European Wax Center(EWCZ) - 2022 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - System-wide sales increased by 32% to $207 million, while total revenue grew by 24% to $45.4 million [16][48] - Adjusted EBITDA rose by 21% to $15.2 million, with an adjusted EBITDA margin of 33.4%, a decline of 80 basis points due to public company costs [16][51] - Adjusted net income increased to $8.6 million, up from $5.7 million year-over-year [52] Business Line Data and Key Metrics Changes - The company opened 21 net new centers, ending the quarter with 874 centers across 44 states [13][49] - Same-store sales growth was reported at 29%, significantly outperforming expectations [14][49] - Mature centers showed strong double-digit growth driven by increased traffic and pricing [15] Market Data and Key Metrics Changes - California contributed approximately one-third of the 29% same-store sales growth, recovering faster than anticipated [15][50] - The company is targeting 7% to 10% annual unit growth, expecting over 8% growth in fiscal 2022 [19] Company Strategy and Development Direction - The company aims to expand its national footprint through new centers and enhance marketing and loyalty programs to deepen customer engagement [17][25] - A focus on increasing the pipeline of Wax Specialists is critical to support new unit growth [20] - The company is leveraging its scale to enhance supply chain efficiencies and support franchisees [35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating macroeconomic headwinds and highlighted strong traffic and engagement from guests [42][43] - The company raised its fiscal 2022 guidance for both top-line and bottom-line metrics based on strong first-quarter performance [62][63] Other Important Information - A special dividend of $3.30 per share is expected to be issued following the refinancing of the capital structure [12][53] - The company is focused on maintaining a strong balance sheet with cash and cash equivalents of $44.2 million at the end of the quarter [52] Q&A Session Summary Question: Changes in service patterns and impact on transaction value - Management noted that it is still early to see a significant shift towards facial services, but expects this to increase over time as customers return [73] Question: Market share gains and geographic performance - Management indicated that approximately 20% of new guests came from competitors, with many independent salons not reopening post-COVID [75] Question: Comps outlook and inflation impacts - Management acknowledged tougher comparisons in Q2 and Q3 but did not foresee degradation in long-term targets [77][78] Question: Gross margin guidance and labor rates - Management confirmed that gross margin expectations remain intact, with franchisees managing inflationary labor rates effectively [82][86] Question: Demand during economic downturns - Historical performance during the 2008-2009 recession showed resilience, with continued center openings and positive comp growth [108] Question: Targeting new customer segments - The company identified a total addressable market of $18 billion, with significant opportunities in the male and multicultural segments [114]