European Wax Center, Inc. Q1 FY2024 earnings call

• Net new center openings were in line with expectations, with a 7.5% growth to 1,051 centers. System-wide sales grew 1.3% and total revenue increased 4%.
• Profit margins were strong, and the cash position improved. A $50 million share repurchase program was authorized.
• Initiatives to drive average ticket and frequency from new and existing guests are in early stages, with good early reads.
• Engaged a new media agency in Q4 to streamline paid digital channels and search efforts, driving reservations, new guests, and cost efficiencies.
• Launched partnerships with new local digital media agencies to stimulate franchisee spending and simplified grassroots marketing plans.
• Deepened support of field trainers in select markets to optimize guest experience, with pilot centers showing improvements in key KPIs.
• Plan to launch brow tint formula nationwide in Q3, with a robust training and marketing campaign.
• Laser hair removal pilot expanded, with early testing showing potential to attract new guests and increase share of wallet, and expansion to more centers in New York and Florida planned.

During the first quarter, European Wax Center added 7 net new centers, resulting in a 7.5% growth to 1,051 centers in 45 states. System-wide sales grew 1.3% to $221.4 million. Total revenue, including wax and retail products, increased 4% to $51.9 million. Same-store sales were down 1.2%, but would have been slightly positive except for weather and Easter-related center closures. Profit margins were strong, and the cash position increased meaningfully during the quarter.

• Unit growth: Expect 75 to 80 net new centers in 2024, primarily from existing franchisees, with openings approximately 1/4 in first half and 3/4 in second half.
• System-wide sales: Expected to be between $1 billion and $1.025 billion, a 6.5% to 9% growth on a 52-week adjusted basis.
• Same-store sales: Expected 2% to 5% growth for the year.
• Adjusted EBITDA: Outlook approximately $75 million to $80 million.
• Adjusted net income: Expected between $22 million and $25 million.

• Macroeconomic uncertainties that could impact consumer spending and business performance.
• Regulatory challenges related to the laser hair removal pilot, especially in stricter environments.
• Execution risks associated with the rollout of new initiatives like the media agency strategy, local marketing partnerships, and field training programs.
• Potential cannibalization of core waxing services by laser hair removal if not managed properly.

Q: About first quarter same-store sales and guidance, how is the tracking?

A: Stacie Shirley mentioned same-store sales impact from weather and Easter, and guidance for Q2 and Q3 system-wide sales tracking in line with expectations.

Q: How to think about driving revenue growth, price vs guests vs service visit growth?

A: David Willis said a combination approach with field trainer support, marketing team driving local grassroots marketing, confident in moving needle without just price increase. Laser pilot shows attracting new guests and share of wallet with contained cannibalization.

Q: Feedback from franchisees on NCO program and profitability ramp?

A: David Willis said franchisees endorsing NCO playbook, seeing early results, addressing concerns on profitability ramp and market oversaturation through aligning with Franchise Advisory Council.

Q: Regionally, any different performance and pricing/labor cost impact?

A: Stacie Shirley said no major regional differences, labor cost challenges, no system-wide price increase planned but market-by-market evaluation.

Q: New center productivity and same-store sales run rate?

A: David Willis talked about new center productivity with early positive reads, Stacie Shirley mentioned long-term same-store sales goal of high single-digit comps with mature centers low single-digit and ramping high single-digit, expecting to get closer with initiatives and stable environment.