KLC Kindercare Learning Companies Inc

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 20, 2024

 

 

KinderCare Learning Companies, Inc.

(Exact name of Registrant as Specified in Its Charter)

 

 

Delaware			001-42367	87-1653366
(State or Other Jurisdiction of Incorporation)			(Commission File Number)	(IRS Employer Identification No.)
5005 Meadows Road
Lake Oswego, Oregon				97035
(Address of Principal Executive Offices)				(Zip Code)

 

Registrant’s Telephone Number, Including Area Code: (503) 872-1300

 

Not applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

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 is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

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. ☐

 

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Item 2.02 Results of Operations and Financial Condition.

On November 20, 2024, KinderCare Learning Companies, Inc. (the “Company”) issued a press release announcing its results of operations for the third quarter ended September 28, 2024. A copy of the press release is furnished as Exhibit 99.1.

The information furnished under Item 2.02 of this Current Report on Form 8-K, including the exhibit, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference into the Company's filings with the Securities and Exchange Commission under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit		Description
99.1		Press Release dated November 20, 2024.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

			KinderCare Learning Companies, Inc.
Date:	November 20, 2024	By:	/s/ Anthony Amandi
		Name: Title:	Anthony Amandi Chief Financial Officer

 

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Exhibit 99.1

KinderCare Reports Third Quarter 2024 Financial Results

Portland, Ore. (November 20, 2024) – KinderCare Learning Companies, Inc. (NYSE: KLC) (“KinderCare”), the nation’s largest private provider of high-quality early childhood education by center capacity, today announced financial results for the quarter ended September 28, 2024.

Third Quarter 2024 Highlights

Non-GAAP financial measures

“KinderCare delivered strong results during the third quarter of 2024, which marks our first earnings report as a public company,” said Paul Thompson, KinderCare’s Chief Executive Officer. “Revenue growth of 7.5% demonstrates our expanding ability to bring high-quality early childhood education and care to more families and communities. Our goal is to grow KinderCare's market share and profitability on the strong foundation of our national scale in our 2,500 community-based centers and through growing program offerings both at-work and before and after school.”

Mr. Thompson continued, "I'd like to thank the entire KinderCare team for their hard work and dedication over the past year plus, which culminated with our initial public offering and first day of trading in early October. As we move forward, we are excited to continue executing on our strategy to build confidence in kids, families, and the future we share."

Third Quarter 2024 Financial Results

Total revenue increased $47.0 million, or 7.5%, to $671.5 million for the third quarter of 2024 compared to $624.5 million for the third quarter of 2023.

Revenue from early childhood education centers increased by $40.5 million, or 6.9%, for the third quarter of 2024 as compared to the third quarter of 2023, of which approximately 6% was from higher tuition rates and approximately 1% was attributable to increased enrollment. Revenue from early childhood education centers was higher by $10.5 million due to the timing of registration fee billing in the third quarter of fiscal 2024 compared to the second quarter of fiscal 2023.

Revenue from before- and after-school sites increased by $6.5 million, or 16.8%, for the third quarter of 2024 as compared to the third quarter of 2023 primarily due to opening new sites, offering more summer day camps, and increased tuition rates.

Income from operations decreased $4.3 million, or 7.4%, to $54.4 million for the third quarter of 2024 compared to $58.7 million for the third quarter of 2023. The decrease in income from operations was primarily due to a $52.7 million increase in cost of services (excluding depreciation and amortization) as a result of $20.0 million lower cost reimbursements from COVID-19 Related Stimulus recognized and increased personnel costs, offset by increased total revenue as noted above. Net income decreased $2.0 million, or 13.0%, to $14.0 million for the third quarter of 2024 compared to $16.0 million for the third quarter of 2023. The decrease in net income was primarily due to the decrease in income from operations noted above, partially offset by other income and a lower effective tax rate. Net income per common share, diluted (1) was $0.15 for the third quarter of 2024 compared to $0.18 for the third quarter of 2023.

Adjusted EBITDA (2) increased $14.4 million, or 25.1%, to $71.4 million in the third quarter of 2024 compared to $57.0 million in the third quarter of 2023, primarily due to increased revenue from both our early childhood education centers and before- and after-school sites. Adjusted net income (2) increased $7.7 million, or 225.4%, to $4.3 million for the third quarter of 2024 compared to an adjusted net loss (2) of $3.4 million for the third quarter of 2023. Adjusted net income per common share, diluted (1)(2) was $0.05 for the third quarter of 2024 compared to adjusted net loss per common share, diluted (1)(2) of $0.04 for the third quarter of 2023.

As of September 28, 2024, the Company operated 1,573 early childhood education centers and 1,018 before- and after-school sites.

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Balance Sheet and Liquidity

As of September 28, 2024, the Company had $137.2 million of cash and cash equivalents and $104.2 million of available borrowing capacity under the revolving credit facility, after giving effect to the outstanding letters of credit of $55.8 million.

During the nine months ended September 28, 2024, we generated $156.7 million in cash provided by operating activities, compared to $307.7 million during the same period in 2023, a decrease of $151.0 million, primarily due to lower cost reimbursements from COVID-19 Related Stimulus and the deferred recognition of the employee retention credit ("ERC") and collections on grants receivable in the prior period, partially offset by revenue growth and timing of interest payments in the current period.

Conference Call and Webcast

Management will host a conference call today at 5:00 pm ET to discuss the financial results for the third quarter of 2024. The conference call will be webcast live via our investor relations website https://investors.kindercare.com/overview/default.aspx or via this link. A replay of the webcast will be made available on our investor relations website at the conclusion of the event.

Interested parties may also access the conference call live over the phone by dialing 1-800-579-2543 (Toll-free) or 1-785-424-1789 (Toll) and referencing conference ID “KC3Q24”. Participants are asked to dial in a few minutes prior to the call to register.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements in this press release and on the related teleconference that express a belief, expectation or intention, as well as those that are not historical fact, are forward-looking statements. These statements include, but are not limited to, statements about the Company’s financial position; business plans and objectives; general economic and industry trends; operating results; and working capital and liquidity and other statements contained in this presentation that are not historical facts. When used in this press release and on the related teleconference, words 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. They involve a number of risks and uncertainties that may cause actual events and results to differ materially from such forward-looking statements. These risks and uncertainties include, but are not limited to: 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; our ability to hire and retain qualified teachers, management, employees, and maintain strong employee engagement; the impact of public health crises, such as the COVID-19 pandemic, on our business, financial condition and results of operations; our ability to address adverse publicity; changes in federal child care and education spending policies 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; and the occurrence of natural disasters, environmental contamination or other highly disruptive events; and other risks and uncertainties set forth under “Risk Factors” in the final prospectus filed with the Securities and Exchange Commission ("SEC") on October 9, 2024, pursuant to Rule 424(b) under the Securities Act, for the Company’s IPO and in its other filings with the SEC. KinderCare does not undertake to update any forward-looking statements made in this press release to reflect any change in management's expectations or any change in the assumptions or circumstances on which such statements are based, except as otherwise required by law.

Use of Non-GAAP Financial Measures

This press release contains certain non-GAAP financial measures, including EBIT, EBITDA, adjusted EBITDA, adjusted net income (loss), and adjusted net income (loss) per common share. Tables showing the reconciliation of these non-GAAP financial measures to the comparable GAAP measures are included at the end of this release. Management believes these non-GAAP financial measures are useful in evaluating the Company’s operating performance, and may be helpful to securities analysts, institutional investors and other interested parties in understanding the Company’s operating performance and prospects.

Investors are cautioned against placing undue reliance on non-GAAP financial measures and are urged to review and consider carefully the adjustments made by management to the most directly comparable GAAP financial measures, such as net income or net

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income per common share. Non-GAAP financial measures may have limited value as analytical tools because they may exclude certain expenses that some investors consider important in evaluating our operating performance or ongoing business performance. Further, non-GAAP financial measures may have limited value for purposes of drawing comparisons between companies because different companies may calculate similarly titled non-GAAP financial measures in different ways because non-GAAP measures are not based on any comprehensive set of accounting rules or principles.

About KinderCare Learning Companies™

A leading private provider of early childhood and school-age education and care, KinderCare builds confidence for life in children and families from all backgrounds. KinderCare supports hardworking families in 40 states and the District of Columbia with differentiated flexible child care solutions:

KinderCare partners with employers nationwide to address the child care needs of today’s dynamic workforce. We provide customized family care benefits for organizations, including care for young children on or near the site where their parents work, tuition benefits, and backup care where KinderCare programs are located. Headquartered in Lake Oswego, Oregon, KinderCare operates more than 2,500 early learning centers and sites.

Contacts:

Investors
Sloan Bohlen, Solebury Strategic Communications
investors@kindercare.com

Media
Stephanie Knight, Solebury Strategic Communications
media@kindercare.com

Source: KinderCare

 

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KinderCare Learning Companies, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except share data)

 

		September 28, 2024				December 30, 2023
Assets
Current assets:
Cash and cash equivalents		$	137,240			$	156,147
Accounts receivable, net			100,923				88,086
Prepaid expenses and other current assets			64,656				39,194
Total current assets			302,819				283,427
Property and equipment, net			413,310				395,745
Goodwill			1,119,259				1,110,591
Intangible assets, net			432,149				439,001
Operating lease right-of-use assets			1,372,242				1,351,863
Other assets			82,718				72,635
Total assets		$	3,722,497			$	3,653,262
Liabilities and Shareholder's Equity
Current liabilities:
Accounts payable and accrued liabilities		$	226,680			$	154,463
Current portion of long-term debt			15,827				13,250
Operating lease liabilities—current			144,731				133,225
Deferred revenue			28,181				25,807
Other current liabilities			89,114				99,802
Total current liabilities			504,533				426,547
Long-term debt, net			1,496,423				1,236,974
Operating lease liabilities—long-term			1,315,098				1,301,656
Deferred income taxes, net			57,715				60,733
Other long-term liabilities			113,153				120,472
Total liabilities			3,486,922				3,146,382
Total shareholder's equity			235,575				506,880
Total liabilities and shareholder's equity		$	3,722,497			$	3,653,262

 

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KinderCare Learning Companies, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except per share data)

 

		Three Months Ended
		September 28, 2024						September 30, 2023
Revenue		$	671,476					$	624,468
Costs and expenses:
Cost of services (excluding depreciation and impairment)			521,093			77.6%			468,422			75.0%
Depreciation and amortization			29,641			4.4%			27,069			4.3%
Selling, general, and administrative expenses			65,110			9.7%			68,477			11.0%
Impairment losses			1,257			0.2%			1,776			0.3%
Total costs and expenses			617,101			91.9%			565,744			90.6%
Income from operations			54,375			8.1%			58,724			9.4%
Interest expense			39,459			5.9%			38,451			6.2%
Interest income			(1,260	)		(0.2%)			(1,581	)		(0.3%)
Other (income) expense, net			(1,937	)		(0.3%)			716			0.1%
Income before income taxes			18,113			2.7%			21,138			3.4%
Income tax expense			4,154			0.6%			5,102			0.8%
Net income		$	13,959			2.1%		$	16,036			2.6%
Net income per common share: (1)
Basic		$	0.15					$	0.18
Diluted		$	0.15					$	0.18
Weighted average number of common shares outstanding: (1)
Basic			90,366						90,366
Diluted			90,366						90,366

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KinderCare Learning Companies, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except per share data)

 

		Nine Months Ended
		September 28, 2024						September 30, 2023
Revenue		$	2,016,079					$	1,892,186
Costs and expenses:
Cost of services (excluding depreciation and impairment)			1,518,818			75.3%			1,357,299			71.7%
Depreciation and amortization			87,393			4.3%			80,582			4.3%
Selling, general, and administrative expenses			234,148			11.6%			220,597			11.7%
Impairment losses			7,140			0.4%			7,081			0.4%
Total costs and expenses			1,847,499			91.6%			1,665,559			88.0%
Income from operations			168,580			8.4%			226,627			12.0%
Interest expense			119,806			5.9%			114,365			6.0%
Interest income			(5,120	)		(0.3%)			(4,119	)		(0.2%)
Other income, net			(5,721	)		(0.3%)			(1,725	)		(0.1%)
Income before income taxes			59,615			3.0%			118,106			6.2%
Income tax expense			18,872			0.9%			30,375			1.6%
Net income		$	40,743			2.0%		$	87,731			4.6%
Net income per common share: (1)
Basic		$	0.45					$	0.97
Diluted		$	0.45					$	0.97
Weighted average number of common shares outstanding: (1)
Basic			90,366						90,366
Diluted			90,366						90,396

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KinderCare Learning Companies, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

 

		Nine Months Ended
		September 28, 2024				September 30, 2023
Operating activities:
Net income		$	40,743			$	87,731
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization			87,393				80,582
Impairment losses			7,140				7,081
Change in deferred taxes			(761	)			(2,690	)
Loss on extinguishment of long-term debt, net			895				3,957
Loss on extinguishment of indebtedness to related party			—				472
Amortization of debt issuance costs			4,956				5,589
Equity-based compensation			22,316				13,873
Realized and unrealized gains from investments held in deferred    compensation asset trusts			(3,285	)			(1,001	)
Gain on disposal of property and equipment			(1,505	)			(642	)
Changes in assets and liabilities, net of effects of acquisitions			(1,156	)			112,812
Cash provided by operating activities			156,736				307,764
Investing activities:
Purchases of property and equipment			(94,614	)			(89,774	)
Payments for acquisitions, net of cash acquired			(10,497	)			(3,638	)
Proceeds from the disposal of property and equipment			1,537				834
Investments in deferred compensation asset trusts			(6,767	)			(5,402	)
Proceeds from deferred compensation asset trust redemptions			1,639				1,438
Cash used in investing activities			(108,702	)			(96,542	)
Financing activities:
Distribution to KC Parent			(320,000	)			—
Proceeds from issuance of long-term debt			264,338				1,258,750
Repayment of long-term debt			—				(1,310,881	)
Repayment of indebtedness to related party			—				(56,328	)
Principal payments of long-term debt			(7,933	)			(2,943	)
Payments of debt issuance costs			(230	)			(7,320	)
Repayments of promissory notes			(339	)			(777	)
Payments of financing lease obligations			(1,223	)			(1,370	)
Payments of deferred offering costs			(1,725	)			—
Payments of contingent consideration for acquisitions			—				(6,917	)
Cash used in financing activities			(67,112	)			(127,786	)
Net change in cash, cash equivalents, and restricted cash			(19,078	)			83,436
Cash, cash equivalents, and restricted cash at beginning of period			156,412				105,469
Cash, cash equivalents, and restricted cash at end of period		$	137,334			$	188,905

 

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KinderCare Learning Companies, Inc.

Condensed Consolidated Non-GAAP Measures (Unaudited)

(In thousands, except per share data)

The following table shows EBIT, EBITDA, and adjusted EBITDA for the periods presented, and the reconciliation to its most comparable GAAP measure, net income, for the periods presented:

		Three Months Ended								Nine Months Ended
		September 28,				September 30,				September 28,				September 30,
		2024				2023				2024				2023
Net income		$	13,959			$	16,036			$	40,743			$	87,731
Add back:
Interest expense			39,459				38,451				119,806				114,365
Interest income			(1,260	)			(1,581	)			(5,120	)			(4,119	)
Income tax expense			4,154				5,102				18,872				30,375
EBIT		$	56,312			$	58,008			$	174,301			$	228,352
Add back:
Depreciation and amortization			29,641				27,069				87,393				80,582
EBITDA		$	85,953			$	85,077			$	261,694			$	308,934
Add back:
Impairment losses (1)			1,257				1,776				7,140				7,081
Equity-based compensation (2)			(1,402	)			56				(94	)			835
Management and advisory fee expenses (3)			1,216				1,216				3,648				3,648
Acquisition related costs (4)			—				84				16				1,179
Non-recurring distribution and bonus expense (5)			—				—				19,287				—
COVID-19 Related Stimulus, net (6)			(14,908	)			(32,160	)			(65,683	)			(126,857	)
Other costs (7)			(760	)			970				6,139				8,659
Adjusted EBITDA		$	71,356			$	57,019			$	232,147			$	203,479

The following table shows adjusted net income (loss) and adjusted net income (loss) per common share for the periods presented and the reconciliation to the most comparable GAAP measure, net income and net income per common share, respectively, for the periods presented:

		Three Months Ended								Nine Months Ended
		September 28,				September 30,				September 28,				September 30,
		2024				2023				2024				2023
Net income		$	13,959			$	16,036			$	40,743			$	87,731
Income tax expense			4,154				5,102				18,872				30,375
Net income before income tax:		$	18,113			$	21,138			$	59,615			$	118,106
Add back:
Amortization of intangible assets			2,284				2,296				6,852				7,131
Impairment losses (1)			1,257				1,776				7,140				7,081
Equity-based compensation (2)			(1,402	)			56				(94	)			835
Management and advisory fee expenses (3)			1,216				1,216				3,648				3,648
Acquisition related costs (4)			—				84				16				1,179
Non-recurring distribution and bonus expense (5)			—				—				19,287				—
COVID-19 Related Stimulus, net (6)			(14,908	)			(32,160	)			(65,683	)			(126,857	)
Other costs (7)			(760	)			970				6,139				8,659
Adjusted income (loss) before income tax			5,800				(4,624	)			36,920				19,782
Adjusted income tax expense (benefit) (8)			1,497				(1,193	)			9,529				5,106
Adjusted net income (loss)		$	4,303			$	(3,431	)		$	27,391			$	14,676
Net income per common share: (9)
Basic		$	0.15			$	0.18			$	0.45			$	0.97
Diluted		$	0.15			$	0.18			$	0.45			$	0.97
Adjusted net income (loss) per common share: (9)
Basic		$	0.05			$	(0.04	)		$	0.30			$	0.16
Diluted		$	0.05			$	(0.04	)		$	0.30			$	0.16
Weighted average number of common shares outstanding: (9)
Basic			90,366				90,366				90,366				90,366
Diluted			90,366				90,366				90,366				90,396

 

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Explanation of add backs:

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v3.24.3

Document And Entity Information	Nov. 20, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Nov. 20, 2024
Entity Registrant Name	KinderCare Learning Companies, Inc.
Entity Central Index Key	0001873529
Entity Emerging Growth Company	false
Entity File Number	001-42367
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	87-1653366
Entity Address, Address Line One	5005 Meadows Road
Entity Address, City or Town	Lake Oswego
Entity Address, State or Province	OR
Entity Address, Postal Zip Code	97035
City Area Code	(503)
Local Phone Number	872-1300
Entity Information, Former Legal or Registered Name	Not applicable
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, par value $0.01 per share
Trading Symbol	KLC
Security Exchange Name	NYSE

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