European Wax Center, Inc. Q4 FY2023 earnings call

• In 2023, the company opened 100 net new units, driven by committed franchisees, and surpassed 1,000 centers nationwide.
• Core guests (Wax Pass and routine) remained consistent in frequency and spend.
• Held a brand conference in Las Vegas to share best practices and align focus for growth.
• Engaged a new media agency for a streamlined media strategy to drive in-center reservations.
• Tested brow tinting in select centers, with positive guest response leading to network-wide rollout.
• Expanded laser hair removal pilot to more centers in New York and plan to invest in other states.

In 2023, European Wax Center achieved system-wide sales of $955 million, revenue of $221 million, and adjusted EBITDA of $76 million. For the fourth quarter of 2023, system-wide sales increased 7.2% to $241.7 million, revenue rose 5.2% to $56.3 million, and same-store sales grew by 1.3%. Gross margin improved to 72% in the fourth quarter. The core segment of waxing remains dominant, with laser hair removal as a pilot initiative showing promising results in attracting new and existing guests while minimizing cannibalization of core services.

• Plan to open 75 to 80 net new centers in 2024, back half weighted with an estimated one-third in the first half and two-thirds in the second half.
• Expect system-wide sales between $1 billion and $1.25 billion, same-store sales growth of 2% to 5%.
• Remove the COVID surcharge on franchisees, impacting 2024 revenue.
• Adjusted EBITDA outlook is $75 million to $80 million, including impact from strategic hires and laser pilot expenses.
• Aim for de-leveraging to approximately 3.5x adjusted EBITDA.

• Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially, such as macroeconomic environment impacts on guest behavior.
• Outcomes of the laser hair removal pilot and brow tinting rollout may not meet expectations.
• Supply chain and cost management challenges could affect profitability.

Q: Randy Konik asked about learnings from brow test, laser revenue per visit, and long-term store growth.

A: David Willis responded that brow tinting is a basket driver, laser pilot shows encouraging results, and long-term unit growth aligns with high-single digit algorithm.

Q: Lorraine Hutchinson inquired about components of 2024 comp guidance.

A: Stacie Shirley explained that comp guidance ramps as initiatives take root, with Q1 expected to be the lowest.

Q: Josh Young asked about trends in guest cohorts and hiring wax specialists.

A: David Willis and Stacie Shirley discussed initiatives to drive new guests and staff retention, with field trainers supporting franchisees.

Q: Korinne Wolfmeyer asked about EBITDA expectations and episodic guest improvement.

A: Stacie Shirley and Andrea Wasserman discussed margin expansion, laser investments, and marketing efforts targeting new guests and Wax Pass conversion.

Q: Dana Telsey asked about market pricing and new center opening playbook.

A: David Willis and Andrea Wasserman talked about pricing evaluation and the new center opening playbook rollout, with centers back half weighted.