European Wax Center Inc (EWCZ) Reports Modest Revenue Growth Amid Economic Headwinds
European Wax Center Inc (NASDAQ:EWCZ) reports a 1.2% increase in total revenue to $55.7 million for Q3 FY2023.
Adjusted EBITDA margin improves, reaching 34.6% despite inflationary pressures.
Net new center growth of 12.6% with 1,026 total centers, signaling expansion.
Company revises fiscal 2023 outlook due to lower-than-expected transactions.
On November 8, 2023, European Wax Center Inc (NASDAQ:EWCZ), a leading franchisor and operator of out-of-home waxing services, announced its financial results for the third quarter of fiscal year 2023. The company reported a modest increase in total revenue, rising 1.2% to $55.7 million compared to the same period last year. Despite the challenging economic environment, European Wax Center Inc (NASDAQ:EWCZ) managed to expand its footprint, with net new centers growing by 12.6% to 1,026 total centers across 45 states.
Financial Performance Highlights
European Wax Center Inc (NASDAQ:EWCZ) experienced a 2.4% increase in system-wide sales, reaching $240.7 million. Same-store sales also saw an uptick of 3.4%. Adjusted EBITDA for the quarter was $19.3 million, a 3.4% increase from the previous year, reflecting an improved margin of 34.6% of total revenue. However, GAAP net income decreased by 20.7% to $4.2 million, and Adjusted net income fell by 9.9% to $6.1 million, primarily due to increased tax expenses.
Operational Challenges and Adjusted Outlook
David Willis, CEO of European Wax Center Inc (NASDAQ:EWCZ), acknowledged the impact of inflation on consumer behavior, noting a decline in visits from less frequent guests. Despite this, the core customer base remained stable, contributing to recurring revenue streams. The company has revised its fiscal 2023 outlook, anticipating lower transactions in the third and fourth quarters. The updated guidance includes net center openings between 98 to 100, system-wide sales ranging from $945 million to $955 million, and total revenue expected to be between $217 million to $219 million. Adjusted net income is projected to be between $20.5 million to $21.5 million, with Adjusted EBITDA forecasted at $74.5 million to $76.0 million.
Balance Sheet and Cash Flow
As of September 30, 2023, European Wax Center Inc (NASDAQ:EWCZ) reported $64.0 million in cash and cash equivalents, with $395.0 million in borrowings outstanding under its senior secured notes. The company's net cash provided by operating activities totaled $17.6 million during the quarter.
Correction to Prior Non-GAAP Adjusted Net Income
The company also disclosed a correction to its previously reported non-GAAP Adjusted net income for the 13 and 26 weeks ended July 1, 2023. The correction increased the non-GAAP net income for the 13 weeks from $5.8 million to $7.1 million and for the 26 weeks from $9.2 million to $10.5 million, due to an error in the calculation of the reported non-GAAP adjustment for income taxes.
European Wax Center Inc (NASDAQ:EWCZ) remains confident in its business model, emphasizing its category-leading position and unit growth. The company's commitment to providing high-quality waxing services and proprietary products continues to drive its expansion and market presence.
For more detailed information on European Wax Center Inc (NASDAQ:EWCZ)'s financial results, including the full earnings release and financial statements, please visit European Wax Center's Investor Relations website.
Explore the complete 8-K earnings release (here) from European Wax Center Inc for further details.
This article first appeared on GuruFocus.
