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 [20][22] - Same-store sales grew by 20 basis points year-over-year [20] - Adjusted EBITDA increased by 9.6% to $20.2 million from $18.4 million in the prior year, with an adjusted EBITDA margin improvement of 400 basis points to 37.2% [23] - Total revenue decreased by approximately $1.2 million, or 2.2%, primarily due to lower contributions from wholesale product and retail revenue [22] - Net interest expense increased to $6.5 million from $6.3 million in the prior year [23] Business Line Data and Key Metrics Changes - The company opened three growth centers during the quarter and closed nine, resulting in six net closures, which was better than the expected closure range of 15-16 [22] - Wax Pass sales saw a slight year-over-year uptick, indicating stability in core guest engagement [39] Market Data and Key Metrics Changes - Com trends were strong through July and mid-August before softening in the latter half of August and September [21] - Regional performance showed improvement in California, while areas like New York, Philadelphia, and DC experienced more weakness [39] 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 [7][12] - A new brand agency has been brought on to refine brand identity and connect with high-value audiences, with initiatives expected to scale meaningfully in 2026 [12][54] - The company expects to return to positive net center growth by year-end 2026, with a focus on new centers and markets with strong demand [17][40] 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 [26][27] - The company is optimistic about the strategic groundwork established, which is beginning to take hold and position the company for sustainable long-term growth [28][29] - Management acknowledged that new guest acquisition remains pressured but expects improvement in 2026 [26][27] Other Important Information - The company narrowed its closure range for the year to between 35 and 40, reflecting timing shifts in anticipated closures and progress made on initiatives with franchisees [25][26] - The company ended the quarter with $73.6 million in cash and a net leverage ratio of 3.9 times [24] Q&A Session Summary Question: Can you quantify the lift from revamped marketing efforts? - Management noted that they have improved contactability from 38% to 60% of guests, which has enhanced engagement and driven frequency improvements [32][33] Question: What trends are observed in Wax Pass sales and regional performance? - Wax Pass sales have seen a slight uptick year-over-year, with stability in the core guest base, while California has shown improvement compared to weaker performance in New York, Philadelphia, and DC [39] 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 [40][46] Question: What is the outlook for new guest acquisition? - Management highlighted that robust data analytics and a refreshed brand identity are expected to enhance new guest acquisition efforts moving forward [54][55] Question: Can you provide insights on guest count versus ticket growth? - Management emphasized a balanced approach to driving traffic and ticket growth, focusing on both increasing guest count and smart pricing strategies [56][58]