Good afternoon, ladies and gentlemen, and welcome to the KinderCare S econd Quarter 2025 Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Tuesday, August 12, 2025. I would now like to turn the conference over to Ms. Olivia Kirrer, Vice President of Investor Relations. Please go ahead. Thank you, and good evening, everyone. Welcome to KinderCare 's Second Quarter Earnings Call. Joining me from the company are Chief Executive Officer, Paul Thompson, and Chief Financial Officer, Tony Amandi. Following Paul 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. Finally, 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 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 Learning Companies undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future developments, or otherwise. With that, I'd like to turn the call over to our Chief Executive Officer, Paul Thompson. Thank you, Olivia, and welcome to everyone on the call with us today. In the second quarter, we delivered year-over-year growth in both revenue and adjusted EPS and continue to advance key priorities across the business, even with a more challenging comparison on adjusted EBITDA. Before getting deeper into results, I'm going to start with recent legislative developments, which have brought greater certainty to the childcare funding environment. Consistent with historical experience, support for early child education remains strong as the Child Care Development Block Grant, or CCDBG, was fully funded in the latest federal budget approved last month, in addition to multiple other provisions aimed at expanding access to childcare. We believe KinderCare has a competitive advantage as we are one of a few providers with scale that both accept and actively support families using approved subsidy vouchers as a core offering across our nationwide network. Navigating the subsidy process can be complex and time-consuming for families. This is an area where many providers lack the resources or willingness to assist. In contrast, our team helps families move through the process efficiently, and we've found that once a voucher is approved, these families tend to make enrollment decisions more quickly than private pay families. The support for the CCDBG is aligned with our expectations, and we are happy to be an advocate for American families' access to this critical funding source. What has received less fanfare, however, are the additional childcare support provisions included as a part of the new federal budget and set to take effect in 2026. The first is the change to the employer-provided childcare credit, or Section 45F. Historically, employers could receive a credit of 25% and deduct up to a max of $150,000 per year for qualified expenses supporting employee childcare. Under the new budget, employers will be able to receive a credit of 40% - 50%, and the maximum deduction increases to $500,000 for large companies and $600,000 for small businesses. For many employers in the U.S., a 40%- 50% tax credit on spending could be substantial. At the same time, we've found that nearly two-thirds of parents believe employers should help offset childcare costs. Additionally, younger generations often cite childcare as one of the most valued workplace benefits. The increased credit for large and small businesses has the potential to accelerate the adoption of childcare as a basic and expected benefit for employees. Our tuition benefit offering is well-positioned to partner with employers, as it gives them the ability to sponsor up to 100% of the cost of tuition. While it is still early, our teams are educating employers on the new provision. Beyond employer tax credits, the new budget is the first in decades to broaden the Child and Dependent Care Tax Credit, as well as increase the Dependent Care Assistance Program, or DCAP. In the case of the Child and Dependent Care Tax Credit, the deduction benefit will increase from 35% of expenses to a max of 50% based on income level. For the DCAP, the credit will permanently expand by 50% to $7,500 per family per year. According to the Bipartisan Policy Center, these provisions within the new federal budget in aggregate effectively increase American families' buying power for early childhood education by an estimated $16 billion over 10 years. Put more directly, we believe that the uncertainty surrounding Congress's support for early childhood education funding is now much clearer. Best of all, this tailwind impacts both federally subsidized tuition and private pay tuition, offering meaningful support to families who don't qualify for subsidies but can benefit from the new tax credits in the 2026 tax year. With that overview of the funding environment, I'll now shift to discussing enrollment and occupancy, which came in below our expectations for the quarter. Average weekly full-time enrollments for the second quarter declined 1.4% from last year, which drove a 130 basis point decrease in same-center occupancy. Put in perspective, that's roughly one to two children per center across our portfolio. We do not believe there is one specific headwind or industry dynamic driving this overall, but that the issue is more center-level and local-market specific. That said, we have identified opportunities where more support and action are needed to improve operating performance and where we have influence and control. As part of our performance benchmarking process, we regularly assess center-level trends to identify both strengths and areas of opportunity. Late last year, that analysis surfaced a number of centers with growth opportunities where additional support and focus will help to unlock their potential. We have since aligned these centers into what we call our Opportunity Region program. Through enhanced leadership and tailored operational guidance, this structured initiative is designed to improve performance and provide targeted and individualized support where it's needed the most. These centers are now benefiting from the same proven practices and frameworks that have driven strong results in our highest performing centers. Complementing this work, we've also made targeted marketing investments in centers where low inquiry volume has been a primary constraint to occupancy improvement. The incremental dollars are focused on improving the digital presence and local awareness of the centers within their immediate markets. Early signs are promising, as we are seeing positive results in inquiries. Though there is still work to do, the early traction supports our strategy. We're accelerating the adoption and usage of digital tools designed to enhance operational efficiency and elevate the quality of family engagement at the center level. In many underperforming centers, we found that Center Directors spend a disproportionate amount of time managing phone calls and coordinating tour schedules. By introducing an online tour schedule for families to use, we've streamlined that process, enabling Directors to shift their focus towards more impactful priorities, namely building stronger engagement with staff, teachers, and families. Our digital tools also offer increased visibility into forward-looking enrollment trends. At the management level, District Leaders can leverage a digital occupancy whiteboard that provides real-time insights into center-level enrollment and occupancy. This enables them to proactively allocate resources more effectively, capitalize on opportunities, and identify areas to mitigate emerging risks before they impact performance. This data-driven approach is strengthening our operational agility and ensuring we're well-positioned to deliver consistent, high-quality experiences for the families we serve. In summary, while enrollment and occupancy presented challenges this quarter, we continue to hold ourselves to a high internal standard. We've identified specific cases and situations across our entire footprint where we see clear opportunities to improve execution and engagement. We're focused on addressing these issues with urgency and precision in the months ahead. Turning now to business performance, Champions, which is our before- and after-school business, ended the normal school year with a quarter full of wins and accolades. We expanded our footprint by five new districts in Q2, with six new sites for our school year program and 13 new districts for Champ Camp this summer. The Champions team also grew our existing footprint by adding sites in seven existing school districts. At the end of the quarter, Champions sites totaled 1,043, reflecting over 10% growth in the past 12 months. Our ability to deepen our existing relationships was highlighted this quarter when Champions was honored by the Hacienda La Punta School District in Southern California. The team was awarded the Partners in Educational Excellence Award in only the third year of partnering with the district. The award nominations include heartfelt letters from four school principals expressing their admiration for Champions' professionalism, consistency, and the positive influence on their school environments. Subsequent to Q2, Champions expanded into three new states in Connecticut, Minnesota, and New Mexico. Additionally, we're celebrating a partnership with Performance Academies in Ohio, where we expect to serve children in 13 schools across the state. We're extremely proud of the work and successes from our Champions team and look forward to the great partnerships they continue to build. Staying with B2B, we continue to attract strong interest from both public and private employers who value the flexibility of our onsite and differentiated tuition support offerings, with each meeting different workforce needs. At the same time, as more employees return to the office, families increasingly appreciate the flexibility of our community-based locations, which make it easier to coordinate pickups with a spouse, grandparent, or trusted friend. We believe these shifting workplace dynamics are fueling continued momentum in our B2B business and expanding the reach of our community-based centers through our unique suite of employer-sponsored tuition benefit programs. A standout example is our partnership with Maricopa County, which announced a new 12,000 sq ft kids' club in downtown Phoenix this past May. The onsite center officially opened on August 4th, and we're now welcoming families into this modern, purpose-built facility. Beyond the center itself, County employees are also leveraging tuition benefit and Benefit Plus offerings at our community centers across Maricopa County. Early enrollment uptake has been very strong, and we look forward to supporting more families in the coming weeks. The flexibility that comes with our tuition benefit offerings is very attractive for employers of all sizes. In Q2, we signed large organizations such as John Deere, UC Davis Medical Center, and the Association of Texas Professional Educators. Also, smaller employers such as Blue Sky Restoration, Barnes and Thornburg LLP, and Wheaton College are partnering with KinderCare to increase access to high-quality childcare for their employees. I'd like to welcome them all into the KinderCare family. I speak for the entire team when I say that we are all excited to be a part of their children's development and families' future. Our ability to support employers of all sizes is directly tied to the strength of our center network. To that end, we've continued to expand the reach of our portfolio with eight new centers opened and 14 tuck-in acquisitions completed in the first half of the year. We have strong forward visibility into both of these growth levers and are confident in delivering against our full-year targets. In line with our disciplined approach, we have also consolidated seven centers so far this year to ensure a healthy, performance-driven portfolio. The second quarter did have some enrollment challenges, but those don't define the strength or trajectory of our business. We delivered meaningful wins, took decisive action where needed, and are heading into the back half of the year with greater clarity. The predictability of our controllable growth drivers, tuitions, new centers, and acquisitions, together with continued performance in B2B and Champions, reinforces our long-term confidence in the business. We're now focused on finishing the year with momentum and setting the stage for a stronger 2026. I'll turn the call over now to Tony to provide more details on the quarter's results and our outlook for the rest of this year. Thanks, Paul. Our second quarter revenue of $700 million grew 1.5% compared to a year ago, driven by overall tuition growth and positive contribution from our newer sites and centers. Same center revenue increased to $638 million, up from $632 million a year ago, supported by the successful ramp-up and integration of centers newly added to the same center pool. This highlights the continued strength of our growth engine and the operational maturity of recently opened or acquired centers. Same center occupancy ended the second quarter at 71%, down 130 basis points from a year ago. To elaborate on occupancy trends throughout the first half of 2025, the first four to six weeks of the year, occupancy fell behind last year's trend line, which drove Q1 down by 50 basis points. Our view at the time was that the change in administration last fall and extreme macro unknowns for factors like inflation, job security, and regulation were causing a longer sales cycle than normal, in addition to slower incident enrollment. We initiated course corrective actions early, expecting that incremental impacts would materialize in the back half in conjunction with the back-to-school period. Our data from that point forward reinforced our view on delayed enrollment, as we saw a normalization in week-to-week trends comparable to last year. This provided us with optimism that our measures would be able to bend that week-to-week growth curve upwards in the later quarters. We held that view up until the summer out period when occupancy diverged from our year-to-date trend line. I'll have additional comments on our occupancy expectations later in my remarks. Tuition growth for Q2 came at 2.4%. While pricing for 2025 is in place for the majority of our students, there will be incremental improvement for the second half as the remaining student population transitions to the new tuition levels during back-to-school. We continue to maintain our targeted differential of 50- 100 basis points between tuition and wage increases. Our visibility into wages continues to be strong due to our practice of awarding merit increases by anniversary rather than calendar date. Our B2B portfolio, which consists of Champions and our onsite centers for employers, continues to demonstrate steady growth. Champions revenue grew by 8% versus last year to $52 million, with 99 net new sites added to the portfolio over the past 12 months. This quarter, we updated the definition of total Champions sites to also include those sites which closed for the summer but are expected to open again once the school year resumes. This was done to represent an accurate number of Champions sites that we're serving throughout the year. In our 10-Q, we note this change and have adjusted our prior periods to properly reflect the updated method of calculation. We continue to execute on our planned new centers, with three open during the second quarter. Additionally, we acquired nine centers this quarter, bringing our total to 14 tuck-in acquisitions for the first half of the year. Cash considerations for the tuck-ins this year have totaled a little under $15 million, which is funded completely out of the $76 million in free cash flow generated during the first six months of the year. The revenue contribution from new and acquired centers year-to-date grew by $3 million, or a 23% improvement over the first two quarters last year. On a trailing 12-month basis, acquisitions revenue increased by just under $1 million year-to-date compared to last year. Our development timeline for new centers provides excellent visibility in the timing of future openings, and we are firmly on track to accelerate our pace of NCOs into the mid-20s per year in 2026 and beyond, consistent with our long-term growth objectives. The opportunity for tuck-ins remains elevated, and we are actively completing these at a rapid pace. We expect to sustain this momentum beyond the current year as part of our broader long-term growth strategy. Net income increased by over $10 million, up 35% from last year, benefiting from lower interest expense following our deleveraging actions after the IPO. Adjusted EBITDA for Q2 came in at $82 million, down 5% from last year, as additional center-level costs tempered the benefit of revenue growth. Our adjusted EBITDA margin for the quarter was 12%, continuing to benefit from new center growth. G&A expense was 11% of revenue. Income from operations was $69 million for the quarter, compared to $81 million for the prior year. The decline is primarily due to lower gross margin, along with the addition of public company costs versus last year. This translated to an operating margin decline of 187 basis points year over year. That said, we're seeing significant benefit from deleveraging, as the interest expense was $20 million, sharply down from $44 million last year, reflecting the positive impact of our post-IPO debt repayment and repricing. Subsequent to quarter-end, we completed another debt repricing on July 1, which we expect to reduce annual interest expense by an additional $5 million annually, further strengthening net income and our cash flow profile. Adjusted net income for Q2 was $26 million, doubling the $13 million from last year, and adjusted EPS was $0.22, increasing from $0.15 a year ago. Our net debt to adjusted EBITDA at the end of Q2 was 2.7 times and is comfortably within our targeted range of 2.5x to 3x. Free cash flow we generate is sufficient to naturally delever through growth over time while we invest in the business. Moving on to our 2025 outlook, we are refining our guidance ranges for the full year to $2.75 billion- $2.8 billion in revenue, $310million- $320 million in adjusted EBITDA, and $0.77- $0.82 in adjusted EPS. The guidance assumes that the remaining performance for these metrics will be weighted more towards Q4, which includes a 53rd week and reflects the general seasonality we expect to see in the second half, last year's G&A heavy result in Q4 notwithstanding. Adjusted EBITDA is historically lowest in Q3 due to the seasonal impact of summer enrollment patterns, and we expect that dynamic to be amplified this year. Q4 will be our strongest quarter for adjusted EBITDA this year, mostly because of the 53rd week. We expect adjusted EBITDA margin to dip just below double digits in Q3, with a rebound to low double digits in Q4. Q3 is historically a seasonally down quarter, and we forecast same center occupancy to be between 67% and 68%. What we typically see in Q3 and Q4 is enrollment will trough at the start of back-to-school and then have continuous improvement through Q4 and into the following year. We expect that trend to continue in 2025 as well, but we see occupancy being down year over year in both Q3 and Q4. For the full year, we expect occupancy to be down approximately 1%- 1.5%. We do not plan to provide quarterly direction on occupancy regularly; however, due to the abnormalities we've seen year to date, we felt additional color would be helpful. As I mentioned, tuition growth was 2.4% in Q2, and we see incremental improvements in Q3 and Q4, pushing that into the 2.5%- 3% range for the year. We expect free cash flow to be between $85 million and $95 million for the year. CapEx will likely land in the range of $130 million- $135 million for the year, with 40% of CapEx going towards maintenance and the remainder going towards growth. Additionally, we're modeling our effective tax rate to be about 27% for 2025. We continue to feel great about our B2B business, as these revenue streams are sticky and recurring due to our long-term contracts, which have a compounding effect to growth year over year. Champions will continue its solid contribution this year, with much more room for expansion in the quarters to come. We still believe these two together will be around 1% contribution for the year. New center openings are going to be just shy of 1% this year, as I've mentioned in the past, and we are confidently targeting 1%- 2% in the coming years. On acquisitions, I mentioned earlier that we're executing against our targets for the year, and the contribution expected to be 1% for 2025. Our pipeline visibility for these two growth levers is exceptionally clear. Our ability to control most parts of the long-term growth algorithm, like tuition, pace of openings, and tuck-in volume, mixed with the continued performance of B2B and Champions, underlies our conviction in the growth potential of the business. Although this year so far has been more challenging for the occupancy component than we had expected, we remain confident and positive about our strategy for long-term growth. With that, I'll turn the call back over to the operator to take your questions. Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speaker phone, please pick up your headset before pressing any keys. To withdraw your question, please press the pound key. We'll pause for just a moment to compile the Q&A roster. Our first question comes from the line of Toni Kaplan from Morgan Stanley. Your line is open. Thanks so much. I wanted to drill down on the enrollment trends that you're seeing. I know you mentioned worsening late in the quarter, and you mentioned it's more of a local market issue. I guess, how many markets are we talking about? Clearly the issue is impacting the whole business. Did this come on all of a sudden? Just trying to understand the sudden change, and maybe if you could talk about just review the reasons for the slower enrollment that you're seeing from the customers. Thanks. Thank you, Toni. As you described, as we came into June, we still were seeing good enrollment of our existing parents. It really is that time as you have summer out in June and the new student enrollment that's required to backfill that is where we saw a softening of the overall enrollment. One other thing that would be helpful for you to know with all the quintile work that we've done, and we've talked about across our portfolio, we're discussing one to two children enrollments per center. We saw a slight decline of enrollment in our top three quintiles. Think about that where you have an 80% occupied center. Perhaps it's your three-year-old that has left the center, and then you have your inquiries are in the infant space. That timing of getting that highly occupied center back to where it has been running can just be a timing piece of it. The other thing that's encouraging to us, and I mentioned in our bottom, in our fifth quintile, we actually saw improvement of occupancy for that. Again, not seeing anything that we would point to specifically to the total industry or portfolio, but more local specific. Okay, thanks. Maybe just as a follow-up, I know you just mentioned that the bottom quintile centers are improving. Just maybe help us out with how you're thinking about closing of centers. Are you closing enough of the underperforming centers right now, just when you think about it across the portfolio? I know sometimes it's just when leases come up and things like that, but just wanted to understand the strategy around closures. Thanks. Yep. We still stand by the same strategy we've always had, Toni. As you're aware and you're kind of asking, we look at every center on an individual basis when their leases are coming up, when renewals are coming up, but also their performance and making decisions on them on a center-by-center basis. We're constantly looking at them. We've talked about in the past, we'll do approximately 1%, but if the time came when we needed to do a few more, we would do that. We're not going to hold back from doing that. We're constantly looking at them and don't necessarily have plans to exceed it. If the right centers were up for closure, we are willing to do that for the right reasons. Thank you. Our next question comes from the line of Andrew Steinerman from JPMorgan. Your line is open. Hey, this is Judson on for Andrew. Maybe to start, I was just wondering if you guys could talk a little bit more specifically about the drivers of gross margin in the quarter, year over year. I noticed that it compressed year- over- year, even when you exclude the COVID stimulus impact. Maybe just talk a little bit more about the drivers and specifically the spread between tuition increases and wage increases. Yeah, we're still really pleased with how that's trending. Still getting that 50- 100 basis points between those two. Our visibility with wage continues to be super strong and hitting right where we expect it to be. We're still creating that. What you're really seeing, Judson, is that the impact of occupancy decline is impacting margins. It gets harder to get leverage on your labor and get leverage on rent and some of the other costs when occupancy is down. It comes back to the occupancy, which is why you're seeing that pressure on gross margin. Right. Maybe to ask about enrollment in another way, I know in the past we talked about enrollment between private pay and subsidy students. You had said that private pay was weaker than subsidy. I'm wondering if that still holds true or if you've seen incremental weakening in the subsidy cohort relative to the first quarter. We haven't seen what I would call weakening. We have seen continued about where the enrollment percentage growth on subsidy prior to where it is now has softened a little bit, but you still are seeing subsidy growth. Recognizing, I know you know this, that every time a state is looking at decisions for their state budget, they're thinking about the number of children that they want to approve through the system, if they can reduce the waitlist of children that are out there. They're also thinking about opportunities to increase the tuition so that their subsidy rates are competitive with that of the private pay rate. Still continuing, I mean, the headline for us and everything we've seen leading through this year is that support for subsidy enrollment in each of the states continues to be strong. There just is an evolvement or refinement throughout the year on how they're trying to do that within their annual budget. Great, thank you. Next is from Manav Patnaik from Barclays. Your line is open. Hi, this is Ronan Kennedy from Manav. Thank you for taking my question. I have a question kind of on the broader demand environment. I know you spoke to how uncertainty regarding Congress's support from an ECE funding standpoint is much clearer and that you thought we could move past the concerns around inflation, job security, and I guess industry regulation. There's an outside element of clarity on fiscal policy. It's a pretty dynamic situation with varying macro factors such as trade, weakening labor, still uncertain rate policy. How do you think this could potentially impact your demand at a fundamental level and what are the families and parents telling you? How are those conversations? Right. I would still say we are confident that the demand from parents far outweighs the supply across the U.S. There are obviously local considerations about where those centers exist today and in certain neighborhoods where there is a need for more centers. There are other markets where you have maybe a denser offering of various providers. The larger headline is we are still very much in a position where there's far more demand from parents and what they're looking for as far as access. The piece beyond that is I do feel there, as you just described, are some other things going across the U.S. that cause parents to think about their own personal situations. I don't think that is unique. That isn't a pricing concern because we've done a number of pricing studies. We look at our pricing increases and the enrollments around there, and so we know we're still in a very productive path on all of our tuition and overall increases we see there. To the uniqueness of specific local dynamics, there isn't anything else we would call out. Okay, thank you. For my second, a two-parter, if I may. You reiterated confidence and the visibility in tuition, new center openings, and M&A, but not necessarily occupancy and enrollment. Any change to visibility dynamics there? First part of the question. What gives you confidence in the support and action initiatives such as the Opportunity Region? Is it acceleration, incremental dollars? Will they be more effective to drive and give confidence in the outlook for occupancy and enrollment? Sure. Just to reiterate the first one, just to make sure. In my comments, we did adjust our guide for the year for our occupancy to be down 1%- 1.5%. I think you're hearing confidence in the other ones. We're still seeing those come out as we thought they would and continue confidence in them. Occupancy, obviously, as we're discussing, isn't where we thought it would be or want it to be, but have enough clarity to give that full guide for the year of - 1% to -1.5%. I'll let Paul talk about opportunity a little bit. Specific to Opportunity, what we've done there is taken a much more localized approach to those individual centers, really relying on the stronger analytics and data of those centers and understanding in one center it may be a Center Director that's been there less than one year and needs training on the operational practices we have or how they outreach to parents, both prospective and existing. It could be that the inquiry to enrollment, so the conversion funnel that we often talk with you about, is below that of their peer group. How do we train and support the Center Director or District Leader in those markets? As you referenced in your own question, we have seen some encouraging performance in our Opportunity Region. It is early. We will continue to observe and manage through what we see as improved performance and then continue to blow that out even farther. The only thing I would add really quickly, because I think it was in your questions, Arun, was it's been an insignificant additional spend of money. It's not a significant investment into those. We're attacking them differently with our business partners and how we do some of those actions. It's still utilizing the same people and the same type of spend. Thank you. Appreciate it. Our next question is from Jeff Meuler from Baird. Your line is open. Yeah, thank you. It's Steven Pawlak in for Jeff. I guess maybe depending on or sort of referencing the experience you've had with the lower quintile centers, how quickly can you sort of reverse or address the enrollment challenges that you're seeing currently? The data point I would give you is in late March was when we restructured this Opportunity Region to be under different leadership, and that takes a little bit of change management as district leaders and center directors get to know each other and go through the practices there. In our second quarter, we did see an improvement in overall enrollment and occupancy. That's a 12-week, 13-week timeframe. Again, that's an early time that we'll continue to monitor, but that speaks to why we have talked about the strength in the total portfolio, the work that Tony's team has done even a number of months ago to say these are centers that are in very viable communities and require different operational attention, and that's what we've put the Opportunity Region to go after, and we're looking to further improve even from where we are right now. The only other reminder I'd give is that once we are through back to school here in kind of late September, every week incrementally outside of holiday weeks grows enrollments and grows total occupancy all the way till May. Every week gives us a chance to do incremental more and break kind of that curve. Every week gives us the opportunity to change the trajectory we're on. [And] the 45F changes, can you maybe just speak to some of the conversations you're having with employers and maybe how meaningful of an opportunity that increase to that program could be and maybe how quickly that can start to become incremental to results? Right now, it's purely about educating employers so that they understand the benefit that's there and that it really takes impact in 2026. Our conversations with employers always are, what's important to them and their employees? What's the benefit that best serves their employees? Is it an onsite center or is it access to our 1,500 community network centers that give them far more flexibility, especially if they're an organization with employees across the U.S.? We really focus on those employers that are trying to attract and retain the very best talent. They should be offering a childcare benefit. This is just a piece of that conversation, but ultimately having them roll out the best benefit possible so that they can have the best talent within their own organization. Thank you. Our next question is from George Tong from Goldman Sachs. Your line is open. Hi, thanks. Good afternoon. I wanted to go back to the enrollment and occupancy trends. You mentioned that there's really no one single factor driving overall declines. It's very market-specific. Can you give an example of what's happening in one market and then how it's different from something happening in a different market, just to see how diverse those various drivers are between your different markets? Yeah, I think one example of a difference between two markets could be if you're seeing a higher level of teacher turnover in a specific center or district or market, and that goes into all the work that our team looks at. Is our wage appropriately measured against that? The dynamics or competition, even outside of our industry, but competition for that workforce. That's one thing that you would look at if you saw a higher turnover of your teachers. The playbook is looking at our competitiveness and our recruiting resources to redirect to them. In another example, it could be that the whole inquiry to enrollment change, and is there a falloff within that? That goes back again to training that team differently and leaning in with them on the responses or information that they're providing to prospective parents. The other one, George, I'd throw in, Paul alluded to it in his comments, would be where the way we're doing inquiries, maybe digitally, just isn't hitting in the specific market. We have to change some word choices or things like that in that local environment. That's something we're able to do and are leaning into now more than we ever have as well. Got it. That's helpful. Given the diversity in these local market issues, does it mean that you have to develop a unique playbook to address each of these issues separately, or is there a unifying trend that can lift performance across all of these underperforming centers? There is a unifying diagnostic approach to the data, George. That tells our center directors and district leaders where they need to focus. It is efficient on the part of how we support the teams and where they need to go look at the root causes, and for them to lean in specifically for their own market. The power we have there, George, with the scale we have, is that every one of our regions has their own Finance Business Partner and Quality and HR Business Partner, but then they all come together as a team as well. They're able to work through the things Paul's talking about, then go take local examples and work locally with their regions while still having the power of the size that we have. Got it. Very helpful. Thank you. Our next question is from Faiza Alwy from Deutsche Bank. Your line is open. Yes, hi, thank you. I noticed that when we looked at the growth algorithm for 2025, you also changed some assumptions around B2B, Champions, and pricing in addition to acquisitions. I just wanted to ask, you know, sort of what changed there? I'm curious specifically on the B2B side. I know we're talking about enrollment declines, but has anything changed from the Champions perspective? No, Faiza, I think you're in, we've said 1%- 2%, right? Now we're saying it's going to be closer to 1%. It's still kind of within that range. That's your point, talking about sharpening it a little bit. No, Champions' growth so far, as you see in the numbers, is slightly behind where we thought it might have been so far. The quarter was not in the double-digit range that we expect. We feel good about that going into the future here. We're really excited about the number of sites Champions is going to bring in, but just with a slightly slower Q2, we just tighten that range a little bit on that one as well. Okay, understood. Just following up on enrollment, sorry, I know we've gotten a lot of questions there, but I just want to make sure I understand, what's giving you the confidence that this is not like a macro or affordability issue and something specific as you labeled it as a local market issue? We are hearing this from others as well. I guess just in context of what we were talking about last year around potentially sort of supply shutting down as some of this COVID-related funding was going to go away from these smaller centers, that was theoretically supposed to help enrollment. Just curious if that, how that has played out. Give us more color on why you think this is more of a center-by-center specific issue. It seems like it's pretty broad-based as you're talking about each of the top three quintiles seeing enrollment decline. Yep, on your local one, we did not see it play out as much as we thought we might have here at the school out one. It's still one we're keeping an eye on to see if we should see more closures, kind of the ma and pas. We haven't seen a huge wave of those like we might have. We're still seeing the acquisition pipeline be quite strong. That continues to be strong, and I think it's an indication of that, but not quite as many closures. On the pricing question, kind of a macro level, we're constantly evaluating that. We have a separate pricing team and then my finance team as well. We're constantly doing analytics on that as far as our tours, as far as our exits, and those things to see if we do believe there's something we need to do different in pricing and keep having answers that feel like we're in the right spot there. As you know, we'll head into Q4 and think about pricing for next year as well. We'll utilize all that information at a center level to make those. The information we continue to see, both from exit surveys and from our current families, suggests that it's not. The only other thing I'd reiterate there on that one is we did see higher retention rates. Paul alluded to it, but we did see higher retention rates of our families the first half of the year. We were able to keep our current families at a better pace than we were the year before. It really does come down to what Paul was discussing about how we're telling that story and explaining the value to prospective families to get them to understand because the families that are with us clearly were. All right, thank you. Our next question is from Jeff Silber from BMO Capital Markets. Your line is open. Thanks so much. I just want to continue the last thought, and maybe I'll play devil's advocate here a bit. You said that most of the softness was coming from prospective students. If I remember correctly, the timeframe to get those students in is for the summer period. How do we know that things will improve between now and the summer if we're just going to have to wait again till next summer to see that improvement? From now to next summer, Jeff. We have the summer out period, and then we have our kind of summer period where we're serving families that kind of have different, some of them have very similar needs, right? The majority of our three and unders have the same needs 52 weeks a year, but some other ones, school age, and even some of those have different decisions during the summer. The summer is definitely a different time period. We'll get here to back to school. Right now we're very focused on Q3 and our back-to-school enrollments, and those will settle in with us. Some of the summer ones will leave us to go back to regular school if they're school age. We'll settle into our back-to-school enrollments, and then, like I mentioned earlier, from back to school all the way to Memorial Day, we'll have incremental growth week by week, every single week, if you take out the couple of holiday weeks throughout that period. Those all continue to be opportunities to build upon that new back-to-school one. Once we hit Memorial Day into June next year, that's when we'll have that change out again of those students that might have different decisions for the summer, and we'll bring in some new ones that weren't with us during the year. Jeff, this other question you had within there, understand that in the last week of the first quarter, I said we restructured the Opportunity Region, but that did impact more of the district leaders and the centers that they were responsible for. As they continue to work with each other and navigate through that change management and all the digital tools that we've been informing you about, whether that be the digital occupancy whiteboard, online scheduling tour, or some other things that we're continuing to roll out this summer and into the fall, those are the things that we know will resonate strongly with our prospective families and help our center directors show up very well in further enrollment. Those are the other reasons to give us confidence as we go into 2026. All right, appreciate that. Maybe I can shift gears to the cost side. Can we talk about labor costs? I know you're pricing ahead of that, but I'm just wondering how those are trending if we've seen any change over the past three to six months or so. They continue to be really stable, Jeff. We have the most teachers we've ever had, and we're retaining them at great rates. As you know from us, we're really tracking the ones that are over a year with us, and we're really happy with both of those. As far as wage rate directly, which is what you're asking, it's been extremely stable, and we're able to know when we're going to give those increases to everyone. I've been doing that for the first eight months of the year here, and it's been very quiet and very stable. All right, thanks so much for the call. Of course. We have a question from George Tong from Goldman Sachs. Your line is open. Hi, thanks. Just a quick follow-up question. I know last quarter you mentioned that you were seeing a bit of delayed enrollment decisions by consumers because of macro uncertainty, basically elongated sales cycles. Is that something you're still seeing now, or has that effect completely normalized? There still is what we would describe for private pay families taking more touch points as they make the decision. I said it earlier in my comments, when a subsidy family receives approval through their voucher, they're looking for a high-quality operator and making their decisions very quickly. You still are seeing a longer decision process from private pay families, but that's them understanding the amount that they're spending each month and wanting to make the best decision for their child. Got it. Very helpful. Thank you. There are no further questions at this time. I would now like to turn the conference back to Mr. Paul Thompson. Please go ahead. Thank you, Chloe. With half of our first fiscal year as a public company behind us, we do have much to celebrate. We've continued to drive growth despite some headwinds, delivered our commitment to reduce leverage, and have among our highest rates of retention among teachers with more than one year of service. We also deepened our partnerships with communities, schools, and employers while staying grounded in what matters most: the incredible work our field teams do every day to support families and children. As a leadership team, we remain committed to disciplined execution, expanding access to high-quality care, and creating long-term value for our shareholders. For the remainder of the year, our focus is on executing a strong back-to-school season and building momentum heading into 2026. Thank you all for joining us today, and we look forward to speaking with you again soon. This concludes today's conference call. Thank you for participating. You may now disconnect.