wording

In conjunction with our IPO, we modified the terms of our stock-based award plans. The 2022 Incentive Award Plan ("2022 Plan") was amended to provide for share settlement of all unexercised stock options and unvested restricted stock units ("RSUs") when stock options are exercised and RSUs vest according to their original vesting schedules. As a result of this modification, the previously liability-classified stock options and RSUs were reclassified as equity and the awards will not be remeasured at fair value each reporting period. The 2015 Equity Incentive Plan ("PIUs Plan") was modified to accelerate the vesting of all outstanding profit interest units ("PIUs"). As certain PIUs were improbable to vest prior to the modification and became probable to vest subsequent to the modification, we recognized the full fair value of the awards at the date of modification. As a result of the modification, we recognized $113.1 million as stock-based compensation expense within selling, general, and administrative expenses. The PIUs were settled in shares of our common stock in accordance with the plan of dissolution and liquidation of our parent company effectively terminating the PIUs Plan.

Previous wording

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

Current wording

Our IPO, as well as the transactions we entered into in connection with our IPO, have affected the comparability of our operating results for the periods presented. Refer to Note 12 and Note 17 within the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information.

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 $63.3 million and $181.9 million during fiscal 2024 and fiscal 2023, respectively, in funding for reimbursement of center operating expenses in cost of services (excluding depreciation and impairment), as well as $0.4 million and $3.0 million during fiscal 2024 and fiscal 2023, respectively, in revenue arising from COVID-19 Related Stimulus. The federal programs funding the COVID-19 Related Stimulus were required to distribute all stimulus funding 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 and $63.3 million during fiscal 2025 and fiscal 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 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.

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 fiscal 2022, we applied for ERC for qualified wages and benefits paid throughout fiscal 2021 and fiscal 2020. Reimbursements of $62.0 million in cash tax refunds for ERC claimed, along with $2.3 million in interest income, were received during fiscal 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 fiscal 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 fiscal 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 fiscal 2022, we applied for ERC for qualified wages and benefits paid throughout fiscal 2021 and fiscal 2020. Reimbursements of $62.0 million in cash tax refunds for ERC claimed, along with $2.3 million in interest income, were received during fiscal 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 fiscal 2025 and fiscal 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.

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 and sites as the number of centers and sites at the beginning of the period plus openings and acquisitions, minus any permanent closures for the period. A permanently closed center or site is a center or site that has ceased operations as of the end of the reporting period that management does not intend on reopening. During fiscal 2025, management updated the definition of total before- and after-school sites to include sites that are temporarily closed as a result of the summer season to more accurately reflect the total sites that were operating during the year. Prior periods presented were adjusted to reflect the updated definition for comparative purposes.

Previous wording

As of December 28, 2024, we had 1,574 early childhood education centers with a center capacity for 210,135 children as compared to 1,557 early childhood education centers as of December 30, 2023, with a center capacity for 209,998 children.

Current wording

As of January 3, 2026, we had 1,601 early childhood education centers with a center capacity for 214,803 children as compared to 1,574 early childhood education centers as of December 28, 2024, with a center capacity for 210,135 children. During fiscal 2025, total centers increased by 27 due to acquiring 26 centers and opening 20 centers, partially offset by 19 permanent center closures.

Previous wording

During fiscal 2024, total centers increased by 17 due to acquiring 23 centers and opening 12 centers, partially offset by 18 permanent center closures. Total before- and after-school sites increased by 77 during fiscal 2024 as compared to the number of before- and after-school sites as of December 30, 2023 due to opening 164 sites, partially offset by 87 site closures.

Current wording

Total before- and after-school sites increased by 128 during fiscal 2025 as compared to the number of before- and after-school sites as of December 28, 2024 due to opening 236 sites, partially offset by 108 site closures.

Previous wording

ECE same-center occupancy increased by 90 basis points for fiscal 2024 as compared to fiscal 2023, driven by a decrease in average center capacity at same-centers, primarily due to serving younger students, which can have slightly smaller class sizes.

Current wording

ECE same-center occupancy decreased by 200 basis points for fiscal 2025 as compared to fiscal 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 $105.2 million, or 4.5%, for fiscal 2024 as compared to fiscal 2023. ECE same-center revenue growth of $103.0 million, or 4.5%, was driven by centers that were classified as same-centers as of both December 28, 2024 and December 30, 2023. The remaining $2.2 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 December 30, 2023 and center closures as of December 28, 2024.

Current wording

ECE same-center revenue increased by $61.2 million, or 2.5%, for fiscal 2025 as compared to fiscal 2024 primarily due to the impact of the 53rd week in fiscal 2025, which contributed $43.5 million in additional ECE same-center revenue. During the comparable 52- week periods, ECE same-center revenue growth of $31.8 million was driven by the net impact of new and acquired centers not yet classified as same-centers as of December 28, 2024 and center closures as of January 3, 2026. This growth was partially offset by a decrease of $14.1 million, or 0.6%, in revenue at centers that were classified as same centers as of both January 3, 2026 and December 28, 2024.

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. See Note 1 and Note 23 of our consolidated financial statements included elsewhere in this

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. See Note 1 and Note 23 of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K 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

The following table sets forth our results of operations including as a percentage of revenue for fiscal 2024 and fiscal 2023 (in thousands, except per share data):

Current wording

The following table sets forth our results of operations including as a percentage of revenue for fiscal 2025 and fiscal 2024 (in thousands, except per share data and percentages):

Previous wording

Total revenue increased by $152.9 million, or 6.1%, for fiscal 2024 as compared to fiscal 2023.

Current wording

Total revenue increased by $70.3 million, or 2.6%, for fiscal 2025 as compared to fiscal 2024. The 53rd week in fiscal 2025 contributed an additional $45.1 million of revenue.

Previous wording

The increase in revenue from early childhood education centers was primarily driven by $105.2 million higher ECE same-center revenue. Additionally, revenue from new and acquired centers not yet classified as same centers increased by $17.2 million during fiscal 2024, partially offset by center closures.

Current wording

The $51.6 million increase in early childhood education center revenue for fiscal 2025 as compared to fiscal 2024 was comprised of $61.2 million higher ECE same-center revenue, partially offset by $9.6 million lower revenue from new and acquired centers not yet classified as same centers and center closures.

Previous wording

Revenue from before- and after-school sites increased by $31.7 million, or 19.2%, for fiscal 2024 as compared to fiscal 2023 primarily due to opening new sites, increased enrollment, and offering more summer day camps.

Current wording

Revenue from before- and after-school sites increased by $18.7 million, or 9.5%, for fiscal 2025 as compared to fiscal 2024 primarily due to opening new sites.

Previous wording

Depreciation and amortization increased by $8.6 million, or 7.9%, for fiscal 2024 as compared to fiscal 2023. This increase was primarily due to higher depreciation expense of $8.8 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 $6.4 million, or 5.4%, for fiscal 2025 as compared to fiscal 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

Income tax expense decreased by $12.8 million for fiscal 2024 as compared to fiscal 2023. The effective tax rate was (18.7)% for fiscal 2024 as compared to 21.1% for fiscal 2023. Compared to the statutory rate, the difference in the effective tax rate for fiscal 2024 was primarily due to nondeductible equity-based compensation related to the PIUs and the partial release of the receivable related to uncertain tax positions as a result of the portion of ERC recognized, partially offset by the nontaxable ERC and state income tax benefit recognized during fiscal 2024. Compared to the statutory rate, the difference in the effective tax rate for fiscal 2023 was primarily due to state income taxes, partially offset by true-ups of the 2022 tax provision and federal tax credits.

Current wording

Income tax expense increased by $4.9 million for fiscal 2025 as compared to fiscal 2024. The effective tax rate was (20.9)% for fiscal 2025 as compared to (18.7)% for fiscal 2024. Compared to the statutory rate, the difference in the effective tax rate for fiscal 2025 was primarily due to nondeductible goodwill impairment and the partial release of the receivable related to uncertain tax positions as a result of the portion of ERC recognized, partially offset by the nontaxable ERC and state income tax benefit recognized during fiscal 2025. Compared to the statutory rate, the difference in the effective tax rate for fiscal 2024 was primarily due to nondeductible stock-based compensation related to the PIUs and the partial release of the receivable related to uncertain tax positions as a result of the portion of ERC recognized, partially offset by the nontaxable ERC and state income tax benefit recognized during fiscal 2024.

Previous wording

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

Current wording

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

EBIT is defined as net (loss) income adjusted for interest and income tax expense. EBITDA is defined as EBIT adjusted for depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for impairment losses, 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 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 (loss) income, for the periods presented (in thousands):

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 loss, for the periods presented (in thousands):

Previous wording

Adjusted net income is defined as net (loss) income adjusted for income tax expense, 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, 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.

Current wording

Adjusted net income is defined as net 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

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

Current wording

Represents impairment charges for goodwill and long-lived assets. Goodwill impairment recognized during fiscal 2025 was $178.0 million and was driven by the further deterioration in our market capitalization from a continued decline in our stock price. Impairments of long-lived assets for the periods presented was driven by center closures and reduced operating performance at certain centers due to the impact of changing demographics in certain locations in which we operate and current macroeconomic conditions on our overall operations. Refer to Note 7 of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information on our goodwill impairment analysis.

Previous wording

Represents non-cash equity-based compensation expense in accordance with Accounting Standards Codification ("ASC") 718, Compensation: Stock Compensationand excludes cash-settled, liability-classified equity-based compensation expense. Fiscal 2024 includes $113.1 million in expense recognized related to the one-time October 2024 modification to the PIUs Plan and excludes $14.3 million in expense included within “Non-recurring distribution and bonus expense” as described in explanation (5) below. Refer to Note 17 within the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further information.

Current wording

Represents non-cash stock-based compensation expense in accordance with Accounting Standards Codification ("ASC") 718, Compensation: Stock Compensationand excludes cash-settled, liability-classified stock-based compensation expense. Fiscal 2024 includes $113.1 million in expense recognized related to the one-time October 2024 modification to the PIUs Plan and excludes $14.3 million in expense included within “Non-recurring distribution and bonus expense” as described in explanation (5) below. Refer to Note 17 within the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information.

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. Fiscal 2024 costs relate to the acquisition of Crème School.

Previous wording

During March 2024, we recognized a $14.3 million one-time expense related to an advance distribution to Class B PIU recipients, including employees, officers, managers, directors, and other providers of services to KC Parent, LP ("KC Parent") and its subsidiaries (collectively, "PIU Recipients"), with outstanding PIUs. In connection with this distribution, we recognized a $5.0 million one-time bonus expense for RSUs and stock options to certain service providers, which are defined as employees, consultants, or directors (collectively, “Participants"), to account for the change in value associated with the March 2024 distribution to PIU Recipients. We do not routinely make distributions to PIU Recipients in advance of a liquidity event or pay bonuses to RSU or stock option Participants outside of normal vesting and we do not expect to do so in the future.

Current wording

During March 2024, we recognized a $14.3 million one-time expense related to an advance distribution to holders of Class B PIUs. In connection with this distribution, we recognized a $5.0 million one-time bonus expense for holders of

Previous wording

Includes expense reimbursements and revenue arising from the COVID-19 pandemic, net of pass-through expenses incurred as a result of certain grant requirements. We recognized $63.3 million and $181.9 million during fiscal 2024 and fiscal 2023, respectively, in funding for reimbursement of center operating expenses in cost of services (excluding depreciation and impairment), as well as $0.4 million and $3.0 million during fiscal 2024 and fiscal 2023, respectively, in revenue arising from COVID-19 Related Stimulus. Additionally, during fiscal 2024, we recognized $23.4 million of ERC offsetting cost of services (excluding depreciation and impairment) as well as $2.6 million in professional fees in selling, general, and administrative expenses as a result of calculating and filing for ERC. COVID-19 Related Stimulus is net of pass-through expenses incurred as stipulated within certain grants of $14.8 million and $34.3 million during fiscal 2024 and fiscal 2023, respectively.

Current wording

Includes expense reimbursements and revenue arising from the COVID-19 pandemic, net of pass-through expenses incurred as a result of certain grant requirements. We recognized $0.7 million and $63.3 million during fiscal 2025 and fiscal 2024, respectively, in funding for reimbursement of center operating expenses in cost of services (excluding depreciation and impairment). Additionally, during fiscal 2025 and fiscal 2024, we recognized $30.1 million and $23.4 million of ERC offsetting cost of services (excluding depreciation and impairment) as well as $2.1 million and $2.6 million in professional fees in selling, general, and administrative expenses, respectively, as a result of calculating and filing for ERC. COVID-19 Related Stimulus is net of pass-through expenses incurred as stipulated within certain grants of $1.9 million and $14.8 million during fiscal 2025 and fiscal 2024, respectively.

Previous wording

Includes certain professional fees incurred for both contemplated and completed debt and equity transactions, as well as costs expensed in connection with prior contemplated offerings. For fiscal 2024, other costs includes $3.6 million in transaction costs associated with our incremental first lien term loan, repricing amendments of our senior secured credit facilities, and debt modifications subsequent to our IPO, as well as $2.5 million in costs related to our IPO. For fiscal 2023, other costs includes $6.3 million in transaction costs associated with our June 2023 refinancing and a $2.9 million loss on a sale and leaseback transaction. These costs represent items management believes are not indicative of core operating performance.

Current wording

Includes certain professional fees incurred for both contemplated and completed debt and equity transactions, as well as costs expensed in connection with prior contemplated offerings. For fiscal 2025, other costs includes $0.7 million in transaction costs associated with the July 2025 repricing amendment and $0.2 million in costs related to our IPO. For fiscal 2024, other costs includes $3.6 million in transaction costs associated with our incremental first lien term loan, repricing amendments of our senior secured credit facilities, and debt modifications subsequent to our IPO, as well as $2.5 million in costs related to our IPO. These costs represent items management believes are not indicative of core operating performance.

Previous wording

Includes the unamortized original issue discount and deferred financing costs that were written off in connection with certain lenders that had reduced principal holdings or did not participate in the loan syndication as a result of certain amendments to our senior secured credit facilities. For fiscal 2024, the loss on extinguishment of long-term debt is primarily the result of the October 2024 repayment of $608.0 million on the First Lien Term Loan Facility. For fiscal 2023, the loss on extinguishment of long-term debt is primarily the result of the June 2023 refinancing. During fiscal 2024, management updated the definition of adjusted net income to include loss on extinguishment of long-term debt, net and has adjusted prior periods presented to reflect the updated definition for comparative purposes. Loss on extinguishment of long-term debt, net is not considered by management to be indicative of core operating performance.

Current wording

Includes the unamortized original issue discount and deferred financing costs that were written off in connection with certain lenders that had reduced principal holdings or did not participate in the loan syndication as a result of certain amendments to our senior secured credit facilities. For fiscal 2025, the loss on extinguishment of long-term debt is the result of the July 2025 repricing amendment to the Credit Agreement. For fiscal 2024, the loss on extinguishment of long-term debt is primarily the result of the October 2024 repayment of $608.0 million on the First Lien Term Loan Facility. Loss on extinguishment of long-term debt, net is not considered by management to be indicative of core operating performance.

Previous wording

The outstanding shares and per share amounts have been retrospectively adjusted to reflect the Common Stock Conversion. Refer to Note 1 and Note 17 within the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further information.

Current wording

The outstanding shares and per share amounts for the portion of the fiscal year ended December 28, 2024 prior to the Common Stock Conversion have been retrospectively adjusted to reflect the Common Stock Conversion. Refer to Note 17 within the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information.

Previous wording

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

Current wording

We expect to continue to meet our liquidity requirements for at least the next 12 months under current operating conditions with cash generated from operations, cash on hand, and to the extent necessary and available, through borrowings under the First Lien Revolving Credit Facility. If the need arises for additional expenditures, we may seek additional funding. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth under “Risk Factors” in Item 1A. In the future, we may attempt to raise additional capital through the sale of equity securities or debt financing arrangements. Any future equity capital or indebtedness we incur may result in terms that could be unfavorable to equity investors. We cannot provide assurance that we will be able to raise additional capital in the future on favorable terms, or at all. Any inability to raise capital could adversely affect our ability to achieve our business objectives.

Previous wording

As of December 28, 2024, our Credit Agreement consisted of a $966.8 million First Lien Term Loan Facility and a $240.0 million First Lien Revolving Credit Facility.

Current wording

As of January 3, 2026, our Credit Agreement consisted of a $962.0 million First Lien Term Loan Facility and a $262.5 million First Lien Revolving Credit Facility.

Previous wording

Additionally, in October 2024, we repaid $608.0 million on the First Lien Term Loan Facility utilizing the net proceeds from our IPO and, in conjunction, entered into another repricing amendment to the Credit Agreement. As of the effective date of the October 2024 repricing amendment, the applicable rate for the First Lien Term Loan Facility and for amounts drawn under the First Lien Revolving Credit Facility were further reduced by 1.25%. As such, the First Lien Term Loan Facility bears interest at a variable rate equal to the Secured Overnight Financing Rate ("SOFR") plus 3.25% per annum. In addition, as of the effective date of the October 2024 repricing amendment, amounts drawn under the First Lien Revolving Credit Facility bear interest at SOFR plus an applicable rate between 2.50% and 3.00% per annum, based on a pricing grid of the Company's First Lien Term Loan Facility net leverage ratio. The October 2024 repricing amendment decreased the required quarterly principal payments on the First Lien Term Loan Facility to $2.4 million, beginning with the payment due for the quarter ended March 29, 2025. All other terms under the Credit Agreement remain unchanged as a result of the amendments. The First Lien Term Loan Facility matures in June 2030.

Current wording

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

Previous wording

In February 2025, subsequent to the fiscal year ended December 28, 2024, the Company entered into another amendment to the Credit Agreement to increase the total commitments under the First Lien Revolving Credit Facility by $22.5 million as well as reclassify and extend $5.0 million of the previously non-extended commitments, increasing the total borrowing capacity of the First Lien Revolving Credit Facility to $262.5 million. All other terms under the Credit Agreement remain unchanged.

Current wording

In February 2025, we entered into an amendment to the Credit Agreement to increase the total commitments under the First Lien Revolving Credit Facility by a net amount of $22.5 million as well as reclassify and extend $5.0 million of the previously non-extended commitments. The total borrowing capacity of the First Lien Revolving Credit Facility increased to $262.5 million, with $252.5 million of extended commitments and $10.0 million of non-extended commitments. All other terms under the Credit Agreement remain unchanged as a result of the amendment.

Previous wording

The Credit Agreement allows for letters of credit to be drawn against the current borrowing capacity of the First Lien Revolving Credit Facility, capped at $172.5 million. Prior to the October 2024 amendment, the cap on the amount of letters of credit that could be drawn against the borrowing capacity of the First Lien Revolving Credit Facility was $115.0 million. Additionally, fees on the outstanding letters of credit bear interest at a rate equal to the applicable rate for amounts drawn under the First Lien Revolving Credit Facility.

Current wording

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

Previous wording

As of December 28, 2024, there were no outstanding borrowings under the First Lien Revolving Credit Facility and $55.8 million of outstanding letters of credit.

Current wording

As of January 3, 2026, there were no outstanding borrowings under the First Lien Revolving Credit Facility and we had an available borrowing capacity of $189.7 million after giving effect to the outstanding letters of credit under the Credit Agreement of $72.8 million.