European Wax Center (EWCZ) Q2 2024 earnings summary

Executive summary

• System-wide sales grew 2.3% to $260.2 million in Q2, with total revenue up 1.3% to $59.9 million and same-store sales up 1.6%.

• Adjusted EBITDA was $20.6 million with a margin of 34.5%, down 2.6% year-over-year; eight net new centers opened in Q2, with 1,059 centers open at period end.

• GAAP net income increased 7.3% to $6 million; adjusted net income grew 4% to $7.3 million.

• CEO David Berg returned effective August 12, 2024, succeeding David Willis.

• The macroeconomic environment remains challenging, impacting transaction and new guest growth, leading to a reduced outlook for the remainder of 2024.

Financial highlights

• Gross margin improved to 73.2% in Q2, driven by product cost savings and lower cost of revenue.

• SG&A expenses decreased 8.7% to $12.9 million, aided by lower incentive compensation and legal judgment proceeds.

• Advertising expenses rose 33.3% to $11.6 million, reflecting new marketing initiatives.

• Interest expense, net, decreased 5.8% to $6.4 million due to higher interest income.

• Ended Q2 with $55.7 million in cash; $10 million deployed for share repurchases, $40 million authorization remains.

Outlook and guidance

• 2024 system-wide sales outlook revised to $930–$950 million, reflecting flat growth at midpoint after adjusting for the prior year’s 53rd week.

• Same-store sales expected between -1.5% and +0.5%; total revenue guidance is $216–$221 million.

• Adjusted EBITDA guidance lowered to $70–$74 million, including up to $4 million in incremental investment for the laser hair removal pilot.

• Net new center openings revised to 27–32 for 2024, with a robust pipeline of 370+ locations.

• Guidance assumes no major changes in consumer behavior or labor market conditions.