European Wax Center(US:EWCZ)2023-11-11 12:04Financial Data and Key Metrics Changes - Q3 system-wide sales increased by 2.4% to $240.7 million, while total revenue rose by 1.2% to $55.7 million, reflecting a shift in the reporting calendar that moved some promotional days into Q2 [32][41] - Q3 adjusted EBITDA increased by 3.4% to $19.3 million, with an adjusted EBITDA margin of 34.6%, representing an 80 basis point improvement year-over-year [52][56] - Cash position improved by approximately $10 million to $64 million, with net leverage decreasing to 4.4x adjusted EBITDA compared to 5.3x in Q3 last year [34][36] Business Line Data and Key Metrics Changes - Wax Pass and routine guests, comprising over 75% of system-wide sales, showed strong brand loyalty, while episodic guests, making up about 25%, were more impacted by economic concerns [12][42] - The company opened 23 net new centers across 12 states in Q3, achieving over 80% of its expected new center openings for fiscal 2023 [25][80] - Same-store sales increased by 3.4%, driven by higher average tickets and consistent performance from ramping and mature centers [22][79] Market Data and Key Metrics Changes - The macroeconomic environment has negatively impacted the behavior of episodic guests, leading to a decrease in their frequency and spend [43][118] - The company is not observing significant regional differences in performance, although some variations exist based on new center openings [70] Company Strategy and Development Direction - The company is focused on two growth vectors: expanding its footprint through new center growth and driving in-center sales to enhance both system-wide and same-store sales [44][56] - A new media agency has been engaged to implement strategies aimed at increasing guest reservations and improving marketing effectiveness [24][28] - The company is testing additional hair removal modalities, such as laser hair removal, to attract new customers and increase share of wallet from existing guests [49] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that while Wax Pass and routine guests remain committed, the macro environment has created challenges for episodic guests, impacting their frequency and spend [43][118] - The company updated its guidance for fiscal 2023 to reflect current transaction trends, expecting system-wide sales between $945 million and $955 million [35][36] - Despite challenges, management remains confident in long-term growth potential, citing strong franchisee confidence and a robust pipeline for new center openings [80] Other Important Information - The company released its inaugural ESG report, highlighting its commitment to sustainability and community support [30] - The adjusted net income for Q3 was $6.1 million, reflecting the impact of tax expenses [52] Q&A Session Summary Question: Can you provide more color on the pattern differential from episodic guests? - Management noted that less frequent guests began to pull back in late August and September, while Wax Pass guests remained stable [86] Question: What are the early impressions from the laser tests? - Initial results from the laser test in six centers are encouraging, suggesting potential to capture new demographics and enhance existing guest spending [61] Question: Are there any changes in new store ramp expectations due to macro pressures? - Management remains bullish on new unit development and does not foresee a slowdown in demand, emphasizing support for franchisees [64][65]