KinderCare reports 7.5% revenue growth in first post-IPO earnings amid declining net income

KinderCare Learning Companies, the largest private provider of early childhood education in the U.S., reported financial results for its third quarter of 2024, its first earnings release following its initial public offering (IPO) in October. 

The company highlighted revenue growth but faced declines in net income and income from operations.

Revenue for the quarter totaled $671.5 million, a 7.5% increase from $624.5 million in the third quarter of 2023. The growth was driven by higher tuition rates, which contributed approximately 6%, and increased enrollment, which accounted for about 1%. 

Revenue from before- and after-school programs saw a notable 16.8% rise, bolstered by new site openings, expanded summer day camps, and tuition rate increases.

Despite revenue growth, income from operations declined by 7.4% to $54.4 million, primarily due to increased personnel costs and the absence of $20 million in COVID-19-related stimulus reimbursements received in the prior year. 

Net income also fell by 13% to $14.0 million, compared to $16.0 million in the same period last year. Net income per diluted share was $0.15, down from $0.18.

Adjusted EBITDA improved significantly, increasing by 25.1% to $71.4 million compared to $57.0 million in Q3 2023. Adjusted net income reached $4.3 million, a sharp turnaround from an adjusted net loss of $3.4 million in the same period last year.

The company’s October IPO raised $616.2 million in net proceeds, which KinderCare plans to use to support its growth strategy. 

CEO Paul Thompson emphasized the company’s commitment to increasing access to early childhood education and expanding its offerings:

“KinderCare delivered strong results during the third quarter of 2024, which marks our first earnings report as a public company. Revenue growth of 7.5% demonstrates our expanding ability to bring high-quality early childhood education and care to more families and communities.

“Our goal is to grow KinderCare's market share and profitability on the strong foundation of our national scale in our 2,500 community-based centers and through growing program offerings both at-work and before and after school.”

While revenue growth reflects KinderCare's ability to increase tuition and attract more enrollments, the drop in net income and operating income underscores the challenges of rising personnel costs and the end of pandemic-related financial support. 

The improvement in adjusted EBITDA suggests the company's operational efficiencies are improving, which could benefit long-term profitability. However, sustaining these gains will require balancing cost pressures with revenue-generating initiatives.

Thompson’s focus on growing market share and enhancing program offerings aligns with the company’s need to navigate a competitive market and address rising operational costs. 

The IPO proceeds provide KinderCare with resources to support these initiatives, but its ability to maintain consistent growth and profitability will be critical as it adjusts to post-IPO scrutiny.

Thompson concluded:

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