European Wax Center(EWCZ) - 2025 Q1 - Quarterly Results

First Quarter Fiscal Year 2025 Earnings Release Overview European Wax Center, Inc. announced its Q1 FY25 results, reiterating its full-year outlook and highlighting strategic progress and solid financial performance Executive Summary European Wax Center, Inc. reported its Q1 FY25 results, reiterating its full-year outlook. The company achieved solid financial performance and made progress on strategic priorities, including enhancing its marketing engine and strengthening corporate infrastructure to support franchisees - Company reiterates fiscal 2025 outlook[1] - Made meaningful progress against strategic priorities and delivered solid financial performance[3] - Advancing data-rich marketing engine and strengthening corporate infrastructure to support franchisees[3] - Focus on long-term network health and goal of achieving net unit growth by end of 2026[3] CEO Statement CEO Chris Morris expressed conviction in the brand and market position, highlighting efforts to navigate a dynamic macroeconomic environment with a disciplined approach to supply chain management. The focus is on driving near-term results, improving four-wall profitability, and reigniting long-term unit growth - CEO Chris Morris amplified conviction in the European Wax Center brand and its leading market position[3] - Navigating a dynamic macroeconomic environment and taking a disciplined, strategic approach to managing the supply chain with franchisee success top of mind[3] - Taking quick action to drive near-term results while sharpening a clear vision for the future, anchored in driving sales, improving four-wall profitability, and reigniting long-term unit growth[3] First Quarter Fiscal Year 2025 Financial Performance This section details European Wax Center's Q1 FY25 financial performance, including key highlights, detailed results, and a summary of the balance sheet and cash flow Key Financial Highlights (Q1 FY25 vs FY24) European Wax Center reported mixed results for Q1 FY25. System-wide sales and Adjusted EBITDA saw increases, while total revenue and GAAP net income decreased. Same-store sales showed modest growth, and net new centers increased slightly Q1 FY25 vs FY24 Key Financial Highlights | Metric | Q1 FY25 | Q1 FY24 | Change (%) | | :----------------------- | :-------- | :-------- | :--------- | | Net new centers | 1,062 | 1,051 | +1.0% | | System-wide sales | $225.9M | $221.4M | +2.1% | | Total revenue | $51.4M | $51.9M | -0.9% | | Same-store sales | +0.7% | N/A | +0.7% | | GAAP net income | $2.6M | $3.7M | -29.7% | | Adjusted Net Income (new) | $9.5M | $8.6M | +10.3% | | Adjusted EBITDA | $18.8M | $17.5M | +7.2% | Detailed Financial Results (Q1 FY25 vs FY24) A deeper dive into Q1 FY25 reveals that the increase in system-wide sales was driven by existing centers and new openings. Total revenue slightly decreased. SG&A expenses rose significantly due to stock-based compensation and executive severance, impacting net income and effective tax rate. Adjusted EBITDA margin improved - System-wide sales of $225.9 million increased 2.1% from $221.4 million in the prior year period, primarily driven by increased spend by guests at existing centers and net new centers opened over the past twelve months[6] - Total revenue of $51.4 million decreased 0.9% from $51.9 million in the prior year period[6] - Selling, general and administrative expenses ("SG&A") of $15.3 million increased 13.9% from $13.5 million in the prior year period. SG&A as a percent of total revenue increased 380 basis points to 29.8% from 26.0% primarily driven by increased stock based compensation and executive severance expense[6] - Interest expense, net of $6.6 million increased from $6.3 million in the prior year period[6] - The effective tax rate increased to 35.0% from 24.9% in the prior year period, primarily due to the impact of nondeductible officer compensation[6] - Net income margin decreased 200 basis points to 5.0% from 7.0%[12] - Adjusted EBITDA Margin increased 280 basis points to 36.5% from 33.7%[12] - The Company repurchased approximately 0.2 million shares of its Class A Common Stock during the period for $1.1 million, bringing cumulative repurchases under the Company's current $50 million authorization to $41.2 million[12] Balance Sheet and Cash Flow Summary As of April 5, 2025, the company maintained a healthy cash position with $58.3 million in cash and equivalents. Net cash provided by operating activities was $12.7 million for the quarter, with outstanding borrowings of $389.0 million under senior secured notes Q1 FY25 Balance Sheet & Cash Flow Snapshot | Metric | Amount (as of April 5, 2025) | | :-------------------------------- | :--------------------------- | | Cash and cash equivalents | $58.3 million | | Restricted cash | $6.5 million | | Borrowings outstanding (senior secured notes) | $389.0 million | | Outstanding borrowings (revolving credit facility) | $0 | | Net cash provided by operating activities (Q1) | $12.7 million | Fiscal Year 2025 Outlook The company reiterates its fiscal year 2025 financial outlook, providing projections for sales, revenue, profitability, and net new center development Financial Outlook The company reiterates its fiscal year 2025 financial outlook, projecting system-wide sales between $940 million and $960 million, and total revenue between $210 million and $214 million. Adjusted Net Income (new definition) is expected to be $31 million to $33 million, with Adjusted EBITDA between $69 million and $71 million Fiscal 2025 Financial Outlook | Metric | Fiscal 2025 Outlook | | :-------------------------------- | :-------------------- | | System-Wide Sales | $940 million to $960 million | | Total Revenue | $210 million to $214 million | | Same-Store Sales | 0.0% to 2.0% | | Adjusted Net Income (previously defined) | $16 million to $18 million | | Adjusted Net Income (now defined) | $31 million to $33 million | | Adjusted EBITDA | $69 million to $71 million | - Adjusted Net Income outlook assumes an effective tax rate of approximately 23% for fiscal 2025[8] Net New Center Outlook For fiscal 2025, the company anticipates 10 to 12 new center openings and 40 to 60 center closures, resulting in 28 to 50 net center closings. The second quarter is expected to see 7 to 8 net center closings - Franchisees are estimated to open 10 to 12 new centers and close 40 to 60 centers in fiscal 2025[9] - This translates to 28 to 50 net center closings in fiscal 2025[9] - The Company expects 7 to 8 net center closings during the second quarter[9] - As of May 13, 2025, 1 center has opened and 2 have closed in the second quarter[9] Company Information This section provides an overview of European Wax Center, Inc., including company profile, forward-looking statements, non-GAAP financial measure disclosures, and key business metric definitions About European Wax Center, Inc. European Wax Center, Inc. is the leading franchisor and operator of out-of-home waxing services in the U.S., performing over 23 million services annually. The company emphasizes professional care, innovative Comfort Wax®, proprietary products, and strong company values, operating over 1,000 centers in 45 states - European Wax Center, Inc. is the leading franchisor and operator of out-of-home waxing services in the United States[13] - Locations perform more than 23 million services per year, providing an unparalleled, professional personal care experience with innovative Comfort Wax® and proprietary products[13] - Its network includes more than 1,000 centers in 45 states, generating sales of $951 million in fiscal 2024[13] - Proud to be Certified™ by Great Place to Work®, leading with values: We Care About Each Other, We Do the Right Thing, We Delight Our Guests, and We Have Fun While Being Awesome[13] Forward-Looking Statements This section outlines the nature of forward-looking statements within the press release, including strategy, outlook, growth prospects, and financial targets for fiscal 2025. It also details various known and unknown risks and uncertainties that could cause actual results to differ materially from expectations, such as operational and financial results of franchisees, market competition, and economic conditions - Includes forward-looking statements regarding European Wax Center, Inc.'s strategy, outlook, growth prospects, operational and financial outlook for fiscal 2025, expected center openings and closures, and capital allocation strategy[14] - These statements are based on current expectations and beliefs, but involve known and unknown risks, uncertainties, and other important factors that may cause actual results to be materially different[15] - Key factors that could cause actual results to differ include operational and financial results of franchisees, ability to enter new markets, marketing effectiveness, competition, economic conditions, and compliance with regulations[15] - The Company does not have any obligation to update or revise forward-looking statements, except as required by law[17] Disclosure Regarding Non-GAAP Financial Measures The company uses non-GAAP financial measures like Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, and Net Leverage Ratio to provide additional insights into operating performance. The definition of Adjusted Net Income was revised in Q1 2025 to exclude amortization of intangible assets, aiming for clearer evaluation of core operations - The Company includes non-GAAP financial measures such as Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, and Net Leverage Ratio to assess operating performance[18] - The definition of Adjusted Net Income (Loss) was revised in the first quarter of 2025 to exclude amortization of intangible assets, which management does not view as part of core operations, to enable clearer and more consistent evaluation of core operating performance[22] - The Company is unable to provide GAAP net income guidance or a reconciliation for forward-looking non-GAAP measures without unreasonable effort due to the inability to predict certain items[24] Key Business Metrics Definitions This section defines key business metrics used by the company. System-Wide Sales include all sales from the network, influencing royalty revenue and brand health. Same-Store Sales track performance of existing centers open for at least 52 full weeks, excluding new openings and closures - System-Wide Sales represent sales from same day services, retail sales, and cash collected from wax passes for all centers in the network, including both franchisee-owned and corporate-owned centers, used to assess royalty revenue, overall center performance, brand health, and market position[25] - Same-Store Sales reflect the change in sales over a comparable 52-week period year over year from services performed and retail sales for centers open for at least 52 full weeks, excluding the impact of new center openings and closures, to highlight the performance of existing centers[26] Condensed Consolidated Financial Statements This section presents the condensed consolidated financial statements, including balance sheets, statements of operations, and statements of cash flows for the period Balance Sheets The balance sheet shows total assets increased slightly from $707.1 million at January 4, 2025, to $713.8 million at April 5, 2025. Cash and cash equivalents increased, while total liabilities remained relatively stable. Stockholders' equity attributable to European Wax Center, Inc. increased to $70.5 million Condensed Consolidated Balance Sheets (Selected Items) | Item | April 5, 2025 (in thousands) | January 4, 2025 (in thousands) | | :------------------------------------ | :----------------------------- | :----------------------------- | | Cash and cash equivalents | $58,326 | $49,725 | | Total current assets | $95,308 | $87,839 | | Intangible assets, net | $427,327 | $432,160 | | Total assets | $713,795 | $707,067 | | Total current liabilities | $35,119 | $36,111 | | Long-term debt, net | $373,630 | $373,246 | | Total liabilities | $615,283 | $615,475 | | Total stockholders' equity | $98,512 | $91,592 | Statements of Operations For the thirteen weeks ended April 5, 2025, total revenue was $51.4 million, a slight decrease from $51.9 million in the prior year. Net income decreased to $2.6 million from $3.7 million, primarily due to increased SG&A expenses and higher income tax expense. Diluted EPS for Class A Common Stock was $0.04 Condensed Consolidated Statements of Operations (Selected Items) | Item | For the Thirteen Weeks Ended April 5, 2025 (in thousands) | For the Thirteen Weeks Ended April 6, 2024 (in thousands) | | :------------------------------------ | :-------------------------------------------------------- | :-------------------------------------------------------- | | Total revenue | $51,427 | $51,874 | | Total operating expenses | $40,845 | $40,692 | | Income from operations | $10,582 | $11,182 | | Interest expense, net | $6,633 | $6,336 | | Income before income taxes | $3,951 | $4,866 | | Income tax expense | $1,381 | $1,212 | | NET INCOME | $2,570 | $3,654 | | Diluted - Class A Common Stock EPS | $0.04 | $0.06 | Statements of Cash Flows Net cash provided by operating activities increased to $12.7 million for the thirteen weeks ended April 5, 2025, compared to $10.7 million in the prior year. Investing activities resulted in a net cash outflow of $0.7 million, while financing activities used $3.5 million, including principal payments on debt and share repurchases Condensed Consolidated Statements of Cash Flows (Selected Items) | Item | For the Thirteen Weeks Ended April 5, 2025 (in thousands) | For the Thirteen Weeks Ended April 6, 2024 (in thousands) | | :------------------------------------ | :-------------------------------------------------------- | :-------------------------------------------------------- | | Net cash provided by operating activities | $12,707 | $10,724 | | Net cash (used in) provided by investing activities | $(660) | $105 | | Net cash used in financing activities | $(3,461) | $(3,186) | | Net increase in cash, cash equivalents and restricted cash | $8,586 | $7,643 | | Cash paid for interest | $5,439 | $5,490 | | Cash paid for income taxes | $143 | $40 | Reconciliation of Non-GAAP Financial Measures This section provides reconciliations for non-GAAP financial measures, including Adjusted Net Income, EBITDA, Adjusted EBITDA, and Net Leverage Ratio Adjusted Net Income Reconciliation The reconciliation shows Adjusted Net Income (as now defined) for Q1 FY25 was $9.5 million, an increase from $8.6 million in Q1 FY24. Key adjustments include share-based compensation, remeasurement of tax receivable agreement liability, executive severance, reorganization costs, and, under the new definition, amortization of intangible assets Reconciliation of Net Income to Adjusted Net Income (Thirteen Weeks Ended) | Item | April 5, 2025 (in thousands) | April 6, 2024 (in thousands) | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net income | $2,570 | $3,654 | | Share-based compensation | $2,564 | $1,382 | | Executive severance | $465 | $0 | | Reorganization costs | $160 | $0 | | Adjusted Net Income, as previously defined | $5,599 | $4,737 | | Amortization of intangible assets | $4,834 | $4,834 | | Tax effect of adjustments | $(962) | $(985) | | Adjusted Net Income, as now defined | $9,471 | $8,586 | EBITDA and Adjusted EBITDA Reconciliation Adjusted EBITDA for Q1 FY25 was $18.8 million, up from $17.5 million in Q1 FY24, with the Adjusted EBITDA Margin improving to 36.5% from 33.7%. Adjustments primarily include share-based compensation, remeasurement of tax receivable agreement liability, executive severance, and reorganization costs Reconciliation of Net Income to EBITDA and Adjusted EBITDA (Thirteen Weeks Ended) | Item | April 5, 2025 (in thousands) | April 6, 2024 (in thousands) | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net income | $2,570 | $3,654 | | Interest expense, net | $6,633 | $6,336 | | Income tax expense | $1,381 | $1,212 | | Depreciation and amortization | $4,981 | $5,095 | | EBITDA | $15,565 | $16,297 | | Share-based compensation | $2,564 | $1,382 | | Executive severance | $465 | $0 | | Reorganization costs | $160 | $0 | | Adjusted EBITDA | $18,752 | $17,498 | | Adjusted EBITDA Margin | 36.5% | 33.7% | Net Leverage Ratio Reconciliation As of April 5, 2025, the Net Leverage Ratio was 4.3x, calculated from total debt of $389.0 million, less cash and cash equivalents of $58.3 million, divided by trailing twelve months Adjusted EBITDA of $76.8 million Reconciliation of Total Debt to Net Leverage Ratio (Trailing Twelve Months Ended April 5, 2025) | Item | Amount (in thousands) | | :------------------------ | :-------------------- | | Total debt | $389,000 | | Less: Cash and cash equivalents | $(58,326) | | Net Debt | $330,674 | | Adjusted EBITDA | $76,759 | | Net Leverage Ratio | 4.3x | Additional Information This section provides details on the webcast and conference call, along with contact information for investor relations and media inquiries Webcast and Conference Call Information European Wax Center, Inc. hosted a conference call and webcast on May 14, 2025, to discuss Q1 FY25 results, with replay available online - European Wax Center, Inc. hosted a conference call to discuss first quarter fiscal 2025 results on May 14, 2025[11] - A replay of the webcast will be available two hours after the call and archived on https://investors.waxcenter.com for one year[11] Contact Information Contact details for investor relations and media inquiries are provided - Investor Contact: Bethany Johns, Bethany.Johns@myewc.com, 469-270-6888[40] - Media Contact: Sophia Tortorella, sophia.tortorella@zenogroup.com, 312-752-6851[40]