KinderCare Learning Companies, Inc.

KinderCare Learning Companies reported second-quarter results on August 13, with revenue slipping 0.4% to $697.5 million and a swing to a net loss of $8.8 million from net income of $38.6 million a year earlier, as management closes dozens of underperforming centers. The closures are part of a deliberate strategy: 90% of the 49 centers shut this quarter sit in the lowest-performing fifth of the portfolio, and the full round of 80 to 85 closures is expected to lift occupancy by roughly 1.5 percentage points and trim annual rent by about $7 million. Meanwhile, the Champions before- and after-school program saw revenue climb 13.4% to $59.4 million on 85 net new sites, marking four straight quarters of double-digit growth, and Creme School opened its first California location in Irvine with 26% growth in summer camp enrollment. However, same-center occupancy fell 2.4 percentage points to 68.6%, and core early childhood education enrollment declined 4.0% year over year, with adjusted EBITDA dropping to $63.0 million from $82.4 million. Full-year adjusted EPS guidance now sits at $0.05 to $0.15, and free cash flow is expected under $10 million, weighed down by $20 million to $25 million in lease exit payments.

KinderCare Learning Companies lowered its full-year guidance after second-quarter adjusted EBITDA fell to $63 million from $82 million a year earlier. Total revenue slipped to $698 million from $700 million, with same-center revenue down 2% due to lower enrollment and an $11 million impact from 49 center closures. The company now expects full-year adjusted EBITDA between $200 million and $220 million and adjusted EPS between $0.05 and $0.15, citing optimization costs and lower tuition expectations. Champions delivered 13% revenue growth, and Learning Adventures revenue nearly doubled year-over-year, but tuition contribution to revenue growth was reduced to 2.5% from 3% because of slower state subsidy reimbursement rate increases. Free cash flow is expected to be less than $10 million for the year, including $20 million to $25 million in lease exit payments.