European Wax Center(US:EWCZ)2024-03-06 17:55Financial Data and Key Metrics Changes - In fiscal 2023, the company achieved system-wide sales of $955 million, a 6.3% increase, and total revenue of $221 million, up 6.6% from the previous year [93][99] - Adjusted EBITDA for the year was $76 million, reflecting a 6.1% increase compared to $71.6 million in fiscal 2022 [93][136] - GAAP net income rose 59.1% to $3.6 million, while adjusted net income decreased from $48.7 million in Q4 2022 to $6 million in Q4 2023 [39][136] Business Line Data and Key Metrics Changes - The company opened 100 net new centers in 2023, achieving over 10% unit growth for the second consecutive year [5][99] - Same-store sales increased by 2.9% for the full year, driven by new center openings and increased guest spending [93][99] - Fourth quarter same-store sales rose by 1.3%, indicating stable performance in existing locations [104] Market Data and Key Metrics Changes - The company plans to open 75 to 80 net new centers in 2024, primarily from existing franchisees, maintaining a high-single digit growth algorithm [40][100] - The company expects system-wide sales for 2024 to be between $1 billion and $1.25 billion, representing a growth rate of approximately 6.5% to 9% [94] Company Strategy and Development Direction - The company is focused on driving visits from both new and existing guests while refining its new center opening best practices to enhance unit economics [35][90] - A new media agency has been engaged to streamline marketing efforts aimed at increasing in-center reservations and guest acquisition [7][133] - The company is piloting laser hair removal services, viewing it as an additive opportunity to attract new guests and increase revenue from existing customers [38][103] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the core business, noting that core guests remained committed to their personal care routines despite macroeconomic challenges [99][101] - The company anticipates a modest gross margin expansion and expects to see adjusted EBITDA margin expansion of approximately 130 basis points for the core waxing business in 2024 [106] - Management highlighted the importance of adapting to market conditions and franchisee needs while maintaining a focus on profitability and growth [141][148] Other Important Information - The company ended fiscal 2023 with $52.7 million in cash and $394 million outstanding under senior secured notes, with a net leverage of 4.4x adjusted EBITDA [10][106] - The company has implemented a new data-driven pre-opening playbook to enhance the success of new center openings [90][131] Q&A Session Summary Question: Insights on brow tinting and laser testing - Management noted that brow tinting is being tested to increase revenue per visit and attract new guests, with positive initial results [44] Question: Expectations for EBITDA and margin expansion - Management indicated that excluding laser investments, they expect approximately 130 basis points of margin expansion beyond 2024 [24][106] Question: Market pricing strategies - Management stated that pricing adjustments will be monitored, with potential recommendations based on market conditions and franchisee feedback [27][122] Question: Trends in guest cohorts and sales guidance - Management confirmed that core guests remain strong, and they are focused on driving new guest acquisition and increasing frequency among existing guests [50][83] Question: Staffing and hiring trends - Management reported that staffing levels are adequate, with a focus on retaining experienced wax specialists to support growth [116][146]