Kindercare Learning Companies Inc: 1Q26 Beat, but Light KPIs with Closures Ahead

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Kindercare Learning Companies Inc: 1Q26 Beat, but Light KPIs with Closures Ahead

IdeaMfrom higher upcoming center closures puts this range at risk. The 2Q guide came in

below estimates on both revenue and adj. EBITDA, as recovery is likely to take time.

The 2Q revenue guide of $690M-$700M implies revenue growth of -1.4% to flat,

with the midpoint of -0.7% being 234/112 bps below prior MSe/Cons. The adj.

EBITDA guide of $65M at the midpoint was 11%/5% below prior MSe/Cons.

We remain UW with a PT of $2.50. We view KLC as a relative UW, and see better

opportunities within our coverage. We do not expect KLC to return to its normalized

growth algorithm in the near-term, and therefore factor in a lower growth rate.

Headwinds such as enrollment weakness, likelihood for center closures (which is

good for utilization but a revenue headwind), relatively stagnant utilization rates,

continuation of childcare affordability issues, decelerating pricing, and the potential

for headcount reductions or budget constraints, are impacting the end market, and

we would expect improvement to be slow as these issues take time to work

through. Following our model update, our FY26 adj. EBITDA (ex-SBC) is 3% higher.

Our DCF-based PT methodology continues to be a blend of our base case ($4) and

our bear case ($1). At $2.50, our target multiple is 4x '26 adj. EV/EBITDA compared

to BFAM of 10x and lower growth Services peers (ARMK, CPG-L, SW-PAR, VSTS,

RTO-L) of 11x.

Exhibit 1: The FY adj EBITDA and adj EPS guide were raised by 2%/33% at the

midpoint after 1Q adj EBITDA was $5M better than expected.

FY2026 Guidance

Current Guidance Guidance

2026 Guidance Prior vs. Prior vs. Midpt vs.

Financial Metric Low High Mdpt. Mdpt. Prior Mdpt. MSe Prior MSe Cons Cons