10-Q

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

KinderCare Learning Companies, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except per share data)


	July 4, 2026			January 3, 2026
Assets
Current assets:
Cash and cash equivalents	$	173,706		$	133,205
Accounts receivable, net		114,312			118,523
Prepaid expenses and other current assets		54,038			106,291
Total current assets		342,056			358,019
Property and equipment, net of accumulated depreciation of 608,539 and 582,808		391,559			417,789
Goodwill		692,405			964,829
Intangible assets, net of accumulated amortization of 161,585 and 157,437		416,774			420,922
Operating lease right-of-use assets		1,474,434			1,500,786
Other assets		86,339			85,545
Total assets	$	3,403,567		$	3,747,890
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities	$	174,793		$	163,312
Current portion of long-term debt		9,620			9,620
Operating lease liabilities—current		162,938			146,594
Deferred revenue		54,875			49,577
Other current liabilities		56,893			115,762
Total current liabilities		459,119			484,865
Long-term debt, net		916,097			917,925
Operating lease liabilities—long-term		1,421,301			1,447,524
Deferred income taxes, net		34,585			35,454
Other long-term liabilities		106,278			106,860
Total liabilities		2,937,380			2,992,628
Commitments and contingencies (Note 15)
Shareholders' equity:
Preferred stock, par value $0.01; 25,000 shares authorized; no shares issued and outstanding as of July 4, 2026 and January 3, 2026		—			—
Common stock, par value $0.01; 750,000 shares authorized; 118,517 shares issued and outstanding as of July 4, 2026 and 118,340 shares issued and outstanding as of January 3, 2026		1,185			1,183
Additional paid-in capital		845,332			841,301
Retained deficit		(381,221	)		(82,619	)
Accumulated other comprehensive income (loss)		891			(4,603	)
Total shareholders' equity		466,187			755,262
Total liabilities and shareholders' equity	$	3,403,567		$	3,747,890

KinderCare Learning Companies, Inc.

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

(In thousands, except per share data)


	Three Months Ended						Six Months Ended
	July 4, 2026			June 28, 2025			July 4, 2026			June 28, 2025
Revenue	$	697,522		$	700,110		$	1,370,044		$	1,368,354
Costs and expenses:
Cost of services (excluding depreciation and impairment)		567,434			519,477			1,118,357			1,035,665
Depreciation and amortization		31,699			31,074			62,776			61,051
Selling, general, and administrative expenses		73,068			78,648			144,197			150,375
Impairment losses		22,923			2,235			314,398			3,745
Total costs and expenses		695,124			631,434			1,639,728			1,250,836
Income (loss) from operations		2,398			68,676			(269,684	)		117,518
Interest expense		18,255			20,073			36,475			40,181
Interest income		(970	)		(1,424	)		(1,812	)		(2,083	)
Other income, net		(4,342	)		(3,049	)		(3,435	)		(2,651	)
(Loss) income before income taxes		(10,545	)		53,076			(300,912	)		82,071
Income tax (benefit) expense		(1,775	)		14,488			(2,310	)		22,326
Net (loss) income	$	(8,770	)	$	38,588		$	(298,602	)	$	59,745
Other comprehensive income (loss), net of tax:
Change in net gains (losses) on cash flow hedges		2,242			(2,091	)		5,494			(6,498	)
Total comprehensive (loss) income	$	(6,528	)	$	36,497		$	(293,108	)	$	53,247
Net (loss) income per common share:
Basic	$	(0.07	)	$	0.33		$	(2.52	)	$	0.51
Diluted	$	(0.07	)	$	0.33		$	(2.52	)	$	0.50
Weighted average number of common shares outstanding:
Basic		118,798			118,309			118,648			118,274
Diluted		118,798			118,371			118,648			118,346

KinderCare Learning Companies, Inc.

Condensed Consolidated Statements of Shareholders' Equity (Unaudited)

(In thousands)


	Three Months Ended July 4, 2026
												Accumulated
						Additional			Retained			Other			Total
	Common Stock					Paid-in			(Deficit)			Comprehensive			Shareholders'
	Shares			Amount		Capital			Earnings			(Loss) Income			Equity
Balance as of April 4, 2026		118,428		$	1,184	$	843,711		$	(372,451	)	$	(1,351	)	$	471,093
Issuance of common stock upon settlement of restricted stock units		99			1		(1	)								—
Common stock withheld for taxes in net settlement of restricted stock units		(10	)		—		(41	)								(41	)
Stock-based compensation							1,663									1,663
Other comprehensive income, net of tax													2,242			2,242
Net loss										(8,770	)					(8,770	)
Balance as of July 4, 2026		118,517		$	1,185	$	845,332		$	(381,221	)	$	891		$	466,187


	Three Months Ended June 28, 2025
												Accumulated
							Additional			Retained		Other			Total
	Common Stock						Paid-in			(Deficit)		Comprehensive			Shareholders'
	Shares			Amount			Capital			Earnings		(Loss) Income			Equity
Balance as of March 29, 2025		118,006		$	1,180		$	833,993		$	51,418	$	(1,708	)	$	884,883
Issuance of common stock upon settlement of restricted stock units		162			2			(2	)							—
Common stock withheld for taxes in net settlement of restricted stock units		(45	)		(1	)		(561	)							(562	)
Stock-based compensation								3,461								3,461
Other comprehensive loss, net of tax													(2,091	)		(2,091	)
Net income											38,588					38,588
Balance as of June 28, 2025		118,123		$	1,181		$	836,891		$	90,006	$	(3,799	)	$	924,279

KinderCare Learning Companies, Inc.

Condensed Consolidated Statements of Shareholders' Equity (Unaudited) (continued)

(In thousands)


	Six Months Ended July 4, 2026
												Accumulated
						Additional			Retained			Other			Total
	Common Stock					Paid-in			(Deficit)			Comprehensive			Shareholders'
	Shares			Amount		Capital			Earnings			(Loss) Income			Equity
Balance as of January 3, 2026		118,340		$	1,183	$	841,301		$	(82,619	)	$	(4,603	)	$	755,262
Issuance of common stock upon settlement of restricted stock units		230			2		(2	)								—
Common stock withheld for taxes in net settlement of restricted stock units		(53	)		—		(138	)								(138	)
Stock-based compensation							4,171									4,171
Other comprehensive income, net of tax													5,494			5,494
Net loss										(298,602	)					(298,602	)
Balance as of July 4, 2026		118,517		$	1,185	$	845,332		$	(381,221	)	$	891		$	466,187


	Six Months Ended June 28, 2025
												Accumulated
							Additional			Retained		Other			Total
	Common Stock						Paid-in			(Deficit)		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		195			2			(2	)							—
Common stock withheld for taxes in net settlement of restricted stock units		(57	)		(1	)		(785	)							(786	)
Stock-based compensation								7,309								7,309
Other comprehensive loss, net of tax													(6,498	)		(6,498	)
Net income											59,745					59,745
Balance as of June 28, 2025		118,123		$	1,181		$	836,891		$	90,006	$	(3,799	)	$	924,279

KinderCare Learning Companies, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)


	Six Months Ended
	July 4, 2026			June 28, 2025
Operating activities:
Net (loss) income	$	(298,602	)	$	59,745
Adjustments to reconcile net (loss) income to cash provided by operating activities:
Depreciation and amortization		62,776			61,051
Impairment losses		314,398			3,745
Change in deferred taxes		(2,781	)		(1,963	)
Amortization of debt issuance costs		2,982			3,189
Stock-based compensation		4,171			7,309
Realized and unrealized gains from investments held in deferred compensation asset trusts		(2,354	)		(1,978	)
Gain on disposal of property and equipment		—			(97	)
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable		4,211			(8,397	)
Prepaid expenses and other current assets		52,997			2,203
Other assets		1,365			7,797
Accounts payable and accrued liabilities		12,583			15,217
Leases		368			4,622
Deferred revenue		5,298			8,929
Other current liabilities		(55,432	)		(27,001	)
Other long-term liabilities		2,502			(762	)
Related party payables		—			(119	)
Cash provided by operating activities		104,482			133,490
Investing activities:
Purchases of property and equipment		(58,005	)		(57,735	)
Payments for acquisitions, net of cash acquired		(995	)		(14,560	)
Proceeds from the disposal of property and equipment		—			169
Investments in deferred compensation asset trusts		(3,537	)		(3,667	)
Proceeds from deferred compensation asset trust redemptions		4,070			3,603
Cash used in investing activities		(58,467	)		(72,190	)
Financing activities:
Payments of deferred offering costs		—			(275	)
Principal payments of long-term debt		(4,810	)		(2,417	)
Payments of debt issuance costs		—			(269	)
Repayments of promissory notes		(149	)		(165	)
Payments of financing lease obligations		(511	)		(689	)
Tax payments related to net settlement of restricted stock units		(138	)		(786	)
Cash used in financing activities		(5,608	)		(4,601	)
Net change in cash, cash equivalents, and restricted cash		40,407			56,699
Cash, cash equivalents, and restricted cash at beginning of period		133,299			62,430
Cash, cash equivalents, and restricted cash at end of period	$	173,706		$	119,129

KinderCare Learning Companies, Inc.

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

(In thousands)


	Six Months Ended
	July 4, 2026		June 28, 2025
Reconciliation of cash, cash equivalents, and restricted cash to the unaudited condensed consolidated balance sheets:
Cash and cash equivalents	$	173,706	$	119,034
Restricted cash included within other assets		—		95
Total cash, cash equivalents, and restricted cash at end of period	$	173,706	$	119,129
Supplemental cash flow information:
Cash paid for interest, net	$	33,989	$	31,169
Cash paid for income taxes, net of refunds		879		15,046
Cash paid for amounts included in the measurement of operating lease liabilities		159,670		146,754
Non-cash operating activities:
Operating lease right-of-use assets obtained in exchange for operating lease liabilities, net	$	77,184	$	160,213
Deferred cloud computing implementation costs included in accounts payable		183		300
Non-cash investing and financing activities:
Property and equipment additions included in accounts payable and accrued liabilities	$	10,458	$	11,009
Finance lease right-of-use assets obtained in exchange for finance lease liabilities, net		83		115
Reductions to finance lease right-of-use assets resulting from reductions to finance lease liabilities		—		1,261
Contingent consideration and holdbacks payable for acquisitions		110		1,534

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 July 4, 2026, the Company provided community-based and employer-sponsored early childhood education and care services through 1,567 centers with a licensed capacity of 210,539 children in 41 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 July 4, 2026, Champions offered educational services through 1,128 sites in 29 states and the District of Columbia. These sites primarily operate at elementary school facilities.

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 Securities and Exchange Commission ("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 six months ended July 4, 2026 are not necessarily indicative of the results to be expected for the fiscal year ending January 2, 2027 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 January 3, 2026 included in the Company's Annual Report on Form 10-K filed with the SEC on March 13, 2026. 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 January 3, 2026 included in the Company's Annual Report on Form 10-K.

Reclassifications—Certain prior year amounts have been reclassified to conform to the current year presentation, including immaterial reclassifications within Note 4, Prepaid Expenses and Other Current Assets.

Recently Adopted Accounting Pronouncements—In July 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 Accounting Standards Codification (“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 Company adopted this guidance during the first quarter of the fiscal year ending January 2, 2027, using the prospective method of adoption. In estimating expected credit losses, the Company has elected the practical expedient under ASU 2025-05 to assume that current economic conditions, as of the balance sheet date, will not change for the remaining life of the current accounts receivable. The adoption of this accounting pronouncement did not have a material impact on the Company’s unaudited condensed consolidated interim financial statements.

Recently Issued Accounting Pronouncements—In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants received by Business Entities, which establishes authoritative guidance under GAAP on the accounting for government grants received by business entities. The ASU is effective for annual periods beginning after December 15, 2028, including interim periods within those annual periods. The guidance may be applied using a retrospective approach with a cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of the earliest period presented, or using a modified retrospective approach. The Company is in the process of determining the impact this rule will have on the consolidated financial statements.

In September 2025, the FASB, issued 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 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 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.

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 January 3, 2026 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 $14.6 million and $14.5 million during the three months ended July 4, 2026 and June 28, 2025, respectively, and food subsidies of $26.7 million and $26.6 million during the six months ended July 4, 2026 and June 28, 2025, respectively, offsetting cost of services (excluding depreciation and impairment) in the unaudited condensed consolidated statements of operations and comprehensive (loss) income.

The Company receives grant funding from various governmental programs and agencies for expenses including teacher compensation, classroom supplies, and other center operating costs, of which a portion is incurred incrementally in accordance with certain grant requirements. Grants of $11.4 million and $10.3 million during the three months ended July 4, 2026 and June 28, 2025, respectively, and grants of $23.0 million and $24.8 million during the six months ended July 4, 2026 and June 28, 2025, respectively, were recognized as reimbursements offsetting cost of services (excluding depreciation and impairment) in the unaudited condensed consolidated statements of operations and comprehensive (loss) income.

Grants receivable are recognized for grants that meet the Company's recognition criteria but have not yet been received, while deferred grants represent amounts received that do not yet meet such criteria. There were no grants receivable as of July 4, 2026 and as of January 3, 2026, the Company recorded $0.3 million in grants receivable within prepaid expenses and other current assets on the unaudited condensed consolidated balance sheets. As of July 4, 2026 and January 3, 2026, the Company recorded $2.4 million and $8.5 million in deferred grants, respectively, within other current liabilities on the unaudited condensed consolidated balance sheets. Refer to Note 7, Other Current Liabilities, for additional information.

COVID-19 Related Stimulus

The Employee Retention Credit (“ERC”), established by the Coronavirus Aid, Relief and Economic Security Act, 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 30, 2023, the Company received reimbursements of $62.0 million in cash tax refunds for ERC claimed, along with $2.3 million in interest income. 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. As of both July 4, 2026 and January 3, 2026, total deferred ERC liabilities of $12.3 million was recorded in other long-term liabilities on the unaudited condensed consolidated balance sheets. Additionally, as of both July 4, 2026 and January 3, 2026, the Company has $3.4 million in ERC receivables recorded in other assets on the unaudited condensed consolidated balance sheets as there is reasonable assurance these reimbursements will be received. Refer to Note 2, Government Assistance, and Note 20, Income Taxes, within the audited consolidated financial statements for the fiscal year ended January 3, 2026 included in the Company's annual report on form 10-K for further information regarding the ERC.

REVENUE RECOGNITION

Contract Balances

Deferred revenue is recorded 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. Tuition that is supplemented or paid by government agencies or employer sponsors is typically received subsequent to when the child care services have been rendered and the performance obligation has been satisfied. Deferred revenue on the unaudited condensed consolidated balance sheets may fluctuate across reporting periods due to the timing of period ends and calendar holidays relative to the Company's billing cycle, as well as seasonal enrollment patterns. As the Company has an unconditional right to consideration upon satisfying its performance obligations, no contract assets are recognized. During the three and six months ended July 4, 2026, $0.2 million and $48.8 million, respectively, was recognized as revenue related to the deferred revenue balance recorded as of January 3, 2026. During the three and six months ended June 28, 2025, less than $0.1 million and $25.9 million, respectively, was recognized as revenue related to the deferred revenue balance recorded as of December 28, 2024.

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 (loss) income.

Disaggregation of Revenue

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


	Three Months Ended				Six Months Ended
	July 4, 2026		June 28, 2025		July 4, 2026		June 28, 2025
Early childhood education centers	$	638,058	$	647,675	$	1,248,229	$	1,262,682
Before- and after-school sites		59,464		52,435		121,815		105,672
Total revenue	$	697,522	$	700,110	$	1,370,044	$	1,368,354

Revenue generated at early childhood education centers from families whose tuition is partially or fully subsidized by amounts received from government agencies was $248.9 million and $258.9 million during the three months ended July 4, 2026 and June 28, 2025, respectively, and $483.2 million and $499.0 million during the six months ended July 4, 2026 and June 28, 2025, respectively.

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.

PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets included the following (in thousands):


	July 4, 2026		January 3, 2026
Prepaid income taxes	$	12,981	$	13,390
Prepaid insurance		12,241		21,822
Prepaid computer maintenance		6,510		6,698
Insurance receivables		6,003		49,056
Cloud computing implementation costs, net		4,560		4,422
Deferred compensation plan		3,034		3,329
Prepaid professional fees		1,770		876
Prepaid property taxes		1,248		2,412
Interest rate derivative contracts		744		—
Prepaid rent		705		1,226
Other		4,242		3,060
Total prepaid expenses and other current assets	$	54,038	$	106,291

GOODWILL

The changes in the carrying amount of goodwill are as follows (in thousands):


Balance as of January 3, 2026	$	964,829
Additions from acquisitions		1,105
Impairment		(273,529	)
Balance as of July 4, 2026	$	692,405

The Company tests goodwill for impairment on an annual basis in the fourth quarter, or more frequently if impairment indicators exist. There were no impairment indicators identified during the three months ended July 4, 2026 requiring an interim goodwill impairment test.

During the first quarter of the fiscal year ending January 2, 2027 the Company's market capitalization deteriorated due to a decline in stock price, which was considered to be an impairment indicator for goodwill. The Company used the market approach based on market capitalization and determined the fair value of the early childhood education centers reporting unit did not exceed its carrying value, resulting in an impairment to the reporting unit. The excess of the reporting unit’s carrying value over its fair value of $273.5 million was recognized as an impairment to goodwill within impairment losses in the unaudited condensed consolidated statements of operations and comprehensive (loss) income during the first quarter of the fiscal year ending January 2, 2027. The before- and after-school reporting unit had an estimated fair value that substantially exceeded its carrying value, resulting in no impairment to the reporting unit. As of the April 4, 2026 measurement date, the adjusted balance of goodwill related to the early childhood education centers reporting unit was $644.5 million. No goodwill impairment was recognized during the three months ended July 4, 2026 or the three and six months ended June 28, 2025.

As of July 4, 2026 and January 3, 2026, goodwill recorded on the unaudited condensed consolidated balance sheets is net of accumulated impairment losses of $451.5 million and $178.0 million, respectively.

Adverse changes in the Company’s market capitalization as well as changes in key assumptions, including higher discount rates or weaker operating results, could result in impairment in future periods, which could be material to the unaudited condensed consolidated statements of operations and comprehensive (loss) income. Refer to Note 10, Fair Value Measurements, for further information regarding the inputs utilized in the estimation of reporting unit fair value.

LEASES

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


	July 4, 2026		January 3, 2026
Assets:
Operating lease right-of-use assets	$	1,474,434	$	1,500,786
Finance lease right-of-use assets		2,966		3,394
Total lease right-of-use assets	$	1,477,400	$	1,504,180
Liabilities—current:
Operating lease liabilities	$	162,938	$	146,594
Finance lease liabilities		1,048		1,022
Total current lease liabilities		163,986		147,616
Liabilities—long-term:
Operating lease liabilities		1,421,301		1,447,524
Finance lease liabilities		2,287		2,741
Total long-term lease liabilities		1,423,588		1,450,265
Total lease liabilities	$	1,587,574	$	1,597,881

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 10, 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				Six Months Ended
	July 4, 2026		June 28, 2025		July 4, 2026		June 28, 2025
Lease expense:
Operating lease expense	$	79,294	$	74,492	$	157,476	$	147,582
Finance lease expense:
Amortization of right-of-use assets		256		331		511		681
Interest on lease liabilities		73		81		151		175
Short-term lease expense		2,101		3,223		4,583		5,998
Variable lease expense		22,680		18,901		44,503		36,871
Total lease expense	$	104,404	$	97,028	$	207,224	$	191,307

Other Information

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


	July 4, 2026			January 3, 2026
Weighted average remaining lease term (in years) (Operating)		9			9
Weighted average remaining lease term (in years) (Finance)		4			5
Weighted average discount rate (Operating)		9.1	%		9.2	%
Weighted average discount rate (Finance)		8.4	%		8.6	%

Maturity of Lease Liabilities

The following table summarizes the maturity of lease liabilities as of July 4, 2026 (in thousands):


	Finance Leases		Operating Leases		Total Leases
Remainder of 2026	$	645	$	142,887	$	143,532
2027		1,236		304,187		305,423
2028		709		285,369		286,078
2029		433		265,748		266,181
2030		403		246,586		246,989
Thereafter		446		1,072,372		1,072,818
Total lease payments		3,872		2,317,149		2,321,021
Less imputed interest		537		732,910		733,447
Present value of lease liabilities		3,335		1,584,239		1,587,574
Less current portion of lease liabilities		1,048		162,938		163,986
Long-term lease liabilities	$	2,287	$	1,421,301	$	1,423,588

As of July 4, 2026, the Company had entered into additional operating leases that have not yet commenced with total fixed payment obligations of $267.8 million. The leases are expected to commence between 2026 and 2029 and have initial lease terms ranging from approximately 10 to 18 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 estimated using key inputs such as credit ratings, base rates, and spreads, which considered the rates on the Company's first lien term loan.

OTHER CURRENT LIABILITIES

Other current liabilities included the following (in thousands):


	July 4, 2026		January 3, 2026
Self-insurance obligations	$	39,088	$	80,280
Long-term incentive plan		6,209		11,919
Deferred compensation plan		3,034		3,329
Deferred grants		2,369		8,456
Accrued rent		1,766		3,385
Financing lease obligations		1,048		1,022
Interest rate derivative contracts		232		3,639
Other		3,147		3,732
Total other current liabilities	$	56,893	$	115,762

LONG-TERM DEBT

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


	July 4, 2026			January 3, 2026
First lien term loans	$	952,343		$	957,153
Debt issuance costs, net		(26,626	)		(29,608	)
Total debt		925,717			927,545
Current portion of long-term debt		(9,620	)		(9,620	)
Long-term debt, net	$	916,097		$	917,925

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 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.

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.

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 July 4, 2026, 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 both July 4, 2026 and January 3, 2026, the Company had no outstanding borrowings on the First Lien Revolving Credit Facility. As of July 4, 2026 and January 3, 2026, the Company had available borrowing capacities of $187.7 million and $189.7 million after giving effect to outstanding letters of credit under the Credit Agreement of $74.8 million and $72.8 million, respectively.

No debt issuance costs were incurred during the three and six months ended July 4, 2026. The Company capitalized original issue discount and debt issuance costs of $0.1 million and $0.3 million during the three and six months ended June 28, 2025, respectively, related to the February 2025 amendment 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 (loss) income.

The Company did not incur any gain or loss on extinguishment of debt during the three and six months ended July 4, 2026 and June 28, 2025.

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 2, 2027 and for the fiscal years thereafter are as follows (in thousands):


Remainder of 2026	$	4,810
2027		9,620
2028		9,620
2029		7,215
2030		921,078
	$	952,343

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. The Company had $20.0 million outstanding letters of credit under the LOC Agreement as of July 4, 2026 and January 3, 2026.

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 (loss) income. Gains and losses are reclassified into interest expense when realized, with the related income tax effects reclassified into income tax (benefit) 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 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. Payments to or from the counterparty are based on the variable rate which is 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. Payments to or from the counterparty are based on the variable rate which is the greater of three-month SOFR or 0.50% per annum.

As of July 4, 2026, the Company's derivatives are considered highly effective. The Company estimates that $0.5 million, before income taxes, of deferred gains recognized within accumulated other comprehensive (loss) income as of July 4, 2026 will be reclassified as a decrease in interest expense within the next 12 months. Actual amounts reclassified into net (loss) 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 (loss) income (in thousands):


	Derivatives Designated as Cash Flow Hedging Instruments
	Gain (Loss) Recognized in Other Comprehensive (Loss) Income			Loss (Gain) Reclassified from Accumulated Other Comprehensive (Loss) Income into Earnings			Total Effect on Other Comprehensive (Loss) Income
Three Months Ended July 4, 2026
Interest rate derivative contracts	$	2,683		$	340		$	3,023
Income tax effect		(693	)		(88	)		(781	)
Net of income taxes	$	1,990		$	252		$	2,242

Three Months Ended June 28, 2025
Interest rate derivative contracts	$	(1,948	)	$	(870	)	$	(2,818	)
Income tax effect		503			224			727
Net of income taxes	$	(1,445	)	$	(646	)	$	(2,091	)


	Derivatives Designated as Cash Flow Hedging Instruments
	Gain (Loss) Recognized in Other Comprehensive (Loss) Income			Loss (Gain) Reclassified from Accumulated Other Comprehensive (Loss) Income into Earnings			Total Effect on Other Comprehensive (Loss) Income
Six Months Ended July 4, 2026
Interest rate derivative contracts	$	6,670		$	736		$	7,406
Income tax effect		(1,722	)		(190	)		(1,912	)
Net of income taxes	$	4,948		$	546		$	5,494

Six Months Ended June 28, 2025
Interest rate derivative contracts	$	(6,941	)	$	(1,818	)	$	(8,759	)
Income tax effect		1,792			469			2,261
Net of income taxes	$	(5,149	)	$	(1,349	)	$	(6,498	)

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.

10.

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 July 4, 2026 and January 3, 2026. 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 July 4, 2026		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	$	2,474	$	2,474	$	—	$	—
Mutual Funds		43,337		43,337		—		—
	$	45,811	$	45,811	$	—	$	—


			Fair Value Measurements Using
	Balance as of January 3, 2026		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	$	6,733	$	6,733	$	—	$	—
Mutual Funds		37,389		37,389		—		—
	$	44,122	$	44,122	$	—	$	—

Goodwill and Long-Lived Assets—Fair value assessments of the reporting units utilized within the goodwill impairment test are considered Level 3 measurements due to the significance of unobservable inputs developed using Company specific information. Specifically, during the first quarter of the fiscal year ending January 2, 2027, the market approach utilized for the quantitative goodwill impairment test incorporated Level 3 inputs including the application of a control premium, which was estimated using expected synergies that would be realized by a hypothetical buyer. No goodwill impairment test was required during the three months ended July 4, 2026.

During the three and six months ended both July 4, 2026 and June 28, 2025, triggering events occurred at specific center asset groups due to lower-than-expected center operating performance or a decision to close a center prior to the end of its lease term, which resulted in reduced cash flow projections over the remaining center asset groups' useful lives. The initial recoverability test identified specific center asset groups, comprised of property and equipment and lease ROU assets, that had carrying values in excess of the estimated undiscounted future cash flows. For those center asset groups, a fair value assessment was performed using the discounted cash flow (“DCF”) method under the income approach and impairments of property and equipment and lease ROU assets were recognized. Fair value assessments performed for long-lived assets are considered a Level 3 measurement as the Company typically estimates fair value of the asset group using the DCF method under the income approach which is based on unobservable inputs including future cash flow projections, market-based inputs including as-is market rents, and discount rate assumptions, as appropriate.

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


	Three Months Ended				Six Months Ended
	July 4, 2026		June 28, 2025		July 4, 2026		June 28, 2025
Impairment of goodwill	$	—	$	—	$	273,529	$	—
Impairment of property and equipment		12,686		2,010		24,764		3,459
Impairment of lease right-of-use assets		10,237		225		16,105		286
Total impairment losses	$	22,923	$	2,235	$	314,398	$	3,745

Refer to Note 5, Goodwill, and Note 6, Leases, for additional information regarding the Company's Goodwill and ROU assets.

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. As of July 4, 2026, interest rate derivatives of $0.7 million were recorded in prepaid expenses and other current assets, $0.7 million were recorded in other assets, and $0.2 million were recorded in other current liabilities on the unaudited condensed consolidated balance sheets. As of January 3, 2026, interest rate derivatives of $3.6 million were recorded in other current liabilities and $2.6 million were recorded in other long-term liabilities on the unaudited condensed consolidated balance sheets. Refer to Note 4, Prepaid Expenses and Other Current Assets, Note 7, Other Current Liabilities, and Note 9, 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 $921.4 million as of July 4, 2026 and $938.0 million as of January 3, 2026 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 8, 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.

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

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 January 3, 2026	$	(4,603	)
Other comprehensive gains before reclassifications		4,948
Reclassifications to net (loss) income of previously deferred losses		546
Balance as of July 4, 2026	$	891


Balance as of December 28, 2024	$	2,699
Other comprehensive losses before reclassifications		(5,149	)
Reclassifications to net (loss) income of previously deferred gains		(1,349	)
Balance as of June 28, 2025	$	(3,799	)

12.

STOCK-BASED COMPENSATION

2022 Incentive Award Plan—The 2022 Incentive Award Plan (“2022 Plan”), provides for the issuance of share-based awards, including stock options and restricted stock units (“RSUs”). Pursuant to the evergreen provisions of the 2022 Plan effective the first day of each calendar year beginning January 1, 2026, the number of shares reserved for the 2022 Plan will be increased unless otherwise determined by the Company’s Board. Under this provision for the calendar year beginning January 1, 2026, the

number of shares of the Company's common stock reserved for awards under the 2022 Plan increased by 4.7 million shares, which was ratified by the Company's Board. As of July 4, 2026, the Company had 20.4 million shares authorized for issuance under the 2022 Plan. Refer to Note 17, Shareholders' Equity and Stock-based Compensation, within the audited consolidated financial statements for the fiscal year ended January 3, 2026 included in the Company's Annual Report on Form 10-K for additional detail on the terms of the 2022 Plan.

Under the 2022 Plan, the Company granted 0.2 million stock options with a weighted average exercise price of $4.02 at a weighted average grant date fair value of $2.58 per stock option, as well as 0.2 million RSUs at a weighted average grant date fair value of $3.97 per RSU during the three months ended July 4, 2026. The Company granted 3.7 million stock options with a weighted average exercise price of $1.93 at a weighted average grant date fair value of $1.15 per stock option as well as 2.6 million RSUs at a weighted average grant date fair value of $2.03 per RSU during the six months ended July 4, 2026. Awards granted to employees during the three and six months ended July 4, 2026, generally have a service-based vesting condition for which the awards vest 25% upon the first anniversary of the grant date and the remaining in equal quarterly installments over the following three years, subject to the retirement eligibility of individual holders, except for certain executive awards which vest 50% on the second anniversary of the grant date and in equal annual installments for the following two years. Stock options generally have a 10-year term for exercise, except for certain executive stock options that have a 5-year term for exercise. RSUs granted to the Company's board of directors during the three and six months ended July 4, 2026 have a service-based vesting condition for which the awards vest over approximately one year subject to continued service.

Stock-based Compensation Expense—Total stock-based compensation expense for all stock-based compensation awards was $1.7 million and $3.5 million during the three months ended July 4, 2026 and June 28, 2025, respectively, and $4.2 million and $7.5 million during the six months ended July 4, 2026 and June 28, 2025, respectively, and was recognized in selling, general, and administrative expense in the unaudited condensed consolidated statements of operations and comprehensive (loss) income. As of July 4, 2026, the total unrecognized stock-based compensation expense for stock options and RSUs, net of estimated forfeitures, was $13.5 million, which will be recognized over the remaining weighted average period of 3.3 years.

13.

NET (LOSS) INCOME PER COMMON SHARE

The reconciliations of basic and diluted net (loss) income per common share for the three and six months ended July 4, 2026 and June 28, 2025 are set forth in the table below (in thousands, except per share data):


	Three Months Ended					Six Months Ended
	July 4, 2026			June 28, 2025		July 4, 2026			June 28, 2025
Net (loss) income available to common shareholders, basic and diluted	$	(8,770	)	$	38,588	$	(298,602	)	$	59,745
Weighted average number of common shares outstanding, basic		118,798			118,309		118,648			118,274
Effect of dilutive securities		—			62		—			72
Weighted average number of common shares outstanding, diluted		118,798			118,371		118,648			118,346
Net (loss) income per common share:
Basic	$	(0.07	)	$	0.33	$	(2.52	)	$	0.51
Diluted	$	(0.07	)	$	0.33	$	(2.52	)	$	0.50

During the three and six months ended July 4, 2026, 5.4 million shares of common stock from stock options and 2.9 million from RSUs were excluded from the calculation of diluted net (loss) income per common share as their effect was anti-dilutive due to a net loss available to common shareholders. During the three and six months ended June 28, 2025, 2.5 million shares of common stock from stock options for both periods and 0.7 million and 0.5 million from RSUs, respectively, were excluded from the calculation of diluted net (loss) income per common share as their effect was anti-dilutive.

14.

INCOME TAXES

The Company’s effective tax rates were 16.8% and 27.3% for the three months ended July 4, 2026 and June 28, 2025, respectively, and 0.8% and 27.2% for the six months ended July 4, 2026 and June 28, 2025, respectively. The Company was in an overall tax benefit position for both the three and six months ended July 4, 2026. Compared to the statutory rate, the reduction in the effective tax rate for the three months ended July 4, 2026 was primarily due to a true up of the 2025 tax provision, partially offset by the relative impact of recurring non-deductible expenses which had a proportionally greater impact

on the effective tax rate when applied to the loss before income taxes for the three months ended July 4, 2026. Additionally, the effective tax rate for the six months ended July 4, 2026, was impacted by the nondeductible goodwill impairment during the first quarter of the fiscal year ending January 2, 2027.

The Company's interim tax provision is calculated using the estimated annual effective tax rate applied to year-to-date pre-tax activity, adjusted for discrete items recognized in the period.

The Company considers all available positive and negative evidence when assessing the carrying amount of its deferred tax assets. Evidence includes the anticipated impact on future taxable income arising from the reversal of temporary differences, actual operating results for the trailing twelve quarters, the ongoing assessment of financial performance, and available tax planning strategies, if any, that management considers prudent and feasible. No valuation allowance was required as of July 4, 2026 and January 3, 2026. The Company will continue to reassess the carrying amount of its deferred tax assets.

The Company is subject to taxation in the United States, including various state and local jurisdictions. The Company is no longer subject to examination by tax authorities for years before 2022.

15.

COMMITMENTS AND CONTINGENCIES

Litigation—The Company is subject to claims and litigation arising in the ordinary course of business. In accordance with ASC 450, Contingencies ("ASC 450"), loss contingencies for these claims and litigation are recorded as liabilities when the likelihood of loss is probable, and an amount or range of loss can be reasonably estimated. The Company estimates insurance receivables based on an analysis of the terms of its policies, including their exclusions, pertinent case law interpreting comparable policies, its experience with similar claims, and assessment of the nature of the claim and remaining coverage. In accordance with ASC 450, insurance receivables related to loss contingencies are recorded for recoveries considered probable under applicable insurance policies. The Company believes the accruals for contingencies are reasonable and sufficient based upon information currently available to management, although assurance cannot be given with respect to the ultimate outcome of any such claims or actions, that final costs related to these contingencies will not exceed current estimates, nor any assurance can be given as to the amount of such final costs that will be covered by insurance.

The Company reexamines its estimates of probable liabilities and insurance receivables at least quarterly and, where appropriate, makes adjustments to its reasonably estimated losses and accruals to reflect the impacts of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. As a result, the current accruals and/or estimates of loss and the estimates of the potential impact on the Company’s condensed consolidated financial statements for the legal proceedings against the Company may change over time.

Refer to Note 1, Organization and Summary of Significant Accounting Policies, within the audited consolidated financial statements for the fiscal year ended January 3, 2026 included in the Company's Annual Report on Form 10-K for additional information on the Company’s self-insurance obligations and related insurance receivables. The Company believes the resolution of pending legal matters will not have a material effect on the Company’s condensed consolidated financial statements.

Settlement of General Liability Claim

In February 2024, an action was commenced against the Company for damages for personal injuries. In February 2026, the Company and the plaintiffs entered into a memorandum of agreement relating to the settlement of this matter. In May 2026, the parties entered into a release and settlement agreement, which was approved by the court on May 22, 2026. As of July 4, 2026, $44.4 million in settlement obligations had been paid and the Company recorded a remaining accrual of $5.6 million in self-insurance obligations related to this matter within other current liabilities on the condensed consolidated balance sheets, which reflects the amount of the then-remaining settlement obligation. Additionally, the previously recorded insurance receivable was reduced to reflect insurer payment of the settlement obligation, and as of July 4, 2026 the Company recorded insurance receivables of $5.6 million within prepaid expenses and other current assets on the condensed consolidated balance sheets, which represent remaining recoveries considered probable from purchased insurance coverage. As of January 3, 2026, the Company had accrued $50.0 million in self-insurance obligations related to this matter within other current liabilities and $49.1 million insurance receivables within prepaid expenses and other current assets on the consolidated balance sheets. Refer to Note 4, Prepaid Expenses and Other Current Assets, and Note 7, Other Current Liabilities. Subsequent to the end of the second quarter of the fiscal year ending January 2, 2027, the remaining settlement obligation was paid and the case was voluntarily dismissed with prejudice on July 20, 2026.

Securities Class Action and Derivative Claim

On August 12, 2025, a purported Company stockholder filed a securities class action complaint in the United States District Court for the District of Oregon against the Company, Paul Thompson, Anthony Amandi, John T. Wyatt, Jean Desravines, Christine Deputy, Michael Nuzzo, Benjamin Russell, Joel Schwartz, Alyssa Waxenberg, and Preston Grasty (collectively, the "KinderCare Defendants"), each of whom were officers or directors at the time of the Company's initial public offering ("IPO"), Partners Group Holding AG, the Company's majority stockholder, and the representatives of the underwriters in the Company's IPO, Goldman Sachs & Co LLC, Morgan Stanley & Co LLC, Barclays Capital Inc., and UBS Securities LLC. A consolidated complaint was filed on February 6, 2026 alleging that defendants violated Sections 11, 15, and 12(a)(2) of the Securities Act of 1933 by making material misstatements or omissions in offering documents filed in connection with the IPO. The complaint seeks unspecified damages, interest, fees, and costs on behalf of purchasers and/or acquirers of common stock issued in the IPO, as well as unspecified equitable relief. On April 7, 2026, the KinderCare Defendants filed a Motion to Dismiss the complaint for failure to state a claim. After reply briefs were filed, a hearing on the Motion to Dismiss was scheduled for November 2026. The Company intends to vigorously defend against the claims in this action. Any potential loss arising from this claim is not currently probable or estimable.

On March 24, 2026, a purported Company stockholder filed a derivative complaint in the United States District Court for the District of Oregon against Paul Thompson, Anthony Amandi, John T. Wyatt, Jean Desravines, Christine Deputy, Michael Nuzzo, Benjamin Russell, Joel Schwartz, Alyssa Waxenberg, and Preston Grasty. The complaint, filed derivatively on behalf of the Company, alleges breaches of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets, and violations of federal securities laws. The plaintiff seeks, among other relief, damages on behalf of the Company, corporate governance reforms, restitution, and attorneys’ fees and costs. This proceeding has been stayed pending a ruling on the Motion to Dismiss filing in the securities class action noted above. The Company intends to vigorously defend against the claims in this action. Any potential loss arising from this claim is not currently probable or estimable.

16.

SEGMENT INFORMATION

The Company uses the “management approach” in determining its operating segments. The management approach considers the internal organization and reporting used by the Company’s Chief Operating Decision Maker (“CODM”) for making strategic decisions, assessing performance, and allocating resources. The Company’s CODM has been identified as the Chief Executive Officer of the Company.

The Company determined it operates as one consolidated segment and therefore has one reportable segment. The consolidated Company segment derives revenue primarily from providing early childhood education and care services at centers and before- and after-school sites.

As a single reportable segment entity, the GAAP measure utilized by the CODM to assess performance and allocate resources is the Company's consolidated net (loss) income. For example, the CODM uses consolidated net (loss) income to monitor budget versus actual results, make decisions on capital investments, as well as to measure market competition and achievement of Company strategic objectives. Consolidated revenue, significant segment expenses, and net (loss) income are reported on the unaudited condensed consolidated statements of operations and comprehensive (loss) income and the measure of segment assets is reported on the unaudited condensed consolidated balance sheets as total assets. The accounting policies of the consolidated Company segment are the same as those described in Note 1, Organization and Summary of Significant Accounting Policies, within the audited consolidated financial statements for the fiscal year ended January 3, 2026 included in the Company's Annual Report on Form 10-K.

17.

SUBSEQUENT EVENTS

On April 8, 2026, the Company's subsidiary, KinderCare Education LLC, entered into a Fifth Amendment (the "Fifth Amendment") to the Master Lease Agreement dated August 1, 2015, as amended ("Lease Agreement") with landlord KCP RE LLC (the "Landlord") relating to 545 early childhood education centers. The Fifth Amendment did not become effective or binding on the parties, and KinderCare Education LLC and the Landlord entered into an Amended and Restated Fifth Amendment ("A&R Fifth Amendment") as of and effective August 11, 2026. The A&R Fifth Amendment amends, restates and supersedes the Fifth Amendment in its entirety and amends the Lease Agreement.

Under the A&R Fifth Amendment, the lease terms for 13 centers were reduced and will now expire on December 31, 2029. Additionally, the lease terms of the remaining 532 centers were extended, with 51 expiring on December 31, 2033, 37 expiring on December 31, 2036, 177 expiring on December 31, 2038, 237 expiring on December 31, 2040, and 30 expiring on December 31, 2042. No annual rent amounts were changed, however, the escalation percentage for relevant rent adjustment dates increased from the lesser of 10% to the lesser of 12.5% or the applicable index increase. Under the A&R Fifth Amendment, total minimum lease payments will increase by approximately $600 million over the amended lease terms. The Company expects to account for the A&R Fifth Amendment as a lease modification in the third quarter of the fiscal year ending January 2, 2027 and is in the process of determining the impact the A&R Fifth Amendment will have on the consolidated financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with, and is qualified in its entirety by reference to, our unaudited condensed consolidated financial statements and notes thereto for the three and six months ended July 4, 2026 and June 28, 2025 included elsewhere in this Quarterly Report on Form 10-Q and audited consolidated financial statements and notes thereto for the fiscal year ended January 3, 2026 included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 13, 2026. Some of the information included in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” sections of this Quarterly Report on Form 10-Q for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Our Company

KinderCare Learning Companies, Inc. (“the Company,” “we,” “us,” and “our”) is a leading provider of high-quality early childhood education (“ECE”) in the United States. We are a mission-driven organization, rooted in a commitment to providing all children with the very best start in life. We serve children ranging from six weeks to 12 years of age across our market-leading footprint of 1,567 early childhood education centers with center capacity for 210,539 children and 1,128 before- and after-school sites located in 42 states and the District of Columbia as of July 4, 2026.

Key Performance Metrics

Total centers and sites

We measure and track the number of centers and sites because, as our number of centers and sites change, it highlights our geographic footprint and potential growth in revenue. We believe this information is useful to investors as an indicator of opportunity for revenue growth and operational expansion and can be used to measure and track our performance over time. We define the number of centers and sites as the number of centers and sites at the beginning of the period plus openings and acquisitions, minus any permanent closures for the period. A permanently closed center or site is a center or site that has ceased operations as of the end of the reporting period that management does not intend on reopening.


	July 4,		January 3,		June 28,		December 28,
	2026		2026		2025		2024
Early childhood education centers		1,567		1,601		1,589		1,574
Before- and after-school sites		1,128		1,153		1,043		1,025
Total centers and sites		2,695		2,754		2,632		2,599

As of July 4, 2026, we operated 1,567 early childhood education centers with a center capacity for 210,539 children as compared to 1,589 early childhood education centers as of June 28, 2025, with a center capacity for 212,901 children. During the six months ended July 4, 2026, total centers decreased by 34 due to 49 permanent center closures as part of our ongoing center optimization initiative, partially offset by opening eight centers and acquiring seven centers. During the six months ended June 28, 2025, total centers increased by 15 due to acquiring 14 centers and opening eight centers, partially offset by seven permanent center closures.

As of July 4, 2026, we operated 1,128 before- and after-school sites, an increase of 85 sites from 1,043 before- and after-school sites as of June 28, 2025. Total before- and after-school sites decreased by 25 during the six months ended July 4, 2026 due to 67 permanent closures, partially offset by opening 42 sites. Total before- and after-school sites increased by 18 during the six months ended June 28, 2025 due to opening 47 sites, partially offset by 29 permanent site closures.

Average weekly ECE FTEs

Average weekly ECE full-time enrollment (“FTEs”) is a measure of the number of full-time children enrolled and charged tuition weekly in our centers. We calculate average weekly ECE FTEs based on weighted averages; for example, an enrolled full-time child equates to one average weekly ECE FTE, while a child enrolled for three full days equates to 0.6 average weekly ECE FTE. This metric is used by management and we believe is useful to investors as it is the key driver of revenue generated and variable costs incurred in our operations.


	Three Months Ended				Six Months Ended
	July 4,		June 28,		July 4,		June 28,
	2026		2025		2026		2025
Average weekly ECE FTEs		142,997		149,010		141,390		146,543

Average weekly ECE FTEs decreased by 6,013, or 4.0%, and 5,153, or 3.5%, for the three and six months ended July 4, 2026 as compared to the three and six months ended June 28, 2025, respectively, primarily due to lower FTEs at same-centers. The impact of center closures reduced average weekly ECE FTEs by approximately 120 basis points and 110 basis points for the three and six months ended July 4, 2026 as compared to the three and six months ended June 28, 2025, respectively.

We define same-center to be centers that have been operated by us for at least 12 months as of the period end date or, in other words, centers that are starting their second year of operation. Excluded from same-centers are any closed centers at the end of the reporting period and any new or acquired centers that have not yet met the same-center criteria.

ECE same-center occupancy

ECE same-center occupancy is a measure of the utilization of center capacity. We calculate ECE same-center occupancy as the average weekly ECE same-center full-time enrollment divided by the total of the ECE same-centers’ capacity during the period. Center capacity is determined by regulatory and operational parameters and can fluctuate due to changes in these parameters, such as changing center structures to meet the demands of enrollment or changes in regulatory standards. This metric is used by management and we believe is useful to investors as it measures the utilization of our centers’ capacity in generating revenue.


	Three Months Ended						Six Months Ended
	July 4,			June 28,			July 4,			June 28,
	2026			2025			2026			2025
ECE same-center occupancy		68.6	%		71.0	%		67.7	%		70.0	%

ECE same-center occupancy decreased by 240 basis points and 230 basis points for the three and six months ended July 4, 2026 as compared to the three and six months ended June 28, 2025, respectively, primarily due to lower enrollment. For the three and six months ended July 4, 2026, our center optimization initiative positively impacted ECE same-center occupancy by approximately 70 basis points and 100 basis points, respectively, as a result of closing underperforming centers.

ECE same-center revenue

ECE same-center revenue is revenues earned from centers that have been operated by us for at least 12 months as of the period end date and is a measure used by management to attribute a portion of our revenue to mature centers as compared to new or acquired centers. This metric is used by management and we believe is useful to investors as it highlights trends in our core operating performance. The following table is in thousands:


	Three Months Ended				Six Months Ended
	July 4,		June 28,		July 4,		June 28,
	2026		2025		2026		2025
ECE same-center revenue	$	623,664	$	637,706	$	1,219,295	$	1,245,240

ECE same-center revenue decreased by $14.0 million, or 2.2%, for the three months ended July 4, 2026 as compared to the three months ended June 28, 2025. This decrease was driven by $16.5 million lower revenue from centers that were classified as same-centers as of both July 4, 2026 and June 28, 2025. Additionally, same-center revenue decreased by $10.7 million due to center closures as of July 4, 2026. These decreases were partially offset by $13.2 million in ECE same-center revenue growth driven by the impact of new and acquired centers not yet classified as same-centers as of June 28, 2025.

ECE same-center revenue decreased by $25.9 million, or 2.1%, for the six months ended July 4, 2026 as compared to the six months ended June 28, 2025. This decrease was driven by $29.6 million lower revenue from centers that were classified as same-centers as of both July 4, 2026 and June 28, 2025. Additionally, same-center revenue decreased by $21.5 million due to center closures as of July 4, 2026. These decreases were partially offset by $25.2 million in ECE same-center revenue growth driven by the impact of new and acquired centers not yet classified as same-centers as of June 28, 2025.

Results of Operations

We operate as a single operating segment to reflect the way our chief operating decision maker reviews and assesses the performance of the business. Refer to Note 1 and Note 16 of our unaudited condensed consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q, and Note 1 and Note 23 of our audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 2026 for additional information regarding the Company's accounting policies and segment disclosures. The period-to-period comparisons below of financial results are not necessarily indicative of future results.

The following table sets forth our results of operations including as a percentage of revenue for the three months ended July 4, 2026 and June 28, 2025 (in thousands, except per share data and percentages):


	Three Months Ended
	July 4, 2026				June 28, 2025
Revenue	$	697,522			$	700,110
Costs and expenses:
Cost of services (excluding depreciation and impairment)		567,434		81.3%		519,477		74.2%
Depreciation and amortization		31,699		4.5%		31,074		4.4%
Selling, general, and administrative expenses		73,068		10.5%		78,648		11.2%
Impairment losses		22,923		3.3%		2,235		0.3%
Total costs and expenses		695,124		99.7%		631,434		90.2%
Income from operations		2,398		0.3%		68,676		9.8%
Interest expense		18,255		2.6%		20,073		2.9%
Interest income		(970	)	(0.1%)		(1,424	)	(0.2%)
Other income, net		(4,342	)	(0.6%)		(3,049	)	(0.4%)
(Loss) income before income taxes		(10,545	)	(1.5%)		53,076		7.6%
Income tax (benefit) expense		(1,775	)	(0.3%)		14,488		2.1%
Net (loss) income	$	(8,770	)	(1.3%)	$	38,588		5.5%
Net (loss) income per common share:
Basic	$	(0.07	)		$	0.33
Diluted	$	(0.07	)		$	0.33
Weighted average number of common shares outstanding:
Basic		118,798				118,309
Diluted		118,798				118,371

The following table sets forth our results of operations including as a percentage of revenue for the six months ended July 4, 2026 and June 28, 2025 (in thousands, except per share data and percentages):


	Six Months Ended
	July 4, 2026				June 28, 2025
Revenue	$	1,370,044			$	1,368,354
Costs and expenses:
Cost of services (excluding depreciation and impairment)		1,118,357		81.6%		1,035,665		75.7%
Depreciation and amortization		62,776		4.6%		61,051		4.5%
Selling, general, and administrative expenses		144,197		10.5%		150,375		11.0%
Impairment losses		314,398		22.9%		3,745		0.3%
Total costs and expenses		1,639,728		119.7%		1,250,836		91.4%
(Loss) income from operations		(269,684	)	(19.7%)		117,518		8.6%
Interest expense		36,475		2.7%		40,181		2.9%
Interest income		(1,812	)	(0.1%)		(2,083	)	(0.2%)
Other income, net		(3,435	)	(0.3%)		(2,651	)	(0.2%)
(Loss) income before income taxes		(300,912	)	(22.0%)		82,071		6.0%
Income tax (benefit) expense		(2,310	)	(0.2%)		22,326		1.6%
Net (loss) income	$	(298,602	)	(21.8%)	$	59,745		4.4%
Net (loss) income per common share:
Basic	$	(2.52	)		$	0.51
Diluted	$	(2.52	)		$	0.50
Weighted average number of common shares outstanding:
Basic		118,648				118,274
Diluted		118,648				118,346

Comparison of the Three Months Ended July 4, 2026 and June 28, 2025

Revenue


	Three Months Ended				Change
	July 4, 2026		June 28, 2025		Amount			%
Early childhood education centers	$	638,058	$	647,675	$	(9,617	)		(1.5	)%
Before- and after-school sites		59,464		52,435		7,029			13.4	%
Total revenue	$	697,522	$	700,110	$	(2,588	)		(0.4	)%

Total revenue decreased by $2.6 million, or 0.4%, for the three months ended July 4, 2026 as compared to the three months ended June 28, 2025.

Revenue from early childhood education centers decreased by $9.6 million, or 1.5%, for the three months ended July 4, 2026 as compared to the three months ended June 28, 2025. The decrease was driven from 4.0% lower enrollment, partially offset by 2.6% increase from higher tuition rates.

The $9.6 million decrease in revenue from early childhood education centers for the three months ended July 4, 2026 as compared to the three months ended June 28, 2025 was comprised of $14.0 million lower ECE same-center revenue, partially offset by a $4.4 million net increase in revenue from centers that were not classified as same-centers.

Revenue from before- and after-school sites increased by $7.0 million, or 13.4%, for the three months ended July 4, 2026 as compared to the three months ended June 28, 2025 primarily due to higher rates and opening new sites.

Cost of services (excluding depreciation and impairment)

Cost of services (excluding depreciation and impairment) increased by $48.0 million, or 9.2%, for the three months ended July 4, 2026 as compared to the three months ended June 28, 2025. The increase was driven by $30.1 million of Employee Retention Credits ("ERC") recognized during the three months ended June 28, 2025, which offsets cost of services (excluding depreciation and impairment) in the comparative period. The increase was also attributable to $10.8 million higher insurance, janitorial, and utilities

expenses, combined with an increase in marketing spend. Lastly, rent expense increased by $7.7 million due to new and acquired centers and sites as well as contractual rent increases.

Depreciation and amortization

Depreciation and amortization remained relatively consistent for the three months ended July 4, 2026 as compared to the three months ended June 28, 2025.

Selling, general, and administrative expenses

Selling, general, and administrative expenses decreased by $5.6 million, or 7.1%, for the three months ended July 4, 2026 as compared to the three months ended June 28, 2025. This decrease was driven by lower personnel costs primarily due to reduced incentive compensation expense reflective of operating performance and certain stock-based compensation awards becoming fully vested.

Impairment losses

Impairment losses increased by $20.7 million, for the three months ended July 4, 2026 as compared to the three months ended June 28, 2025, primarily driven by more centers with reduced cash flow projections as a result of lower operational performances as well as center closures and early lease termination agreements executed during the three months ended July 4, 2026.

Interest expense

Interest expense decreased by $1.8 million, or 9.1%, for the three months ended July 4, 2026 as compared to the three months ended June 28, 2025. This decrease was primarily driven by lower interest rates on the First Lien Term Loan Facility as a result of the July 2025 repricing amendment and lower outstanding principal, partially offset by losses on interest rate derivative contracts reclassified into net loss during the three months ended July 4, 2026 compared to gains reclassified into net income during the three months ended June 28, 2025.

Interest income

Interest income remained relatively consistent for the three months ended July 4, 2026 as compared to the three months ended June 28, 2025.

Other income, net

Other income, net increased by $1.3 million for the three months ended July 4, 2026 as compared to the three months ended June 28, 2025. The increase was primarily comprised of net changes in realized and unrealized gains from investments held in deferred compensation asset trusts.

Income tax (benefit) expense

Income taxes decreased $16.3 million to an income tax benefit for the three months ended July 4, 2026, as compared to income tax expense for the three months ended June 28, 2025. The effective tax rate was 16.8% for the three months ended July 4, 2026, as compared to 27.3% for the three months ended June 28, 2025. Compared to the statutory rate, the reduction in the effective tax rate for the three months ended July 4, 2026, was primarily due to a true up of the 2025 tax provision, partially offset by the relative impact of recurring nondeductible expenses which had a proportionally greater impact to the effective tax rate when applied to the loss before income taxes for the three months ended July 4, 2026. Compared to the statutory rate, the difference in the effective tax rate for the three months ended June 28, 2025, was primarily due to the impact of state and local taxes.

Comparison of the Six Months Ended July 4, 2026 and June 28, 2025

Revenue


	Six Months Ended				Change
	July 4, 2026		June 28, 2025		Amount			%
Early childhood education centers	$	1,248,229	$	1,262,682	$	(14,453	)		(1.1	)%
Before- and after-school sites		121,815		105,672		16,143			15.3	%
Total revenue	$	1,370,044	$	1,368,354	$	1,690			0.1	%

Total revenue increased by $1.7 million, or 0.1%, for the six months ended July 4, 2026 as compared to the six months ended June 28, 2025.

Revenue from early childhood education centers decreased by $14.5 million, or 1.1%, for the six months ended July 4, 2026 as compared to the six months ended June 28, 2025. The decrease was driven from 3.5% lower enrollment, partially offset by 2.4% increase from higher tuition rates.

The $14.5 million decrease in revenue from early childhood education centers for the six months ended July 4, 2026 as compared to the six months ended June 28, 2025 was comprised of $25.9 million lower ECE same-center revenue, partially offset by a $11.5 million net increase in revenue from centers that were not classified as same-centers.

Revenue from before- and after-school sites increased by $16.1 million, or 15.3%, for the six months ended July 4, 2026 as compared to the six months ended June 28, 2025 primarily due to higher rates and opening new sites.

Cost of services (excluding depreciation and impairment)

Cost of services (excluding depreciation and impairment) increased by $82.7 million, or 8.0%, for the six months ended July 4, 2026 as compared to the six months ended June 28, 2025. The increase was driven by $30.1 million of ERC recognized during the six months ended June 28, 2025, which offsets cost of services (excluding depreciation and impairment) in the comparative period. Additionally, the increase was attributable to $29.0 million higher insurance, janitorial, utilities and food costs, partially due to operating more centers and sites, combined with an increase in marketing spend. Rent expense increased $15.9 million due to new and acquired centers and sites as well as contractual rent increases. Lastly, the increase was also attributable to $5.0 million higher personnel costs due to increased wage rates.

Depreciation and amortization

Depreciation and amortization increased by $1.7 million, or 2.8%, for the six months ended July 4, 2026 as compared to the six months ended June 28, 2025. This increase was primarily due to higher depreciation expense as a result of assets placed into service from new and acquired centers.

Selling, general, and administrative expenses

Selling, general, and administrative expenses decreased by $6.2 million, or 4.1%, for the six months ended July 4, 2026 as compared to the six months ended June 28, 2025. This decrease was driven by lower personnel costs primarily due to reduced incentive compensation expense reflective of operating performance, as well as lower stock-based compensation due to certain awards becoming fully vested combined with awards granted during the current period at a lower fair value than previously granted awards.

Impairment losses

Impairment losses increased by $310.7 million, for the six months ended July 4, 2026 as compared to the six months ended June 28, 2025. This increase was driven by a $273.5 million goodwill impairment as a result of testing performed during the first quarter of fiscal 2026 triggered by the further deterioration in our market capitalization from a continued decline in our stock price. Additionally, impairment of long-lived assets increased by $37.1 million due to more centers with reduced cash flow projections as a result of lower operational performance as well as centers closed or identified for closure and early lease terminations executed during the six months ended July 4, 2026.

Interest expense

Interest expense decreased by $3.7 million, or 9.2%, for the six months ended July 4, 2026 as compared to the six months ended June 28, 2025. This decrease was primarily driven by lower interest rates on the First Lien Term Loan Facility as a result of the July 2025 repricing amendment and lower outstanding principal, partially offset by losses on interest rate derivative contracts reclassified into net loss during the six months ended July 4, 2026 compared to gains reclassified into net income during the six months ended June 28, 2025.

Interest income

Interest income remained relatively consistent for the six months ended July 4, 2026 as compared to the six months ended June 28, 2025.

Other income, net

Other income, net remained relatively consistent for the six months ended July 4, 2026 as compared to the six months ended June 28, 2025 and was primarily comprised of net changes in realized and unrealized gains from investments held in deferred compensation asset trusts.

Income tax (benefit) expense

Income taxes decreased $24.6 million to an income tax benefit for the six months ended July 4, 2026, as compared to income tax expense for the six months ended June 28, 2025. The effective tax rate was 0.8% for the six months ended July 4, 2026 as compared to 27.2% for the six months ended June 28, 2025. Compared to the statutory rate, the reduction in the effective tax rate for the six months ended July 4, 2026 was primarily due to nondeductible goodwill impairment recorded during the first quarter of the fiscal year ending January 2, 2027. Compared to the statutory rate, the difference in the effective tax rate for the six months ended June 28, 2025, was due to state and local income taxes.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we also provide the below non-GAAP financial measures. EBIT, EBITDA, adjusted EBITDA, adjusted net income, and adjusted net income per common share (collectively referred to as the “non-GAAP financial measures”) are not presentations made in accordance with GAAP, and should not be considered as an alternative to net income or loss, income or loss from operations, or any other performance measure in accordance with GAAP, or as an alternative to cash provided by operating activities as a measure of our liquidity. Consequently, our non-GAAP financial measures should be considered together with our consolidated financial statements, which are prepared in accordance with GAAP.

We present EBIT, EBITDA, adjusted EBITDA, adjusted net income, and adjusted net income per common share because we consider them to be important supplemental measures of our performance and believe they are useful to securities analysts, investors, and other interested parties. Specifically, adjusted EBITDA and adjusted net income allow for an assessment of our operating performance without the effect of charges that do not relate to the core operations of our business. We also use these non-GAAP financial measures for budgeting and compensation purposes.

EBIT, EBITDA, adjusted EBITDA, adjusted net income, and adjusted net income per common share have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

•

they do not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments on indebtedness;

•

they do not reflect income tax (benefit) expense or the cash requirements for income tax liabilities;

•

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will have to be replaced in the future, and EBIT, EBITDA, adjusted EBITDA, adjusted net income, and adjusted net income per common share do not reflect cash requirements for such replacements;

•

they do not reflect our cash used for capital expenditures or contractual commitments;

•

they do not reflect changes in or cash requirements for working capital; and

•

other companies, including other companies in our industry, may calculate these measures differently than we do, limiting their usefulness as comparative measures.

EBIT, EBITDA, and Adjusted EBITDA

EBIT is defined as net (loss) income adjusted for interest and income tax (benefit) expense. EBITDA is defined as EBIT adjusted for depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for impairment losses, stock-based compensation, COVID-19 Related Stimulus, net, and other costs because these charges do not relate to the core operations of our business.

We present EBIT, EBITDA, and adjusted EBITDA because we consider them to be important supplemental measures of our performance and believe they are useful to securities analysts, investors, and other interested parties. We believe adjusted EBITDA is helpful to investors in highlighting trends in our core operating performance compared to other measures, which can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate, and capital investments.

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


	Three Months Ended						Six Months Ended
	July 4,			June 28,			July 4,			June 28,
	2026			2025			2026			2025
Net (loss) income	$	(8,770	)	$	38,588		$	(298,602	)	$	59,745
Add back:
Interest expense		18,255			20,073			36,475			40,181
Interest income		(970	)		(1,424	)		(1,812	)		(2,083	)
Income tax (benefit) expense		(1,775	)		14,488			(2,310	)		22,326
EBIT	$	6,740		$	71,725		$	(266,249	)	$	120,169
Add back:
Depreciation and amortization		31,699			31,074			62,776			61,051
EBITDA	$	38,439		$	102,799		$	(203,473	)	$	181,220
Add back:
Impairment losses (1)		22,923			2,235			314,398			3,745
Stock-based compensation (2)		1,663			3,461			4,171			7,534
COVID-19 Related Stimulus, net (3)		—			(26,050	)		—			(26,713	)
Other costs (4)		—			—			—			210
Adjusted EBITDA	$	63,025		$	82,445		$	115,096		$	165,996

Adjusted net income and adjusted net income per common share

Adjusted net income is defined as net (loss) income adjusted for income tax (benefit) expense, amortization of intangible assets, impairment losses, stock-based compensation, COVID-19 Related Stimulus, net, other costs, and non-GAAP income tax expense because these charges do not relate to the core operations of our business. Adjusted net income per common share is defined as the amount of adjusted net income per weighted average number of common shares outstanding. We present adjusted net income and adjusted net income per common share because we consider them to be important measures used to evaluate our operating performance internally. We believe the use of adjusted net income and adjusted net income per common share provides investors with consistency in the evaluation of the Company as they offer a meaningful comparison of past, present, and future operating results, as well as more useful financial comparisons to our peers. We believe these supplemental measures can be used to assess the financial performance of our business without regard to certain costs that are not representative of our continuing operations.

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


	Three Months Ended						Six Months Ended
	July 4,			June 28,			July 4,			June 28,
	2026			2025			2026			2025
Net (loss) income	$	(8,770	)	$	38,588		$	(298,602	)	$	59,745
Income tax (benefit) expense		(1,775	)		14,488			(2,310	)		22,326
Net (loss) income before income tax	$	(10,545	)	$	53,076		$	(300,912	)	$	82,071
Add back:
Amortization of intangible assets		2,074			2,309			4,148			4,618
Impairment losses (1)		22,923			2,235			314,398			3,745
Stock-based compensation (2)		1,663			3,461			4,171			7,534
COVID-19 Related Stimulus, net (3)		—			(26,050	)		—			(26,713	)
Other costs (4)		—			—			—			210
Adjusted income before income tax		16,115			35,031			21,805			71,465
Adjusted income tax expense (5)		6,222			9,042			7,691			18,445
Adjusted net income	$	9,893		$	25,989		$	14,114		$	53,020
Net (loss) income per common share:
Basic	$	(0.07	)	$	0.33		$	(2.52	)	$	0.51
Diluted	$	(0.07	)	$	0.33		$	(2.52	)	$	0.50
Adjusted net income per common share:
Basic	$	0.08		$	0.22		$	0.12		$	0.45
Diluted	$	0.08		$	0.22		$	0.12		$	0.45
Weighted average number of common shares outstanding:
Basic		118,798			118,309			118,648			118,274
Diluted		118,798			118,371			118,648			118,346

Explanation of add backs:

(1)

Represents impairment charges for goodwill and long-lived assets. Goodwill impairment recognized during the six months ended July 4, 2026 of $273.5 million was driven by the further deterioration in our market capitalization from a continued decline in our stock price during the first quarter of fiscal 2026. Impairments of long-lived assets for the periods presented was a result of reduced operating performance at certain centers due to the impact of changing demographics in certain locations in which we operate and current macroeconomic conditions on our overall operations, as well as centers closed or identified for closure and early lease terminations executed. Refer to Note 5 and Note 10 of our unaudited condensed consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q for further information on our goodwill and long-lived asset impairment analysis.

(2)

Represents non-cash stock based compensation expense in accordance with Accounting Standards Codification (“ASC”) 718, Compensation: Stock Compensation.

(3)

Includes expense reimbursements and revenue arising from the COVID-19 pandemic, net of pass-through expenses incurred as a result of certain grant requirements. During both the three and six months ended June 28, 2025, we recognized $30.1 million of ERC offsetting cost of services (excluding depreciation and impairment) as well as $2.1 million in professional fees in selling, general, and administrative expenses as a result of calculating and filing for ERC. COVID-19 Related Stimulus is net of pass-through expenses incurred as stipulated within certain grants of $1.9 million during both the three and six months ended June 28, 2025. Additionally, we recognized $0.7 million during the six months ended June 28, 2025 in funding for reimbursement of center operating expenses in cost of services (excluding depreciation and impairment).

(4)

For the six months ended June 28, 2025, other costs include $0.2 million in costs related to our IPO. These costs represent items management believes are not indicative of core operating performance.

(5)

Includes the tax effect of the non-GAAP adjustments, calculated using the appropriate federal and state statutory tax rate and the applicable tax treatment for each adjustment. The non-GAAP tax rate was 38.6% and 35.3% for the three and six months ended July 4, 2026, respectively, and 25.8% for both the three and six months ended June 28, 2025. Our statutory rate is re-evaluated at least annually.


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)


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


Exhibit Number		Description
3.1		Third Amended and Restated Certificate of Incorporation of KinderCare Learning Companies, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on October 15, 2024).
3.2		Amended and Restated Bylaws of KinderCare Learning Companies, Inc. (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed on October 15, 2024).
31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)



	KinderCare Learning Companies, Inc.

Date: August 13, 2026	By:	/s/ John T. Wyatt
	Name:	John T. Wyatt
	Title:	Chief Executive Officer

Date: August 13, 2026	By:	/s/ Anthony Amandi
	Name:	Anthony Amandi
	Title:	Chief Financial Officer


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


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


		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 (Loss) Income (Unaudited)	3
	Condensed Consolidated Statements of Shareholders' Equity (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34

PART II.	OTHER INFORMATION	36

Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	36
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	36
Item 6.	Exhibits	37
	Signatures	38