Aug 13, 2026 earnings call — Footprint optimization and center consolidations
Updated full-year revenue guidance to $2.66 billion to $2.7 billion, reflecting footprint optimization and slower subsidy reimbursement.
Revenue $0.7B (est $0.7B) · EPS $0.08 (est $0.10) · Next-quarter revenue outlook $0.7B–$0.7B
Key quotes
"As a result, we're consolidating those centers, and as of today, we are approximately 2/3 of the way through this work, including 49 center closures completed during the second quarter."
"Family response continues to exceed our expectations, as revenue from these programs has almost doubled from a year ago."
"Champions revenue in the second quarter increased 13% year-over-year, driven by a mixture of new site openings and higher average revenue per site."
Analyst Q&A 7
Impact of center closures on guidance
Q (Jeffrey Silber · BMO): He asked how the center closures changed guidance and whether other factors like tuition or subsidies also affected guidance and timing into next year.
A: Management said the closures reduced revenue by about 70 basis points in the quarter and will reduce occupancy about 150 basis points, with about $30 million of revenue decrease factored into guidance. They also cut pricing expectation from 3% to 2.5% because subsidy-driven rate increases have not appeared, and said this could impact the first half of next year.
"So in the quarter, it was about 70 basis points of impact to revenue." — Anthony Amandi (CFO)
EBITDA effect and marketing progress
Q (Jeffrey Meuler · Baird): He asked to reconcile the slide showing a small negative EBITDA impact this year versus the $8 million annual benefit, and whether other items (insurance, price yield) adjust EBITDA. He also asked about marketing and enrollment progress in the opportunity region.
A: Anthony said the reported negative $3 million is the direct, near-term impact from closures (severance and minimal maintenance), while the roughly $8 million is the annualized benefit expected going forward, so only partial benefit appears this year. John Wyatt said the opportunity region is performing well, they added a few million more to targeted marketing into back-to-school, paid search has increased inquiries year-over-year each week, and simplification of the center director role is starting to show traction in some centers.
"So on the $3 million that's on that slide, right, that is the direct impact we saw from closing those centers." — Anthony Amandi (CFO)
Timing and cash costs of closures
Q (Faiza Alwy · Deutsche Bank): She asked whether the $8 million benefit will appear in 2027 or if lingering costs will flow through the P&L, and also asked where the execution efforts stand and when enrollment should meaningfully improve.
A: They expect the adjusted EBITDA benefits to start flowing through in '27 and partially in the back half of this year, but they estimated $20 million to $25 million of one-time cash costs to buy out leases that would not hit EBITDA but could affect net income and might spill into 2027. Management said turning centers takes time, some centers already show progress, and they hope improvement will continue through back-to-school, the rest of the year, and into the first half of next year while they continue targeted paid-search investment.
"As far as direct impact to adjusted EBITDA, we would expect the benefits to start flowing through in '27 and as it relates to Jeff's question earlier, even start to see that partially in the back half of this year." — Anthony Amandi (CFO)
How centers are evaluated for action
Q (John Ronan Kennedy · Barclays): He asked what specific criteria determine whether a center is invested in, remediated, consolidated, or closed, and whether more closures could occur after FY '26; he also asked about clean enrollment trends for the retained portfolio.
A: They said they reviewed every center, starting by qualifying the portfolio against demographics, then looking at inquiry levels, engagement, historical financial trends, drive-time (typically 10 to 15 minutes) and nearby sister centers for magnet options; labor was not viewed as a primary constraint. They expect to continue closing centers in future years as part of normal portfolio management, and noted the quarter was down 240 basis points with closures about a 70 basis point impact, leaving enrollment down around 3%.
"The biggest one that we're really looking at is we have a pretty good feel on when we're building a new center, when we're acquiring a center, what we expect to have success with as far as demographics go." — Anthony Amandi (CFO)
Tuition subsidy and back-to-school plans
Q (Toni Kaplan · Morgan Stanley): She asked if the tuition reduction in guidance is a timing issue tied to state subsidies and what else the company is doing differently for back-to-school; she also asked for the Q3 revenue range.
A: They said the tuition reduction is not simply timing — state subsidy decisions remain uncertain so they reduced expected pricing from 3% to 2.5%, though future state actions could change that. For back-to-school they increased targeted marketing (nationwide plus more targeted spend) and began an AI program to improve tour quality and follow-up; Q3 revenue guidance is $660 million to $680 million, adjusted EBITDA $44 million to $48 million, and occupancy in the mid-60s.
"So we're at $660 million to $680 million for revenue, $44 million to $48 million for adjusted EBITDA and occupancy in the mid-60s." — Anthony Amandi (CFO)
How many retained centers match closed ones
Q (Keen Fai Tong · Goldman Sachs): He asked how many retained centers have occupancy or profitability comparable to the centers being closed, and what improvement is needed and how fast before management decides to close or continue remediation.
A: They said they don't have an exact figure, but about 9 out of 10 of the closures so far are from quintile 5 and a strong portion of remaining closures this year are also from quintile 5; some low-occupancy centers are retained for demographic reasons or because a center-director change could enable a turnaround. Management said decisions are center-by-center and consider lease life, tenure, trajectory toward roughly 45% to 50% (their general breakeven range), and engagement levels as a leading indicator; density of local population is also a factor.
"I mean like we shared, out of the closures we've done so far, about 9 out of 10 of them, right, are out of quintile 5." — Anthony Amandi (CFO)
Why occupancy fell and EBITDA bridge
Q (Joshua Chan · UBS): He asked whether COVID mainly drove the low occupancy at closed centers, and why EBITDA guidance falls (down about $15 million) even though closing unprofitable centers should help.
A: They said it is not necessarily COVID; demographics have changed in some areas and families moved away so centers that were once successful no longer have families to serve. On the EBITDA bridge, Anthony said insurance headwinds, roughly $3 million of one-time closure costs, and the reduction in expected tuition pricing from 3% to 2.5% are working against them, and because Q1 and Q2 are usually their highest EBITDA quarters they get less benefit in the back half.
"But it's more just demographics generally to Tom's point, have changed and the families just aren't there for us to serve anymore and it's time to let them go." — Anthony Amandi (CFO)