More Problems at KinderCare (KLC)
Two months ago, The Bear Cave published on problems at KinderCare (NYSE: KLC — $1.35 billion), the largest daycare and early childhood education company in the United States. The Bear Cave wrote:
“Today’s investigation from The Bear Cave finds that KinderCare often fails to deliver the safe and nurturing environment it promises parents and taxpayers. The Bear Cave finds that toddlers escape from the KinderCare daycares onto busy roads, are left alone locked inside KinderCare buildings and buses, and are physically, verbally, and sexually abused, with many cases going unreported until bystanders raise alarm or video evidence circulates. In sum, The Bear Cave believes KinderCare is a broken business that harms the children and families it claims to help.”
Now these concerns are entering the mainstream, allegations against the company are growing, lawmakers are demanding accountability, and The Bear Cave is surfacing additional complaints of billing fraud against the company. In addition, The Bear Cave believes KinderCare is on the wrong end of demographic trends such as declining birthrates and increasing work-from-home employment and faces an existential threat from potential subsidy cuts.
Following The Bear Cave’s last investigation, Evie Magazine reported on additional safety issues at KinderCare and The Bear Cave went on the Relatable Podcast with Allie Beth Stuckey to discuss the allegations against KinderCare and its reliance on government subsidies. Following the interview, Rep. Anna Paulina Luna, a Republican representing Florida’s 13th congressional district, tweeted that she was “writing to House leadership and DOGE to address this disgusting report” and added:
“If you can’t keep children safe—and worse, are complicit in their abuse—you do NOT deserve a dime of taxpayer funding.”
Government subsidies are particularly important for KinderCare. In its 10-K, KinderCare disclosed that “subsidy revenue from government agencies was $942.1 million” in 2024, about 35.3% of its total revenue of $2.66 billion. In 2023, KinderCare had $795.9 million in subsidy revenue, representing about 31.7% of its total revenue, and in Q1 2025, the company disclosed $240.1 million in subsidy revenue, representing about 35.9% of total revenue.
This trend, 31.7% of revenue from subsidies in 2023, 35.3% of revenue from subsidies in 2024, and 35.9% of revenue from subsidies in Q1 2025, suggests government subsidies play an increasingly important role for KinderCare.
That makes sense as KinderCare views its ability to obtain government subsidies as a core tenet of its business. In its 10-K, the company states that “our core competency of subsidy expertise will allow us to help families find access to continued public subsidies” and under the heading “Our Competitive Strengths” the company includes a section on its “expertise in helping families access public subsidy funding for child care” and highlights its “dedicated Subsidy Team.” KinderCare discloses:
“We proactively work with prospective and current families to help them access public subsidy funding. The process for accessing public subsidy funding is complex and burdensome, causing many families to forego applying for available resources. Our dedicated Subsidy Team assists families with understanding the requirements of programs available to them and with completing the administrative steps necessary to access public subsidy funding. We believe our scale allows us to invest in the expertise, resources and infrastructure needed to effectively navigate these programs across our network of centers. Our frequent interactions and relationships with government institutions position us as a leading advocate for our industry to help build continued growing public funding support for our industry.” (Emphasis ours)
But does the KinderCare playbook of acquiring facilities, raising prices, cutting costs, and increasing government subsidy revenue lead to better outcomes for parents, children, and taxpayers?
The Bear Cave thinks not.
For example, in a 2024 complaint to the Massachusetts Attorney General, obtained through a public records request, a foster parent wrote,
“KinderCare has closed the classroom 23 times in the past year. They have billed the commonwealth for my foster child [redacted] to be there every time. I believe it’s a common practice to bill all foster children of parents with vouchers and tell us the daycare is closed from lack of staffing or other unknown reasons.
The Commonwealth should not pay or be billed by a private company for services not rendered.”
This is no isolated incident.