European Wax Center, Inc.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to European WAC Center's fourth quarter and fourth year fiscal 2023 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a Q&A session. In order to facilitate as many participants as possible, we ask that you please limit yourself to one question and one follow-up during the Q&A session. If you have additional questions, you may rejoin the queue. On the call today are David Willis, Chief Executive Officer, and Stacey Shirley, Chief Financial Officer, and Andrea Wasserman, Chief Commercial Officer. I would now like to turn the conference over to Stacey for opening remarks. You may begin.

Thank you, and welcome to European WAC Center's fourth quarter fiscal 23 earnings call. For today's call, David will begin with a brief review of our fourth quarter and full year performance and discuss our priorities for fiscal 2024. Then I will provide additional details regarding our fiscal 2023 financial performance and our fiscal 2024 outlook. Following the prepared remarks, we will be available to take questions. Before we start, I would like to remind you of our legal disclaimer. We will make certain statements today which are forward-looking within the meaning of the federal securities laws. including statements about the outlook of our business and other matters referenced in our earnings release issued today. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings as well as our earnings release issued today for a more detailed description of the risk factors that may affect our results. Please also note that these forward-looking statements reflect our opinions only as of the date of this call and we take no obligation to revise or publicly release the results of any revision to our forward-looking statements in light of new information or future events. Also during this call, we will discuss non-GAAP financial measures which adjust our GAAP results to eliminate the impact of certain items. You will find additional information regarding these non-GAAP financial measures and a reconciliation of these non-GAAP to GAAP measures in our earnings release. A live broadcast of this call is also available on the investor relations section of our website at investors.waxcenter.com. I'll now turn the call over to David Willis.

Thank you, Stacey, and good morning, everyone. Thank you for joining us today. We ended 2023 on a strong note with fourth quarter performance in line with our expectations. We made progress on our strategy of expanding net new centers and driving in-center sales which are both key to the European WAC Center growth story. Additionally, we were pleased with our ability to drive in-center reservations during the quarter, which capped off a solid year of growth for European WAC Center. In 2023, we opened 100 net new units driven by our committed franchisees and are proud to have delivered meaningful top line and bottom line growth across the board. generating $955 million in system-wide sales, $221 million in revenue, and $76 million in adjusted EBITDA. Even in a challenging macroeconomic environment, the European WAC Center business model is consistent, anchored by the resiliency of our core guests whose commitment to their personal care routines did not waver throughout the year. Reflecting on my first six months as CEO, I could not be prouder of our teams. I want to thank our associates, franchisees, and in-center partners for their relentless focus on the work that drives results for our network and for living our values every day. This year, we're excited to celebrate the 20th anniversary of the European Wax Center brand. In 2004, Our founders created this category of out-of-home waxing when they realized that waxing was an essential and recurring service, often performed in salons as an afterthought. They introduced a high standard of professionalism by creating a business concept solely focused on a consistent, hygienic, and efficient wax experience. Twenty years later, we remain the undisputed leader in this industry. I believe that our leadership team and board have advanced our founders' vision and set our company on a path to unlock the true potential of European WAC Center with an asset-light, predictable, high-growth franchise model. In 2023, we achieved several milestones as a brand from strengthening our leadership team to deepening our relationships with our core guests and franchisees to innovating our product offerings. We work to position European WAC Center for further growth. Importantly, we delivered on both of our key growth vectors, expanding our footprint through new net center openings and driving in-center sales, which benefits system-wide sales and same-store sales growth. I'll discuss both of these in more detail now. I'll start with our unit growth vector. In 2023, we delivered over 10% unit growth for a second year in a row, surpassing 1,000 centers nationwide, and we are incredibly pleased to have met the high end of our fiscal 2023 net new unit guidance. We ended the year strong in Q4 by opening 18 net new centers across 13 different states, 100% of our new center openings in 2023 came from existing franchisees, which speaks to the commitment and excitement they continue to have for the European WAC Center brand and our business model. Looking ahead in 2024, we expect to deliver 75 to 80 net new units in line with our high single digit unit growth algorithm. We're pleased that our franchisees remain well capitalized and committed to growing with our brand. Their continued demand underpins a robust development pipeline of over 370 commitments and provides us visibility to be able to continue to deliver against our high single digit unit growth algorithm for 2025 and over the long term. In partnership with our franchisees, We are focused on growing the top line in existing centers, particularly through new guest acquisition, while taking a deliberate approach to new center openings in 2024 with focus on markets with less development activity over the last few years. To support our franchisees, our operations team is putting an even greater focus on refining and evolving our new center opening best practices. which in turn enhances our already strong unit economics. One initiative we're particularly excited about is the network-wide launch of our improved data-driven pre-opening playbook. This playbook highlights some of our best-in-class centers that opened on day one with both the right number of new guests in their file and appropriately trained staff, which led to higher sales, revenue, and predictability compared to centers that opened without these elements. We believe this playbook will be a powerful tool for our franchisees moving forward. Before I turn to our next growth vector, I wanted to touch on our recent brand conference. Just two weeks ago, our teams were in Las Vegas with our franchisees. We spent the time hearing from those across our team and our network, sharing best practices and aligning on areas of focus for the brand and franchisees moving forward. We celebrated the wins we've had over the last year, but more importantly, kept our focus on the growth and opportunity we have together ahead. Our franchisees walked away from the conference feeling excited and confident in the direction of European Wax Center. Turning to our second growth vector, driving in-center sales, which benefits system-wide sales and same-store sales growth. I'll start with our guest trends in Q4. As expected, our core guests, which include both wax pass and routine guests, remain consistent in their frequency and spend. These guests remain committed to their personal care routines and represent a recurring and reliable revenue stream for our brand. In addition, Exiting our third quarter earnings call, transactions among our less frequent guests remained stable. Driven by these stable transaction trends and our refined media strategy, full year 2023 system-wide sales, revenue, and same-store sales came in above the midpoint of the guidance we provided in November. As we discussed last quarter, We remain focused on driving visits from both new and existing guests as well as attracting more guests to the brand through our attract more, buy more, visit more marketing strategies under Andrea's leadership. We believe that our evolved approach to our commercial and data insights capabilities as well as our data-driven marketing and media strategy will allow us to deliver a year of in-center sales growth at 5% to 7% for system-wide sales and 2% to 5% same-store sales growth in 2024. There continues to be a vast opportunity to drive new guests to the brand. And as discussed last quarter, we engaged a new media agency focused on implementing a streamlined media strategy across all of our paid digital channels and search efforts. This strategy launched in Q4 with a singular focus of driving more guest reservations in centers. A key pillar of our strategy is to optimize our approach to paid media by improving the efficiency of our media spend. I'm pleased to share that since our new media search and performance creative agency took over in Q4, we've seen an improvement in our average cost per reservation across various search engines and social media platforms. While it is still early, and we understand it will take time for this strategy to be fully implemented, we are off to a solid start and have good early reads on the reach, frequency, targeting, and creative that will drive further efficiencies in these channels. We also see several areas of opportunity for us to continue to increase share of wallet from our existing guests. We previously shared that we've been testing brow tinting in select centers. Historically, guests may have waxed their brows at European Wax Center, but went somewhere else to get them tinted. Our team has worked to develop a proven brow tint formula, which guests have enthusiastically responded to. We've been very encouraged by our ongoing tests as we've learned that it is a lever to bring new guests to the brand, and we look forward to expanding this service to our network soon. Increasing frequency among our existing guests and converting non-core guests to WaxPass users also remains a priority. As you know, WaxPass holders visit more than twice as often and spend more than twice as much with the brand compared to our less frequent guests. making the WaxPass membership program our most powerful frequency driver. As we've evolved our data and technology functions, we've implemented key communication flows to encourage WaxPass consideration and purchase in our marketing channels. Last quarter, WaxPasses and gift cards were available online for the first time in our brand's history, which proved successful in retaining both new and existing guests. In addition, through our guest survey work, we've learned that while guests are attracted to the Wax Pass, they are less likely to commit to purchasing a full nine plus service Wax Pass until they visited and experienced the services we provide a few times. To encourage conversion and increase frequency and loyalty, We tested a three plus one wax pass offered only to new guests to incentivize trial by driving additional visits. We were pleased with the results of the test in the fourth quarter and plan to roll out this network wide this spring. On the operations side, we have implemented new leadership to oversee the local marketing team that supports and works directly with our franchisees. We've also repositioned our field trainers by embedding these experts in local markets to further aid and coach franchisees and center associates in driving ticket value and frequency in centers. These, in turn, drive system-wide sales. Ultimately, we are confident in our ability to drive new guests to the brand while increasing average ticket value and frequency among existing guests through the initiatives I've outlined, which we believe will help us achieve another strong year of top line growth in 2024. Before I pass it to Stacy, I wanted to touch on our laser hair removal pilot. As we've discussed over the last two quarters, we believe that offering additional hair removal modalities could be an effective method of attracting new guests to the brand, increasing share of wallet from existing wax guests in enhancing already robust four-wall economics over time. We launched our pilot laser test in six New York area centers in Q4 and have been pleased with the results seen thus far. We were able to generate strong sales from both new and existing guests while minimalizing cannibalization of existing core waxing services. Based on results today, We are expanding our pilot test to more centers in New York this quarter and planning to make additional investments to support this test in other select states throughout the year. Stacy will provide more detail on this shortly. While we see this as a potential additive opportunity to expand our brand and the model, European WAC Center remains the dominant player in our category with the strong and resilient core service offering waxing. As we introduce laser on a pilot basis, we believe we are uniquely positioned to leverage our scale and our footprint as the experts in out-of-home hair removal. With that, I'd like to hand the call over to Stacey Shirley to review our financial performance and our guidance details for fiscal 2024. Stacey? Thanks, David.