European Wax Center(EWCZ) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - System-wide sales for Q3 2025 were $238.2 million, a decrease of 0.8% year-over-year, primarily due to closed centers [19] - Same-store sales grew by 20 basis points year-over-year [19] - Adjusted EBITDA increased by 9.6% to $20.2 million from $18.4 million in the prior year [22] - Adjusted EBITDA margin improved by 400 basis points to 37.2% [22] - Total revenue decreased by approximately $1.2 million, or 2.2%, primarily due to lower contributions from wholesale product and retail revenue [20] - Gross margin increased modestly to 73.3% [21] - Adjusted net income rose by 14.2% to $10.7 million from $9.3 million last year [22] Business Line Data and Key Metrics Changes - The company opened three growth centers during the quarter and closed nine, resulting in six net closures [20] - The focus on traffic growth among both new and existing guests has been emphasized, with retention stable quarter-over-quarter [8][10] Market Data and Key Metrics Changes - The company ended Q3 with 1,053 centers, down 1% year-over-year [20] - Com trends were strong through July and mid-August before softening in the latter half of August and September [19] Company Strategy and Development Direction - The company is focused on three strategic priorities: driving sales through traffic growth, improving four-wall profitability for franchisees, and pursuing disciplined, profitable expansion [6][12] - A new brand agency has been brought on to refine the brand and connect with high-value audiences, with foundational work already completed [12][44] - The company expects to return to positive net center growth by year-end 2026 [17] Management's Comments on Operating Environment and Future Outlook - Management reaffirmed full-year financial guidance, expecting system-wide sales of $940-$950 million and same-store sales to be flat to up 1% for the full year [25] - The company is optimistic about the progress made in marketing and operational capabilities, which are expected to strengthen guest engagement and traffic [19][24] - Management noted that new guest acquisition remains pressured but anticipates improvement in 2026 [25][44] Other Important Information - The company narrowed its closure range to between 35 and 40 for the year, reflecting timing shifts in anticipated closures [24] - The company has a $40 million revolver fully undrawn and ended the quarter with $73.6 million in cash [23] Q&A Session Summary Question: Can you quantify the lift seen from revamped marketing efforts? - Management noted that they have improved contactability from 38% to 60% of guests, which has allowed for better engagement and improved frequency [30] Question: What trends are observed in Wax Pass sales and regional performance? - Wax Pass sales have seen a slight year-over-year uptick, with stability in the core guest base, while California has shown improvement compared to New York, Philadelphia, and DC [32][33] Question: What are the expectations for center openings and closures moving forward? - Management indicated that closures are primarily low-volume units due to various factors, and they expect to return to net positive growth by the end of 2026 [36][37] Question: What is the outlook for new guest acquisition? - Management highlighted that robust data analytics and a fresh brand identity are expected to enhance new guest acquisition efforts [41][44] Question: What factors might affect Q4 performance? - Management acknowledged timing situations that may impact year-over-year growth but remains confident in meeting full-year guidance [40]