European Wax Center's Q3 2025 Earnings Call: Contradictions in Guest Engagement, Unit Closures, and Data Strategies

Date of Call: November 12, 2025

Financials Results

• Revenue: $54.2M, down approximately $1.2M or 2.2% YOY
• Gross Margin: 73.3%, increased modestly (no prior-year percentage provided)

Guidance:

• Reaffirmed system-wide sales guidance of $940M to $950M and same-store sales flat to +1% for FY2025.
• Adjusted EBITDA expected $69M to $71M; full-year revenue $205M to $209M; adjusted net income $31M to $33M (≈23% effective tax rate before discrete items).
• Expect total closures of 35–40 for 2025; 12 gross openings; 23–28 net center closures for the full year; target return to positive net center growth by end of 2026.
• Plan for advertising slightly above 3% of system-wide sales; remain focused on supply-chain/tariff mitigation.

Business Commentary:

• Sales and Traffic Performance:
• European Wax Center reported system-wide sales of $238.2 million in Q3 with 20 basis points of same-store sales growth, compared to a decrease of 0.8% year-over-year.
• The decrease in system-wide sales was primarily due to the impact of closed centers. The stability in same-store sales growth was attributed to improved marketing tactics and franchisee engagement.

• Closure and Development Strategy:
• The company expects between 35 to 40 closures for the year, narrowing down from an initial range of 40 to 60, reflecting timing shifts and progress made with franchisees.

• The strategic focus is on returning to net center growth by the end of 2026, with new center openings planned to outpace closures.

• Profitability and Cost Management:

• Adjusted EBITDA increased by 9.6% to $20.2 million, with a margin increase of 400 basis points to 37.2%.

• This improvement was due to a focus on profitability, cost discipline, and operational efficiency, as well as favorable timing of operating expenses.

• Marketing and Guest Engagement:

• The company achieved a 75% improvement in the efficiency of influencer content and a 53% lift in unique website visitors through new influencer strategies.
• The enhancements in marketing and guest engagement were driven by data-driven insights and refined marketing tactics aimed at both existing and new guests.

Sentiment Analysis:

Overall Tone: Positive

• Management repeatedly reaffirmed guidance and highlighted improving metrics: "we are reaffirming our full year financial guidance"; Q3 adjusted EBITDA grew to $20.2M (+9.6%) and adjusted EBITDA margin rose to 37.2%. CEO: "I'm confident we are headed in the right direction" describing progress on marketing, operations and franchisee engagement.

Q&A:

• Question from Joshua Young (Truist Securities, Inc., Research Division): It sounds like the revamped marketing efforts are showing solid early results in terms of reengaging some of those less frequent guests. Can you just give us any quantification in terms of the lift that you're seeing there? And how do you think that can look as you move into '26?
  Response: Contactability improved from ~38% to 60%, enabling meaningful frequency gains; management declined to give precise frequency metrics but said this materially improves ability to drive routines and is expected to help into 2026.

• Question from Dana Telsey (Telsey Advisory Group LLC): As you talked about the cadence of the quarter, what did you notice about your core consumer? How is it different? How is it the same? What are you seeing from Wax Pass sales? And how is that trending? And regional trends, anything California versus other areas?
  Response: Core guest base is stable; Wax Pass sales slightly up YOY; California showing improvement while New York, Philadelphia and D.C. are weaker.

• Question from Dana Telsey (Telsey Advisory Group LLC): On the center openings and closings as you move forward, thoughts on more closings, less closings, openings? Is there any difference in cost of opening, different construction or configuration of a center that you're looking for and how you're thinking about closings go forward?
  Response: They narrowed 2025 closure guidance to 35–40 due to timing shifts and franchisee support; expect closures early in 2026 with net positive center growth by year-end and will provide 2026 detail in February.

• Question from Alexander Conway (Robert W. Baird & Co. Incorporated, Research Division): If I could just ask again about the units. What are you still seeing out of the units that are having to close? What are the main holdups? And what's really giving you that confidence that those pressures are going to alleviate by the second half of next year?
  Response: Closing units are low-volume due to poor real estate/market or franchisee-specific issues; confidence stems from improved portfolio visibility, collaboration with franchisees, lease timing analysis and operational initiatives expected to reduce closure risk into 2026.

• Question from Alexander Conway (Robert W. Baird & Co. Incorporated, Research Division): It seems like through the first 3 quarters, you drove decent EBITDA growth year-over-year. And obviously, guidance is showing that below for the full year. Are there any unique factors to Q4 that we should be thinking about that's kind of causing the lower year-over-year growth?
  Response: CFO said timing of certain operating expenses (marketing, technology) will shift into Q4; full-year EBITDA guidance remains intact and Q4 timing dynamics explain the year-over-year profile.

• Question from Simeon Gutman (Morgan Stanley, Research Division): On new guest acquisition: what is your hypothesis on what is holding it back? If there's anything regionally, broader marketing, or certain markets more mature? Why has that been tougher than expected to turn?
  Response: Shortfall was due to prior lack of analytics and refined tactics; they've built data/analytics, hired new brand and influencer agencies, and expect these capabilities and refreshed brand work to drive improved acquisition, especially in 2026.

• Question from Simeon Gutman (Morgan Stanley, Research Division): Can you give us a sense of guest count versus ticket in the quarter? And what is the right model or mode for the business? Is flat guest count acceptable with price, or does it need positive guest count?
  Response: They don't disclose guest-count vs ticket split; strategy is balanced—priority is sustainable traffic growth plus smart ticket expansion via add‑ons and measured price increases, avoiding heavy promotional tactics.

Contradiction Point 1

Guest Frequency and Engagement Strategies

It highlights a potential inconsistency in the company's strategy and results regarding improving guest frequency and engagement, which are crucial for business growth and profitability.

Can you quantify the lift from reengaging infrequent guests and how this will trend into 2026? - Joshua Young(Truist Securities, Inc., Research Division)

2025Q3: Our team had a relentless focus on enhancing our operational excellence and embedded marketing within our centers. And as a result, we have seen improved contactability with guests from 38% to 60%, which has led to an increase in guest frequency, especially for those guests who we had identified as downtrend. - Christopher Morris(CEO)

Can you provide details on the performance of different customer cohorts? - Scot Ciccarelli(Truist Securities, Inc.)

2025Q2: We're focused on identifying guest routines and tailoring engagement strategies for lower-frequency guests, showing early success in enhancing frequency among downtrend guests. - Christopher Morris(CEO)

Contradiction Point 2

Unit Closures and Growth Strategy

It addresses a potential inconsistency in the company's timeline and confidence regarding reducing unit closures and achieving net unit growth, impacting the company's growth strategy.

What are the current challenges with units that are closing, and what gives confidence that these pressures will ease by next year's second half? - Alexander Conway(Robert W. Baird & Co. Incorporated, Research Division)

2025Q3: We expect to narrow the range of closures and are confident that we will achieve our target of net positive growth in new centers by the end of 2026. - Christopher Morris(CEO)

How should we think about the closure pace given improved ramps and marketing strategies? - Randal J. Konik(Jefferies LLC)

2025Q2: We want to be closer to the low end of the previous range for closures, supporting growth in 2026. We expect that by achieving net unit growth, we will continue to build momentum going into '27. - Christopher Morris(CEO)

Contradiction Point 3

Store Closure Projections

It involves changes in financial forecasts, specifically regarding gross margin expectations, which are critical indicators for investors.

How do you plan to handle center openings and closings going forward? - Dana Telsey(Telsey Advisory Group LLC)

2025Q3: We are tightening the range for store closures this year. We currently expect 35 to 40 closures. - Christopher Morris(CEO)

What are your expectations for store closures in 2025 and future growth? - Randal Konik(Jefferies)

2024Q4: We expect to close between 40 to 60 locations this year. - Christopher Morris(CEO)

Contradiction Point 4

Data and Brand Identity Challenges

It reflects differing perspectives on the company's strategies to improve new guest acquisition.

What is limiting new guest acquisition, and how are you addressing it? - Simeon Gutman(Morgan Stanley, Research Division)

2025Q3: We felt that we were not leveraging the data as effectively as we could to engage new guests. And so we have been working with a new data agency to bring in more data, better data analytics, better segmentation. - Christopher Morris(CEO)

What are the plans for promotional strategy and pricing? When is system-wide implementation scheduled? - Korinne Wolfmeyer(Piper Sandler)

2024Q4: We've been working over the last 9 months with a very data-driven marketing agency to improve our data analytics segmentation, bringing in new data sets. - Christopher Morris(CEO)