KinderCare Learning Companies, Inc. Q1 FY2025 earnings call

• Revenue for the first quarter was $668 million, up 2% year-over-year, in line with 2025 guidance, driven by growth in early childhood education centers and Champion sites.
• Adjusted EBITDA was $84 million, a 12% year-over-year increase, and net income was $21 million.
• Delayed enrollment decisions in Q1 were due to consumer hesitancy, but demand for high-quality care remains real and is just delayed.
• Added 10 centers in Q1, including an acquisition in Idaho and new KinderCare For Employer centers. Champion sites added 19 new sites, with 1,038 total as of March 29.
• Focus on improving lower-performing centers through family and teacher engagement, staff training, and best practices from higher-performing centers.
• G&A expenses down as a percentage of revenue, illustrating operating leverage. Disciplined cost management continues to yield results.
• Nearly 90% of programs are nationally accredited, and KinderCare won Gallup's Exceptional Workplace Award for the ninth consecutive year.

Early childhood education centers: Same-center revenue increased to $606 million, up from $598 million a year ago, driven by tuition rates. Champion sites: Revenue grew by 7.8% to $53 million versus last year, with 88 net new sites added to the portfolio over the past 12 months. First quarter revenue totaled $668 million, growing 2% year-over-year. Same-center revenue grew by 1.4%, while same-center occupancy ended the quarter at 69.1%, a 50-basis-point year-over-year decline due to delayed enrollment decisions.

• Reaffirmed 2025 guidance: revenue $2.75 billion to $2.85 billion, adjusted EBITDA $310 million to $325 million, adjusted EPS $0.75 to $0.85.
• Confident in long-term occupancy growth of 1% to 2% annually, despite flat occupancy anticipated in the medium term.
• B2B and Champion businesses trending well against expectations, with NCOs and acquisitions on track.

• Macro-volatility can impact consumer spending, but childcare is an essential life service for working families.
• Delayed enrollment decisions due to consumer hesitancy and uncertainty, though demand for high-quality care remains real.

Q: What are parents doing with their kids due to delayed enrollment start dates?

A: Delayed enrollment is more for younger age groups, with parents taking longer time off work or using accommodations, but there are still high inquiries, tours, and good retention numbers. Summer enrollment sees different experiences with older siblings in school-age programs or summer camps.

Q: How cyclical is the Champions business?

A: Champions are resilient as the weekly spend per week is lower than early childhood education, and it's a great solution for working parents to keep kids in a safe environment.

Q: Are you still anticipating 1% to 2% annual occupancy growth?

A: Yes, confident in medium-term and long-term occupancy growth of 1% to 2% annually.

Q: How much revenue from Q1 came from M&A in the last 12 months?

A: Acquisition revenue for tuck-ins was $5.5 million for the trailing 12 months ending the quarter, up from $4.8 million the prior year.

Q: What about guidance considering macro complexity?

A: Macro conditions impact occupancy, but B2B, Champions, NCOs, and acquisitions are trending well and not much impacted by macro.

Q: Differences in enrollment between subsidy and private pay families?

A: Subsidy families are less hesitant once approved for vouchers, while private pay families bear full tuition cost and delay enrollment due to personal situation.

Q: Expectation for pricing acceleration?

A: Expect acceleration from the 2.5% seen in Q1 to guide to 3% to 5% for the year.

Q: More potential sellers in M&A?

A: Market remains robust, with multiples averaging 3 to 5, and some deals below that or up to sixes as good value.