KinderCare Learning Companies, Inc.

Welcome to KinderCare's first quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. It is now my pleasure to introduce Olivia Kier, KinderCare's VP of Investor Relations. Ms. Kier, you may now begin the conference.

Thank you, and good afternoon, everyone. Welcome to KinderCare's first quarter 2026 earnings call. Joining me from the company are Chief Executive Officer Tom Wyatt and Chief Financial Officer Tony Amandi. Following Tom and Tony's comments today, we will have a question and answer session. During this call, we will be discussing non-GAAP financial measures. The most directly comparable GAAP financial measures and a reconciliation of the differences between the GAAP and non-GAAP financial measures are available in our earnings release and within the supplemental earnings presentation, both of which are posted on our investor relations website at investors.kindercare.com. A reminder that certain statements made today may be forward-looking statements. These statements are made based upon management's current expectations and beliefs concerning future events impacting the company and involve a number of uncertainties and risks, which are explained in detail in the risk factors section of our most recent annual report on Form 10-K and other filings with the SEC. Please refer to these filings for a more detailed discussion of forward-looking statements and the risks and uncertainties of such statements. The actual results of operations or financial condition of the company could differ materially from those expressed or implied in our forward-looking statements. All forward-looking statements are made as of today, and except as required by law, KinderCare undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future developments, or otherwise. Before we move on, we'd like to note that management will be holding meetings at Baird's 2026 Global Consumer Technology and Services Conference on June 2nd. We look forward to connecting with those of you who will be attending. I'll now turn the call over to Chief Executive Officer, Tom Wyatt.

Thank you, Olivia, and good afternoon, everyone. I'm pleased to share with you updates on our first quarter performance. We finished the quarter slightly better than expected. That was supported in part by the efforts of our center and site directors and by our focus on execution. Over the past few months, we've made several changes across the business. and our results reflect the work that is already underway. It is still early, but we are starting to see encouraging signs that those actions are making an impact. Revenue was up modestly, supported by continued strength in our champions brand and B2B businesses. At the same time, enrollment in our ECE centers remained below prior year levels, down about 3%. That is an improvement from the fourth quarter when enrollment was down 3.6% year over year, but it continues to be a primary pressure point on the business and where we are concentrating our efforts. Enrollment is not something that turns during a single quarter. It's a process of improving execution across a large portfolio of centers. Our focus right now is on putting the right pieces in place so that performance improves as we move throughout the year. Our best opportunity for material progress will be in the back half of the year. Until then, we expect gradual improvements through the first half. For the past few months, we have increased and refined our marketing investment, and we are seeing that show up in higher inquiry volume over last year. Since we began our investment, we have seen a 15% increase in inquiry in the targeted areas and a 3% increase for Medicare overall. So more families are engaging with us, and that is an important first step. Just as importantly, we are starting to see early signs that conversion is beginning to improve in certain parts of the business. This is notable at CRIM and most pronounced in our opportunity region, where enrollment during the quarter versus last year increased by 8%. That progress is not yet consistent across the system, but it reinforces something we believe strongly. Demand is there. Our job is to convert it consistently across the system. And that is where our focus is right now. We are putting a dedicated focus on tightening execution at the center level. This is about how quickly we respond to families, the quality of our tour experience, and how effectively we follow up. It is also about making sure our center and site leaders spend their time on the things that matter most. We've taken steps to reduce administrative burden so they can focus more on the families and teachers, because that is what ultimately drives performance. In addition to work on enrollment, we are also taking steps to strengthen our real estate portfolio and better position our centers for sustainable long-term performance. Much like any multi-unit operator, we evaluate our real estate portfolio on an ongoing basis. And that typically includes closing roughly 1% of our centers each year. We recently completed a more comprehensive network assessment with the goal of enabling long-term health and growth for all of our centers. To achieve this goal in 2026, we expect to have a higher number of center closures than usual. We understand that any closures can be disruptive to families and staff. Whenever possible, we proactively help families and employees transferred to nearby locations to maintain continuity of care. This is disciplined portfolio management. It will result in stronger, more productive centers and higher overall occupancy over time, both of which support our mission to offer high quality care to families. To be clear, these are not easy decisions. They will create some near-term variability as we execute across the year. However, We are confident that they are the right decisions to drive beneficial outcomes in the long term. We'll keep you updated in the coming quarters on our progress. Before turning to more detailed business results, I want to spend a few minutes on the subsidy landscape. I have spent time this quarter meeting with state and federal lawmakers to advocate for families and the critical role childcare plays in this country. From Colorado to Massachusetts, to Washington, DC, the feedback has been constructive and encouraging. We continue to see strong bipartisan support for childcare at all levels of government. Federally, an additional $85 million in CCDBG funding was approved in February. At the state level, while we are seeing different approaches, the overall direction remains constructive. For example, Indiana is deploying approximately 200 million to support the families of 14,000 additional children. We applaud the state's leaders for taking action to support the children and families of Indiana. More broadly, we are seeing constructive developments in several other states. There are supportive actions in New Jersey and in Maryland to reach more subsidy families and reduce their program wait lists. Overall, While conditions vary by market, we're encouraged by the recent directions many states are taking. Turning back to the business, we spent this quarter taking steps to drive week-to-week enrollment improvement in the first half of the year so we can build momentum in the second half. For our flagship brand, KendiCare, our work continues to enable center directors to spend more time engaging in person with teachers and families. We are also evolving how we manage inquiries, allowing our directors to stay focused on families, particularly in centers with high inquiry and lower occupancy. The data consistently tells us that when family and teacher engagement improves, outcomes improve across the board for children, teachers, and enrollment, leading to stronger center performance. We are also placing more emphasis this year on our in-center small group enrichment programs, which provide incremental revenue. These are programs we have had for quite some time, which offer families additional options for their children, like phonics, languages, music, and STEM. We are creating amazing experiences for children in our centers and expanding this enrichment into our summer camps as well. Early results are encouraging. And we're pleased with the momentum we see in engagement, retention, educational enrichment, and the value these programs bring to our centers. At CRIM, our new brand positioning is starting to resonate. We are preparing for upcoming specialty summer camps, and we see families enjoying our updated curriculum, which launched in the first quarter. We are seeing better conversion on stronger inquiries, especially in younger students. and are encouraged by the progress we are making. Champions continues to be a strong performer for us. Our 70% growth reflects both new site additions and the strength of our existing sites, and we see continued opportunity in both. In our B2B offering, we continue to see strong employer interest in supporting their employees. We signed 12 new tuition benefit clients in the quarter, including a large public university in Florida and multiple professional organizations. All told, we are seeing increasing demand for more integrated solutions across our services. These relationships are becoming a more meaningful and complimentary part of our business and a strong growth driver going forward. We continue to make positive progress in our real estate growth during the quarter by opening three new centers and acquiring another two. So when you step back The picture to us is clear. We feel good about the progress we're seeing. We are proud of the growth from B2B and Champions, and we're seeing solid improvement at CRIMS. We're also seeing traction from our marketing investment and from the changes we've made within our KinderCare centers. We still have work to do, but we have a clear path forward and are focused on continuing our progress into the second half of the year. With that, I will turn it over to Tony. Thanks, Tom.