Today, European Wax Center, Inc. (NASDAQ: EWCZ), the largest and
fastest-growing franchisor and operator of out-of-home waxing
services in the United States, reports financial results for the 13
and 39 weeks ended September 30, 2023.
David Willis, Chief Executive Officer of European Wax Center,
Inc. stated: “The third quarter marked another period of top-line,
bottom-line and unit growth for European Wax Center. Our robust
unit economics continued to generate strong demand from existing
franchisees who drove more than 12%-unit growth through 23 net new
center openings and who continue to add to our new unit pipeline.
In addition, our Wax Pass holders and routine guests remained
committed to their waxing regimens and continue to represent a
recurring revenue stream with consistent frequency and spend with
our brand.”
Mr. Willis continued, “Despite compelling franchisee-driven unit
growth and stable demand from our loyal guests, the heightened
inflationary environment continued to impact visits from a portion
of our less frequent guests, and our momentum entering the third
quarter did not sustain through September. While trends exiting the
third quarter have stabilized, we are updating our fiscal 2023
outlook to reflect lower-than-expected transactions in the third
and fourth quarters to date. Importantly, we still expect to
achieve meaningful organic new unit and top line growth alongside
stable Adjusted EBITDA margin at the midpoint of our revised
guidance. While the quarter did not materialize the way we
expected, we are confident that our fundamental business model
remains strong, underpinned by our category-leading position,
best-in-class unit growth and consistent core guest base.”
Results for the Third Quarter of Fiscal 2023
versus Fiscal 2022
- Franchisees opened 23 net new centers, and we ended the quarter
with 1,026 centers, representing a 12.6% increase versus 911
centers in prior year period.
- System-wide sales of $240.7 million increased 2.4% from $235.2
million in the prior year period, primarily driven by net new
centers opened over the past twelve months and increased spend by
guests at existing centers. Due to a shift in our fiscal reporting
calendar, the third quarter of fiscal 2023 had fewer promotional
days than the prior year period, contributing to a lower
year-over-year growth rate compared to recent quarters.
- Total revenue of $55.7 million increased 1.2% from $55.0
million in the prior year period. Due to a shift in our fiscal
reporting calendar, the third quarter of fiscal 2023 had fewer
promotional days than the prior year period, contributing to a
lower year-over-year growth rate compared to recent quarters.
- Same-store sales increased 3.4%.
- Selling, general and administrative expenses (“SG&A”) of
$14.4 million increased 5.2% from $13.7 million in the prior year
period. SG&A as a percent of total revenue increased 100 basis
points to 25.8% from 24.8%, primarily due to an increase in
corporate-funded marketing expense.
- Interest expense of $6.5 million decreased from $6.8 million in
the prior year period primarily due to an increase in interest
income from the Company’s short-term investments.
- Income tax expense was $1.8 million compared to a negligible
amount in the prior year period.
- Net income of $4.2 million decreased 20.7% from $5.3 million in
the prior year period due to increased tax expense, and Adjusted
net income of $6.1 million decreased 9.9% from $6.7 million in the
prior year period.
- Adjusted EBITDA of $19.3 million increased 3.4% from $18.6
million in the prior year period. As a percent of total revenue,
Adjusted EBITDA margin increased 80 basis points to 34.6% from
33.8%.
Year-to-Date Results through the Third Quarter of Fiscal
2023 versus Fiscal 2022
- Franchisees opened 82 net new centers in the first three
quarters of fiscal 2023.
- System-wide sales of $713.3 million grew 6.0% from $673.2
million in the prior year-to-date period, primarily driven by net
new centers opened over the past twelve months and increased spend
by guests at existing centers.
- Total revenue of $164.7 million increased 7.1% from $153.8
million in the prior year-to-date period.
- Same-store sales increased 3.4%.
- SG&A of $45.8 million increased 3.2% from $44.4 million in
the prior year-to-date period. SG&A as a percent of total
revenue improved 100 basis points to 27.8% from 28.8%, primarily
due to a reduction in professional fees related to the Company’s
refinancing and secondary offering in 2022, partially offset by
increased share-based compensation expense in the current
year.
- Interest expense of $20.1 million increased from $16.4 million
in the prior year-to-date period due to higher average principal
balances and interest rates following the Company’s refinancing in
2022, partially offset by the nonrecurrence of a $2.0 million loss
on debt extinguishment.
- Income tax expense was $4.0 million compared to $0.1 million in
the prior year-to-date period.
- Net income of $8.7 million decreased from $11.3 million in the
prior year-to-date period due to increased tax expense, and
Adjusted net income of $16.5 million decreased from $22.7 million
in the prior year-to-date period.
- Adjusted EBITDA of $56.7 million increased 8.3% from $52.4
million in the prior year-to-date period. As a percent of total
revenue, Adjusted EBITDA margin increased 40 basis points to 34.5%
from 34.1%.
Balance Sheet and Cash FlowThe Company ended
the quarter with $64.0 million in cash and cash equivalents, $6.5
million in restricted cash, $395.0 million in borrowings
outstanding under its senior secured notes and no outstanding
borrowings under its revolving credit facility. Net cash provided
by operating activities totaled $17.6 million during the
quarter.
Fiscal 2023 Outlook(1)The Company updates its
previous outlook for fiscal year 2023 as follows:
|
Fiscal 2023 Outlook (Current) |
Fiscal 2023 Outlook (Previous) |
New
Center Openings, Net |
98 to 100 |
95 to 100 |
System-Wide Sales |
$945 million to $955 million |
$965 million to $990 million |
Total
Revenue |
$217 million to $219 million |
$222 million to $229 million |
Same-Store Sales |
1.5% to 2.5% |
Mid-Single Digits |
Adjusted
Net Income(2) |
$20.5 million to $21.5 million |
$22 million to $24.5 million |
Adjusted
EBITDA |
$74.5 million to $76.0 million |
$77 million to $80 million |
(1) Fiscal 2022 and Fiscal 2023 each include a 53rd week in the
fourth quarter. The Company estimates the 53rd week contribution to
the top and bottom line is slightly less than the contribution from
an average fourth quarter week. The Company’s current outlook
assumes no meaningful change in consumer behavior driven by
inflationary pressures or the COVID-19 pandemic and no further
impacts from incremental tightening in the labor market beyond what
we see today.(2) Adjusted net income outlook assumes a 20% blended
statutory tax rate for Fiscal 2023.
See “Disclosure Regarding Non-GAAP Financial Measures” and the
reconciliation tables that accompany this release for a discussion
and reconciliation of certain non-GAAP financial measures included
in this release.
Adjustments to Reported Non-GAAP Adjusted Net Income for
the 13 and 26 Weeks Ended July 1, 2023In the second
quarter of fiscal 2023, the Company reported non-GAAP Adjusted net
income of $5.8 million and $9.2 million for the 13 and 26 weeks
ended July 1, 2023, respectively. Subsequent to our earnings
release on August 9, 2023, the Company discovered an error in the
calculation of the reported non-GAAP adjustment for income taxes
which resulted in an understatement of non-GAAP Adjusted net income
for the 13 and 26 weeks ended July 1, 2023. After correction of
this error, non-GAAP net income for the 13 weeks ended July 1, 2023
increased from $5.8 million, as reported, to $7.1 million, as
adjusted. Non-GAAP net income for the 26 weeks ended July 1, 2023
increased from $9.2 million, as reported, to $10.5 million, as
adjusted. This error had no effect on the Company’s reported GAAP
results for the 13 and 26 weeks ended July 1, 2023. Refer to the
Reconciliation from GAAP net income to non-GAAP Adjusted net income
table and related footnotes at the end of this press release for
more details.
Webcast and Conference Call InformationEuropean
Wax Center, Inc. will host a conference call to discuss third
quarter fiscal 2023 results today, November 8, 2023, at 8:00 a.m.
ET/7:00 a.m. CT. To access the conference call dial-in information,
analysts should click here to register online at least 15 minutes
before the start of the call. All other participants are asked to
access the earnings webcast via https://investors.waxcenter.com. A
replay of the webcast will be available two hours after the call
and archived on the same web page for one year.
About European Wax Center, Inc.European Wax
Center, Inc. (NASDAQ: EWCZ) is the largest and fastest-growing
franchisor and operator of out-of-home waxing services in the
United States. European Wax Center locations perform more than 22
million services per year, providing guests with an unparalleled,
professional personal care experience administered by highly
trained wax specialists within the privacy of clean, individual
waxing suites. The Company continues to revolutionize the waxing
industry with its innovative Comfort Wax® formulated with the
highest quality ingredients to make waxing a more efficient and
relatively painless experience, along with its collection of
proprietary products to help enhance and extend waxing results. By
leading with its values – We Care About Each Other, We Do the Right
Thing, We Delight Our Guests, and We Have Fun While Being Awesome –
the Company is proud to be Certified™ by Great Place to Work®.
European Wax Center, Inc. was founded in 2004 and is headquartered
in Plano, Texas. Its network, which now includes more than 1,000
centers in 45 states, generated sales of nearly $900 million in
fiscal 2022. For more information, including how to receive your
first wax free, please visit: https://waxcenter.com.
Forward-Looking StatementsThis press release
includes “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements in this press release include but are not limited to
European Wax Center, Inc.’s strategy, outlook and growth prospects,
its operational and financial outlook for fiscal 2023 and its
long-term targets and algorithm, including but not limited to
statements under the heading “Fiscal 2023 Outlook” and statements
by European Wax Center’s executive. Words including “anticipate,”
“believe,” “continue,” “could,” “estimate,” “expect,” “intend,”
“may,” “might,” “plan,” “potential,” “predict,” “project,” “seek,”
“should,” “will,” or “would,” or, in each case, the negative
thereof or other variations thereon or comparable terminology are
intended to identify forward-looking statements. In addition, any
statements or information that refer to expectations, beliefs,
plans, projections, objectives, performance or other
characterizations of future events or circumstances, including any
underlying assumptions, are forward-looking.
These forward-looking statements are based on current
expectations and beliefs. These statements are neither promises nor
guarantees, but involve known and unknown risks, uncertainties and
other important factors that may cause the Company’s actual
results, performance or achievements to be materially different
results, performance or achievements expressed or implied by the
forward-looking statements, including, but not limited to: the
operational and financial results of its franchisees; the ability
of its franchisees to enter new markets, select appropriate sites
for new centers or open new centers; the effectiveness of the
Company’s marketing and advertising programs and the active
participation of franchisees in enhancing the value of its brand;
the failure of its franchisees to participate in and comply with
its agreements, business model and policies; the Company’s and its
franchisees’ ability to attract and retain guests; the effect of
social media on the Company’s reputation; the Company’s ability to
compete with other industry participants and respond to market
trends and changes in consumer preferences; the effect of the
Company’s planned growth on its management, employees, information
systems and internal controls; the Company’s ability to retain of
effectively respond to a loss of key executives; a significant
failure, interruptions or security breach of the Company’s computer
systems or information technology; the Company and its franchisees’
ability to attract, train, and retain talented wax specialists and
managers; changes in the availability or cost of labor; the
Company’s ability to retain its franchisees and to maintain the
quality of existing franchisees; failure of the Company’s
franchisees to implement business development plans; the ability of
the Company’s limited key suppliers, including international
suppliers, and distribution centers to deliver its products;
changes in supply costs and decreases in the Company’s product
sourcing revenue; the Company’s ability to adequately protect its
intellectual property; the Company’s substantial indebtedness; the
impact of paying some of the Company’s pre-IPO owners for certain
tax benefits it may claim; changes in general economic and business
conditions; the Company’s and its franchisees’ ability to comply
with existing and future health, employment and other governmental
regulations; complaints or litigation that may adversely affect the
Company’s business and reputation; the seasonality of the Company’s
business resulting in fluctuations in its results of operations;
the impact of global crises, such as the COVID-19 pandemic on the
Company’s operations and financial performance; the impact of
inflation and rising interest rates on the Company’s business; the
Company’s access to sources of liquidity and capital to finance its
continued operations and growth strategy and the other important
factors discussed under the caption “Risk Factors” in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2022
filed with the Securities and Exchange Commission (the “SEC”), as
such factors may be updated from time to time in its other filings
with the SEC, accessible on the SEC’s website at www.sec.gov and
Investors Relations section of the Company’s website at
www.waxcenter.com.
These and other important factors could cause actual results to
differ materially from those indicated by the forward-looking
statements made in this press release. Any forward-looking
statement that the Company makes in this press release speaks only
as of the date of such statement. Except as required by law, the
Company does not have any obligation to update or revise, or to
publicly announce any update or revision to, any of the
forward-looking statements, whether as a result of new information,
future events or otherwise.
Disclosure Regarding Non-GAAP Financial
Measures In addition to the financial measures presented
in this release in accordance with U.S. Generally Accepted
Accounting Principles (“GAAP”), the Company has included certain
non-GAAP financial measures in this release, including Adjusted
EBITDA and Adjusted net income. Management believes these non-GAAP
financial measures are useful because they enable management,
investors, and others to assess the operating performance of the
Company.
We define EBITDA as net income (loss) before interest, taxes,
depreciation and amortization. We believe that EBITDA, which
eliminates the impact of certain expenses that we do not believe
reflect our underlying business performance, provides useful
information to investors to assess the performance of our
business.
We define Adjusted EBITDA as net income (loss) before interest,
taxes, depreciation and amortization, adjusted for the impact of
certain additional non-cash and other items that we do not consider
in our evaluation of ongoing performance of our core operations.
These items include exit costs related to leases of abandoned
space, IPO-related costs, non-cash equity-based compensation
expense, corporate headquarters office relocation, non-cash gains
and losses on remeasurement of our tax receivable agreement
liability, transaction costs and other one-time expenses.
We define Adjusted net income (loss) as net income (loss)
adjusted for the impact of certain additional non-cash and other
items that we do not consider in our evaluation of ongoing
performance of our core operations. These items include exit costs
related to leases of abandoned space, IPO-related costs, non-cash
equity-based compensation expense, corporate headquarters office
relocation, debt extinguishment costs, non-cash gains and losses on
remeasurement of our tax receivable agreement liability,
transaction costs and other one-time expenses. Please refer to the
reconciliations of non-GAAP financial measures to their GAAP
equivalents located at the end of this release.
This release includes forward-looking guidance for certain
non-GAAP financial measures, including Adjusted EBITDA and Adjusted
net income. These measures will differ from net income (loss),
determined in accordance with GAAP, in ways similar to those
described in the reconciliations at the end of this release. We are
not able to provide, without unreasonable effort, guidance for net
income (loss), determined in accordance with GAAP, or a
reconciliation of guidance for Adjusted EBITDA and Adjusted net
income (loss) to the most directly comparable GAAP measure because
the Company is not able to predict with reasonable certainty the
amount or nature of all items that will be included in net income
(loss).
Glossary of Terms for Our Key Business
MetricsSystem-Wide Sales. System-wide sales represent
sales from same day services, retail sales and cash collected from
wax passes for all centers in our network, including both
franchisee-owned and corporate-owned centers. While we do not
record franchised center sales as revenue, our royalty revenue is
calculated based on a percentage of franchised center sales, which
are 6.0% of sales, net of retail product sales, as defined in the
franchise agreement. This measure allows us to better assess
changes in our royalty revenue, our overall center performance, the
health of our brand and the strength of our market position
relative to competitors. Our system-wide sales growth is driven by
net new center openings as well as increases in same-store
sales.
Same-Store Sales. Same-store sales reflect the change in
year-over-year sales from services performed and retail sales for
the same-store base. We define the same-store base to include those
centers open for at least 52 full weeks. If a center is closed for
greater than six consecutive days, the center is deemed a closed
center and is excluded from the calculation of same-store sales
until it has been reopened for a continuous 52 full weeks. This
measure highlights the performance of existing centers, while
excluding the impact of new center openings and closures. We review
same-store sales for corporate-owned centers as well as
franchisee-owned centers. Same-store sales growth is driven by
increases in the number of transactions and average transaction
size.
EUROPEAN WAX CENTER, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS (Amounts
in thousands, except share and per share
amounts)(Unaudited) |
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
ASSETS |
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
63,959 |
|
|
$ |
44,219 |
|
Restricted cash |
|
|
6,544 |
|
|
|
6,575 |
|
Accounts receivable, net |
|
|
6,764 |
|
|
|
6,932 |
|
Inventory, net |
|
|
21,702 |
|
|
|
23,017 |
|
Prepaid expenses and other current assets |
|
|
8,295 |
|
|
|
5,574 |
|
Total current assets |
|
|
107,264 |
|
|
|
86,317 |
|
Property
and equipment, net |
|
|
2,555 |
|
|
|
2,747 |
|
Operating lease right-of-use assets |
|
|
4,292 |
|
|
|
4,899 |
|
Intangible assets, net |
|
|
168,812 |
|
|
|
183,030 |
|
Goodwill |
|
|
328,551 |
|
|
|
328,551 |
|
Deferred
income taxes |
|
|
139,347 |
|
|
|
106,187 |
|
Other
non-current assets |
|
|
3,561 |
|
|
|
4,301 |
|
Total assets |
|
$ |
754,382 |
|
|
$ |
716,032 |
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
$ |
16,462 |
|
|
$ |
18,547 |
|
Long-term debt, current portion |
|
|
4,000 |
|
|
|
4,000 |
|
Tax receivable agreement liability, current portion |
|
|
2,467 |
|
|
|
4,867 |
|
Deferred revenue, current portion |
|
|
4,313 |
|
|
|
4,084 |
|
Operating lease liabilities, current portion |
|
|
1,263 |
|
|
|
1,312 |
|
Total current liabilities |
|
|
28,505 |
|
|
|
32,810 |
|
Long-term debt, net |
|
|
371,639 |
|
|
|
370,935 |
|
Tax
receivable agreement liability, net of current portion |
|
|
206,233 |
|
|
|
167,293 |
|
Deferred
revenue, net of current portion |
|
|
6,850 |
|
|
|
6,901 |
|
Operating lease liabilities, net of current portion |
|
|
3,621 |
|
|
|
4,227 |
|
Other
long-term liabilities |
|
|
2,063 |
|
|
|
3,562 |
|
Total liabilities |
|
|
618,911 |
|
|
|
585,728 |
|
Commitments and contingencies |
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
Preferred stock ($0.00001 par value, 100,000,000 shares authorized,
none issued and outstanding as of September 30, 2023 and December
31, 2022.) |
|
|
— |
|
|
|
— |
|
Class A common stock ($0.00001 par value, 600,000,000 shares
authorized, 51,225,048 and 45,277,325 shares issued and 50,131,924
and 44,561,685 shares outstanding as of September 30, 2023 and
December 31, 2022, respectively) |
|
|
— |
|
|
|
— |
|
Class B common stock ($0.00001 par value, 60,000,000 shares
authorized, 12,306,072 and 18,175,652 shares issued and outstanding
as of September 30, 2023 and December 31, 2022, respectively) |
|
|
— |
|
|
|
— |
|
Treasury stock, at cost 1,093,124 and 715,640 shares of Class A
common stock as of September 30, 2023 and December 31, 2022,
respectively |
|
|
(16,449 |
) |
|
|
(10,080 |
) |
Additional paid-in capital |
|
|
227,845 |
|
|
|
207,517 |
|
Accumulated deficit |
|
|
(111,992 |
) |
|
|
(118,437 |
) |
Total stockholders’ equity attributable to European Wax Center,
Inc. |
|
|
99,404 |
|
|
|
79,000 |
|
Noncontrolling interests |
|
|
36,067 |
|
|
|
51,304 |
|
Total
stockholders’ equity |
|
|
135,471 |
|
|
|
130,304 |
|
Total liabilities and stockholders’ equity |
|
$ |
754,382 |
|
|
$ |
716,032 |
|
EUROPEAN WAX CENTER, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in
thousands)(Unaudited) |
|
|
|
|
|
For the Thirteen Weeks Ended |
|
|
For the Thirty-Nine Weeks Ended |
|
|
|
September 30, 2023 |
|
|
September 24, 2022 |
|
|
September 30, 2023 |
|
|
September 24, 2022 |
|
REVENUE |
|
|
|
|
|
|
|
|
|
|
|
|
Product sales |
|
$ |
31,890 |
|
|
$ |
31,565 |
|
|
$ |
93,457 |
|
|
$ |
86,844 |
|
Royalty fees |
|
|
13,345 |
|
|
|
13,086 |
|
|
|
39,843 |
|
|
|
37,240 |
|
Marketing fees |
|
|
7,551 |
|
|
|
7,339 |
|
|
|
22,368 |
|
|
|
20,964 |
|
Other revenue |
|
|
2,931 |
|
|
|
3,054 |
|
|
|
9,031 |
|
|
|
8,780 |
|
Total revenue |
|
|
55,717 |
|
|
|
55,044 |
|
|
|
164,699 |
|
|
|
153,828 |
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
|
15,721 |
|
|
|
16,313 |
|
|
|
47,078 |
|
|
|
43,168 |
|
Selling, general and administrative |
|
|
14,372 |
|
|
|
13,662 |
|
|
|
45,769 |
|
|
|
44,364 |
|
Advertising |
|
|
8,099 |
|
|
|
8,398 |
|
|
|
24,592 |
|
|
|
23,003 |
|
Depreciation and amortization |
|
|
5,040 |
|
|
|
5,059 |
|
|
|
15,148 |
|
|
|
15,173 |
|
Total operating expenses |
|
|
43,232 |
|
|
|
43,432 |
|
|
|
132,587 |
|
|
|
125,708 |
|
Income from operations |
|
|
12,485 |
|
|
|
11,612 |
|
|
|
32,112 |
|
|
|
28,120 |
|
Interest expense, net |
|
|
6,471 |
|
|
|
6,804 |
|
|
|
20,095 |
|
|
|
16,391 |
|
Other expense (income) |
|
|
36 |
|
|
|
(516 |
) |
|
|
(756 |
) |
|
|
302 |
|
Income before income taxes |
|
|
5,978 |
|
|
|
5,324 |
|
|
|
12,773 |
|
|
|
11,427 |
|
Income tax expense |
|
|
1,784 |
|
|
|
37 |
|
|
|
4,038 |
|
|
|
83 |
|
NET INCOME |
|
$ |
4,194 |
|
|
$ |
5,287 |
|
|
$ |
8,735 |
|
|
$ |
11,344 |
|
Less:
net income attributable to noncontrolling interests |
|
|
1,253 |
|
|
|
1,765 |
|
|
|
2,290 |
|
|
|
4,969 |
|
NET INCOME ATTRIBUTABLE TO EUROPEAN WAX CENTER,
INC. |
|
$ |
2,941 |
|
|
$ |
3,522 |
|
|
$ |
6,445 |
|
|
$ |
6,375 |
|
EUROPEAN WAX CENTER, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in
thousands)(Unaudited) |
|
|
|
For the Thirty-Nine Weeks Ended |
|
|
|
September 30, 2023 |
|
|
September 24, 2022 |
|
Cash
flows from operating activities: |
|
|
|
|
|
|
Net income |
|
$ |
8,735 |
|
|
$ |
11,344 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
|
15,148 |
|
|
|
15,173 |
|
Amortization of deferred financing costs |
|
|
3,964 |
|
|
|
2,483 |
|
Gain on interest rate cap |
|
|
— |
|
|
|
(196 |
) |
Provision for inventory obsolescence |
|
|
(4 |
) |
|
|
(26 |
) |
Loss on debt extinguishment |
|
|
— |
|
|
|
1,957 |
|
Provision for bad debts |
|
|
105 |
|
|
|
38 |
|
Deferred income taxes |
|
|
3,825 |
|
|
|
— |
|
Remeasurement of tax receivable agreement liability |
|
|
(756 |
) |
|
|
302 |
|
Loss on disposal of property and equipment |
|
|
11 |
|
|
|
5 |
|
Equity compensation |
|
|
9,489 |
|
|
|
7,452 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
Accounts receivable |
|
|
(189 |
) |
|
|
(137 |
) |
Inventory, net |
|
|
1,319 |
|
|
|
(3,638 |
) |
Prepaid expenses and other assets |
|
|
(1,300 |
) |
|
|
1,101 |
|
Accounts payable and accrued liabilities |
|
|
(1,180 |
) |
|
|
(7,623 |
) |
Deferred revenue |
|
|
178 |
|
|
|
289 |
|
Other long-term liabilities |
|
|
(489 |
) |
|
|
(575 |
) |
Net cash provided by operating activities |
|
|
38,856 |
|
|
|
27,949 |
|
Cash
flows from investing activities: |
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(774 |
) |
|
|
(143 |
) |
Net cash used in investing activities |
|
|
(774 |
) |
|
|
(143 |
) |
Cash
flows from financing activities: |
|
|
|
|
|
|
Deferred loan costs |
|
|
— |
|
|
|
(12,419 |
) |
Proceeds from long-term debt |
|
|
— |
|
|
|
384,328 |
|
Principal payments on long-term debt |
|
|
(3,000 |
) |
|
|
(181,000 |
) |
Payments of debt extinguishment costs |
|
|
— |
|
|
|
(77 |
) |
Distributions to EWC Ventures LLC members |
|
|
(2,492 |
) |
|
|
(7,280 |
) |
Payment of Class A common stock offering costs |
|
|
— |
|
|
|
(870 |
) |
Repurchase of Class A common stock |
|
|
(6,369 |
) |
|
|
— |
|
Taxes on vested restricted stock units paid by withholding
shares |
|
|
(516 |
) |
|
|
(525 |
) |
Dividends to holders of Class A common stock |
|
|
— |
|
|
|
(122,227 |
) |
Dividend equivalents to holders of EWC Ventures units |
|
|
(2,787 |
) |
|
|
(82,887 |
) |
Payments pursuant to tax receivable agreement |
|
|
(3,209 |
) |
|
|
— |
|
Net cash used in financing activities |
|
|
(18,373 |
) |
|
|
(22,957 |
) |
Net increase in cash |
|
|
19,709 |
|
|
|
4,849 |
|
Cash,
cash equivalents and restricted cash, beginning of period |
|
|
50,794 |
|
|
|
43,301 |
|
Cash, cash equivalents and restricted cash, end of
period |
|
$ |
70,503 |
|
|
$ |
48,150 |
|
Supplemental cash flow information: |
|
|
|
|
|
|
Cash paid for interest |
|
$ |
16,621 |
|
|
$ |
12,886 |
|
Cash paid for income taxes |
|
$ |
633 |
|
|
$ |
96 |
|
Non-cash
investing activities: |
|
|
|
|
|
|
Property purchases included in accounts payable and accrued
liabilities |
|
$ |
— |
|
|
$ |
5 |
|
Right-of-use assets obtained in exchange for operating lease
obligations |
|
$ |
368 |
|
|
$ |
— |
|
Reconciliation of GAAP net income to Adjusted net income
for corrections to the 13 and 26 weeks ended July 1,
2023: |
|
|
|
For the Thirteen Weeks Ended July 1, 2023 |
|
|
|
As Reported |
|
|
Corrections |
|
|
As Adjusted |
|
(in thousands) |
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
5,594 |
|
|
$ |
— |
|
|
$ |
5,594 |
|
Share-based compensation(1) |
|
|
1,826 |
|
|
|
— |
|
|
|
1,826 |
|
Remeasurement of tax receivable agreement liability (2) |
|
|
(792 |
) |
|
|
— |
|
|
|
(792 |
) |
Tax effect of adjustments to net income (3) (4) |
|
|
(863 |
) |
|
|
1,295 |
|
|
|
432 |
|
Adjusted
net income |
|
$ |
5,765 |
|
|
$ |
1,295 |
|
|
$ |
7,060 |
|
|
|
|
|
For the Twenty-Six Weeks Ended July 1, 2023 |
|
|
|
As Reported |
|
|
Corrections |
|
|
As Adjusted |
|
(in thousands) |
|
|
|
|
|
|
|
|
|
Net
income |
|
$ |
4,541 |
|
|
$ |
— |
|
|
$ |
4,541 |
|
Share-based compensation(1) |
|
|
7,757 |
|
|
|
— |
|
|
|
7,757 |
|
Remeasurement of tax receivable agreement liability (2) |
|
|
(792 |
) |
|
|
— |
|
|
|
(792 |
) |
Tax effect of adjustments to net income (3) (4) |
|
|
(2,334 |
) |
|
|
1,295 |
|
|
|
(1,039 |
) |
Adjusted
net income |
|
$ |
9,172 |
|
|
$ |
1,295 |
|
|
$ |
10,467 |
|
(1) Represents non-cash equity-based compensation expense. (2)
Represents non-cash adjustments related to the remeasurement of our
tax receivable agreement liability. (3) Represents the income tax
impact of non-GAAP adjustments computed by applying our estimated
blended statutory tax rate to our share of the identifies items and
incorporating the effect of nondeductible and other rate impacting
adjustments.(4) For the 13 and 26 weeks ended July 1, 2023, we made
a correction to the non-GAAP adjustment for income taxes of ($0.9
million) and ($2.3 million), respectively, that we reported in our
earnings release on August 9, 2023. As a result, we now report
non-GAAP adjustments for income taxes of $0.4 million and ($1.0
million) and Adjusted net income of $7.1 million and $10.5 million
for the 13 and 26 weeks ended July 1, 2023, respectively.
Reconciliation of GAAP net income to Adjusted net
income: |
|
|
|
For the Thirteen Weeks Ended |
|
|
For the Thirty-Nine Weeks Ended |
|
|
|
September 30, 2023 |
|
|
September 24, 2022 |
|
|
September 30, 2023 |
|
|
September 24, 2022 |
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
4,194 |
|
|
$ |
5,287 |
|
|
$ |
8,735 |
|
|
$ |
11,344 |
|
Share-based compensation(1) |
|
|
1,732 |
|
|
|
2,117 |
|
|
|
9,489 |
|
|
|
7,452 |
|
Loss on extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,957 |
|
Remeasurement of tax receivable agreement liability (2) |
|
|
36 |
|
|
|
(516 |
) |
|
|
(756 |
) |
|
|
302 |
|
Transaction costs (3) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,406 |
|
Other (4) |
|
|
— |
|
|
|
(157 |
) |
|
|
— |
|
|
|
260 |
|
Tax effect of adjustments to net income (5) |
|
|
105 |
|
|
|
— |
|
|
|
(935 |
) |
|
|
— |
|
Adjusted
net income |
|
$ |
6,067 |
|
|
$ |
6,731 |
|
|
$ |
16,533 |
|
|
$ |
22,721 |
|
(1) Represents non-cash equity-based compensation expense. (2)
Represents non-cash adjustments related to the remeasurement of our
tax receivable agreement liability. (3) Represents costs related to
our Secondary offering of Class A common stock by selling
stockholders and certain costs incurred in connection with our
securitization transaction.(4) Represents non-core operating
expenses identified by management. For fiscal year 2022 these costs
relate to executive severance.(5) Represents the income tax impact
of non-GAAP adjustments computed by applying our estimated blended
statutory tax rate to our share of the identifies items and
incorporating the effect of nondeductible and other rate impacting
adjustments.
Reconciliation of GAAP net income to EBITDA and Adjusted
EBITDA: |
|
|
|
For the Thirteen Weeks Ended |
|
|
For the Thirty-Nine Weeks Ended |
|
|
|
September 30, 2023 |
|
|
September 24, 2022 |
|
|
September 30, 2023 |
|
|
September 24, 2022 |
|
(in
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
4,194 |
|
|
$ |
5,287 |
|
|
$ |
8,735 |
|
|
$ |
11,344 |
|
Interest expense |
|
|
6,471 |
|
|
|
6,804 |
|
|
|
20,095 |
|
|
|
16,391 |
|
Income tax expense |
|
|
1,784 |
|
|
|
37 |
|
|
|
4,038 |
|
|
|
83 |
|
Depreciation and amortization |
|
|
5,040 |
|
|
|
5,059 |
|
|
|
15,148 |
|
|
|
15,173 |
|
EBITDA |
|
$ |
17,489 |
|
|
$ |
17,187 |
|
|
$ |
48,016 |
|
|
$ |
42,991 |
|
Share-based compensation(1) |
|
|
1,732 |
|
|
|
2,117 |
|
|
|
9,489 |
|
|
|
7,452 |
|
Remeasurement of tax receivable agreement liability (2) |
|
|
36 |
|
|
|
(516 |
) |
|
|
(756 |
) |
|
|
302 |
|
Transaction costs (3) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,406 |
|
Other (4) |
|
|
— |
|
|
|
(157 |
) |
|
|
— |
|
|
|
260 |
|
Adjusted EBITDA |
|
$ |
19,257 |
|
|
$ |
18,631 |
|
|
$ |
56,749 |
|
|
$ |
52,411 |
|
Adjusted EBITDA margin |
|
|
34.6 |
% |
|
|
33.8 |
% |
|
|
34.5 |
% |
|
|
34.1 |
% |
(1) Represents non-cash equity-based compensation expense. (2)
Represents non-cash adjustments related to the remeasurement of our
tax receivable agreement liability. (3) Represents costs related to
our Secondary offering of Class A common stock by selling
stockholders and certain costs incurred in connection with our
securitization transaction.(4) Represents non-core operating
expenses identified by management. For fiscal year 2022 these costs
relate to executive severance.
Investor Contact European Wax Center,
Inc.Bethany JohnsBethany.Johns@myewc.com469-270-6888
Media Contact Creative Media Marketing
Carolanne Coviello Ewc@cmmpr.com 212-979-8884 ext 209
European Wax Center (NASDAQ:EWCZ)
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