KinderCare Learning Companies, Inc.

ORGANIZATIONAND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization—KinderCare Learning Companies, Inc. (the “Company”) offers early childhood education and care programs to children ranging from six weeks through 12 years of age. Founded in 1969, the services provided include infant, toddler, preschool, kindergarten, and before- and after-school programs. The Company provides childhood education and care programs within the following categories:

Community-Based and Employer-Sponsored Early Childhood Education and Care—The Company provides early childhood education and care services, as well as back-up care, primarily marketed under the names KinderCare Learning Centers and Crème School. Additionally, the Company partners with employer sponsors under a variety of arrangements such as discounted rent, enrollment guarantees, or an arrangement whereby the center is managed by the Company in return for a management fee. As of April 4, 2026, the Company provided community-based and employer-sponsored early childhood education and care services through 1,606 centers with a licensed capacity of 215,371 children in 40 states and the District of Columbia.

Before- and After-School Educational Services—The Company provides before- and after-school educational services for preschool and school-age children under the name Champions. As of April 4, 2026, Champions offered educational services through 1,159 sites in 29 states and the District of Columbia. These sites primarily operate at elementary school facilities.

Basis of Presentation—The unaudited condensed consolidated interim financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and footnotes required by GAAP for complete annual financial statements. Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with GAAP, have been condensed or omitted pursuant to those rules and regulations.

The unaudited condensed consolidated interim financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary to fairly state the Company’s financial position, results of operations, and cash flows for the periods presented. All intercompany balances and transactions have been eliminated in consolidation. The results of operations for the three months ended April 4, 2026 are not necessarily indicative of the results to be expected for the fiscal year ending January 2, 2027 or for any other future annual or interim period.

These unaudited condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended January 3, 2026 included in the Company's Annual Report on Form 10-K filed with the SEC on March 13, 2026. Capitalized terms not defined herein shall have the meaning set forth in the audited consolidated financial statements and notes thereto.

There have been no changes to the significant accounting policies described in the Company’s audited consolidated financial statements and notes thereto for the fiscal year ended January 3, 2026 included in the Company's Annual Report on Form 10-K.

Recently Adopted Accounting Pronouncements—In July 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides all entities with a practical expedient when applying the guidance in Accounting Standards Codification (“ASC”) 326, Financial Instruments—Credit Losses, to current accounts receivable and current contract assets arising from transactions accounted for under ASC 606, Revenue from Contracts with Customers. The Company adopted this guidance during the first quarter of the fiscal year ending January 2, 2027, using the prospective method of adoption. In estimating expected credit losses, the Company has elected the practical expedient under ASU 2025-05 to assume that current economic conditions, as of the balance sheet date, will not change for the remaining life of the current accounts receivable. The adoption of this accounting pronouncement did not have a material impact on the Company’s unaudited condensed consolidated interim financial statements as the Company's allowance for credit losses was not material as of April 4, 2026.

Recently Issued Accounting Pronouncements—In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants received by Business Entities, which establishes authoritative guidance under GAAP on the accounting for government grants received by business entities. The ASU is effective for annual periods beginning after December 15, 2028, including interim periods within those annual periods. The guidance may be applied using a retrospective approach with a cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of the earliest period presented, or using a modified retrospective approach. The Company is in the process of determining the impact this rule will have on the consolidated financial statements.

In September 2025, the FASB, issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which simplifies the capitalization guidance in ASC 350-40, Intangibles—Goodwill and Other—Internal-Use Software, by removing all references to software development project stages so that the guidance is neutral to different software development methods. The guidance is effective for annual reporting periods beginning after December 15, 2027, including interim periods within those annual periods, and may be applied prospectively, retrospectively, or with a modified transition approach based on the status of the project and whether software costs were capitalized before the date of adoption. The Company is in the process of determining the impact this rule will have on the consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), and in January 2025, the FASB issued ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, which requires a public business entity to disclose specific information about certain costs and expenses in the notes to the financial statements for interim and annual reporting periods. ASU 2024-03, as clarified by ASU 2025-01, is effective for annual reporting periods beginning after December 15, 2026 and interim periods within annual reporting periods beginning after December 15, 2027, and may be applied prospectively or retrospectively. The Company is in the process of determining the impact this rule will have on the consolidated financial statements.

GOVERNMENT ASSISTANCE

The Company receives government assistance from various governmental entities to support the operations of its early childhood education and care centers and before- and after-school sites, which is comprised of both assistance relating to income (“Income Grants”) and capital projects. Income Grants consist primarily of funds received for reimbursement of food costs, teacher compensation, and classroom supplies, and in certain cases, as incremental revenue. Refer to Note 1, Organization and Summary of Significant Accounting Policies, and Note 2, Government Assistance, within the audited consolidated financial statements for the fiscal year ended January 3, 2026 included in the Company's Annual Report on Form 10-K for further information regarding the Company's government assistance policy and disclosures related to all forms of government assistance received.

A portion of the Company's food costs are reimbursed through the federal Child and Adult Care Food Program. The program is operated by states to partially or fully offset the cost of food for children that meet certain criteria. The Company recognized food subsidies of$12.1 million during both the three months ended April 4, 2026 and March 29, 2025 offsetting cost of services (excluding depreciation and impairment) in the unaudited condensed consolidated statements of operations and comprehensive (loss) income.

The Company receives grant funding from various governmental programs and agencies for expenses including teacher compensation, classroom supplies, and other center operating costs, of which a portion is incurred incrementally in accordance with certain grant requirements. Grants of$11.6 million and$14.5 million during the three months ended April 4, 2026 and March 29, 2025, respectively, were recognized as reimbursements offsetting cost of services (excluding depreciation and impairment) in the unaudited condensed consolidated statements of operations and comprehensive (loss) income.

Grants receivable are recognized for grants that meet the Company's recognition criteria but have not yet been received, while deferred grants represent amounts received that do not yet meet such criteria. There wereno grants receivable as of April 4, 2026, and as of January 3, 2026, the Company recorded$0.3 million in grants receivable within prepaid expenses and other current assets on the unaudited condensed consolidated balance sheets. As of April 4, 2026 and January 3, 2026, the Company recorded$7.4 million and$8.5 million in deferred grants, respectively, within other current liabilities on the unaudited condensed consolidated balance sheets.

COVID-19 Related Stimulus

The Employee Retention Credit (“ERC”), established by the Coronavirus Aid, Relief and Economic Security Act, 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 30, 2023, the Company received reimbursements of $62.0 million in cash tax refunds for ERC claimed, along with $2.3 million in interest income. Due to the unprecedented nature of ERC legislation and the changing administrative guidance, not all of the ERC reimbursements received have met the Company's recognition criteria. Asof both April 4, 2026 and January 3, 2026, total deferred ERC liabilities of$12.3 million was recorded in other long-term liabilities on the unaudited condensed consolidated balance sheets. Additionally, as of both April 4, 2026 and January 3, 2026, the Company has$3.4 million in ERC receivables recorded in other assets on the unaudited condensed consolidated balance sheets as there is reasonable assurance these reimbursements will be received. Refer to Note 2, Government Assistance, and Note 20, Income Taxes, within the audited consolidated financial statements for the fiscal year ended January 3, 2026 included in the Company's annual report on form 10-K for further information regarding the ERC.

REVENUE RECOGNITION

Contract Balances

Deferred revenue is recorded when payments are received or due in advance of the Company’s performance under the contract, which is recognized as revenue as the performance obligation is satisfied. Payment from parents for tuition is typically received in advance on a weekly or monthly basis, in which case the revenue is deferred and recognized as the performance obligation is satisfied. Tuition that is supplemented or paid by government agencies or employer sponsors is typically received subsequent to when the child care services have been rendered and the performance obligation has been satisfied. Deferred revenue on the unaudited condensed consolidated balance sheets may fluctuate across reporting periods due to the timing of period ends and calendar holidays relative to the Company's billing cycle, as well as seasonal enrollment patterns. As the Company has an unconditional right to consideration upon satisfying its performance obligations, no contract assets are recognized. During the three months ended April 4, 2026,$48.6 million was recognized as revenue related to the deferred revenue balance recorded as of January 3, 2026. During the three months ended March 29, 2025,$26.0 million was recognized as revenue related to the defe rred revenue balance recorded as of December 28, 2024.

The Company applied the practical expedient of expensing costs incurred to obtain a contract if the amortization period of the asset is one year or less. Sales commissions are expensed as incurred in selling, general, and administrative expenses in the unaudited condensed consolidated statements of operations and comprehensive (loss) income.

Disaggregation of Revenue

The following table disaggregates total revenue between education centers and school sites (in thousands):

Revenue generated from families whose tuition is partially or fully subsidized by amounts received from government agencies was$234.3 million and$240.1 million during the three months ended April 4, 2026 and March 29, 2025, respectively.

Performance Obligations

The transaction price allocated to the remaining performance obligations relates to services that are paid or invoiced in advance. The Company does not disclose the transaction price allocated to unsatisfied performance obligations for contracts with an original contractual period of one year or less, or for variable consideration allocated entirely to wholly unsatisfied promises that form part of a series of services. The Company’s remaining performance obligations not subject to the practical expedients are not material.

GOODWILL

The changes in the carrying amount of goodwill are as follows (in thousands):

The Company tests goodwill for impairment on an annual basis in the fourth quarter, or more frequently if impairment indicators exist. During the three months ended April 4, 2026, the Company’s market capitalization deteriorated due to a decline in stock price as a result of continued market uncertainty. The Company considered this to be an impairment indicator for goodwill.

After considering the various approaches to the goodwill impairment test, the Company used the market approach based on market capitalization and determined the fair value of the early childhood education centers reporting unit did not exceed its carrying value, resulting in an impairment to the reporting unit. The excess of the reporting unit’s carrying value over its fair value of$273.5 million was recognized as an impairment to goodwill within impairment losses in theunaudited condensed consolidated statements of operations and comprehensive (loss) income during the three months ended April 4, 2026. No goodwill impairment was recognized during the three months ended March 29, 2025. As of April 4, 2026, the adjusted balance of goodwill related to the early childhood education centers reporting unit was $644.5 million. The before- and after-school reporting unit had an estimated fair value that substantially exceeded its carrying value, resulting in no impairment to the reporting unit. As of April 4, 2026 and January 3, 2026, goodwill recorded on the unaudited condensed consolidated balance sheets is net of accumulated impairment losses of$451.5 million and $178.0 million, respectively.

Adverse changes in the Company’s market capitalization as well as changes in key assumptions, including higher discount rates or weaker operating results, could result in impairment in future periods, which could be material to the unaudited condensed consolidated statements of operations and comprehensive (loss) income. Refer to Note 8, Fair Value Measurements, for further information regarding the inputs utilized in the estimation of reporting unit fair value.

LEASES

Right-of-use (“ROU”) assets and lease liabilities balances were as follows (in thousands):

Finance lease ROU assets are included in other assets and finance lease liabilities are included in other current liabilities and other long-term liabilities on the unaudited condensed consolidated balance sheets. Refer to Note 8, Fair Value Measurements, for information regarding impairment of ROU assets.

Lease Expense

The components of lease expense were as follows (in thousands):

Other Information

The weighted average remaining lease term and the weighted average discount rate were as follows:

Maturity of Lease Liabilities

The following table summarizes the maturity of lease liabilities as of April 4, 2026 (in thousands):

As of April 4, 2026, the Company had entered into additional operating leases that have not yet commenced with total fixed payment obligations of $198.2 million. The leases are expected to commence between 2026 and 2027 and have initial lease terms of approximately 15 years.

The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. The rates are estimated using key inputs such as credit ratings, base rates, and spreads, which considered the rates on the Company's first lien term loan.

LONG-TERM DEBT

Long-term debt included the following (in thousands):

Senior Secured Credit Facilities—The Company's credit agreement, dated as of June 12, 2023 (as subsequently amended and restated) (the “Credit Agreement”) includes $1,224.5 million senior secured credit facilities which consist of a $962.0 million first lien term loan (the “First Lien Term Loan Facility”)and a $262.5 million revolving credit facility (“First Lien Revolving Credit Facility”) (collectively, the “Senior Secured Credit Facilities”).

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

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

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

All obligations under the Credit Agreement are secured by substantially all the assets of the Company and its subsidiaries. The Credit Agreement contains various financial and nonfinancial loan covenants and provisions. The Company's financial loan covenant is a quarterly maximum First Lien Term Loan Facility net leverage ratio. The First Lien Term Loan Facility net leverage ratio is required to be tested only if, on the last day of each fiscal quarter, the amount of revolving loans outstanding under the First Lien Revolving Credit Facility, excluding all letters of credit, exceeds 35% of total revolving commitments on such date. Nonfinancial loan covenants restrict the Company’s ability to, among other things, incur additional debt; make fundamental changes to the business; make certain restricted payments, investments, acquisitions, and dispositions; or engage in certain transactions with affiliates. As of April 4, 2026, the Company was in compliance with the covenants of the Credit Agreement.

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

As of both April 4, 2026 and January 3, 2026, the Company hadno outstanding borrowings on the First Lien Revolving Credit Facility and 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.

No debt issuance costs were incurred during the three months ended April 4, 2026. The Company capitalized original issue discount and debt issuance costs of$0.2 million during the three months ended March 29, 2025, related to the February 2025 amendment to the Credit Agreement. These costs are being amortized over the terms of the related debt instruments and amortization expense is included within interest expense in the unaudited condensed consolidated statements of operations and comprehensive (loss) income.

The Companydidnot incur any gain or loss on extinguishment of debt during the three months ended April 4, 2026 and March 29, 2025, respectively.

Principal payments on the First Lien Term Loan Facility are payable in arrears on the last business day of each calendar year quarter, with the final payment of the remaining principal balance due in June 2030 when the First Lien Term Loan Facility matures. Interest payments on the Senior Secured Credit Facilities are payable in arrears on the last business day of each calendar year quarter. The $252.5 million of extended commitments under the First Lien Revolving Credit Facility mature in October 2029, while the$10.0 million of non-extended commitments have a maturity date of June 2028.

Future principal payments on long-term debt for the remaining fiscal year ending January 2, 2027 and for the fiscal years thereafter are as follows (in thousands):

Other Credit Facilities—In February 2024, the Company entered into a credit facilities agreement (the “LOC Agreement”) which allows for $20.0 million in letters of credit to be issued. The Company pays certain fees under the LOC Agreement, including fees on the outstanding balance of letters of credit at a rate of 5.95% per annum and fees on the unused portion of letters of credit at a rate of 0.25% per annum. Fees on the letters of credit are payable in arrears on the last business day of each March, June, September, and December. The LOC Agreement matures in December 2026. The Company had $20.0 million outstanding letters of credit under the LOC Agreement as of April 4, 2026 and January 3, 2026.

RISK MANAGEMENT AND DERIVATIVES

The Company is exposed to market risks, including the effect of changes in interest rates, and may use derivatives to manage financial exposures that occur in the normal course of business. The Company does not hold or issue derivatives for trading or speculative purposes. The Company may elect to designate certain derivatives as hedging instruments under ASC 815, Derivatives and Hedging. The Company formally documents all relationships between designated hedging instruments and hedged items, as well as its risk management and strategy for undertaking hedge transactions.

Cash Flow Hedges—For interest rate derivative contracts that are designated and qualify as cash flow hedges, unrealized gains or losses resulting from changes in fair value of the derivative contracts are reported as a component of other comprehensive income or loss, inclusive of the related income tax effects, within the consolidated statements of operation and comprehensive (loss) income. Gains and losses are reclassified into interest expense when realized, with the related income tax effects reclassified into income tax (benefit) expense, during the same period in which interest expense is recognized on the hedged item, the First Lien Term Loan Facility. The Company classifies the cash flows at settlement from these designated cash flow hedges in the same category as the cash flows from the related hedged items within the cash provided by operations component of the unaudited condensed consolidated statements of cash flows.

In January 2024, the Company entered into a pay-fixed-receive-float interest rate swap contract with a notional amount of $400.0 million through its maturity and a fixed interest rate of 3.85% per annum. Additionally, in February 2024, the Company entered into two pay-fixed-receive-float interest rate swap contracts with a combined notional amount of $400.0 million through their maturity and fixed interest rates of 3.89% per annum. The contracts were executed in order to hedge the interest rate risk on a portion of the variable debt under the Credit Agreement. Payments to or from the counterparty are based on the variable rate which is the greater of three-month SOFR or 0.50% per annum. The interest rate swap contracts commenced on June 28, 2024 and will mature on December 31, 2026.

In March 2025, the Company entered into two forward starting pay-fixed-receive-float interest rate swap contracts, one with a fixed interest rate of 3.72% per annum and the other with a fixed interest rate of 3.74% per annum, with a combined notional amount of $500.0 million through their maturity. The contracts will commence when the Company's current interest rate swap contracts expire on December 31, 2026 and will mature on December 31, 2027. The contracts were executed in order to hedge the interest rate risk on a portion of the variable debt under the Credit Agreement. Payments to or from the counterparty are based on the variable rate which is thegreater of three-month SOFR or 0.50% per annum.

As of April 4, 2026, the Company's derivatives are considered highly effective. The Company estimates that$1.3 million, before income taxes, of deferred losses recognized within accumulated other comprehensive (loss) income as of April 4, 2026 will be reclassified as an increase in interest expense within the next 12 months. Actual amounts reclassified into net (loss) income during the next 12 months are dependent on changes in the three-month SOFR.

The following tables present the amounts affecting the unaudited condensed consolidated statements of operations and comprehensive (loss) income (in thousands):

Credit Risk—The Company is exposed to credit-related losses in the event of nonperformance by counterparties to hedging instruments. The counterparties to all derivative transactions are major financial institutions with at or above investment grade credit ratings. This does not eliminate the Company’s exposure to credit risk with these institutions; however, the Company’s risk is limited to the fair value of the instruments. The Company is not aware of any circumstance or condition that would preclude a counterparty from complying with the terms of the derivative contracts and will continuously monitor the credit worthiness of all its derivative counterparties for any significant adverse changes.

FAIR VALUE MEASUREMENTS

Fair value guidance defines fair value as the exchange price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company uses a three-level hierarchy established by the FASB that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach, and cost approach).

The levels of the fair value hierarchy are described below:

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Level 1: Quoted prices in active markets for identical assets or liabilities.

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Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

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Level 3: Unobservable inputs with little or no market data available, which require the reporting entity to develop its own assumptions.

Investments held for the Deferred Compensation Plan—The Company records the fair value of the investments and cash and cash equivalents held for the deferred compensation plan in other assets on the unaudited condensed consolidated balance sheets. The carrying value of cash and cash equivalents held in the fund approximates fair value, and the amounts were not material as of April 4, 2026 and January 3, 2026. The investments held in the plan consist of mutual funds and money market funds with fair values that can be corroborated by prices for identical assets and therefore are classified as Level 1 investments under the fair value hierarchy.

The following tables summarize the composition of the underlying investments in the Company's deferred compensation plan trust assets, excluding cash and cash equivalents (in thousands):

Goodwill and Long-Lived Assets—Fair value assessments of the reporting units utilized within the goodwill impairment test are considered Level 3 measurements due to the significance of unobservable inputs developed using Company specific information. Specifically, during the three months ended April 4, 2026, the market approach utilized for the quantitative goodwill impairment test incorporated Level 3 inputs including the application of a control premium, which is estimated using expected synergies that would be realized by a hypothetical buyer.

During both the three months ended April 4, 2026 and March 29, 2025, triggering events at specific center asset groups related to property and equipment and lease ROU assets occurred due to reduced cash flow projections over the remaining lease term or asset useful lives, as applicable, due to lower-than-expected center sales performance and centers identified for closure. The Company identified specific center asset groups in the initial recoverability test that had carrying values in excess of the estimated undiscounted future cash flows. For those center asset groups, a fair value assessment was performed using the discounted cash flow (“DCF”) method under the income approach and impairments of property and equipment and lease ROU assets were recognized. Fair value assessments performed for long-lived assets are considered a Level 3 measurement as the Company typically estimates fair value of the asset group using the DCF method under the income approach which is based on unobservable inputs including future cash flow projections, market-based inputs including as-is market rents, and discount rate assumptions, as appropriate.

The following table presents the amount of impairment expense of goodwill and long-lived assets (in thousands):

Refer to Note 4, Goodwill, and Note 5, Leases, for additional information regarding the Company's Goodwill and ROU assets.

Derivative Financial Instruments—The Company's derivative financial instruments include interest rate derivative contracts. The fair value of derivative financial instruments is determined using observable market inputs such as quoted prices for similar instruments, forward pricing curves, and interest rates, and considers nonperformance risk of the Company and its counterparties, and as such, derivative financial instruments are classified as Level 2. The Company’s derivative financial instruments are subject to master netting arrangements that allow for the offset of assets and liabilities in the event of default or early termination of the contracts. The Company elects to record its derivative financial instruments at net fair value on the unaudited condensed consolidated balance sheets. As of April 4, 2026 and January 3, 2026, interest rate derivatives of$1.3 million and$3.6 million, respectively, were recorded inother current liabilities and$0.6 million and$2.6 million, respectively, were recorded inother long-term liabilities on the unaudited condensed consolidated balance sheets. Refer to Note 7, Risk Management and Derivatives, for additional information regarding the Company’s derivative financial instruments.

Long-Term Debt—The Company records long-term debt on the unaudited condensed consolidated balance sheets net of unamortized issuance costs. The estimated fair value of first lien term loans was$850.9 million as of April 4, 2026 and$938.0 million as of January 3, 2026, and is based on mid-point prices, or prices for similar instruments from active markets, on the balance sheet date. Judgment is required to develop these estimates, and as such, the first lien term loan and the first lien revolving credit facility are classified as Level 2. Refer to Note 6, Long-term Debt, for additional information regarding the Company's long-term debt.

Other Financial Instruments—The carrying value of cash and cash equivalents, restricted cash, accounts receivable, and accounts payable and accrued liabilities approximates fair value due to the short-term nature of these assets and liabilities.

There were no transfers between levels within the fair value hierarchy during any of the periods presented.

ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

The changes in accumulated other comprehensive (loss) income, net of tax, are comprised of unrealized gains and losses on cash flow hedging instruments, and were as follows (in thousands):

STOCK-BASED COMPENSATION

2022 Incentive Award Plan—The 2022 Incentive Award Plan (“2022 Plan”), provides for the issuance of share-based awards, including stock options and restricted stock units (“RSUs”). Originally, the 2022 Plan reserved 15.7 million shares of common stock for awards. Pursuant to the evergreen provisions of the 2022 Plan effective the first day of each calendar year beginning January 1, 2026, the number of shares reserved for the 2022 Plan will be increased unless otherwise determined by the Company’s Board. Under this provision for the calendar year beginning January 1, 2026, the number of shares of the Company’s common stock reserved for awards under the 2022 Plan increased by 4.7 million shares, which was ratified by the Company's Board on March 11, 2026. Refer to Note 17, Shareholders' Equity and Stock-based Compensation, within the audited consolidated financial statements for the fiscal year ended January 3, 2026 included in the Company's Annual Report on Form 10-K for additional detail on the terms of the 2022 Plan.

Under the 2022 Plan, the Company granted 3.5 million stock options with an exercise price of $1.84 at a weighted average grant date fair value of $1.09 per stock option as well as 2.4 million RSUs at a weighted average grant date fair value of $1.84 per RSU during the three months ended April 4, 2026. Awards granted to employees during the three months ended April 4, 2026 have a service-based vesting condition for which the awards vest 25% upon thefirst anniversary of the grant date and the remaining in equal quarterly installments over the following three years, subject to the retirement eligibility of individual holders, and stock options have either a fixed 5-year or 10-year terms for exercise.

Stock-based Compensation Expense—Total stock-based compensation expense for all stock-based compensation awards was$2.5 million and$4.1 million during the three months ended April 4, 2026 and March 29, 2025, respectively, and was recognized in selling, general, and administrative expense in the unaudited condensed consolidated statements of operations and comprehensive (loss) income. As of April 4, 2026, the total unrecognized stock-based compensation expense for stock options and RSUs, net of estimated forfeitures, was$14.1 million, which will be recognized over the remaining weighted average period of 3.5 years.

NET (LOSS) INCOME PER COMMON SHARE

The reconciliations of basic and diluted net (loss) income per common share for the three months ended April 4, 2026 and March 29, 2025 are set forth in the table below (in thousands, except per share data):

During the three months ended April 4, 2026,5.4 million shares of common stock from stock options and 2.8 million from RSUs were excluded from the calculation of diluted net (loss) income per common share as their effect was anti-dilutivedue to a net loss available to common shareholders. During the three months ended March 29, 2025,2.5 million shares of common stock from stock options and 0.2 million from RSUs were excluded from the calculation of diluted net (loss) income per common share as their effect was anti-dilutive.

INCOME TAXES

The Company’s effective tax rates were 0.2% and 27.0% for the three months ended April 4, 2026 and March 29, 2025, respectively. Compared to the statutory rate, the difference in the effective tax rate for the three months ended April 4, 2026 was primarily due to nondeductible goodwill impairment, partially offset by state and local taxes. The effective tax rate for the three months ended March 29, 2025 was primarily driven by state and local taxes, nondeductible compensation and fringe benefit expenses, as well as changes in uncertain tax reserves.

The Company considers all available positive and negative evidence when assessing the carrying amount of its deferred tax assets. Evidence includes the anticipated impact on future taxable income arising from the reversal of temporary differences, actual operating results for the trailing twelve quarters, the ongoing assessment of financial performance, and available tax planning strategies, if any, that management considers prudent and feasible. No valuation allowance was required as of April 4, 2026 and January 3, 2026. The Company will continue to reassess the carrying amount of its deferred tax assets.

The Company is no longer subject to examination by tax authorities for years before 2022.

COMMITMENTS AND CONTINGENCIES

Litigation—The Company is subject to claims and litigation arising in the ordinary course of business. In accordance with ASC 450, Contingencies("ASC 450"), loss contingencies for these claims and litigation are recorded as liabilities when the likelihood of loss is probable, and an amount or range of loss can be reasonably estimated. The Company estimates insurance receivables based on an analysis of the terms of its policies, including their exclusions, pertinent case law interpreting comparable policies, its experience with similar claims, and assessment of the nature of the claim and remaining coverage. In accordance with ASC 450, insurance receivables related to loss contingencies are recorded for recoveries considered probable under applicable insurance policies. The Company believes the accruals for contingencies are reasonable and sufficient based upon information currently available to management, although assurance cannot be given with respect to the ultimate outcome of any such claims or actions, that final costs related to these contingencies will not exceed current estimates, nor any assurance can be given as to the amount of such final costs that will be covered by insurance.

The Company reexamines its estimates of probable liabilities and insurance receivables at least quarterly and, where appropriate, makes adjustments to its reasonably estimated losses and accruals to reflect the impacts of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. As a result, the current accruals and/or estimates of loss and the estimates of the potential impact on the Company’s condensed consolidated financial statements for the legal proceedings against the Company may change over time.

Refer to Note 1, Organization and Summary of Significant Accounting Policies, within the audited consolidated financial statements for the fiscal year ended January 3, 2026 included in the Company's Annual Report on Form 10-K for additional information on the Company’s self-insurance obligations and related insurance receivables. The Company believes the resolution of pending legal matters will not have a material effect on the Company’s condensed consolidated financial statements.

Settlement of General Liability Claim

In February 2024, an action was commenced against the Company for damages for personal injuries. On February 19, 2026, the Company and the plaintiffs entered into a memorandum of agreement relating to the settlement of this matter. The settlement is expected to be finalized and the case dismissed with prejudice in the second quarter of the fiscal year ending January 2, 2027. As of both April 4, 2026, and January 3, 2026, the Company accrued $50.0 million in self-insurance obligations related to this matter within other current liabilities on the condensed consolidated balance sheets, which reflects the amount of the agreed-upon settlement. Additionally, the Company recorded insurance receivables of $49.7 million within prepaid expenses and other current assets on the condensed consolidated balance sheets, which represents recoveries considered probable from purchased insurance coverage.

Securities Class Action and Derivative Claim

On August 12, 2025, a purported Company stockholder filed a securities class action complaint in the United States District Court for the District of Oregon against the Company, Paul Thompson, Anthony Amandi, John T. Wyatt, Jean Desravines, Christine Deputy, Michael Nuzzo, Benjamin Russell, Joel Schwartz, Alyssa Waxenberg, and Preston Grasty (collectively, the "KinderCare Defendants"), each of whom were officers or directors at the time of the Company's initial public offering ("IPO"), Partners Group Holding AG, the Company's majority stockholder, and the representatives of the underwriters in the Company's IPO, Goldman Sachs & Co LLC, Morgan Stanley & Co LLC, Barclays Capital Inc., and UBS Securities LLC. A consolidated complaint was filed on February 6, 2026 alleging that defendants violated Sections 11, 15, and 12(a)(2) of the Securities Act of 1933 by making material misstatements or omissions in offering documents filed in connection with the IPO. The complaint seeks unspecified damages, interest, fees, and costs on behalf of purchasers and/or acquirers of common stock issued in the IPO, as well as unspecified equitable relief. On April 7, 2026, the KinderCare Defendants filed a Motion to Dismiss the complaint for failure to state a claim. The Company intends to vigorously defend against the claims in this action. Any potential loss arising from this claim is not currently probable or estimable.

On March 24, 2026, a purported Company stockholder filed a derivative complaint in the United States District Court for the District of Oregon against Paul Thompson, Anthony Amandi, John T. Wyatt, Jean Desravines, Christine Deputy, Michael Nuzzo, Benjamin Russell, Joel Schwartz, Alyssa Waxenberg, and Preston Grasty. The complaint, filed derivatively on behalf of the Company, alleges breaches of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets, and violations of federal securities laws. The plaintiff seeks, among other relief, damages on behalf of the Company, corporate governance reforms, restitution, and attorneys’ fees and costs. This proceeding has been stayed pending a ruling on the Motion to Dismiss filing in the securities class action noted above. The Company intends to vigorously defend against the claims in this action. Any potential loss arising from this claim is not currently probable or estimable.

SEGMENT INFORMATION

The Company uses the “management approach” in determining its operating segments. The management approach considers the internal organization and reporting used by the Company’s Chief Operating Decision Maker (“CODM”) for making strategic decisions, assessing performance, and allocating resources. The Company’s CODM has been identified as the Chief Executive Officer of the Company.

The Company determined it operates asone consolidated segment and therefore hasone reportable segment. The consolidated Company segment derives revenue primarily from providing early childhood education and care services at centers and before- and after-school sites.

Asa single reportable segment entity, the GAAP measure utilized by the CODM to assess performance and allocate resources is the Company's consolidated net (loss) income. For example, the CODM uses consolidated net (loss) income to monitor budget versus actual results, make decisions on capital investments, as well as to measure market competition and achievement of Company strategic objectives. Consolidated revenue, significant segment expenses, and net (loss) income are reported on the unaudited condensed consolidated statements of operations and comprehensive (loss) income and the measure of segment assets is reported on the unaudited condensed consolidated balance sheets as total assets. The accounting policies of the consolidated Company segment are the same as those described in Note 1, Organization and Summary of Significant Accounting Policies, within the audited consolidated financial statements for the fiscal year ended January 3, 2026 included in the Company's Annual Report on Form 10-K.

SUBSEQUENT EVENTS

On April 8, 2026, the Company's subsidiary, KinderCare Education LLC, entered into a Fifth Amendment (the "Fifth Amendment") to the Master Lease Agreement with landlord KCP RE LLC (the "Landlord") dated August 1, 2015, as amended (the "Lease"), which impacts 545 center sites. The Fifth Amendment is not effective and will not be effective until the day following the date of Landlord's repayment and release of the existing mortgage loan covering the sites, which will depend upon the Landlord's refinancing of such mortgage loan. There can be no assurance that the Fifth Amendment will become effective or will be effective on the terms reflected in the Fifth Amendment. If the Fifth Amendment becomes effective, the lease terms for certain centers under the Master Lease Agreement will be extendedby approximately three tonine years, and total minimum lease payments will increase by approximately $600 million over the amended lease terms. The Company expects to account for the Fifth Amendment as a lease modification and is in the process of determining the impact this Fifth Amendment will have on the consolidated financial statements, when and if the Fifth Amendment becomes effective.