European Wax Center(EWCZ) - 2025 Q2 - Quarterly Results

Executive Summary & Business Overview European Wax Center, Inc. is a leading franchisor of waxing services, focusing on strategic growth, profitability, and expansion, with mixed Q2 FY2025 results Company Overview & Strategic Priorities European Wax Center, Inc. is a leading U.S. waxing service franchisor, reinforcing business stability and focusing on traffic, franchisee profitability, and expansion - European Wax Center, Inc. (NASDAQ: EWCZ) is the leading franchisor and operator of out-of-home waxing services in the United States[3] - CEO Chris Morris noted encouraging early signs that strategies are taking hold, reinforcing the stability of the core business and the resilience of the European Wax Center brand[4] - The company's three strategic priorities are: driving traffic and sales growth, improving four-wall profitability for franchisees, and pursuing thoughtful, profitable expansion[4] Second Quarter Fiscal 2025 Highlights Q2 FY2025 showed mixed results with slight decreases in system-wide sales and total revenue, but increases in same-store sales, Adjusted Net Income, and Adjusted EBITDA Q2 FY2025 Key Financial Metrics | Metric | Q2 FY2025 | Change vs. Q2 FY2024 | | :-------------------- | :---------- | :------------------- | | Total Centers | 1,059 | Flat | | System-wide sales | $257.6 million | -1.0% | | Total revenue | $55.9 million | -6.6% | | Same-store sales | +0.3% | N/A | | GAAP net income | $5.4 million | -9.0% | | Adjusted Net Income | $11.8 million | +5.6% | | Adjusted EBITDA | $21.6 million | +4.7% | Financial Performance This section details the company's financial results for Q2 and year-to-date fiscal 2025, including balance sheet and cash flow performance Second Quarter Fiscal 2025 Detailed Results Q2 FY2025 saw a decrease in system-wide sales and total revenue, offset by same-store sales growth and increases in Adjusted Net Income and Adjusted EBITDA - System-wide sales decreased 1.0% to $257.6 million, primarily driven by a decrease in same-day services and retail sales, partially offset by an increase in cash collected from wax pass sales[7] - Total revenue decreased 6.6% to $55.9 million from $59.9 million in the prior year period[7] - Same-store sales increased 0.3%[7] - GAAP net income of $5.4 million decreased 9.0%, and Adjusted Net Income of $11.8 million increased 5.6%[7] - Adjusted EBITDA of $21.6 million increased 4.7%, and Adjusted EBITDA Margin increased 420 basis points to 38.7%[8] Year-to-Date Fiscal 2025 Results Year-to-date fiscal 2025 showed slight system-wide sales growth, decreased total revenue, increased same-store sales, and higher Adjusted Net Income and EBITDA - System-wide sales of $483.5 million increased 0.4% from $481.5 million in the prior year-to-date period, primarily driven by an increase in cash collected from wax pass sales, partially offset by a decrease in same day services[12] - Total revenue of $107.3 million decreased 3.9% from $111.7 million in the prior year-to-date period[12][34] - Same-store sales increased 0.5%[12] - Net income of $8.0 million decreased 16.9%, and Adjusted Net Income of $21.3 million increased 7.9%[12] - Adjusted EBITDA of $40.4 million increased 5.9%, and Adjusted EBITDA Margin increased 350 basis points to 37.6%[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 As of July 5, 2025, the company reported $63.9 million in cash, $388.0 million in senior secured notes, and $15.2 million in net operating cash flow Balance Sheet and Cash Flow Summary | Metric | Amount (in thousands) | | :-------------------------- | :-------------------- | | Cash and cash equivalents | $63,891 | | Restricted cash | $6,439 | | Borrowings outstanding (senior secured notes) | $388,000 | | Revolving credit facility | $0 outstanding | - Net cash provided by operating activities totaled $15.2 million during the quarter[10] Outlook & Guidance This section provides the company's updated financial outlook for fiscal 2025, including projections for sales, revenue, and net center changes Fiscal 2025 Financial Outlook The company updated its fiscal 2025 financial outlook, lowering sales and revenue projections while reiterating Adjusted Net Income and Adjusted EBITDA guidance Fiscal 2025 Financial Guidance | Metric | Current Outlook | Previous Outlook | | :-------------------- | :-------------------- | :-------------------- | | System-Wide Sales | $940 million to $950 million | $940 million to $960 million | | Total Revenue | $205 million to $209 million | $210 million to $214 million | | Same-Store Sales | 0.0% to 1.0% | 0.0% to 2.0% | | Adjusted Net Income | $31 million to $33 million | $31 million to $33 million | | Adjusted EBITDA | $69 million to $71 million | $69 million to $71 million | Fiscal 2025 Net New Center Outlook The company projects 10 to 12 new center openings and 40 to 60 closures in fiscal 2025, resulting in 28 to 50 net center closings - The Company continues to estimate that franchisees will open 10 to 12 new centers and close 40 to 60 centers in fiscal 2025[13] - This translates to 28 to 50 net center closings in fiscal 2025[13] - The Company expects 15 to 16 net center closings during the third quarter[13] Additional Information This section provides background on European Wax Center, disclaimers for forward-looking statements, non-GAAP financial measure definitions, and a glossary of key business metrics About European Wax Center, Inc. European Wax Center, Inc. is the leading U.S. franchisor and operator of out-of-home waxing services, with over 1,000 centers and $951 million in FY2024 sales - European Wax Center, Inc. (NASDAQ: EWCZ) is the leading franchisor and operator of out-of-home waxing services in the United States[16] - The company offers an unparalleled, professional personal care experience administered by highly trained wax specialists within the privacy of clean, individual waxing suites, performing more than 23 million services per year[16] - European Wax Center was founded in 2004 and is headquartered in Plano, Texas; its network includes more than 1,000 centers in 44 states, which generated sales of $951 million in fiscal 2024[16] Forward-Looking Statements This section clarifies that the press release contains forward-looking statements regarding the company's strategy and projections, subject to various known and unknown risks - This press release 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[17] - 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, performance, or achievements to be materially different[18] - Key factors that could cause actual results to differ include operational and financial results of franchisees, ability to attract and retain guests, competition, impact of growth, labor costs, supply chain issues, intellectual property, indebtedness, economic conditions, and regulatory compliance[18][19] Non-GAAP Financial Measures Disclosure The company uses non-GAAP financial measures like Adjusted EBITDA and Adjusted Net Income to assess performance, with a revised definition for Adjusted Net Income in Q1 2025 - 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[21] - Definitions are provided for EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, and Adjusted Net Income[22][23][24][25] - The definition of Adjusted Net Income was revised in the first quarter of 2025 to exclude the impact of non-cash amortization of intangible assets, which management does not view as part of core operations, to enable clearer evaluation of core operating performance[25][26] Glossary of Key Business Metrics This section defines key business metrics, including System-Wide Sales, which reflect overall network performance, and Same-Store Sales, which measure existing center performance - System-Wide Sales represent sales from same day services, retail sales and cash collected from wax passes for all centers in our network, including both franchisee-owned and corporate-owned centers; this measure allows assessment of royalty revenue, overall center performance, brand health, and market position[29] - Same-Store Sales reflect the change in sales over a comparable 52-week period year over year from services performed and retail sales for the same-store base, excluding the impact of new center openings and closures; this measure highlights the performance of existing centers[30] Financial Statements This section presents the Condensed Consolidated Balance Sheets, Statements of Operations, and Statements of Cash Flows for European Wax Center, Inc. Condensed Consolidated Balance Sheets The balance sheets show total assets increased to $716.4 million and total liabilities slightly decreased, leading to higher stockholders' equity as of July 5, 2025 Condensed Consolidated Balance Sheets | Item | July 5, 2025 (in thousands) | January 4, 2025 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Total assets | $716,376 | $707,067 | | Total liabilities | $610,514 | $615,475 | | Total stockholders' equity | $105,862 | $91,592 | | Cash and cash equivalents | $63,891 | $49,725 | | Long-term debt, net | $374,019 | $373,246 | Condensed Consolidated Statements of Operations Total revenue and net income decreased for both the quarter and year-to-date periods, with diluted EPS for Class A Common Stock remaining flat for the quarter Condensed Consolidated Statements of Operations | Item | 13 Weeks Ended July 5, 2025 (in thousands) | 13 Weeks Ended July 6, 2024 (in thousands) | 26 Weeks Ended July 5, 2025 (in thousands) | 26 Weeks Ended July 6, 2024 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total revenue | $55,911 | $59,871 | $107,338 | $111,745 | | Income from operations | $14,069 | $14,281 | $24,651 | $25,463 | | NET INCOME | $5,393 | $5,924 | $7,963 | $9,578 | | NET INCOME ATTRIBUTABLE TO EUROPEAN WAX CENTER, INC. | $3,752 | $4,249 | $5,487 | $7,014 | | Diluted - Class A Common Stock EPS | $0.09 | $0.09 | $0.13 | $0.15 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities increased for the year-to-date period, while net cash used in financing activities significantly decreased, leading to a higher net increase in cash Condensed Consolidated Statements of Cash Flows | Item | 26 Weeks Ended July 5, 2025 (in thousands) | 26 Weeks Ended July 6, 2024 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Net cash provided by operating activities | $27,904 | $25,131 | | Net cash used in investing activities | $(1,363) | $(80) | | Net cash used in financing activities | $(12,405) | $(22,130) | | Net increase in cash, cash equivalents and restricted cash | $14,136 | $2,921 | | Cash, cash equivalents and restricted cash, end of period | $70,330 | $62,149 | Non-GAAP Reconciliations This section provides reconciliations of GAAP Net Income to Adjusted Net Income, EBITDA, and Adjusted EBITDA, along with the Net Leverage Ratio calculation Reconciliation of Net Income to Adjusted Net Income This reconciliation details adjustments from GAAP Net Income to Adjusted Net Income, notably excluding amortization of intangible assets for clearer core operational insights Reconciliation of Net Income to Adjusted Net Income | Item | 13 Weeks Ended July 5, 2025 (in thousands) | 13 Weeks Ended July 6, 2024 (in thousands) | 26 Weeks Ended July 5, 2025 (in thousands) | 26 Weeks Ended July 6, 2024 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income | $5,393 | $5,924 | $7,963 | $9,578 | | Share-based compensation | $2,379 | $1,941 | $4,943 | $3,323 | | Amortization of intangible assets | $4,834 | $4,834 | $9,667 | $9,667 | | Adjusted Net Income | $11,773 | $11,146 | $21,284 | $19,732 | Reconciliation of Net Income to EBITDA and Adjusted EBITDA This reconciliation details adjustments from GAAP Net Income to EBITDA and Adjusted EBITDA, highlighting increased Adjusted EBITDA and Adjusted EBITDA Margin across all periods Reconciliation of Net Income to EBITDA and Adjusted EBITDA | Item | 13 Weeks Ended July 5, 2025 (in thousands) | 13 Weeks Ended July 6, 2024 (in thousands) | 26 Weeks Ended July 5, 2025 (in thousands) | 26 Weeks Ended July 6, 2024 (in thousands) | Trailing Twelve Months Ended July 5, 2025 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :---------------------------------------- | | Net income | $5,393 | $5,924 | $7,963 | $9,578 | $13,066 | | Interest expense, net | $6,594 | $6,367 | $13,227 | $12,703 | $26,016 | | Income tax expense | $2,060 | $1,721 | $3,441 | $2,933 | $2,698 | | Depreciation and amortization | $5,003 | $5,079 | $9,984 | $10,174 | $20,090 | | EBITDA | $19,050 | $19,091 | $34,615 | $35,388 | $61,870 | | Share-based compensation | $2,379 | $1,941 | $4,943 | $3,323 | $6,770 | | Adjusted EBITDA | $21,613 | $20,642 | $40,407 | $38,140 | $77,772 | | Total revenue | $55,911 | $59,871 | $107,338 | $111,745 | $212,509 | | Net income margin | 9.6% | 9.9% | 7.4% | 8.6% | 6.1% | | Adjusted EBITDA Margin | 38.7% | 34.5% | 37.6% | 34.1% | 36.6% | Reconciliation of Total Debt to Net Leverage Ratio This section calculates the Net Leverage Ratio as 4.2x for the trailing twelve months ended July 5, 2025, based on net debt and Adjusted EBITDA Reconciliation of Total Debt to Net Leverage Ratio | Item | Trailing Twelve Months Ended July 5, 2025 (in thousands) | | :-------------------------- | :---------------------------------------- | | Total debt | $388,000 | | Less: Cash and cash equivalents | $(63,891) | | Net Debt | $324,109 | | Adjusted EBITDA | $77,772 | | Net Leverage Ratio | 4.2 x | Contact Information This section provides contact details for investor relations and media inquiries for European Wax Center, Inc. Investor and Media Contacts Investor relations and media contact information is provided for European Wax Center, Inc. - Investor Contact: Edelman Smithfield for European Wax Center, Inc. (EWCIR@edelman.com)[44] - Media Contact: Zeno Group, Sophia Tortorella (sophia.tortorella@zenogroup.com, 312-752-6851)[44]