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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 27, 2025


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-42367

KinderCare Learning Companies, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware	87-1653366
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
5005 Meadows Road Lake Oswego, OR	97035
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (503) 872-1300

Securities registered pursuant to Section 12(b) of the Act:

     Title of each class

     Trading
Symbol(s)

     Name of each exchange on which registered

     Common stock, par value $0.01 per share
 
     KLC
 
     New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 10, 2025, the registrant had 118,318,554 shares of common stock, $0.01 par value per share, outstanding.

Table of Contents


		Page

PART I.	FINANCIAL INFORMATION	2

Item 1.	Financial Statements (Unaudited)	2
	Condensed Consolidated Balance Sheets (Unaudited)	2
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)	3
	Condensed Consolidated Statements of Shareholders' Equity (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows (Unaudited)	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	38

PART II.	OTHER INFORMATION	40

Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	42
	Signatures	43

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can generally identify forward-looking statements by our use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “seek,” “vision,” or “should,” or the negative thereof or other variations thereon or comparable terminology. Important factors that could cause actual results and events to differ materially from those indicated in the forward-looking statements include, among others, the following:

•

our ability to address changes in the demand for child care and workplace solutions;

•

our ability to adjust to shifts in workforce demographics, economic conditions, office environments and unemployment rates, and our ability to manage any adverse impact of a prolonged shutdown of the United States government on these factors;

•

our ability to hire and retain qualified teachers, management, employees, and maintain strong employee engagement;

•

the impact of public health crises on our business, financial condition and results of operations;

•

our ability to address adverse publicity;

•

changes in federal child care and education spending policies, tax incentives and budget priorities;

•

our ability to acquire additional capital;

•

our ability to successfully identify acquisition targets, acquire businesses and integrate acquired operations into our business;

•

our reliance on our subsidiaries;

•

our ability to protect our intellectual property rights;

•

our ability to protect our information technology and that of our third-party service providers;

•

our ability to manage the costs and liabilities of collecting, using, storing, disclosing, transferring and processing personal information;

•

our ability to manage payment-related risks;

•

our expectations regarding the effects of existing and developing laws and regulations, litigation and regulatory proceedings;

•

our ability to maintain adequate insurance coverage;

•

the fluctuation in our stock price;

•

the occurrence of natural disasters, environmental contamination or other highly disruptive events;

•

our ability to maintain adequate insurance coverage; and

•

the other factors described in the section titled “Risk Factors” in Part I Item 1A. in our Annual Report on Form 10-K for the fiscal year ended December 28, 2024 and elsewhere in this Quarterly Report on Form 10-Q.

Any forward-looking statement that we make in this Quarterly Report on Form 10-Q speaks only as of the date of such statement. Except as required by law, we do not undertake any obligation to update or revise, or to publicly announce any update or revision to, any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Quarterly Report on Form 10-Q.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

KinderCare Learning Companies, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except share data)


	September 27, 2025			December 28, 2024
Assets
Current assets:
Cash and cash equivalents	$	174,733		$	62,336
Accounts receivable, net		103,298			104,333
Prepaid expenses and other current assets		56,034			48,104
Total current assets		334,065			214,773
Property and equipment, net of accumulated depreciation of 575,498 and 522,650		430,736			418,524
Goodwill		1,137,181			1,119,714
Intangible assets, net of accumulated amortization of 155,363 and 148,593		422,996			429,766
Operating lease right-of-use assets		1,474,746			1,373,064
Other assets		83,769			89,626
Total assets	$	3,883,493		$	3,645,467
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities	$	198,189		$	152,660
Related party payables		—			119
Current portion of long-term debt		9,620			7,251
Operating lease liabilities—current		164,843			144,919
Deferred revenue		29,513			26,376
Other current liabilities		67,346			81,433
Total current liabilities		469,511			412,758
Long-term debt, net		921,268			918,719
Operating lease liabilities—long-term		1,421,150			1,315,587
Deferred income taxes, net		34,411			30,907
Other long-term liabilities		105,944			102,987
Total liabilities		2,952,284			2,780,958
Commitments and contingencies (Note 15)
Shareholders' equity:
Preferred stock, par value $0.01; 25,000,000 shares authorized; no shares issued and outstanding as of September 27, 2025 and December 28, 2024		—			—
Common stock, par value $0.01; 750,000,000 shares authorized; 118,141,158 shares issued and outstanding as of September 27, 2025 and 117,984,749 shares issued and outstanding as of December 28, 2024		1,181			1,180
Additional paid-in capital		839,652			830,369
Retained earnings		94,556			30,261
Accumulated other comprehensive (loss) income		(4,180	)		2,699
Total shareholders' equity		931,209			864,509
Total liabilities and shareholders' equity	$	3,883,493		$	3,645,467

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

KinderCare Learning Companies, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)

(In thousands, except per share data)


	Three Months Ended						Nine Months Ended
	September 27, 2025			September 28, 2024			September 27, 2025			September 28, 2024
Revenue	$	676,830		$	671,476		$	2,045,184		$	2,016,079
Costs and expenses:
Cost of services (excluding depreciation and impairment)		543,139			521,093			1,578,804			1,518,818
Depreciation and amortization		31,019			29,641			92,070			87,393
Selling, general, and administrative expenses		73,043			65,110			223,418			234,148
Impairment losses		3,309			1,257			7,054			7,140
Total costs and expenses		650,510			617,101			1,901,346			1,847,499
Income from operations		26,320			54,375			143,838			168,580
Interest expense		24,095			39,459			64,276			119,806
Interest income		(1,731	)		(1,260	)		(3,814	)		(5,120	)
Other income, net		(2,249	)		(1,937	)		(4,900	)		(5,721	)
Income before income taxes		6,205			18,113			88,276			59,615
Income tax expense		1,655			4,154			23,981			18,872
Net income	$	4,550		$	13,959		$	64,295		$	40,743
Other comprehensive loss, net of tax:
Change in net losses on cash flow hedges		(381	)		(14,406	)		(6,879	)		(6,285	)
Total comprehensive income (loss)	$	4,169		$	(447	)	$	57,416		$	34,458
Net income per common share:
Basic	$	0.04		$	0.15		$	0.54		$	0.45
Diluted	$	0.04		$	0.15		$	0.54		$	0.45
Weighted average number of common shares outstanding:
Basic		118,353			90,366			118,300			90,366
Diluted		118,413			90,366			118,368			90,366

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

KinderCare Learning Companies, Inc.

Condensed Consolidated Statements of Shareholders' Equity (Unaudited)

(In thousands)


	Three Months Ended September 28, 2024
										Accumulated
					Additional					Other			Total
	Common Stock				Paid-in			Retained		Comprehensive			Shareholders'
	Shares		Amount		Capital			Earnings		(Loss) Income			Equity
Balance as of June 29, 2024		90,366	$	904	$	78,756		$	149,885	$	7,808		$	237,353
Stock-based compensation						(1,331	)							(1,331	)
Other comprehensive loss, net of tax											(14,406	)		(14,406	)
Net income									13,959					13,959
Balance as of September 28, 2024		90,366	$	904	$	77,425		$	163,844	$	(6,598	)	$	235,575


	Three Months Ended September 27, 2025
											Accumulated
						Additional					Other			Total
	Common Stock					Paid-in			Retained		Comprehensive			Shareholders'
	Shares			Amount		Capital			Earnings		(Loss) Income			Equity
Balance as of June 28, 2025		118,123		$	1,181	$	836,891		$	90,006	$	(3,799	)	$	924,279
Issuance of common stock upon settlement of restricted stock units		27			—		—								—
Common stock withheld for taxes in net settlement of restricted stock units		(9	)		—		(65	)							(65	)
Stock-based compensation							2,826								2,826
Other comprehensive loss, net of tax												(381	)		(381	)
Net income										4,550					4,550
Balance as of September 27, 2025		118,141		$	1,181	$	839,652		$	94,556	$	(4,180	)	$	931,209


	Nine Months Ended September 28, 2024
										Accumulated
					Additional					Other			Total
	Common Stock				Paid-in			Retained		Comprehensive			Shareholders'
	Shares		Amount		Capital			Earnings		(Loss) Income			Equity
Balance as of December 30, 2023		90,366	$	904	$	383,188		$	123,101	$	(313	)	$	506,880
Distribution to parent						(320,000	)							(320,000	)
Stock-based compensation						14,237								14,237
Other comprehensive loss, net of tax											(6,285	)		(6,285	)
Net income									40,743					40,743
Balance as of September 28, 2024		90,366	$	904	$	77,425		$	163,844	$	(6,598	)	$	235,575


	Nine Months Ended September 27, 2025
												Accumulated
							Additional					Other			Total
	Common Stock						Paid-in			Retained		Comprehensive			Shareholders'
	Shares			Amount			Capital			Earnings		(Loss) Income			Equity
Balance as of December 28, 2024		117,985		$	1,180		$	830,369		$	30,261	$	2,699		$	864,509
Issuance of common stock upon settlement of restricted stock units		222			2			(2	)							—
Common stock withheld for taxes in net settlement of restricted stock units		(66	)		(1	)		(850	)							(851	)
Stock-based compensation								10,135								10,135
Other comprehensive loss, net of tax													(6,879	)		(6,879	)
Net income											64,295					64,295
Balance as of September 27, 2025		118,141		$	1,181		$	839,652		$	94,556	$	(4,180	)	$	931,209

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

KinderCare Learning Companies, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)


	Nine Months Ended
	September 27, 2025			September 28, 2024
Operating activities:
Net income	$	64,295		$	40,743
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		92,070			87,393
Impairment losses		7,054			7,140
Change in deferred taxes		5,898			(761	)
Loss on extinguishment of long-term debt, net		5,434			895
Amortization of debt issuance costs		4,635			4,956
Stock-based compensation		10,135			22,316
Realized and unrealized gains from investments held in deferred compensation asset trusts		(3,850	)		(3,285	)
Gain on disposal of property and equipment		(82	)		(1,505	)
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable		1,035			(12,936	)
Prepaid expenses and other current assets		(9,888	)		(15,809	)
Other assets		7,381			(2,898	)
Accounts payable and accrued liabilities		40,314			60,100
Leases		22,729			2,321
Deferred revenue		2,938			2,374
Other current liabilities		(14,456	)		(19,549	)
Other long-term liabilities		(1,241	)		(14,759	)
Related party payables		(119	)		—
Cash provided by operating activities		234,282			156,736
Investing activities:
Purchases of property and equipment		(95,925	)		(94,614	)
Payments for acquisitions, net of cash acquired		(17,544	)		(10,497	)
Proceeds from the disposal of property and equipment		169			1,537
Investments in deferred compensation asset trusts		(4,885	)		(6,767	)
Proceeds from deferred compensation asset trust redemptions		3,762			1,639
Cash used in investing activities		(114,423	)		(108,702	)
Financing activities:
Payments of deferred offering costs		(275	)		(1,725	)
Distribution to parent		—			(320,000	)
Proceeds from issuance of long-term debt		—			264,338
Principal payments of long-term debt		(4,834	)		(7,933	)
Payments of debt issuance costs		(317	)		(230	)
Repayments of promissory notes		(250	)		(339	)
Payments of financing lease obligations		(934	)		(1,223	)
Tax payments related to net settlement of restricted stock units		(851	)		—
Cash used in financing activities		(7,461	)		(67,112	)
Net change in cash, cash equivalents, and restricted cash		112,398			(19,078	)
Cash, cash equivalents, and restricted cash at beginning of period		62,430			156,412
Cash, cash equivalents, and restricted cash at end of period	$	174,828		$	137,334

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

KinderCare Learning Companies, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited) (continued)

(In thousands)


	Nine Months Ended
	September 27, 2025		September 28, 2024
Reconciliation of cash, cash equivalents, and restricted cash to the unaudited condensed consolidated balance sheets:
Cash and cash equivalents	$	174,733	$	137,240
Restricted cash included within other assets		95		94
Total cash, cash equivalents, and restricted cash at end of period	$	174,828	$	137,334
Supplemental cash flow information:
Cash paid for interest	$	49,833	$	75,750
Cash paid for income taxes, net of refunds		15,008		37,079
Cash paid for amounts included in the measurement of operating lease liabilities		208,899		217,564
Non-cash operating activities:
Operating lease right-of-use assets obtained in exchange for operating lease liabilities	$	230,610	$	143,824
Deferred cloud computing implementation costs included in accounts payable		25		—
Non-cash investing and financing activities:
Property and equipment additions included in accounts payable and accrued liabilities	$	11,083	$	8,537
Finance lease right-of-use assets obtained in exchange for finance lease liabilities		115		110
Reductions to finance lease right-of-use assets resulting from reductions to finance lease liabilities		1,261		—
Deferred offering costs included in accounts payable and accrued liabilities		—		6,997
Contingent consideration and holdbacks payable for acquisitions		1,300		—

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

KinderCare Learning Companies, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

ORGANIZATION AND 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 September 27, 2025, the Company provided community-based and employer-sponsored early childhood education and care services through 1,595 centers with a licensed capacity of 213,709 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 September 27, 2025, Champions offered educational services through 1,138 sites in 29 states and the District of Columbia. These sites primarily operate at elementary school facilities.

Initial Public Offering—On October 8, 2024, the Company’s registration statement on Form S-1, as amended (File No. 333-281971) (“Form S-1”) related to its initial public offering (“IPO”), was declared effective by the Securities and Exchange Commission (“SEC”). In connection with the 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 the Company’s registration statement on Form S-1 for its IPO (the “Common Stock Conversion”). As a result, 756.8 million shares of Class A common stock outstanding were converted to 90.4 million shares of common stock. All shares outstanding, per share amounts, and stock-based compensation awards disclosures, as applicable, for the three and nine months ended September 28, 2024 have been adjusted to retrospectively reflect the Common Stock Conversion in the unaudited condensed consolidated interim financial statements and notes thereto.

Refer to Note 17, Shareholders' Equity, Member's Equity, and Equity-based Compensation, within the audited consolidated financial statements for the fiscal year ended December 28, 2024 included in the Company's Annual Report on Form 10-K for further information on events and transactions that occurred in connection with the IPO.

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 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 and nine months ended September 27, 2025 are not necessarily indicative of the results to be expected for the fiscal year ending January 3, 2026 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 December 28, 2024 included in the Company's Annual Report on Form 10-K filed with the SEC on March 21, 2025. 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 December 28, 2024 included in the Company's Annual Report on Form 10-K.

Recently Issued Accounting Pronouncements—In September 2025, the Financial Accounting Standards Board (“FASB”), issued Accounting Standards Update (“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 Accounting Standards Codification (“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 July 2025, the FASB issued 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 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 guidance is effective for annual reporting periods beginning after December 15, 2025, including interim periods within those annual periods, and should be applied prospectively. The Company does not expect this rule to have a material impact 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.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740)—Improvements to Income Tax Disclosures, which provides more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The guidance is effective for annual periods beginning after December 15, 2024 and may be applied prospectively or retrospectively. The adoption of ASU 2023-09 will result in modifications to the Company’s income tax disclosures beginning with the fiscal year ending January 3, 2026, however, the Company does not expect a material impact to 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 December 28, 2024 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 $13.8 million and $13.2 million during the three months ended September 27, 2025 and September 28, 2024, and food subsidies of $40.4 million and $38.6 million during the nine months ended September 27, 2025 and September 28, 2024, respectively, offsetting cost of services (excluding depreciation and impairment) in the unaudited condensed consolidated statements of operations and comprehensive income (loss).

The Company receives grant funding from various governmental programs and agencies for expenses including teacher compensation, classroom supplies, and other center operating costs, a portion of which are incrementally incurred by the Company as stipulated by certain grant requirements. Grants of $12.0 million and $4.8 million during the three months ended September 27, 2025 and September 28, 2024, and grants of $36.8 million and $11.9 million during the nine months ended September 27, 2025 and September 28, 2024, respectively, were recognized as reimbursements offsetting cost of services (excluding depreciation and impairment) in the unaudited condensed consolidated statements of operations and comprehensive income (loss).

The Company records grants receivable for grants that have met the Company's recognition criteria but have not yet been received as well as deferred grants for amounts received from government assistance that do not yet meet the Company’s recognition criteria. As of September 27, 2025 and December 28, 2024, the Company recorded $1.6 million and $1.8 million in grants receivable, respectively, within prepaid expenses and other current assets on the unaudited condensed consolidated balance sheets. As of September 27, 2025 and December 28, 2024, the Company recorded $7.3 million and $7.4 million in deferred grants, respectively, within other current liabilities on the unaudited condensed consolidated balance sheets.

COVID-19 Related Stimulus

The federal government passed multiple stimulus packages since the onset of the coronavirus disease 2019 (“COVID-19”) pandemic to stabilize the child care industry, including without limitation, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), the Consolidated Appropriations Act, and the American Rescue Plan Act. “COVID-19 Related Stimulus” refers to grants arising from governmental acts relating to the COVID-19 pandemic and are accounted for in accordance with the Company's government assistance policy.

COVID-19 Related Stimulus is recognized as revenue or as cost reimbursements based on stipulations within each specific grant. The Company recognized $0.7 million during the nine months ended September 27, 2025 and $16.9 million and $55.9 million during the three and nine months ended September 28, 2024, respectively, in funding for reimbursement of center operating expenses, offsetting cost of services (excluding depreciation and impairment) in the unaudited condensed consolidated statements of operations and comprehensive income (loss). There were no amounts recognized during the three months ended September 27, 2025.

The Employee Retention Credit (“ERC”), established by the CARES 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 the fiscal year ended December 31, 2022, the Company applied for ERC for qualified wages and benefits paid throughout the fiscal years ended January 1, 2022 and January 2, 2021. Reimbursements of $62.0 million in cash tax refunds for ERC claimed, along with $2.3 million in interest income, were received during the fiscal year ended December 30, 2023. 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. During the nine months ended September 27, 2025 and September 28, 2024, the Company 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, in the unaudited condensed consolidated statements of operations and comprehensive income (loss). No ERC was recognized during the three months ended September 27, 2025 and September 28, 2024. As of September 27, 2025 and December 28, 2024, total deferred ERC liabilities were $12.3 million and $43.7 million, respectively, of which $12.3 million was recorded in other long-term liabilities as of September 27, 2025, and $31.4 and $12.3 million were recorded in other current liabilities and other long-term liabilities, respectively, as of December 28, 2024 on the unaudited condensed consolidated balance sheets. Additionally, as of September 27, 2025 and December 28, 2024, the Company has $3.4 million in ERC receivables recorded in other assets and prepaid expenses and other current assets, respectively, on the unaudited condensed consolidated balance sheets as there is reasonable assurance these reimbursements will be received. The Company reclassified the ERC receivables from current to long-term as of September 27, 2025 due to a change in the estimated timing of when the payment will be received as a result of recent Internal Revenue Service processing delays. Refer to Note 20, Income Taxes, within the audited consolidated financial statements for the fiscal year ended December 28, 2024 included in the Company's Annual Report on Form 10-K for further information regarding uncertain tax positions for ERC not yet recognized.

ACQUISITIONS

The Company's growth strategy includes expanding and diversifying service offerings through acquiring high quality early childhood education centers.

2025 Acquisitions—During the nine months ended September 27, 2025, the Company acquired 20 early childhood education centers in 18 separate business acquisitions which all were accounted for as business combinations. The centers were acquired for total consideration of $18.8 million, which included cash consideration of $17.5 million, contingent consideration of $1.2 million, and holdbacks of $0.1 million. Holdbacks are generally expected to be paid within one year of the acquisition closing date. The Company recorded goodwill of $17.5 million, which is deductible for tax purposes, and fixed assets of $1.6 million. The allocation of purchase price consideration is subject to further refinement as management's assessment of the valuation of property and equipment and deferred taxes is not yet complete. The operating results for the acquired centers, which were not material to the Company’s overall financial results individually or in aggregate, are included in the unaudited condensed consolidated statements of operations and comprehensive income (loss) from the dates of acquisition.

The fair value of the contingent consideration is based on the probability and timing of the continuation of the lease of the related acquired center. The amounts are payable six to nine years from acquisition date and the range of undiscounted amounts payable under the asset purchase agreement is between zero and $1.2 million. Contingent consideration payable is recorded within other long-term liabilities on the Company's unaudited condensed consolidated balance sheets. As of September 27, 2025, there were no changes in the recognized amounts or range of outcomes of the contingent consideration from the acquisition. Refer to Note 8, Fair Value Measurements, for additional information related to the Company's contingent consideration payable.

2024 Acquisitions—During the nine months ended September 28, 2024, the Company acquired 16 early childhood education centers in eight separate business acquisitions which all were accounted for as business combinations. The centers were acquired for cash consideration of $10.5 million. The Company recorded goodwill of $8.7 million, which is deductible for tax purposes, and fixed assets of $1.9 million. The operating results for the acquired centers, which were not material to the Company’s overall financial results individually or in aggregate, are included in the unaudited condensed consolidated statements of operations and comprehensive income (loss) from the dates of acquisition.

REVENUE RECOGNITION

Contract Balances

The Company records deferred revenue 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. The Company has the unconditional right to consideration as it satisfies the performance obligations, therefore no contract assets are recognized. During the three and nine months ended September 27, 2025, $0.1 million and $26.0 million, respectively, was recognized as revenue related to the deferred revenue balance recorded as of December 28, 2024. During the three and nine months ended September 28, 2024, $0.1 million and $25.4 million, respectively, was recognized as revenue related to the deferred revenue balance recorded as of December 30, 2023.

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 income (loss).

Disaggregation of Revenue

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


	Three Months Ended				Nine Months Ended
	September 27, 2025		September 28, 2024		September 27, 2025		September 28, 2024
Early childhood education centers	$	626,987	$	626,439	$	1,889,669	$	1,872,894
Before- and after-school sites		49,843		45,037		155,515		143,185
Total revenue	$	676,830	$	671,476	$	2,045,184	$	2,016,079

A portion of revenue is generated from families whose tuition is subsidized by amounts received from government agencies. Subsidy revenue was $252.2 million and $242.6 million during the three months ended September 27, 2025 and September 28, 2024, and $751.2 million and $699.8 million during the nine months ended September 27, 2025 and September 28, 2024, respectively, recognized within revenue in the unaudited condensed consolidated statements of operations and comprehensive income (loss).

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):


Balance as of December 28, 2024	$	1,119,714
Additions from acquisitions		17,467
Balance as of September 27, 2025	$	1,137,181

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 September 27, 2025, the Company’s publicly traded share price experienced continued decline resulting in a decrease in market capitalization. Accordingly, management completed an interim goodwill impairment assessment and concluded that it was not more likely than not that the fair values of its reporting units were less than the respective carrying amounts. There was no impairment of goodwill during both the three and nine months ended September 27, 2025 and September 28, 2024. Adverse changes in key assumptions, including sustained share price declines, higher discount rates, or weaker operating results, could reduce the excess of fair values over the carrying amounts and result in impairment in future periods.

LEASES

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


	September 27, 2025		December 28, 2024
Assets:
Operating lease right-of-use assets	$	1,474,746	$	1,373,064
Finance lease right-of-use assets		2,741		4,547
Total lease right-of-use assets	$	1,477,487	$	1,377,611
Liabilities—current:
Operating lease liabilities	$	164,843	$	144,919
Finance lease liabilities		913		1,406
Total current lease liabilities		165,756		146,325
Liabilities—long-term:
Operating lease liabilities		1,421,150		1,315,587
Finance lease liabilities		2,206		3,793
Total long-term lease liabilities		1,423,356		1,319,380
Total lease liabilities	$	1,589,112	$	1,465,705

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):


	Three Months Ended				Nine Months Ended
	September 27, 2025		September 28, 2024		September 27, 2025		September 28, 2024
Lease expense:
Operating lease expense	$	75,912	$	73,212	$	223,494	$	216,145
Finance lease expense:
Amortization of right-of-use assets		259		392		940		1,167
Interest on lease liabilities		74		124		249		391
Short-term lease expense		2,620		2,256		8,618		5,702
Variable lease expense		19,594		17,702		56,465		51,913
Total lease expense	$	98,459	$	93,686	$	289,766	$	275,318

Other Information

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


	September 27, 2025			December 28, 2024
Weighted average remaining lease term (in years) (Operating)		9			8
Weighted average remaining lease term (in years) (Finance)		4			4
Weighted average discount rate (Operating)		9.2	%		9.4	%
Weighted average discount rate (Finance)		9.1	%		8.5	%

Maturity of Lease Liabilities

The following table summarizes the maturity of lease liabilities as of September 27, 2025 (in thousands):


	Finance Leases		Operating Leases		Total Leases
Remainder of 2025	$	289	$	73,625	$	73,914
2026		1,152		302,536		303,688
2027		1,057		287,600		288,657
2028		531		268,330		268,861
2029		255		248,665		248,920
Thereafter		349		1,158,048		1,158,397
Total lease payments		3,633		2,338,804		2,342,437
Less imputed interest		514		752,811		753,325
Present value of lease liabilities		3,119		1,585,993		1,589,112
Less current portion of lease liabilities		913		164,843		165,756
Long-term lease liabilities	$	2,206	$	1,421,150	$	1,423,356

As of September 27, 2025, the Company had entered into additional operating leases that have not yet commenced with total fixed payment obligations of $215.4 million. The leases are expected to commence between 2025 and 2026 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 established based on the Company’s first lien term loan.

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities included the following (in thousands):


	September 27, 2025		December 28, 2024
Accounts payable	$	58,464	$	45,293
Accrued compensation and related expenses		94,006		69,551
Accrued property and other taxes		26,238		22,209
Accrued interest		16,209		11,691
Other		3,272		3,916
Total accounts payable and accrued liabilities	$	198,189	$	152,660

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:

•

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

•

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.

•

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 September 27, 2025 and December 28, 2024. 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):


	Fair Value Measurements Using
	Balance as of September 27, 2025		Quoted Price in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money Market Funds	$	6,543	$	6,543	$	—	$	—
Mutual Funds		36,148		36,148		—		—
	$	42,691	$	42,691	$	—	$	—


	Fair Value Measurements Using
	Balance as of December 28, 2024		Quoted Price in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money Market Funds	$	6,499	$	6,499	$	—	$	—
Mutual Funds		31,432		31,432		—		—
	$	37,931	$	37,931	$	—	$	—

Contingent Consideration Payable—The Company measures contingent consideration payable at fair value based on a series of unobservable inputs, including the timing and probability of the occurrence of future events, and requires judgment from management. As such, contingent consideration payable is classified as Level 3. Significant market assumptions include a discount rate and the probability of the occurrence of specific events. Refer to Note 3, Acquisitions, for additional information related to the Company's contingent consideration payable.

The following table provides a roll forward of the fair value of recurring Level 3 fair value measurements (in thousands):


Balance at December 28, 2024	$	—
Issuance of contingent consideration		1,200
Balance at September 27, 2025	$	1,200

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 September 27, 2025, interest rate derivatives of $0.8 million were recorded in other current liabilities and $4.8 million were recorded in other long-term liabilities on the unaudited condensed

consolidated balance sheets. As of December 28, 2024, interest rate derivatives of $2.0 million were recorded in prepaid expenses and other current assets and $1.7 million were recorded in other assets on the unaudited condensed consolidated balance sheets. Refer to Note 10, 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 $961.4 million as of September 27, 2025 and $978.9 million as of December 28, 2024 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 9, 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.

Nonrecurring Fair Value Estimates—The estimated fair value of the Company's long-lived assets are calculated using the discounted cash flow (“DCF”) method of the income approach to fair value. The DCF method for property and equipment incorporates unobservable inputs (Level 3) which include future cash flow projections and discount rate assumptions. For ROU assets, the DCF method incorporates market-based inputs (Level 3) which include the as-is market rents and discount rates.

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


	Three Months Ended				Nine Months Ended
	September 27, 2025		September 28, 2024		September 27, 2025		September 28, 2024
Impairment of property and equipment	$	2,799	$	1,152	$	6,258	$	4,892
Impairment of lease right-of-use assets		510		105		796		2,248
Total impairment losses	$	3,309	$	1,257	$	7,054	$	7,140

Refer to Note 6, Leases, for additional information regarding the Company's ROU assets.

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

LONG-TERM DEBT

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


	September 27, 2025			December 28, 2024
First lien term loans	$	961,963		$	966,797
Debt issuance costs, net		(31,075	)		(40,827	)
Total debt		930,888			925,970
Current portion of long-term debt		(9,620	)		(7,251	)
Long-term debt, net	$	921,268		$	918,719

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 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.

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.

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 September 27, 2025, 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 September 27, 2025, the Company had no outstanding borrowings on the First Lien Revolving Credit Facility and had an available borrowing capacity of $194.4 million after giving effect to the outstanding letters of credit under the Credit Agreement of $68.1 million. Additionally, as of December 28, 2024, the Company had no outstanding borrowings on the First Lien Revolving Credit Facility and had an available borrowing capacity of $184.2 million after giving effect to the outstanding letters of credit under the Credit Agreement of $55.8 million.

The Company capitalized original issue discount and debt issuance costs of less than $0.1 million and $0.3 million during the three and nine months ended September 27, 2025, respectively, related to the February 2025 and July 2025 amendments to the Credit Agreement. The Company capitalized original issue discount and debt issuance costs of $0.9 million during the nine months ended September 28, 2024, related to the March 2024 and April 2024 amendments 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 income (loss). No debt issuance costs were incurred during the three months ended September 28, 2024.

The Company recognized a $5.4 million loss on extinguishment of debt during the three and nine months ended September 27, 2025, related to 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 the July 2025 amendment to the Credit Agreement. The Company recognized a $0.9 million loss on extinguishment of debt during the nine months ended September 28, 2024, related to 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 the April 2024 amendment to the Credit Agreement. Losses from extinguishment of debt are recognized in interest expense in the unaudited condensed consolidated statements of operations and comprehensive income (loss). The Company did not incur any gain or loss on extinguishment of debt during the three months ended September 28, 2024.

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 3, 2026 and for the fiscal years thereafter are as follows (in thousands):


Remainder of 2025	$	4,810
2026		9,620
2027		9,620
2028		9,620
2029		7,215
Thereafter		921,078
	$	961,963

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. Upon entering into the LOC Agreement, the Company issued $20.0 million in letters of credit and cancelled $16.7 million of outstanding letters of credit under the First Lien Revolving Credit Facility. The Company had $20.0 million outstanding letters of credit under the LOC Agreement as of September 27, 2025 and December 28, 2024.

10.

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 income (loss). Gains and losses are reclassified into interest expense when realized, with the related income tax effects reclassified into income tax 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 October 2022, the Company entered into an interest rate cap contract on approximately half of the variable rate debt under the Senior Secured Credit Facilities. The cap commenced on December 31, 2022 and provided protection in the form of variable payments from a counterparty in the event that the three-month SOFR increased above 4.85%. The notional amount of the derivative decreased quarterly as principal payments were made on the First Lien Term Loan Facility. The notional amount was $659.8 million immediately prior to its expiration on June 28, 2024. The Company paid an initial premium of $5.0 million for the interest rate cap. The Company elected to exclude the change in the time value of the interest rate cap from the assessment of hedge effectiveness and amortized the initial value of the premium over the life of the contract. The premium amortization was recognized in interest expense in the unaudited condensed consolidated statements of operations and comprehensive income (loss). The derivative was considered highly effective through its expiration on June 28, 2024.

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. The Company receives variable amounts of interest from a counterparty at 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. The Company will receive variable amounts of interest from a counterparty at the greater of three-month SOFR or 0.50% per annum.

As of September 27, 2025, the Company's derivatives are considered highly effective. The Company estimates that $0.8 million, before income taxes, of deferred losses recognized within accumulated other comprehensive (loss) income as of September 27, 2025 will be reclassified as an increase in interest expense within the next 12 months. Actual amounts reclassified into net 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 income (loss) (in thousands):


	Derivatives Designated as Cash Flow Hedging Instruments
	Gain (Loss) Recognized in Other Comprehensive Loss			Gain Reclassified from Accumulated Other Comprehensive (Loss) Income into Income			Total Effect on Other Comprehensive Loss
Three Months Ended September 27, 2025
Interest rate derivative contracts	$	337		$	(851	)	$	(514	)
Income tax effect		(87	)		220			133
Net of income taxes	$	250		$	(631	)	$	(381	)

Three Months Ended September 28, 2024
Interest rate derivative contracts (1)	$	(17,564	)	$	(1,857	)	$	(19,421	)
Income tax effect		4,535			480			5,015
Net of income taxes	$	(13,029	)	$	(1,377	)	$	(14,406	)


	Derivatives Designated as Cash Flow Hedging Instruments
	Loss Recognized in Other Comprehensive Loss			Gain Reclassified from Accumulated Other Comprehensive (Loss) Income into Income			Total Effect on Other Comprehensive Loss
Nine Months Ended September 27, 2025
Interest rate derivative contracts	$	(6,604	)	$	(2,669	)	$	(9,273	)
Income tax effect		1,705			689			2,394
Net of income taxes	$	(4,899	)	$	(1,980	)	$	(6,879	)

Nine Months Ended September 28, 2024
Interest rate derivative contracts (1)	$	(6,681	)	$	(1,792	)	$	(8,473	)
Income tax effect		1,725			463			2,188
Net of income taxes	$	(4,956	)	$	(1,329	)	$	(6,285	)

(1)

The amount excluded from the assessment of hedge effectiveness reclassified into interest expense, which related to amortization of the interest rate cap premium, was $1.7 million during the nine months ended September 28, 2024. No amount was excluded from the assessment of hedge effectiveness during the three months ended September 28, 2024.

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.

11.

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):


Balance as of December 30, 2023	$	(313	)
Other comprehensive losses before reclassifications		(4,956	)
Reclassifications to net income of previously deferred gains		(1,329	)
Balance as of September 28, 2024	$	(6,598	)


Balance as of December 28, 2024	$	2,699
Other comprehensive losses before reclassifications		(4,899	)

KinderCare Learning Companies, Inc. 10-Q