What KinderCare Learning Companies (KLC) Said on Its Q3 Earnings Call

Key Points

• KinderCare missed expectations and cut its 2026 outlook: Q3 revenue fell 1.7% to $665 million, adjusted EBITDA dropped to $43 million, and the company posted an $85 million net loss. It now expects revenue of $2.64–$2.66 billion and adjusted EBITDA of $190–$195 million for the year.
• Enrollment weakness remains the key challenge, though trends are improving: Weekly early-childhood enrollment declined about 6% year over year, and same-center occupancy fell to 63.8%. Management said the enrollment gap narrowed from over 5% to about 3%, while acknowledging execution issues in converting family inquiries.
• Center closures weigh on near-term results but are expected to reduce costs: KinderCare closed 69 centers through Q3 and expects about 85 closures for the year. The closures are projected to create a $32 million revenue headwind in 2026 but deliver roughly $10 million in annualized adjusted EBITDA benefit.

KinderCare Learning Companies NYSE: KLC reported lower third-quarter revenue and a net loss as enrollment at its largest childcare brand fell short of expectations, prompting the company to reduce its full-year outlook. Executives said enrollment trends have improved since the back-to-school period, though total enrollment remains below year-ago levels.

Revenue fell 1.7% to $665 million from $677 million a year earlier. Growth in the Champions before- and after-school business, along with contributions from enrichment programs and newer centers, partly offset lower enrollment at KinderCare centers.

The company posted a net loss of $85 million, or $0.71 per share, compared with net income of $5 million, or $0.04 per share, a year earlier. Chief Financial Officer Tony Amandi attributed the change primarily to higher noncash impairment losses, including a goodwill impairment triggered by a decline in the company’s stock price and impairments related to closed and underperforming centers.

Adjusted EBITDA declined to $43 million from $66 million, reflecting lower enrollment and resulting operating deleverage in the early childhood education business. The figure included approximately $3 million in severance expenses that were not added back. KinderCare reported an adjusted net loss of $3 million, or $0.03 per share, compared with adjusted net income of $15 million, or $0.13 per share, a year earlier.

Enrollment Efforts and Center Closures

Average weekly early childhood education enrollments declined approximately 6% year over year, including an approximately 190-basis-point impact from center closures. Same-center occupancy fell 320 basis points to 63.8%, though Amandi said the company’s footprint optimization provided an approximately 150-basis-point benefit to occupancy during the quarter.

Chief Executive Officer Tom Wyatt said inquiries from prospective families were up year to date, but the company had not converted enough of that interest into enrollment. “The biggest culprit for where we stand today has been execution,” Wyatt said in response to an analyst’s question.

KinderCare named Cheslee Escobedo to lead its namesake brand during the quarter and made additional field leadership changes and reductions in corporate and support roles. The company is also shifting some administrative work away from center directors, improving tour scheduling and follow-up, and using artificial intelligence tools to support interactions with prospective families.

Wyatt said new enrollments since the end of back-to-school had outpaced the comparable period last year, although total enrollment remained lower. He said the year-over-year enrollment deficit had narrowed from more than 5% to about 3%. Amandi clarified that the approximately 200-basis-point improvement reflected expected enrollments through just before the holidays, including families that had paid deposits and known departures.

KinderCare closed 20 centers during the quarter, bringing its total to 69 through the third quarter, and expects approximately 85 closures for the full year. Amandi said many affected locations had experienced declines in the density of children under age five, making them difficult to operate profitably.

The company estimates the closures will create a $32 million revenue headwind in 2026 and an annualized adjusted EBITDA benefit of approximately $10 million, mainly from lower rent tied to leases with definitive termination dates. Lease termination cash costs are expected to be $15 million to $17 million this year and another $8 million to $10 million in early 2027. KinderCare also expects approximately $10 million in rent obligations for closed centers to carry into next year.

Champions Growth and Pricing

Champions delivered its fifth consecutive quarter of double-digit revenue growth, with average weekly enrollment rising approximately 17% year over year. Amandi said the business contributed approximately $8 million in revenue growth from existing programs and new sites.

At the Crème brand, enrollment remained below the prior year, but the gap continued to narrow, Wyatt said. He added that a new Crème school in Irvine, California, exceeded its first-year enrollment expectations within its first 50 days.

KinderCare for Employers recorded approximately 2% comparable-center enrollment growth during the quarter. The company said it has eight new on-site centers under contract over the next two years and has expanded its sales and client relationship teams to pursue employer partnerships.

Pricing contributed approximately 2.8% to early childhood education revenue performance in the quarter. Amandi said private-pay rates were performing as expected, but subsidy rates across the company’s markets were below its expectations.

Reduced Full-Year Outlook

KinderCare now expects 2026 revenue of $2.64 billion to $2.66 billion, adjusted EBITDA of $190 million to $195 million and adjusted earnings per share of $0.02 to $0.04. Amandi said the reduction primarily reflected third-quarter enrollment that fell short of expectations and its effect on revenue and profitability. Although enrollment trends improved in the fourth quarter, he said the timing limits their contribution to full-year results.

The company expects capital expenditures of $120 million to $125 million and free cash flow of less than $10 million for the year, including elevated costs associated with center optimization. It ended the quarter with $143 million in cash and $188 million of available capacity under its revolving credit facility.

About KinderCare Learning Companies (NYSE:KLC)

KinderCare Learning Companies provides early childhood education and child care in the United States. Its services include full-day care and preschool programs for infants, toddlers and school-age children, with curricula designed to support children's learning and development. The company operates through brands including KinderCare Learning Centers and Champions, which provides before- and after-school programs. It also offers child care solutions for employers, including on-site centers and backup care.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.