Annual Report for Fiscal Year Ending January 3, 2025 (Form 10-K)

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 audited consolidated financial statements and notes thereto for the fiscal year ended January 3, 2026 included in Item 8 of this Annual Report on Form 10-K. This discussion and analysis primarily addresses the 53-week fiscal year ended January 3, 2026 ("fiscal 2025") and the 52-week fiscal year ended December 28, 2024 ("fiscal 2024") and comparisons between these years. Discussion and analysis as well as comparisons of the fiscal years ended December 28, 2024 and December 30, 2023 can be found within "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our previous Annual Report on Form 10-K for the fiscal year ended December 28, 2024 filed with the SEC on March 21, 2025. Some of the information included in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, 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 included elsewhere in this Annual Report on Form 10-K 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. is a leading provider of high-quality 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 1,601 early childhood education centers with center capacity for 214,803 children and 1,153 before- and after-school sites located in 41 states and the District of Columbia as of January 3, 2026.

On October 8, 2024, our registration statement on Form S-1, as amended (File No. 333-281971) ("Form S-1") related to our IPO, was declared effective by the SEC, and our IPO was completed on October 10, 2024. In connection with our IPO, the Company converted Class A and Class B common stock, both with a par value of $0.0001 per share, to common stock, with a par value of $0.01 per share, at a ratio of 8.375 shares of Class A and Class B common stock to one share of common stock, which became effective immediately following the effectiveness of our registration statement on Form S-1 for our IPO ("Common Stock Conversion"). As a result, prior periods presented in our consolidated financial statements and notes thereto as of and for the fiscal year ended January 3, 2026 have been adjusted to retrospectively reflect the Common Stock Conversion. Refer to Note 17 within the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information.

Factors Affecting the Comparability of our Results of Operations

As a result of certain factors, our historical results of operations may not be comparable from period to period and may not be comparable to our financial results of operations in future periods. Set forth below is a brief discussion of the key factors impacting the comparability of our results of operations.

Fiscal Period

We report on a 52- or 53-week fiscal year comprised of 13- or 14-week fourth quarters, respectively, with the fiscal year ending on the Saturday closest to December 31. Fiscal 2025 is a 53-week fiscal year as compared to fiscal 2024 which is a 52-week fiscal year. The 53rd week in fiscal 2025 contributed an additional $45.1 million of revenue and an estimated $12 million of adjusted EBITDA.

IPO and Related Transactions

In October 2024, we sold 27.6 million shares of our common stock through our IPO, including 3.6 million shares sold pursuant to the underwriters' exercise in full of their option to purchase additional shares. Net proceeds of $616.1 million, after underwriting discounts and offering costs, were recognized within additional paid-in capital on the consolidated financial statements. These net proceeds were primarily utilized to repay $608.0 million of outstanding principal on our first lien term loan ("First Lien Term Loan Facility"), which provided us the ability to enter into a refinancing amendment to the credit agreement, dated as of June 12, 2023 (as subsequently amended and restated) (the "Credit Agreement") to reduce the interest rates on our senior secured credit facilities. We recognized a loss on extinguishment of debt of $24.8 million within interest expense as a result of the partial repayment and refinancing of our senior secured credit facilities.

In conjunction with our IPO, we modified the terms of our stock-based award plans. The 2022 Incentive Award Plan ("2022 Plan") was amended to provide for share settlement of all unexercised stock options and unvested restricted stock units ("RSUs") when stock options are exercised and RSUs vest according to their original vesting schedules. As a result of this modification, the previously liability-classified stock options and RSUs were reclassified as equity and the awards will not be remeasured at fair value each reporting period. The 2015 Equity Incentive Plan ("PIUs Plan") was modified to accelerate the vesting of all outstanding profit interest units ("PIUs"). As certain PIUs were improbable to vest prior to the modification and became probable to vest subsequent to the modification, we recognized the full fair value of the awards at the date of modification. As a result of the modification, we recognized $113.1 million as stock-based compensation expense within selling, general, and administrative expenses. The PIUs were settled in shares of our common stock in accordance with the plan of dissolution and liquidation of our parent company effectively terminating the PIUs Plan.

Our IPO, as well as the transactions we entered into in connection with our IPO, have affected the comparability of our operating results for the periods presented. Refer to Note 12 and Note 17 within the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information.

COVID-19 Related Stimulus

During 2020 and 2021, the United States government approved several incremental stimulus funding programs for ECE providers in response to the coronavirus disease 2019 ("COVID-19") pandemic, and as a result, we have received grants in the form of revenue or cost reimbursements ("COVID-19 Related Stimulus"). We recognized $0.7 million and $63.3 million during fiscal 2025 and fiscal 2024, respectively, in funding for reimbursement of center operating expenses in cost of services (excluding depreciation and impairment). The federal programs funding the COVID-19 Related Stimulus were required to distribute all stimulus funding by December 31, 2024, and we do not expect to receive a material amount of funding after that date. The variability of funding provided by COVID-19 Related Stimulus has impacted the comparability of our operating results for the periods presented.

The Employee Retention Credit ("ERC"), established by the Coronavirus Aid, Relief and Economic Security Act and extended and expanded by several subsequent governmental acts, allows eligible businesses to claim a per employee payroll tax credit based on a percentage of qualified wages, including health care expenses, paid during calendar year 2020 through September 2021. During fiscal 2022, we applied for ERC for qualified wages and benefits paid throughout fiscal 2021 and fiscal 2020. Reimbursements of $62.0 million in cash tax refunds for ERC claimed, along with $2.3 million in interest income, were received during fiscal 2023. Due to the unprecedented nature of ERC legislation and the changing administrative guidance, not all of the ERC reimbursements received have met our recognition criteria. During fiscal 2025 and fiscal 2024, we recognized $30.1 million and $23.4 million of ERC in cost of services (excluding depreciation and impairment), along with $1.3 million and $0.5 million in interest income, respectively. The timing in recognition of the remaining deferred ERC liabilities will have an impact on the comparability of future periods.

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 grow, it highlights our geographic expansion and potential growth in revenue. We believe this information is useful to investors as an indicator of 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. During fiscal 2025, management updated the definition of total before- and after-school sites to include sites that are temporarily closed as a result of the summer season to more accurately reflect the total sites that were operating during the year. Prior periods presented were adjusted to reflect the updated definition for comparative purposes.

As of January 3, 2026, we had 1,601 early childhood education centers with a center capacity for 214,803 children as compared to 1,574 early childhood education centers as of December 28, 2024, with a center capacity for 210,135 children. During fiscal 2025, total centers increased by 27 due to acquiring 26 centers and opening 20 centers, partially offset by 19 permanent center closures.

Total before- and after-school sites increased by 128 during fiscal 2025 as compared to the number of before- and after-school sites as of December 28, 2024 due to opening 236 sites, partially offset by 108 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.

Average weekly ECE FTEs decreased by 2,901, or 2.0%, for fiscal 2025 as compared to fiscal 2024 primarily due to lower FTEs at same-centers.

ECE same-center occupancy

ECE same-center occupancy is a measure of the utilization of center capacity. 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. 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.

ECE same-center occupancy decreased by 200 basis points for fiscal 2025 as compared to fiscal 2024, primarily due to lower enrollment at same-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:

ECE same-center revenue increased by $61.2 million, or 2.5%, for fiscal 2025 as compared to fiscal 2024 primarily due to the impact of the 53rd week in fiscal 2025, which contributed $43.5 million in additional ECE same-center revenue. During the comparable 52- week periods, ECE same-center revenue growth of $31.8 million was driven by the net impact of new and acquired centers not yet classified as same-centers as of December 28, 2024 and center closures as of January 3, 2026. This growth was partially offset by a decrease of $14.1 million, or 0.6%, in revenue at centers that were classified as same centers as of both January 3, 2026 and December 28, 2024.

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. See Note 1 and Note 23 of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K 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 fiscal 2025 and fiscal 2024 (in thousands, except per share data and percentages):

Comparison of the Fiscal Years Ended January 3, 2026 and December 28, 2024

Revenue

Total revenue increased by $70.3 million, or 2.6%, for fiscal 2025 as compared to fiscal 2024. The 53rd week in fiscal 2025 contributed an additional $45.1 million of revenue.

Revenue from early childhood education centers increased by $51.6 million, or 2.1%, for fiscal 2025 as compared to fiscal 2024 primarily due to the impact of the 53rd week in fiscal 2025. During the comparable 52- week periods, revenue increased $7.3 million, or 0.3%, of which 2.2% was from higher tuition rates, partially offset by 1.9% from lower enrollment.

The $51.6 million increase in early childhood education center revenue for fiscal 2025 as compared to fiscal 2024 was comprised of $61.2 million higher ECE same-center revenue, partially offset by $9.6 million lower revenue from new and acquired centers not yet classified as same centers and center closures.

Revenue from before- and after-school sites increased by $18.7 million, or 9.5%, for fiscal 2025 as compared to fiscal 2024 primarily due to opening new sites.

Cost of services (excluding depreciation and impairment)

Cost of services (excluding depreciation and impairment) increased by $95.6 million, or 4.7%, for fiscal 2025 as compared to fiscal 2024. This increase was driven by $43.9 million higher personnel costs due to wage rate and salary increases as well as higher health insurance costs, partially offset by lower labor hours and grant-related bonuses. Additionally, rent expense increased $20.0 million driven by new and acquired centers as well as contractual rent increases. Higher cost of services

(excluding depreciation and impairment) was also attributable to $17.9 million lower government assistance due to a decrease in cost reimbursements, primarily related to the conclusion of certain COVID-19 Related Stimulus funding, partially offset by higher ERC recognized in fiscal 2025 as compared to fiscal 2024 in connection with the timing of tax statute of limitations and qualifying creditable wages. Lastly, other center operating expenses increased by $13.9 million as a result of operating more centers and sites, driven by higher janitorial and utilities costs, food and supplies, as well as property taxes.

Depreciation and amortization

Depreciation and amortization increased by $6.4 million, or 5.4%, for fiscal 2025 as compared to fiscal 2024. 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 $125.8 million, or 29.7%, for fiscal 2025 as compared to fiscal 2024. This decrease was primarily driven by $138.7 million lower stock-based compensation expense and bonus expense in fiscal 2025 as compared to fiscal 2024 primarily as a result of the October 2024 modification to the PIUs Plan, which accelerated the vesting of outstanding PIUs, as well as the March 2024 distribution to PIU holders and a related bonus to holders of restricted stock units and stock options. Additionally, meeting and travel expenses decreased by $6.4 million in fiscal 2025 as compared to fiscal 2024 primarily attributable to a field leadership summit held during fiscal 2024. These decreases were partially offset by an $11.3 million increase in personnel costs due to higher salaries, benefits, and severance expenses, partially offset by optimized headcount, as well as a $6.6 million increase in computer costs due to software license fees and amortization of deferred cloud computing costs.

Impairment losses

Impairment losses increased by $193.5 million, or 1836.9%, for fiscal 2025 as compared to fiscal 2024. This increase was driven by a $178.0 million goodwill impairment as a result of testing performed during the fourth quarter of fiscal 2025 triggered by the further deterioration in our market capitalization from a continued decline in our stock price. Additionally, property and equipment impairment increased by $15.6 million due to more centers with lower operational performance and reduced cash flow projections during fiscal 2025. Refer to Note 7 of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information on our goodwill impairment analysis.

Interest expense

Interest expense decreased by $86.6 million, or 50.8%, for fiscal 2025 as compared to fiscal 2024. Of this decrease, $67.6 million is driven by lower outstanding principal and interest rates on the First Lien Term Loan Facility as a result of the October 2024 repayment and subsequent repricing amendments in October 2024 and July 2025 combined with $19.3 million attributable to lower losses on extinguishment of debt from the July 2025 repricing as compared to the October 2024 amendments.

Interest income

Interest income decreased by $2.5 million, or 34.5%, for fiscal 2025 as compared to fiscal 2024 primarily driven by lower average daily cash balances earning interest at lower average rates as a result of the Federal Reserve reducing the federal funds target rate beginning in late fiscal 2024 and continuing throughout fiscal 2025. This decrease was partially offset by higher interest income from ERC recognition.

Other income, net

Other income, net remained relatively consistent for fiscal 2025 as compared to fiscal 2024 and was primarily comprised of net changes in realized and unrealized holding gains on deferred compensation plan investment trust assets and sublease income.

Income tax expense

Income tax expense increased by $4.9 million for fiscal 2025 as compared to fiscal 2024. The effective tax rate was (20.9)% for fiscal 2025 as compared to (18.7)% for fiscal 2024. Compared to the statutory rate, the difference in the effective tax rate for fiscal 2025 was primarily due to nondeductible goodwill impairment and the partial release of the receivable related to

uncertain tax positions as a result of the portion of ERC recognized, partially offset by the nontaxable ERC and state income tax benefit recognized during fiscal 2025. Compared to the statutory rate, the difference in the effective tax rate for fiscal 2024 was primarily due to nondeductible stock-based compensation related to the PIUs and the partial release of the receivable related to uncertain tax positions as a result of the portion of ERC recognized, partially offset by the nontaxable ERC and state income tax benefit recognized during fiscal 2024.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States of America ("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:

EBIT, EBITDA, and Adjusted EBITDA

EBIT is defined as net loss adjusted for interest and income tax expense. EBITDA is defined as EBIT adjusted for depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for impairment losses, stock-based compensation, management and advisory fee expenses, acquisition related costs, non-recurring distribution and bonus expense, 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, for the periods presented (in thousands):

Explanations of add backs are located after the reconciliation of adjusted net income and adjusted net income per common share.

Adjusted net income and adjusted net income per common share

Adjusted net income is defined as net loss adjusted for income tax expense, amortization of intangible assets, impairment losses, stock-based compensation, management and advisory fee expenses, acquisition related costs, non-recurring distribution and bonus expense, COVID-19 Related Stimulus, net, loss on extinguishment of long-term debt, 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):

Explanation of add backs:

Liquidity and Capital Resources

Our primary sources of cash are cash provided by operations, current cash balances, and borrowings available under our revolving credit facility (the "First Lien Revolving Credit Facility"). Our principal uses of cash are payments of our operating expenses, such as personnel salaries and benefits, debt service, rents paid to landlords, and capital expenditures.

We expect to continue to meet our liquidity requirements for at least the next 12 months under current operating conditions with cash generated from operations, cash on hand, and to the extent necessary and available, through borrowings under the First Lien Revolving Credit Facility. If the need arises for additional expenditures, we may seek additional funding. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth under "Risk Factors" in Item 1A. In the future, we may attempt to raise additional capital through the sale of equity securities or debt financing arrangements. Any future equity capital or indebtedness we incur may result in terms that could be unfavorable to equity investors. We cannot provide assurance that we will be able to raise additional capital in the future on favorable terms, or at all. Any inability to raise capital could adversely affect our ability to achieve our business objectives.

Debt facilities

As of January 3, 2026, our Credit Agreement consisted of a $962.0 million First Lien Term Loan Facility and a $262.5 million First Lien Revolving Credit Facility.

In July 2025, we 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 our First Lien Term Loan Facility net leverage ratio. All other terms under the Credit Agreement remain unchanged as a result of the amendment.

In February 2025, we 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. The total borrowing capacity of the First Lien Revolving Credit Facility increased to $262.5 million, with $252.5 million of extended commitments and $10.0 million of non-extended commitments. All other terms under the Credit Agreement remain unchanged as a result of the amendment.

The First Lien Term Loan Facility matures in June 2030. The extended commitments under the First Lien Revolving Credit Facility mature in October 2029, while the non-extended commitments mature in June 2028.

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. We pay 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 our 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.

As of January 3, 2026, there were no outstanding borrowings under the First Lien Revolving Credit Facility and we had an available borrowing capacity of $189.7 million after giving effect to the outstanding letters of credit under the Credit Agreement of $72.8 million.

The interest rate effective as of January 3, 2026 was 6.42% on the First Lien Term Loan Facility, 2.00% on outstanding letters of credit, 0.125% fronting fee on outstanding letters of credit, and 0.25% on the unused portion of the First Lien Revolving Credit Facility.

The weighted average interest rate during fiscal 2025 for the First Lien Term Loan Facility was 7.24%.

All obligations under the Credit Agreement are secured by substantially all of our assets. The Credit Agreement contains various financial and nonfinancial loan covenants and provisions.

Under the Credit Agreement, the financial loan covenant is a quarterly maximum First Lien Term Loan Facility net leverage ratio (as defined in the Credit Agreement) to be tested only if, on the last day of each fiscal quarter, the amount of revolving loans outstanding on the First Lien Revolving Credit Facility (excluding all letters of credit) exceeds 35% of total revolving commitments on such date. As this threshold was not met as of January 3, 2026 the quarterly maximum First Lien Term Loan Facility net leverage ratio financial covenant was not in effect. Nonfinancial loan covenants restrict our 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.

An annual calculation of excess cash flows determines if we will be required to make a mandatory prepayment on the First Lien Term Loan Facility. Mandatory prepayments would reduce future required quarterly principal payments. The excess cash flow calculation required as of January 3, 2026, did not require a mandatory prepayment on the First Lien Term Loan Facility.

As of January 3, 2026, we were in compliance with all covenants of the Credit Agreement.

In February 2024, we entered into a credit facilities agreement, dated as of February 1, 2024, which allows for $20.0 million in letters of credit to be issued ("LOC Agreement"). We pay an interest rate of 5.95% on any outstanding balance and 0.25%

on any unused portion. The LOC Agreement matures in December 2026. As of January 3, 2026, there were $20.0 million outstanding letters of credit under the LOC Agreement.

We do not engage in off-balance sheet financing arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.

See Note 12 of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information regarding our debt facilities.

Cash flows

The following table summarizes our cash flows (in thousands) for the periods presented:

Net cash provided by operating activities

Cash provided by operating activities increased by $122.6 million for fiscal 2025 as compared to fiscal 2024. The increase was driven by the change in net loss, adjusted for non-cash items, of $63.6 million primarily due to lower interest expense, partially offset by lower cost reimbursements from government assistance. Additionally, the net changes in operating assets and liabilities resulted in a $59.0 million increase primarily driven by higher accrued compensation and deferred revenue due to timing of our fiscal year-end, as well as lower spend on our enterprise resource planning software system due to implementation in early fiscal 2025. These increases were partially offset by lower accrued interest compared to prior periods.

Net cash used in investing activities

Cash used in investing activities increased by $7.2 million for fiscal 2025 as compared to fiscal 2024. The increase was driven by $12.2 million increased payments for acquisitions. This increase was partially offset by a $3.5 million change in deferred compensation asset trusts as a result of decreased deposits and increased redemptions as well as $1.5 million lower capital expenditures net of proceeds from disposals.

Net cash used in financing activities

Cash used in financing activities decreased by $49.4 million for fiscal 2025 as compared to fiscal 2024. The decrease was primarily due to $55.7 million net cash used for the March 2024 distribution to KC Parent, partially offset by $8.4 million net proceeds from our IPO after our partial repayment on the First Lien Term Loan Facility in October 2024.

Cash requirements

As of January 3, 2026, we had the following obligations:

Certain agreements have cancellation penalties for which, if we were to cancel, we would be required to pay up to approximately $4.8 million. Other cancellation penalties cannot be estimated as we cannot predict the occurrence of future agreement cancellations. See Note 11 and Note 13 of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for additional detail related to our contractual obligations.

Critical Accounting Estimates and Significant Judgments

The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates and judgments that affect our consolidated financial statements and accompanying notes. Amounts recorded in our consolidated financial statements are, in some cases, estimates based on our management's judgment and input from actuaries and other third parties and are developed from information available at the time. We evaluate the appropriateness of these estimates on an ongoing basis. Actual outcomes may vary from the estimates, and changes, if any, are reflected in current period earnings.

The accounting policies that we believe are critical in the preparation of our consolidated financial statements are described below. For a description of our other significant accounting policies, see Note 1 in our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.

Revenue Recognition

Our revenue is derived primarily from tuition charged for providing early childhood education and care services. Based on past practices and client specific circumstances, we grant price concessions to clients that impact the total transaction price. These price concessions represent variable consideration. We estimate variable consideration using the expected value method, which includes our historical experience with similar clients and the current macroeconomic conditions. We constrain the estimate of variable consideration to ensure that it is probable that significant reversal in the amount of cumulative revenue recognized will not occur in a future period when the uncertainty related to the variable consideration is subsequently resolved.

Goodwill and Indefinite-Lived Intangible Assets

Goodwill represents the excess of consideration transferred over the fair value of the identifiable net assets of businesses acquired. Indefinite-lived intangible assets consist of various trade names and trademarks.

We test goodwill and indefinite-lived intangible assets for impairment on an annual basis in the fourth quarter or more frequently if impairment indicators exist. Potential indicators of impairment include macroeconomic conditions, industry and market considerations, actual and projected financial performance and cash flows, entity-specific events, and changes in our stock price in relation to the carrying value of our reporting units, among other relevant factors. Impairment of goodwill is tested at the reporting unit level. Our reporting units consists of the early childhood education centers reporting unit and the before- and after-school sites reporting unit. We may first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit or an indefinite-lived intangible asset is less than its carrying amount. If, after assessing the totality of events and circumstances, we determine that it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset is greater than its carrying amount, the quantitative impairment test is unnecessary. If a reporting unit or indefinite-lived intangible asset does not pass the qualitative assessment, or if we choose to bypass the qualitative assessment, a quantitative test is performed.

If the quantitative impairment test is performed over goodwill, the assessment considers both the income approach and the market approach and selects an approach or weighting of approaches, as deemed appropriate, to estimate a reporting unit's

fair value. In an income approach discounted cash flows ("DCF") method, we utilize estimates and assumptions including forecasted future cash flows, the determination of an appropriate discount rate, tax rate, and terminal growth rate. Future cash flows are based on internally-developed forecasts of each reporting unit and take into consideration, as applicable, revenue growth rates driven by tuition and occupancy assumptions, expectations for wage rate and labor hours, known and expected rent increases, and other operating and selling, general and administrative costs driven by growth of the reporting units, as well as capital expenditures and working capital requirements. The discount rate represents the weighted-average cost of capital, which is determined based on relevant market conditions, our market risk sensitivity compared to guideline public companies, and our implied specific risk premium. For a market approach, we may consider various valuation methodologies, including multiples of comparable public companies or the use of market capitalization adjusted for a reasonable control premium estimated using expected synergies that would be realized by a hypothetical buyer. If the carrying amount of the reporting unit exceeds the fair value calculated using one or a combination of the methods described above, an impairment charge will be recognized in an amount equal to that excess.

If a quantitative fair value measurement calculation is performed for indefinite-lived intangible assets, we utilize the relief-from-royalty method for indefinite-lived trade names and trademarks. The relief-from-royalty method assumes trade names and trademarks have value to the extent their owner is relieved of the obligation to pay royalties for the benefits received from them. This method requires us to estimate the future revenue for the related brands, the appropriate royalty rate, and the weighted average cost of capital. If the net book values of the assets exceed fair value, an impairment charge will be recognized in an amount equal to that excess.

The determination of fair value requires management to apply significant judgment in formulating estimates and assumptions. The estimated fair value of the reporting units and indefinite-lived intangible assets are sensitive to changes in underlying estimates and assumptions, including differences between estimated and actual revenue and cash flows, as well as the discount rate and the terminal growth rate used to evaluate the fair value of these assets. Although we believe the estimates of fair value are reasonable, adverse changes in our market capitalization as well as key assumptions, including higher discount rates or weaker operating results, could result in impairment in future periods, which could be material to results of operations.

In accordance with ASC 350, Intangibles-Goodwill and Otherand ASC 360, Property, Plant, and Equipment,we first perform impairment testing of indefinite-lived intangible assets and any other assets or liabilities other than long-lived assets and goodwill, followed by long-lived assets held and used, prior to testing goodwill.

Long-Lived Assets

Long-lived assets consist of lease right-of-use assets, property and equipment, and definite-lived intangible assets. Definite-lived intangible assets consist of trade names and trademarks, client relationships, accreditations, proprietary curricula, internally developed software, and covenants not-to-compete. We review and evaluate the carrying value and remaining useful lives of long-lived asset groups whenever events or changes in circumstances require impairment testing and/or a revision to the remaining useful life of the related assets. If this review indicates a potential impairment, we would assess the recoverability of the asset group by determining if the carrying value exceeds the sum of future undiscounted cash flows that could be generated by the asset group. Such cash flows consider factors such as expected future operating income and historical trends, as well as the effects of potential management decisions and strategic initiatives. Impairment of property and equipment may not be appropriate under certain circumstances, such as a new or maturing center, recent or anticipated center management turnover, or an unusual, nonrecurring expense impacting the cash flow projection. If an asset group is not recoverable, impairment will be measured as the excess of the carrying amount of the asset group over its estimated fair value based on estimated future discounted cash flows including disposition sales proceeds, if applicable, with the allocation of impairment to the related long-lived assets not to reduce their carrying values below their respective fair values. We typically estimate fair value of the asset group using the DCF method, 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. As a result of the inherent uncertainty associated with formulating these estimates, actual results could differ from those estimates.

Self-Insurance Obligations

We are self-insured for certain levels of workers' compensation, employee medical, general liability, auto, property, and other insurance coverage. Insurance claim liabilities represent our estimate of retained risks. We purchase coverage at varying levels to limit our potential future losses, including stop-loss coverage for certain exposures. We record insurance receivables for amounts in excess of our self-insured retention or deductible that represent recoveries considered probable from purchased insurance coverage, which limits the financial impact of potential future losses. The nature of these liabilities may not fully manifest for several years. We retain a substantial portion of the risk related to certain workers' compensation,

general liability, and medical claims. Liabilities associated with these losses include estimates of both filed claims and incurred but not yet reported ("IBNR") claims.

On a quarterly basis, we review our obligations for claims and adjust as appropriate. As part of this evaluation, we periodically review the status of existing and new claim obligations as established by internal and third-party claims administrators and an independent third-party actuary. Self-insurance obligations are accrued on an undiscounted basis based on estimates for known claims and estimated IBNR claims. The estimates require significant management judgment and are developed utilizing standard actuarial methods and are based on historical claims experience and actuarial assumptions, including loss rate and loss development factors. Changes in assumptions such as loss rate and loss development factors, as well as changes in actual experience, could cause these estimates to change.

While we believe that the amounts accrued for these obligations are sufficient, any significant increase in the number of claims and/or costs associated with claims made under these programs could have a material effect on our financial position and results of operations.

Stock-based Compensation

We account for stock options and RSUs (collectively, "stock-based compensation awards") granted to employees, officers, managers, directors, and other providers of services by measuring the fair value of the stock-based compensation awards and recognizing the resulting expense, net of estimated forfeitures, over the requisite service period during which the grantees are required to perform service in exchange for the stock-based compensation awards, which varies based on award-type. The requisite service period is reduced for the awards that provide for continued vesting upon retirement if any of the grantees are retirement eligible at the date of grant or will become retirement eligible during the vesting period. In October 2024, the amended and restated 2022 Plan related to stock options and RSUs was further amended to provide for share-settlement of previously cash-settled unexercised stock options and unvested RSUs, and as a result, the liability classified awards were reclassified as equity in accordance with ASC 718, Compensation: Stock Compensation. The estimated number of awards that will ultimately vest and the determination of grant date fair value of stock options requires judgment, and to the extent actual results, or updated estimates, differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period actual results are realized or estimates are revised. Refer to Note 17 in our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information.

We estimate the grant date fair value of stock options using the Black-Scholes option-pricing model. The determination of the fair value of stock options using the option-pricing model is affected by a number of complex and subjective assumptions. These assumptions include, but are not limited to, the fair value of our common stock, the expected term of the awards, the expected stock price volatility over the term of the awards, risk-free interest rate, and dividend yield.

Fair value: The fair value of our common stock is based on the public market.

Expected term: We calculate the expected term of stock options using the simplified method, which is the simple average of the vesting period and the contractual term. The simplified method is applied as we have insufficient historical data to provide a reasonable basis for an estimate of the expected term.

Expected volatility: As there is limited historical or implied volatility information available since our IPO in October 2024, we estimate the expected volatility using the historical stock volatility of a group of similar companies that are publicly traded over a period equivalent to the expected term of the stock options. We will continue to utilize this approach until we have sufficient historical information available.

Risk free interest rate: The risk-free interest rate is based on the U.S. constant maturity rates with remaining terms similar to the expected term of the stock options.

Expected dividend yield: We do not expect to declare a dividend to shareholders in the foreseeable future.

Leases

We recognize lease liabilities and right-of-use assets on the consolidated balance sheet based on the present value of the lease payments for the lease term. Our leases generally do not provide an implicit interest rate. Therefore, the present values of these lease payments are calculated using our incremental borrowing rates, which are estimated using key inputs such as credit ratings, base rates, and spreads. The incremental borrowing rate is the rate of interest that we would have to pay to

borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. The rates are established based on our First Lien Term Loan Facility. Variable lease payments may be based on an index or rate, such as consumer price indices, and include rent escalations or market adjustment provisions. Unless considered in-substance fixed lease payments, variable lease payments are expensed when incurred. Our lease agreements do not contain any material residual value guarantees.

The lease term for all of our leases includes the non-cancelable period of the lease. We do not include periods covered by lease options to renew or terminate the lease in the determination of the lease term until it is reasonably certain that the option will be exercised. This evaluation is based on management's assessment of various relevant factors including economic, contractual, asset-based, entity-specific, and market-based factors, among others.

We have leases that contain lease and non-lease components. The non-lease components typically consist of common area maintenance. For all classes of leased assets, we have elected the practical expedient to account for the lease and non-lease components as a single lease component. For these leases, the lease payments used to measure the lease liability include all the fixed and in-substance fixed consideration in the contract.

For leases with a term of one year or less ("short-term leases"), we have elected to not recognize the arrangements on the balance sheet and the lease payments are recognized in the consolidated statement of income on a straight-line basis over the lease term. Variable lease payments associated with these leases are recognized and presented in the same manner as for all other leases.

We modify leases as necessary for a variety of reasons, including to extend or shorten the contractual lease term, or expand or reduce the leased space or underlying asset.

Income Taxes

We account for income taxes in accordance with the authoritative guidance, which requires income tax effects for changes in tax laws to be recognized in the period in which the law is enacted.

Deferred tax assets and liabilities are recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. The guidance also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that a portion of the deferred tax asset will not be realized. We have determined that a valuation allowance is not necessary as of January 3, 2026 as we anticipate that our future taxable income will be sufficient to recover the remainder of our deferred tax assets. However, should there be a change in our ability to recover our deferred tax assets, we could be required to record a valuation allowance against such deferred tax assets. This would result in additional recorded tax expense or a reduced tax benefit in the period in which we determine that the recovery is not more likely than not.

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. In accordance with the authoritative guidance on accounting for uncertainty in income taxes, we recognize liabilities for uncertain tax positions based on the two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained in audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. We reevaluate these uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and new audit activities. Any change in these factors could result in the recognition of a tax benefit or an additional charge to the tax provision.