Q1 2024 European Wax Center Inc Earnings Call
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Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to European Wax Centers' first quarter fiscal 2024 earnings call.
Speaker Change: Good morning, ladies and gentlemen, and thank you for standing by welcome to European WAC Centers' first quarter fiscal 'twenty 'twenty four earnings call.
Operator: 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 accommodate as many participants as possible, we ask that you please limit yourself to one question and one follow-up during the question and answer session. If you have additional questions, you may rejoin the queue. On the call today are David Willis, Chief Executive Officer; Stacie Shirley, Chief Financial Officer; and Andrea Wasserman, Chief Commercial Officer. I would like now to turn the conference over to Bethany Johns, Director of Investor Relations. Ma'am, you may begin.
Speaker Change: At this time all participants are in a listen only mode.
Speaker Change: After the speaker's presentation, there will be a Q&A session in order to.
Speaker Change: As many participants as possible we ask that you. Please limit yourself to one question and one follow up during the question and answer session. If you have a short question you might rejoin the queue on the call today are David Wallis Chief Executive Officer.
Speaker Change: Stacie, Shirley Chief Financial Officer, and Andrea Wasserman, Chief Commercial Officer, I would like now to turn the conference over to Bethany Johns director of Investor Relations.
Bethany Johns: Ma'am you may begin.
Bethany Johns: Thank you and welcome to European Wax Center's first quarter fiscal 2024 earnings call. For today's call, David will begin with a brief review of our first quarter performance and discuss our priorities for the balance. Then, Stacie will provide additional details regarding our financial performance and our fiscal 2024 outlook. Following the prepared remarks, the team will be available to take questions. Before we start, I would like to remind you of our legal disclaimer.
Bethany Johns: Thank you and welcome to the European Wax Centers' first quarter fiscal 2024 earnings call for today's call. David will begin with a brief review of our first quarter performance and discuss our priorities for the balance of 2024.
Speaker Change: And Stacy will provide additional details regarding our financial performance and our fiscal 2024 outlook. Following our prepared remarks, the team will be available to take questions.
Bethany Johns: 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 us. 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.
Speaker Change: 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.
Bethany Johns: Also, during the 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 and our earnings relief on the investor relations section of our website at investors.waxcenter.com. I will now turn the call over to David Willis.
Speaker Change: 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.
Speaker Change: 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 the 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.
Speaker Change: A live broadcast of this call is also available on the Investor Relations section of our website at investors don't wax Center Dot com.
Speaker Change: I will now turn the call over to David Miller.
David L. Willis: Thank you, Bethany, and good morning everyone. Thank you for joining us today. We began 2024 with stable frequency and spend among our current guests, signaling the resiliency and predictability of our business model. Even in an uncertain macroeconomic environment, these guests remain resilient. Net new center openings, a key growth driver for European Wax Cntr, were in line with our expectations as we grew the center count 7.5% to 1,051 centers in 45 states. We also delivered growth of 1.3% and 4%, respectively, and system-wide sales in total revenue. Same store sales were down 1.2%.
David Miller: Thank you Bethany and good morning, everyone. Thank you for joining us today.
David Miller: We began 2024 with stable frequency and spend among our current guests signaling the resiliency and predictability of our business model.
David Miller: Even in an uncertain macroeconomic environment. These guests remain resilient.
David Miller: Net new center openings, a key growth driver for European Wax Center, we're in line with our expectations as we grew center count seven 5% to 1051 centers in 45 states.
David Miller: We also delivered growth of one, 3% and 4% respectively and.
David Miller: System wide sales in total revenue.
David Miller: Same store sales were down one 2% and we estimate they would have been slightly positive except for weather and Easter related center closures that impacted our top line metrics.
David L. Willis: And we estimate they would have been slightly positive except for weather and Easter-related center closures that impacted our top line. However, profit margins were strong, and due to our asset-light, highly cash-generative franchise model, our cash position increased meaningfully during the quarter. In fact, with our growing liquidity in mind, this week, our board authorized a new $50 million share repurchase program to give us flexibility as we seek opportunities to drive long-term shareholder value.
David Miller: Profit margins were strong and due to our asset light highly cash generative franchise model, our cash position increased meaningfully during the quarter in.
David Miller: In fact with our growing liquidity in mind. This week, our board authorized a new $50 million share repurchase program to give us flexibility as we seek opportunities to drive long term shareholder value.
David L. Willis: On our year-end earnings call, we shared our focused initiatives to drive average ticket and frequency from both new and existing guests. We are still in the beginning stages of these initiatives, and as I will detail shortly, we are seeing good early results. As we shared last quarter, we expected that, in the current macro environment, Q1 would be the low point in our full-year results as these efforts begin to take root.
David Miller: On our year end earnings call, we shared our focused initiatives to drive average ticket and frequency from both new and existing guests.
David Miller: We're still in the beginning stages of these initiatives and as I will detail. Shortly we are seeing good early reads.
David Miller: As we shared last quarter, we expected that in the current macro environment Q1 would be the low point in our full year results. As these efforts began to take root.
David L. Willis: We believe that these initiatives will materialize and gain traction as we move through the year. Second quarter trends are tracking in line with this expectation. As a result, we are reiterating our fiscal 2024 financial guidance today. But before I dive into our strategic initiatives, I want to congratulate the entire European Wax Cntr team on being officially recognized as a great place to work for the second year in a row. Our associates are the key to EWC's culture and success, and the leadership team and I are proud to facilitate an environment where they are free to be their authentic selves, drive performance, delight our guests, and be unleashed to do their best work.
David Miller: We believe that these initiatives will materialize and gained traction as we move through the year.
David Miller: Second quarter trends are tracking in line with this expectation.
David Miller: As a result, we are reiterating our fiscal 2024 financial guidance today.
David Miller: Before I dive into our strategic initiatives I want to congratulate the entire European Wax center team I'm being officially recognized as a great place to work for the second year in a row.
David Miller: Our associates are the key to Ewc's culture, and success and the leadership team and I are proud to facilitate an environment, where they are free to be their authentic selves drive performance delight, our guests and be unleashed to do their best work.
David L. Willis: Ultimately, they are focused on consistently delivering for both our franchisees and our guests, which we fully expect will translate into continued long-term growth. Now, I'd like to discuss the progress we've made on our two key growth sectors, expanding net new centers and driving center sales, as well as the plans we have for the balance of 2024. I'll start with our unit growth vector.
David Miller: <unk> they are focused on consistently delivering for both our franchisees and our guests, which we fully expect will translate into continued long term growth.
David Miller: Now I'd like to discuss the progress we've made on our two key growth vectors, expanding net new centers and driving in center sales.
David Miller: As well as the plans we have for the balance of 2024.
David L. Willis: As planned in our development schedules, our franchisees opened seven net new centers, translating to 7.5% unit growth in Q1. Our franchisee relationships continue to strengthen as we work together to further elevate European Wax Center's leadership position. In fact, nearly all of our expected 75 to 80 net new centers in fiscal 2024 will come from existing franchisees, showcasing their excitement for the European Wax Cntr business model and their commitment to reinvesting in our brand.
David Miller: I'll start with our unit growth vector.
David Miller: As planned in our development schedules, our franchisees opened seven net new centers translating to seven 5% unit growth in Q1.
David Miller: Our franchisee relationships continued to strengthen as we work together to further elevate European WAC Center's leadership position.
David Miller: In fact, nearly all of our expected 75 to 80 net new centers in <unk>.
David Miller: Fiscal 2024 will come from existing franchisees showcasing their excitement for the European Whacked Center business model and their commitment to reinvesting in our brands.
David L. Willis: We remain focused on the diversity of our franchisee base as well and expect smaller independent operators, self-funded multi-unit developers, and private equity-backed franchisees to each operate approximately one-third of our centers over time. Overall, our franchisees remain well-capitalized, and our development pipeline of over 370 locations remains robust. Most importantly, these long-term commitments are a testament to the strength and resiliency of our model and give us visibility to deliver against our high single-digit unit growth algorithm for 2024, 2025, and beyond.
David Miller: We remain focused on the diversity of our franchisee base as well and expect smaller independent operators.
David Miller: Self funded multi unit developers and private equity backed franchisees to each operate approximately one third of our centers every time.
David Miller: Overall, our franchisees remain well capitalized and our development pipeline of over 370 locations remains robust.
David Miller: Most importantly, these long term commitments are a testament to the strength and resiliency of our model and give us visibility to deliver against our high single digit unit growth algorithm for 2020 for 2025 and beyond.
David Miller: Our key focus this year is on supporting top line growth and strong four wall economics for franchisees, particularly through new guest acquisition.
David L. Willis: Our key focus this year is on supporting top line growth and strong four-wall economics for franchisees, particularly through new guest acquisition. We believe that a strong opening creates the best foundation for new centers and their unit economics. Our data-driven pre-opening playbook launched in Q1.
David Miller: We believe that a strong opening creates the best foundation for new centers and their unit economics.
David Miller: Our data driven Preopening playbook launched in Q1.
David L. Willis: And the centers following it are generating higher average grand opening guest lists and staffing levels. While it will take time for these improvements to move the needle on system-wide metrics, we believe they will translate into higher sales, profitability, and predictability for franchisees through their ramping cycles. Turning to our second growth vector, driving in-center sales, which benefits system-wide sales in terms of same-store sales growth. I'll start with the dynamics we're seeing across our guest cohort.
David Miller: And the centers following it are generating higher average grand opening guests lists and staffing levels.
David Miller: While it will take time for these improvements to move the needle on system wide metrics, we believe they will translate into higher sales profitability and predictability for franchisees theyre ramping cycles.
David Miller: Turning to our second growth vector driving in center sales, which benefits systemwide sales and same store sales growth.
David Miller: I'll start with the dynamics, we're seeing across our guest cohorts as.
David L. Willis: As I mentioned earlier, spend and frequency among our existing guests have remained stable in 2024. This includes both our less frequent guests as well as our core guests. As a reminder, core guests are comprised of the WaxPass and Routine guests who drive approximately 75% of our sales volume. These guests have remained committed to their personal care routines for much of the last two years, representing a recurring and durable revenue stream for our brand through various economic cycles. We are pleased with their stability, but we remain focused on growing spend and frequency among this group. Current customers remain loyal fans of European Wax Cntr's unparalleled service, efficiency, and expertise.
David Miller: As I mentioned earlier spend and frequency among our existing guests have remained stable in 2020 for.
David Miller: This includes both our less frequent guests as well as our core guests as a reminder, core guests are comprised of the wax pass and routine guests who drive approximately 75% of our sales volume.
David Miller: These guests have remained committed to their personal care routines for much of the last two years, representing a recurring and durable revenue stream for our brand through various economic cycles.
David Miller: We are pleased with their stability, but we remained focused on growing spend and frequency among this group.
David Miller: Current customers remain loyal fans of European wax centers unparalleled service efficiency and expertise.
David L. Willis: But attracting first-time guests remains our biggest opportunity, especially in the current macro environment where consumers appear more discerning with their spend. We have made real progress against the media, local marketing, and operational initiatives that I outlined on our last earnings call. However, it's still too early to see the full benefits of our guest acquisition effort.
David Miller: But attracting first time guests remains our biggest opportunity, especially in the current macro environment, where consumers appear more discerning with their spend.
David Miller: We have made real progress against the media local marketing and operational initiatives that are outlined on our last earnings call. However, it's still too early to see the full benefits of our guest acquisition efforts.
David L. Willis: I'll now highlight a few updates on our initiative, starting with media. We engaged a new media agency in Q4 to streamline our strategy across all of our paid digital channels and search efforts and increase guest reservations in centers. We are pleased that this new strategy is driving reservations, new guests, and cost-efficiently in Lake Q2. We expect to begin aligning our media mix to the channels and messages driving the strongest return. As a result, we believe the biggest impact from our improved approach will come in the back half of the year. And finally, with WaxPass holders generating more than twice the spend and frequency of non-core gas, we remain very focused on growing wax past penetration.
David Miller: I'll now highlight a few updates on our initiatives starting with media.
David Miller: We engaged a new media agency in Q4 to streamline our strategy across all of our paid digital channels and search efforts and increased guest reservations in centers.
David Miller: We are pleased that this new strategy is driving reservations.
David Miller: New guests and cost efficiencies.
David Miller: In late Q2, we expect.
David Miller: To begin aligning our media mix to the channels and messages driving the strongest returns.
David Miller: As a result, we believe the biggest impact from our improved approach will come in the back half of the year.
David Miller: And finally with wax pass holders generating more than twice the spend and frequency of non core guests. We remain very focused on growing wax pass penetration.
David L. Willis: To target frequency conversion and loyalty, we successfully tested a 3 plus 1 wax pass offer for new guests, which generated incremental sales and retention rates. As a result, we rolled it out network-wide at the end of Q1 and have already seen a positive impact. On to the second bucket, local marketing. We believe one of the best ways to drive new guest acquisition is through local marketing efforts that boost center visibility and awareness.
David Miller: Target frequency conversion and loyalty, we successfully tested a three plus one wax pass offer for new guests, which generated incremental sales and retention rates.
David Miller: As a result, we rolled it out network wide at the end of Q1 and have already seen a positive impact.
David Miller: Under the second bucket local marketing.
David Miller: We believe one of the best ways to drive New guest acquisition is through local marketing efforts that boost center visibility and awareness.
David L. Willis: As we ended Q1, we launched partnerships with new local digital media agencies to stimulate franchisee spending. We believe the increased effectiveness and structure under the new agencies will help us demonstrate an even higher local marketing ROI and motivate additional network investment. We also dedicated corporate personnel and introduced franchisee tools to help simplify grassroots marketing plans and execution.
David Miller: As we ended Q1, we launched partnerships with new local digital media agencies.
David Miller: To stimulate franchisee spending.
David Miller: We believe the increased effectiveness and structure under the new agencies will help us demonstrate an even higher local marketing ROI and motivate additional network investment.
David Miller: We also dedicated corporate personnel and introduce franchisee tools to help simplify grassroots marketing plans and execution.
David L. Willis: Enthusiasm from the network so far has been encouraging with meaningful uptake, and we expect franchisees to ramp up their local marketing spend and efforts throughout 2024. Lastly, our operational initiatives should drive new guests to the brand as well as increase spend from existing guests. First, we deepen the support of our field trainers in select markets through training, coaching, and ongoing development. By optimizing the guest experience, pilot centers in this program generated improvements across our most important KPIs that impact four-wall sales and profitability.
David Miller: Enthusiasm from the network. So far has been encouraging with meaningful uptake and we expect franchisees to ramp up their local marketing spend and efforts throughout 2024.
David Miller: Lastly, our operational initiatives should drive new guests to the brand as well as increased spend from existing guests.
David Miller: We've deepened the support of our field trainers in select markets through training coaching and ongoing development.
David Miller: By optimizing the guest experience pilot centers in this program generated improvements across our most important kpis that impact four wall sales and profitability.
David L. Willis: We are excited about this program's potential and are currently increasing resources to scale it as the year progresses. As I mentioned last quarter, we continue to make good progress on our proven brow tint formula. Pilot testing indicated that brow tinting attracts new guests to the brand and increases services and, therefore, dollars per ticket. We expect to launch this incremental service nationwide in the third quarter and support it with a robust staff training program and marketing campaign.
David Miller: We're excited about this program as potential and are currently increasing resources to scale it as the year progresses.
David Miller: As I mentioned last quarter, we continue to make good progress on our proven Brown <unk> formula.
<unk> testing indicated that brow tinting attract new guests to the brand and increase its services and therefore dollars per ticket.
David Miller: We expect to launch this incremental service nationwide in the third quarter and supported with a robust staff training program and marketing campaign.
David L. Willis: Finally, we continue to advance our laser hair removal pilot. Early testing validated our hypothesis that expanding our service offering to laser could attract new guests to the brand and increase share of wallet from existing wax. Our first six pilot centers in New York generated strong sales with minimal cannibalization of the core waxing service. Given our confidence in these early results, We expanded the pilot to 10 more New York centers during Q1 and expect to add a handful of Florida centers in Q2.
David Miller: Finally, we continue to advance our laser hair removal pilot.
David Miller: Early testing validated our hypothesis that expanding our service offering to laser could attract new guests to the brand and increase share of wallet from existing waxes.
David Miller: Our first six pilot centers in New York generated strong sales with minimal cannibalization at core waxing services.
David Miller: Given our confidence in these early results.
We expanded the pilot to 10 more New York centers during Q1 and expect to add a handful of Florida centers in Q2.
David L. Willis: These Q2 centers will help us better understand the operational impact of a stricter regulatory environment and further confirm our hypothesis that lasers can enhance already robust four-wall economics over time. As mentioned on our last call, we plan to make additional deliberate investments to support this pilot in other states throughout the year, including adding dedicated personnel to our corporate leadership team. While we see this as a potential additive opportunity to expand our brand and the model, European Wax Cntr remains the dominant player in out-of-home hair removal with a strong and resilient core service offering.
David Miller: These Q2 centers will help us better understand the operational impact of a stricter regulatory environment.
David Miller: And further confirm our hypothesis that laser can enhance already robust four wall economics over time.
David Miller: As mentioned on our last call we plan to make additional deliberate investments to support this pilot in other states throughout the year.
David Miller: Including added adding dedicated personnel to our corporate leadership team.
David Miller: While we see this as a potential additive opportunity to expand our brand and the model European wax and it remains the dominant player in out of home hair removal with a strong and resilient core service offering waxing.
Stacie R. Shirley: As the experts in our category, we remain uniquely positioned to leverage our scale and footprint to pilot the laser and look forward to updating you on our progress. Ultimately, we are confident in our ability to drive new guests to the brand and increase ticket value and frequency among existing guests through the initiatives I outlined. We believe that our data-driven strategies will allow us to deliver another year of top-line growth in 2024. With that, I'd like to hand the call over to Stacie Shirley to review our financial performance and guidance.
As the experts in our category, we remain uniquely positioned to leverage our scale and footprint to pilot laser and look forward to updating you on our progress.
David Miller: Ultimately, we are confident in our ability to drive new guests to the brand and increased ticket value and frequency among existing guests through the initiatives I outlined.
David Miller: We believe that our data driven strategies will allow us to deliver another year of top line growth in 2024.
Speaker Change: With that I'd like to hand, the call over to Stacie Shirley to review, our financial performance and guidance.
Stacie R. Shirley: Thanks, David, and good morning. Before I begin my remarks, I'd like to remind everyone that in some instances, I will speak to adjusted metrics on this call. You can find reconciliation tables to the most comparable gap figures in our press release and 10-Q filed with the SEC today. As a reminder, both fiscal years 2022 and 2023 included a 53rd week, but fiscal 2024 returns to a 52-week year.
David Miller: Stating.
Stacie R. Shirley: Thanks, David and good morning, before I begin my remarks, I'd like to remind everyone that in some instances I will speak to adjusted metrics on this call you can find reconciliation tables to the most comparable GAAP figures in our press release and 10-Q filed with the SEC today.
Stacie R. Shirley: As a reminder, both fiscal years 2022, and 2023 included a 50 <unk> week.
2020 for returns to a 52 week year.
Stacie R. Shirley: Turning now to our first quarter financial performance, we added seven net new centers during the quarter, in line with our expectations. System-wide sales grew 1.3% to $221.4 million as a result of our ramping centers, and total revenue, which includes wax and retail products we sell to the network, increased 4% to $51.9 million. However, same store sales were down 1.2%, excluding the impact of Cntr closures related to inclement weather in January and a shift in Easter timing between quarters.
Stacie R. Shirley: Turning now to our first quarter financial performance, we added seven net new centers during the quarter in line with our expectations.
Stacie R. Shirley: System wide sales grew one 3% to $221 4 million as a result of our ramping centers and total revenue, which includes wax and retail products, we sell to the network increased 4% to $51 9 million.
Stacie R. Shirley: Same store sales were down one 2%.
Stacie R. Shirley: Excluding the impact of center closures related to inclement weather in January and a shift in Easter timing between quarters.
Stacie R. Shirley: We estimate Q1 same-store sales would have been slightly positive. As a reminder, same-store sales reflect in-center transactions and wax pass visits as they are redeemed, while system-wide sales is predominantly a cash-based metric that we recognize as payments for products, services, and wax passes are redeemed.
Estimated Q1 same store sales would have been slightly positive.
As a reminder, same store sales reflect in central transaction and webcast visits as they are redeemed while system wide sales is predominantly a cash base metric that we recognize as payments for products services and wax passes are received.
Stacie R. Shirley: In terms of profitability, first quarter gross margin improved approximately 290 basis points to 73.9, primarily as a result of negotiated cost savings. Q1 SG&A decreased 22% year over year to $13.5 million. And as a percent of revenue, it improved 860 basis points to 26% compared to 34.6% in the prior year. This decrease was driven by the modification of certain pre-IPO equity awards that added an incremental $3.9 million in share-based compensation to Q1 last year.
Stacie R. Shirley: In terms of profitability first quarter gross margin improved approximately 290 basis points to 73, 9%, primarily a result of negotiated cost savings.
Stacie R. Shirley: Q1, SG&A decreased 22% year over year to $13 5 million and as a percent of revenue improved 860 basis points to 26% compared to 34, 6% in the prior year.
Stacie R. Shirley: This decrease was driven by the modification of certain pre IPO equity awards that added an incremental $3 9 million in share based compensation to Q1 last year.
Stacie R. Shirley: First quarter SG&A this year was also positively impacted by the timing of technology, professional, and laser-related expenses that we expect to shift into. Q1 adjusted EBITDA dollars increased 7.4% year-over-year to $17.5 million, and margin improved 100 basis points to 33.7%, driven by the flow-through of the cost savings I just mentioned. With higher interest income in 2024, net interest expense decreased to $6.3 million from $6.9 million in the same period last year. Income tax expense was $1.2 million compared to a benefit of $500,000 last year.
Stacie R. Shirley: First quarter SG&A. This year was also positively impacted by the timing of technology professional and laser related expenses that we expect to shift into Q2.
Stacie R. Shirley: Q1, adjusted EBITDA dollars increased seven 4% year over year to $17 $5 million and margin improved 100 basis points to 33, 7% driven by the flow through of the cost savings I just mentioned.
Stacie R. Shirley: With higher interest income in 2024 net interest expense decreased to $6 3 million from $6 9 million in the same period last year.
Stacie R. Shirley: Income tax expense was $1 2 million compared to a benefit of 500000 last year.
Stacie R. Shirley: Despite the increase in taxes, GAAP net income improved to $3.7 million, and adjusted net income grew 41.3% to $4.8 million. Turning to the balance sheet, we ended the first quarter with $60.4 million in cash, and net cash provided by operating activities was $10.7 million, compared to approximately $100,000 in investing output. As David mentioned, strong free cash flow is a staple of our AssetLight CapitalLight model. We had $393 million outstanding under our senior secured notes, and our $40 million revolver remains fully in use.
Stacie R. Shirley: Despite the increase in taxes GAAP net income improved to $3 $7 million and adjusted net income grew 41, 3% to $4 8 million.
Stacie R. Shirley: Turning to the balance sheet. We ended the first quarter was $64 million in cash and net cash provided by operating activities was $10 $7 million compared to approximately 100000.
Stacie R. Shirley: And investing outflows.
David: As David mentioned strong free cash flow is a staple of our asset light capital light model.
Speaker Change: You had $393 million outstanding under our senior secured notes and our $40 million revolver remains fully undrawn.
Stacie R. Shirley: Net leverage at the end of Q1 was 4.2 times adjusted EBITDA, and our guidance implies net leverage to be at or below four times at the end of this year. However, our leverage expectations do not reflect any share repurchases we may execute under the new $50 million authorization approved by our board this week. As a reminder, we fulfilled our previous $40 million repurchase authorization in Q4 2023 and believe that an additional authorization gives us flexibility to be opportunistic as we drive long-term shareholder value.
Speaker Change: Net leverage at the end of Q1 was $4 two times adjusted EBITDA and our guidance implies net leverage to be at or below four times at the end of this year.
Speaker Change: Our leverage expectations do not reflect any share repurchases, we may execute under the new $50 million authorization approved by our board this week.
Speaker Change: As a reminder, we fulfilled our previous $40 million repurchase authorization in Q4, 2023 and believes that an additional authorization gives us flexibility to be opportunistic as we drive long term shareholder value.
Stacie R. Shirley: We remain committed to delivering organically over time through adjusted EBITDA growth and continuously evaluating the best use of our strong free cash. Turning now to our outlook for 2024, Given stable trends for existing guests and the expected progression of our initiatives to drive greater share of wallet and new guest acquisition, we are reiterating our full year guidance. Our outlook assumes a stable macro environment and that our focus initiatives will materialize as we progress through the year. While data points thus far have been encouraging, we are still in the early stages of these specific initiatives, and we continue to monitor how they are responding with new and existing guests in this macro environment.
Speaker Change: We remain committed to delevering organically overtime to adjusted EBITDA growth and continuously evaluating the best use of our strong free cash flow.
Speaker Change: Turning now to our outlook for 2024.
Speaker Change: Given stable trends for existing guests and the expected progression of our initiatives to drive greater share of wallet and new guest acquisition, we are reiterating our full year guidance.
Speaker Change: Our outlook assumes a stable macro environment and then our focus initiatives will materialize as we progressed through the year.
Speaker Change: While data points, thus far have been encouraging we are still in the early stages of these specific initiatives and we continue to monitor how they are resonating with new and existing guests in this macro environment.
Stacie R. Shirley: In terms of unit growth, we continue to expect franchisees to open 75 to 80 net new centers in 2024, driven primarily by existing franchisees and focused on markets where we have had less development activity in recent years. Based on franchisee construction schedules, we are updating the expected timing of those openings to approximately one-fourth in the first half of the year and three-fourths in the second half. On the top line, we continue to expect system-wide sales between $1 and $1.025 billion, for approximately 6.5% to 9% growth on a 52-week adjusted basis, as well as 2 to 5% growth in Sainsbury's sales group for the year.
Speaker Change: In terms of unit growth, we continue to expect franchisees opened 75 to 80 net new centers in 2024, driven primarily by existing franchisees and focus on markets, where we have had less development activity in recent years.
Speaker Change: Based on franchisee construction schedules, we are updating the expected timing of those openings to approximately one four in the first half of the year and three force in the second half.
Speaker Change: On the top line, we continue to expect system wide sales between one and one <unk> five 1 billion or approximately six 5% to 9% growth on a 52 week adjusted basis as well as two 5% same store sales growth for the year.
Stacie R. Shirley: As David noted in his remarks, we believe our top line will benefit more from our focused strategic initiatives in the second half of the year than in the first. With the rollout of these initiatives in mind, we expect system-wide sales dollars to be the lightest in Q1 and spread fairly evenly between the second and third quarters. We still anticipate that Q1 same-store sales will be the lowest this year, with subsequent quarters following a consistent ramp as our top line initiatives take effect. As David mentioned, the second quarter to date is tracking in line with this expectation.
As David noted in his remarks, we believe our top line will benefit more from our focused strategic initiatives in the second half of the year than in the first half.
With the rollout of these initiatives in mind, we expect system wide sales dollars to be the lightest and Q1 and spread fairly evenly between the second and third quarters.
Speaker Change: We still anticipate that Q1 same store sales will be the lowest this year with subsequent quarters. Following a consistent ramp as our top line initiatives take rate.
David: As David mentioned second quarter to date is tracking in line with this expectation.
Stacie R. Shirley: We continue to expect total revenue between $225 million and $232 million. On a four-year basis, revenue as a percent of system-wide sales will be impacted by the 2024 removal of a COVID-related surcharge for franchising. However, even without the surcharge in place, we expect underlying cost savings to drive gross margin expansion in fiscal 2024. From an expense standpoint, on a full year basis, we expect advertising as a percent of revenue to be flat to last year.
David: We continue to expect total revenue between $225 million and $232 million.
David: On a full year basis revenue as a percent of system wide sales will be impacted by the 2020 for removal at a COVID-19 related surcharge for franchisees.
David: However, even without the surcharge in place, we expect underlying cost savings to drive gross margin expansion in fiscal 2024.
David: From an expense standpoint on a full year basis, we expect advertising as a percent of revenue to be flat to last year.
Operator: However, we currently plan for advertising expense to be approximately 400 basis points higher year over year in Q2 to align our spin with the ramp of seasonal traffic and to drive initiatives we've described. As shared on our last call, we expect to invest approximately $4 million in operating expenses, a significant portion of which is foundational and one-time in nature to support the expansion of our laser hair removal pilot. We plan to incur these expenses at a greater pace in Q2 and further increase them over the balance of the year.
We currently plan for advertising expense to be approximately 400 basis points higher year over year in Q2 to align our spin with the ramp of seasonal traffic and to drive initiatives. We described.
David: As shared on our last call, we expect to invest approximately $4 million of operating expenses, a significant portion of which is foundational and onetime in nature to support the expansion of our laser hair removal pilot.
David: We plan to incur these expenses at a greater pace in Q2, and further increase them over the balance of the year. Please.
Operator: We've seen encouraging results in the early stages of this pilot, but above all, we remain focused on our strong, resilient, and profitable core service offering, WAX. Including these incremental laser costs, our adjusted EBITDA outlook remains approximately $75 million to $80 million. Absent the laser investment, we would expect to drive adjusted EBITDA margin expansion in 2024. We expect approximately $28 million of interest expense this year and currently believe our 2024 effective tax rate will be approximately 25% before the discrete item.
We've seen encouraging results in the early stages of this pilot, but above all we remain focused on our strong resilient and profitable core service offerings waxing.
Speaker Change: Including these incremental laser costs, our adjusted EBITDA outlook remains approximately $75 million to $80 million.
Speaker Change: Absent the laser investment we would expect to drive adjusted EBITDA margin expansion in 2024.
Speaker Change: We expect approximately $28 million of interest expense. This year and currently believe our 2024 effective tax rate will be approximately 25% before discrete items.
Operator: Given our capital structure, we expect our blended statutory tax rate will be approximately 20% and is expected to increase over time as pre-IPO shareholders exchange their Class B shares for Class A shares. As a result, we expect adjusted net income between $22 million and $25 million. In summary, we remain confident in our resilient, asset-light model, recurring predictable visits from our core guests, and our well-capitalized franchisee base. We are pleased with the progress we continue to make on our strategies to drive in-center sales growth in 2024.
Given our capital structure, we expect our blended statutory tax rate will be approximately 20% and expect it to increase over time as pre IPO shareholders exchanged for class B shares for class a shares.
Speaker Change: As a result, we expect adjusted net income between $22 million and $25 million.
Speaker Change: In summary, we remain confident in our resilient asset light model recurring predictable visits from our forecast.
Speaker Change: And our well capitalized franchisee base, we are pleased with the progress we continue to make on our strategies to drive in center sales growth in 2024.
Operator: We believe we are making investments in the right areas to extend our position and continue to take shares as the undisputed leader in the highly fragmented out-of-home hair removal category. We'd now like to open up the call for questions. Operator?
Speaker Change: We believe we are making investments in the right areas to extend our position and continue taking share as the undisputed leader in the highly fragmented out of home hair removal category.
Speaker Change: I would now like to open up the call for questions operator.
Operator: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. The first question comes from Randy Konik on behalf of Jeffreys. Your line is now open.
Speaker Change: Okay.
Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone.
Speaker Change: For your name to be announced to withdraw your question. Please press star one one again, please standby, while we compile the Q&A roster.
Speaker Change: The first question comes from Randy <unk> with Jefferies. Your line is now open.
Randal J. Konik: Hey, good morning, everybody. I guess, David, first, I just need some clarification. When you look at the first quarter same-store sales and you talked about the weather headwind, the Easter shift, and you talked about slightly positive, what were the results? Does that mean a 0.1 or a 1% comp? I just, just that. And then when you talk about in the guidance, I think the second and third quarters are supposed to be equal in terms of your same-store sales assumption. Are you tracking any range of that annual guidance of two to five right now? Is that kind of what we should take away?
Speaker Change: Hey, good morning, everybody.
Speaker Change: David Firstly, a clarification when you look at the first quarter same store sales and you talked about the the weather headwind the Easter shift and you talked about slightly positive would have been the result does that mean.
Speaker Change: One of our 1% type comp I, just just that and then when you talk about in the guidance.
Speaker Change: The I think the second and third quarter is supposed to be equal in terms of your same store sales assumption are you tracking in the range of that annual guidance of 2% to five right now is that kind of what we should take away.
Stacie R. Shirley: Good morning, Randy. This is Stacie.
Stacy: Good morning, Randy This is Stacy so a couple of things we didn't we weren't more descriptive of reverse scripted as it relates to that slightly positive as you know these are estimates and so that's kind of where we came out when you take the combination of both of those impacts.
Stacie R. Shirley: So, a couple of things. We weren't more descriptive or prescriptive as it relates to that slightly positive. As you know, these are estimates, and so that's kind of where we came out when you take the combination of both of those impacts. As for the guidance we gave on Q2 and Q3, it wasn't same-store sales; that was system-wide sales. So we would expect both Q2 and Q3 to be more similar.
Stacy: As it relates to the guidance, we gave on Q2 and Q3. It wasn't same store sales that with system wide sales.
Stacy: We would expect both Q2 and Q3 to be more similar in the past Q2 is usually the heaviest quarter, but as a result of the ramp of the initiatives. We would expect both of those quarters to be a little more in line than what they've been in the past.
Stacie R. Shirley: In the past, Q2 is usually the heaviest quarter, but as a result of the ramp of the initiative, we would expect both of those quarters to be a little more in line with what they've been in the past.
David L. Willis: Gotcha. Okay.
Speaker Change: Gotcha, Okay, and then just as we think about over the let's say the medium term a couple of things as we think about that.
Stacy: The ability to drive.
Speaker Change: Venue gross.
Speaker Change: How do you think about the different levers of price versus.
Speaker Change: Frequency of guests versus service service per visit growth or just give us your perspective there.
Speaker Change: Love to understand in the laser test.
Speaker Change: He has done so far.
Speaker Change: Are you getting a different type of guest and really trying to look in some waxing services when they do laser just curious on what type of behaviors. They are exhibiting.
Speaker Change: In the laser test units versus the non.
Speaker Change: Laser.
David L. Willis: And then just as we think about the, let's say the medium term, a couple things. As we think about the ability to drive venue growth, how do you think about the different levers of price versus frequency of guests versus service per visit growth? Just give us your perspective there.
Speaker Change: That are out there.
Yes, Randy Thanks, Thanks for the question.
Speaker Change: As it relates to driving revenue growth.
Speaker Change: Mix between price and frequency and dollars per ticket.
Speaker Change: Generally we expect to drive more tickets and dollars per ticket, let me, let me double click on that so when we talk about our field trainer support program.
Speaker Change: This is where we deployed field trainers into different markets and we're seeing an immediate impact.
Speaker Change: On our ability to influence wagstaff conversion retail attachment. So for the guests that are coming into those centers, we're able to drive better retention rates visit frequency and dollars per transaction what.
Speaker Change: What we've really modeled is on the back side of what we internally refer to as operation elevate is to bring in our marketing team to really drive local grassroots marketing on the back side of operation elevate that's intended to drive more momentum and ultimately drive more guests. So it is a combination approach Randy.
Speaker Change: We're confident in our ability to move the needle without just having to rely on taking price.
David L. Willis: And I'd love to understand the laser test that you've done so far. Are you getting a different type of guest? Are they trying to loop in some waxing services when they do the laser? I'm just curious about what type of behaviors they're exhibiting in the laser test units versus the non-laser units that are out there. Thanks.
Speaker Change: As it relates to laser.
David L. Willis: Yeah, Randy. Thanks for the question. As it relates to driving revenue growth, you know, the mix between price and frequency and dollars per ticket, Kenley, we expect to drive more tickets and dollars per ticket. Let me double-click on that.
Speaker Change: It is our hypothesis.
Speaker Change: In this initial pilot program was if we can attract more new guests.
Speaker Change: To the brand and drive greater share of wallet from our existing wax guests. The sixth center pilot was expanded to 10 centers because we saw enough data to confirm that the third data point is we wanted to ensure that cannibalization of our core waxing services were contained within acceptable levels and we're also seeing that.
Speaker Change: The ultimate bellwether for laser for this brand is is it accretive on both topline and Bottomline and while we're incredibly encouraged with the initial results.
Speaker Change: We want to get smarter in some other states, where the regulatory environment is a bit stricter than in New York. So that's what's leading us to expand the laser pilot.
Speaker Change: Two Florida, we're taking it to our corporate owned centers in Florida, and we will continue to monitor we have strong interest from our network to further expand into other states. So we will continue to evaluate.
Speaker Change: Laser potential.
Speaker Change: Within the brand I hope that helps Randy.
Randal J. Konik: Yes. It helps thank you so much.
Randal J. Konik: Of course.
Speaker Change: One moment for the next question.
Speaker Change: Next question will come from Scot Ciccarelli with true with your line is open.
Speaker Change: Good morning, guys. Thanks for the time.
Speaker Change: It does for let's say for comps to hit the low end of your annual guide.
Speaker Change: Need positive low single digits into Q kind of ramping that to mid single digits for the balance of the year and then by our math to hit the high end, you basically need a steeper slope with an exit rate.
Speaker Change: Really high single digits, almost even double digit so I.
Speaker Change: So questions are can we assume that you are posting positive low single digits today and second is that fair assumptions regarding kind of the slope to the curve you guys are thinking about for the balance of the year.
Speaker Change: Good morning, Scott.
Speaker Change: I think the way you said, it's pretty reasonable right. What we've said is that it will be a a steady and consistent growth as we progress through the year. As a result of these initiatives that we have in place that will continue to monitor and so I think youre basis of your CAC is pretty is pretty reasonable it's definitely more backend loaded as it relates to most importantly, these initiatives and.
Speaker Change: <unk> to resonate this new guest and then for Q2, what we've said is we're in line or in tracking with with the expectations that we put forward is the 2% to 5%.
Speaker Change: But stacy just to be clear.
Speaker Change: Current plans in place in terms of the change of marketing et cetera.
Speaker Change: The expectation is that can get you to mid single digit to high single digit kind of exit rate by the end of the year fourth quarter.
Scott: Yes, I mean as you do your math right is a negative one two and then you have to see how you would have to ramp to get to that two five again, that's I think a reasonable assumption of how you would get there yes, Scott Let me just let me just add onto that.
Speaker Change: Our reiterating the guide assumes a stable macro and that the initiatives. We've been discussing will in fact drive the results and impact as we progress through the year. There's a couple of proof points that we are seeing that is informing this reiteration of the guide.
Speaker Change: One is the National Media agency retained in Q4, they've laid the groundwork and we're seeing this drive reservations, new guests and cost efficiencies.
Speaker Change: And they are working on optimizations that that strategy that we expect to drive further impact as we move through the year.
David L. Willis: So when we talk about our field trainer support program, this is where we deploy field trainers into different markets, and we're seeing an immediate impact on our ability to influence wax pass conversion and retail attachment. So for the guests that are coming into those centers, we're able to drive better retention rates, visit frequency, and dollars per transaction. What we've really modeled on the backside of what we internally refer to as Operation Elevate is to bring in our marketing team to really drive local grassroots marketing on the backside of Operation Elevate.
David L. Willis: That's intended to drive more momentum and ultimately drive more guests. So it is a combined approach, Randy, but we're confident in our ability to move the needle without just having to rely on taking price. As it relates to the laser, our hypothesis in this initial pilot program was that we could attract more new guests to the brand and drive a greater share of wallet from our existing wax guests. The six center pilot was expanded to 10 centers because we saw enough data to confirm that.
David L. Willis: The third data point is we wanted to ensure that cannibalization of our core waxing services was contained within acceptable levels and was, The ultimate bellwether for the laser for this brand is, is it accretive on both top line and bottom line? And while we're incredibly encouraged with the initial results, we want to get smarter in some other states where the regulatory environment is a bit stricter than in New York. So that's what's leading us to expand the laser pilot to Florida.
Speaker Change: I'd just touched on Randy's question, our field trainers support program.
David L. Willis: We're taking it to our corporate-owned centers in Florida, and we'll continue to monitor it. We have strong interest from our network to further expand into other states, so we will continue to evaluate laser potential within the brand. Hope that helps, Randy.
Operator: Yeah, it helps. Thank you so much.
Speaker Change: We're incredibly excited about this we had the pilot we launched in Q4, we expanded to a few additional centers late Q1 really important takeaway for US is the improvements we're seeing in for well Kpis are actually the franchisees are able to sustain those after our field trainers have done their work and lead these.
Operator: One moment for the next question. The next question will come from Scot Ciccarelli with Truist. Your line is open.
Scot Ciccarelli: Good morning, guys. Thanks for the time.
Speaker Change: Market. So our goal with this program and intention is to further scale. This program as we move through the year.
Speaker Change: Fairly smaller datasets that we had talked on previous calls about our NCO playbook.
Speaker Change: This is a data driven playbook, that's very prescriptive about the spend required before center openings staffing required the training of the Scotland and four this was launched late Q1 and those centers that opened following the new playbook.
Operator: It looks like for comps to hit the low end of your annual guide, you need positive low single digits in 2Q, kind of ramping that to mid single digits for the balance of the year. And then, by our math, to hit the high end, you basically need a steeper slope with an exit rate, really high single digits, almost double digits. So I guess the questions are, can we assume that you are posting positive low single digits today? And second, is that a fair assumption regarding the kind of slopes of the curve you guys are thinking about for the balance of the year?
Speaker Change: We're seeing them open with more new guests in their final day, one properly trained staff and as we would've expected a faster ramp in both tickets and revenue for these new centers and then finally, one last data point Scott is our local digital agency.
Speaker Change: Agencies, we brought on April one we had just over 400 of our centers sign up and start leveraging these new agencies and we're seeing early reads that are very encouraging so.
Speaker Change: I wanted to give at least a few examples of these early proof points those combined with our second quarter to date trends are what gives us confidence in reaffirming kind of the full year outlook.
Stacie R. Shirley: Good morning, Scott. I think that what you said is pretty reasonable, right? What we've said is that there will be steady and consistent growth as we progress through the year as a result of these initiatives. And so I think your basis for your CAC is pretty reasonable. It's definitely more back-end loaded as it relates to, most importantly, these initiatives and continuing to resonate this new. And then for Q2, what we've said is we're, you know, in line or in tracking with the expectations that we have.
Speaker Change: Got it Super helpful guys I appreciate it.
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: Okay.
Stacie R. Shirley: But, Stacie, just to be clear, the current plans in place in terms of the change in marketing, etc., the expectation is that they can get you to a mid-single-digit to high-single-digit kind of exit rate by the end of the year or fourth quarter.
Speaker Change: Our next question comes from Dana Telsey with Telsey Advisory Group. Your line is open.
David L. Willis: Yeah, Scott, let me just add on to that. So our reiterating of the guide assumes a stable macro and that the initiatives we've been discussing will, in fact, drive results and impact as we progress through the year. There are a couple of proof points that we are seeing that are informing this reiteration of the guide. One is the National Media Agency retaining Q4. They've laid the groundwork, and we're seeing this drive reservations, new guests, and cost efficiency.
Dana Lauren Telsey: Hi can you just review regionally did you see anything difference by region in terms of what you saw California. For example, how is that performance versus the rest and then in terms of pricing and labor costs anything changing in terms of pricing and labor costs in terms of you taking price.
Speaker Change: Going forward and is there anything we should be mindful of with the new marketing agency that impacts third second quarter third quarter fourth quarter that could be meaningful. Thank you. Thank you.
David L. Willis: And they're working on optimizations of that strategy that we expect to drive further impact as we move through the year. I just touched on Randy's question, our field trainer support program. We're incredibly excited about this.
Speaker Change: So from a geography standpoint, and Dana and sorry, good morning.
David L. Willis: We had the pilot we launched in Q4. We expanded to a few additional centers in late Q1. Really important takeaway for us is that the improvements we're seeing in four well KPIs are actually the franchisees are able to sustain those after our field trainers have done their work and left these markets. So our goal with this program and intention is to further scale this program as we move through the year. Fairly smaller data set, but we had talked on previous calls about our NCO playbook.
Speaker Change: Relate to call out there is weather throughout the different places hit a little bit harder. So that's probably the only thing that I would say, but from a California perspective, not so much top line. We continue to have the challenges from the increasing cost of labor and construction, but that's those are things that we've just continued to deal with.
Speaker Change: Yes, Dana I would just add.
Speaker Change: As it relates to labor costs, no major headlines in terms of across the network. There's obviously isolated markets that have seen elevated minimum wage rates go into effect earlier.
Speaker Change: Earlier this year in select markets, we've seen franchisees.
Speaker Change: Price in those markets to accommodate.
Andrew: The elevated labor costs, maybe Andrew do you want to touch on how we're thinking about pricing umbrella sure Hi, Dana So as a reminder for everybody. We did recommend price increases in 2021 and again in 2022, but as you know our franchisees set their own prices and some have taken prices up over the past year as well based on the always on.
Andrew: An analysis and monitoring and evaluating the situation that we continue to do we don't plan to recommend a system wide price increase this year, but we continue to put science behind that we would consider.
Andrew: Different pricing scenario it market by market and we're looking across our own costs are four wall margins for our franchisee is the pricing elasticity that we see consumers to exhibit the transaction trends that we experience and what the competition is doing.
Andrew: So all of that is factoring into the way that we are continuing to look at the landscape.
Andrew: Okay.
Speaker Change: Got it.
Speaker Change: Thank you.
Speaker Change: One moment for the next question.
Speaker Change: The next question comes from low rain Hutchinson with Bank of America. Your line is open thank.
Speaker Change: Thank you good morning.
Speaker Change: Was curious what the feedback was from franchisees around the MTO program and.
Speaker Change: That alleviated any concerns they may have on the profitability ramp of future centers, given the higher cost to open.
Speaker Change: Well I'd tell you Larry and good morning.
David L. Willis: You know, this is a data-driven playbook that's very prescriptive about the spend required before a center opens, the staffing required, the training of the staff, and for, this was launched late in Q1, and those centers that opened following the new playbook. We're seeing them open with more new guests in their files on day one, properly trained staff, and, as we would have expected, a faster ramp in both tickets and revenue for these new centers.
Speaker Change: Those franchisees that launched with the new NCO playbook I would say are fully endorsing it they're seeing good early good early results.
David L. Willis: And then finally, one last data point, Scott, is our local digital agencies. We brought them on April 1. We've had just over 400 of our centers sign up and start leveraging these new agencies, and we're seeing early leads that are very encouraging. So I wanted to give at least a few examples of these early proof points. Those, combined with our second quarter data trends, are what give us confidence in reaffirming kind of the full year out.
Speaker Change: Very small data set as we turned this on kind of midway through midway through Q1, but we also put in place Lorraine.
Speaker Change: Two things there's two concerns that franchisees had that we wanted to address one is the ramp in profitability of an NCO and I think this data. This playbook helps address that and gives them the best chance to ramp with more momentum get to faster breakeven and ultimately.
Speaker Change: A faster ramp to the very attractive 50% cash on cash returns.
Speaker Change: And the other thing that we're doing there we are sensitive to franchisees concern that we have.
<unk> Overdevelop a market. So we aligned with our franchise advisory Council to come up with mutually agreed upon market impact guidelines. So our real estate model is already factored in and model that we were going to develop a particular location what impact that would have on surrounding centers we've always.
Speaker Change: Worked under the assumption and parameters that are 5% to 10% cannibalization would be acceptable for multi unit growth concept. So we've aligned with our franchise Advisory Council to say it.
Speaker Change: A given site that selected by a franchisee is expected to have an outsized impact on the surrounding centers, we'll look for another location. So we're really trying to address this both ways, giving those NCI was the best opportunity to drive profitable growth, while protecting the profitability of surrounding franchise locations.
Speaker Change: Thank you.
Speaker Change: One moment for the next question.
Speaker Change: The next question comes from Lorraine.
Speaker Change: Correne will smile with Piper Sandler Your line is open.
Speaker Change: Hey, good morning team, thanks for taking the questions.
Lorraine: First one is I'm just wondering if theres any way you can better quantify the Easter and weather impact and maybe you could give us some color on how many centers were actually closed on the Easter holiday and how many centers and how many days were closed due to weather and maybe that could help give us a little bit more comfort.
Speaker Change: There is not some other impacts going on like the macro or weaker episodic got strength that may also be contributing to that lower same store sales. Thanks.
Speaker Change: Good morning.
Speaker Change: I appreciate the question Graeme, but we've not broken it out.
Speaker Change: Between those two pieces.
Speaker Change: I can tell you from a weather perspective, nearly 300 store days is kind of what we calculated in January across those kind of 12 different states and so it was very impactful for sure, but we've not quantified it any further than that.
Speaker Change: And then of course on Easter we're closed that day so.
Operator: Got it. Super helpful, guys. Appreciate it. Sure.
Speaker Change: Got it. Thanks, that's helpful. And then I think in the prepared remarks, you talked a little bit about a spending shift from.
Speaker Change: Q1 to Q2 is there a way you can quantify that and then maybe help give us a little bit more color on how we should be thinking about the margin cadence for the remainder of the year. Thank you.
Operator: Got it. Super helpful, guys.
Speaker Change: Sure so from a from a gross margin perspective I'll start there.
Operator: Our next question comes from Dana Telsey with the Telsey Advisory Group. Your line is open.
Speaker Change: We had a very significant increase in Q1 as a result of these kind of negotiated cost savings that we've had I would expect to continue to see.
Dana Lauren Telsey: Hi. Can you just review regionally? Did you see anything different by region in terms of what you saw in California, for example? How is that performance versus the rest? And then, in terms of pricing and labor costs, is anything changing in terms of pricing and labor costs in terms of you taking prices going forward? And is there anything we should be mindful of with the new marketing agency that impacts the third, second quarter, third quarter, fourth quarter that could be meaningful?
Stacie R. Shirley: Thank you.
Speaker Change: An improvement over the balance of the year not to the size of what we saw in Q1 that was definitely outsized and certainly as we get to the back half we're going to start anniversarying. Some of those cost savings that we started to see at the.
Speaker Change: End of 'twenty three.
Speaker Change: From the other guidance that we provided we didn't quantify the impact of the.
Speaker Change: The shift in timing of professional fees and technology. The biggest thing to take into account in Q2 is what we said about advertising that we would expect about a 400 basis point increase as a percentage of revenue for the quarter. As we are again ramping up these initiatives to support that.
Speaker Change: And then also getting more in line with just the seasonal traffic.
David L. Willis: So from a geography standpoint, Dana, and sorry, good morning. There's nothing really to call out. You know, there was weather throughout the, you know, in different places hit a little bit harder. So that's probably the only thing that I would do. From a California perspective, not so much on the top line, you know; we continue to have the challenges of the, you know, increasing cost of labor and construction, but those are things that we've continued to deal with.
Speaker Change: Great. Thank you Youre.
Speaker Change: Youre welcome one moment for the next question.
Andrea Wasserman: Yeah, Dana, I would just add, you know, as it relates to labor costs, no major headlines in terms of across the network, but there's obviously isolated markets. Elevated minimum wage rates went into effect earlier this year, and in select markets, we've seen franchisees take prices in those markets to accommodate the elevated labor costs. Maybe, Andrea, you want to touch on how we're thinking about pricing? Sure. Hi Dana. So as a reminder for everybody, we
Speaker Change: The next question comes from Simeon Gutman with Morgan Stanley. Your line is open.
Andrea Wasserman: Sure. Hi Dana.
Andrea Wasserman: So, as a reminder for everybody, we did recommend price increases in 2021 and again in 2022. But, as you know, our franchisees set their own prices, and some have taken prices up over the past year as well. Based on the ongoing analysis and monitoring and evaluating of the situation that we continue to do, we don't plan to recommend a system-wide price increase this year, but we continue to put science behind that.
Simeon Ari Gutman: Good morning, I wanted to ask about New center productivity I think it's hard for us to get the correct math and then following up getting to the it looks like you need to do three comps the rest of the year to get to the to the guidance range at least the low end you had about 100 stores coming into this.
Andrea Wasserman: We would consider different pricing scenarios, market by market, and we're looking across our own costs, our four-wall margins for our franchisees, the pricing elasticity that we see consumers exhibit, the transaction trends that we experience, and what the competition is doing. So, all of that is factoring into the way that we are continuing to look at the landscape.
Simeon Ari Gutman: Year Youll have another 102 this year, so the ability to get to that comp range with nearly 20% more units as well and how that may interact with some the trajectory of the year.
Operator: One moment for the next question. The next question comes from Lorraine Hutchinson with Bank of America. Your line is open. Thank you. Good morning.
Yes, I mean, so on the on the New center productivity.
Speaker Change: As I had mentioned earlier, it's a very small data set at least those centers that opened with our NCO playbook.
Simeon Ari Gutman: Acquirements.
Simeon Ari Gutman: We're very pleased I mean their ticket trajectory.
Simeon Ari Gutman: Trajectory there revenue trajectory.
Simeon Ari Gutman: Weeks to a few months in some cases with some of these centers is.
David L. Willis: Well, I'll tell you, Lorraine, good morning. Those franchisees that launched with the new NCO playbook, I would say, are fully endorsing it. They're seeing good early results. Very small data set as we turn this on, kind of midway through Q1.
Simeon Ari Gutman: Sure.
Speaker Change: It looks like centers pre COVID-19 in terms of what what is the productivity of these new centers now having said that our guidance I mean, I think you had mentioned 100 centers. This year our guide for unit development is 7500 coming in.
David L. Willis: But we also put in place, Lorraine, two things. There are two concerns that franchisees had that we wanted to address. One is the ramp and profitability of an NCO. And I think this data, this playbook, helps address that and gives them the best chance to ramp with more momentum, get to faster break even, and ultimately, you know, a faster ramp to the very attractive 50% cash on cash return.
David L. Willis: The other thing that we're doing, we are sensitive to franchisees' concerns that we may oversaturate or overdevelop a market. So we have aligned with our Franchise Advisory Council to come up with mutually agreed upon market impact guidelines. So our real estate models already factored in and modeled if we were going to develop a particular location, what impact that would have on surrounding centers. We've always worked under the assumption and parameters that a 5% to 10% cannibalization would be acceptable for a multi-unit growth concept.
David L. Willis: So we've aligned with our Franchise Advisory Council to say if a given site that's selected by a franchisee is expected to have an outside impact on the surrounding centers, we'll look for another location. So we're really trying to address this both ways, giving those NCOs the best opportunity to drive profitable growth while protecting the profitability of surrounding franchisees.
Speaker Change: 75% to 80 for the full year, but we do expect to hit within our guidance. We fully acknowledge this is a quarter over quarter over quarter.
Improvement in our in our comp and the initiatives that we've talked about in the early data points are giving us that confidence that these will materialize and drive greater impact as we progress quarter to quarter to quarter.
Speaker Change: Thanks for that.
Speaker Change: <unk> expenses I think you said.
Speaker Change: I was going to ask it how much expenses shift from Q1 to Q2, I don't think Youre quantifying and then the IPO Awards.
Speaker Change: Could you just refresh what what that was from and then is this new run rate going forward or do we see some of that expense come back at any point.
Speaker Change: So in Q1 last year, there was almost $4 million of kind of let's say.
Speaker Change: One time or not one time, but an outsized amount related to the pre IPO. Some pre IPO grants. So that you can completely take that out as it relates to the ongoing run rate.
Speaker Change: So what you would see quarter over quarter, it's pretty consistent I.
Speaker Change: I think we'd call it out its roughly two.
Speaker Change: $2 million or something like that.
Speaker Change: Got it okay. Thanks, everyone. Good luck.
Operator: One moment for the next question. The next question comes from Lorraine, I mean, excuse me, Korinne Wolfmeyer with Piper Sandler. Your line is open.
Simeon Ari Gutman: Thanks Simeon.
Speaker Change: One moment for the next question.
Speaker Change: The next question comes from Jonathan Komp with Baird. Your line is now open.
Korinne N. Wolfmeyer: Hey, good morning team. Thanks for taking the questions. My first one is, I'm just wondering if there's any way you could better quantify the Easter and weather impact, and maybe you could give us some color on, you know, how many centers were actually closed on the Easter holiday? And then how many centers and how many days were closed due to weather. Maybe that could help give us a little bit more comfort that there's not some other impact going on like the macro or weaker episodic gas trends that may Thanks.
Jonathan Robert Komp: Yes, hi, good morning.
Jonathan Robert Komp: If I could just follow up on the plan for unit development here in 2020 for I think three.
Jonathan Robert Komp: Three quarters back half weighted is more weighted to the back half than we've typically seen could you maybe just comment.
Jonathan Robert Komp: Any individual circumstances relating to the shape of the year and really visibility to that second half ramp.
John: Yes, John Good question. Thank you.
Speaker Change: Is it is more back half weighted than what we saw what we saw last year there were six centers.
We had scheduled to open in Q2 that are going to move to the back half of the year three of those in the northeast just had some permitting delays three of those lease negotiations with landlords took an extended period of time, we have every confidence that all six of those centers will open in 2024 so.
Speaker Change: While we are back half loaded I don't have any concerns that.
Speaker Change: Okay.
Speaker Change: That this is going to push further as of today, John our franchisees remain committed to developing with.
Speaker Change: The brand they continue to make solid cash on cash return so.
Speaker Change: Hopefully that addresses your.
Specific question.
Speaker Change: Yes, that's really helpful.
Speaker Change: Maybe just one other broader question as you think about it.
Speaker Change: Right. The same store sales run rate for this business over time, so not directly tied to 2024, but over time. How are you thinking about same store sales I know at one point of.
Speaker Change: Our view was towards high single digit comps.
Speaker Change: I don't know if you have any updated thoughts relative to that thanks again.
Stacie R. Shirley: Good morning, and I appreciate the question, Korinne, but we've not broken it out between those two pieces. What I can tell you from a weather perspective is that nearly 300 score days is kind of what we calculated in January across those 12 different, you know, states. And so it was very impactful, for sure, but we've not quantified it any further than that. And then, of course, on Easter, you know; we're closed that day. So,
Stacie R. Shirley: Got it. Thanks so much. That's helpful. And then, I think in your prepared remarks, you talked a little bit about a spending shift from Q1 to Q2. Is there a way you can quantify that and then maybe help give us a little bit more color on how we should be thinking about the margin cadence for the remainder of the year? Thank you. Sure. So from a purely financial point of view,
Speaker Change: Yes, I appreciate the question.
Speaker Change: Clearly that is where our long term algorithm is thats, what we have just spoken about and to get there. It's a low single digit.
Stacie R. Shirley: Sure. So from a gross margin perspective, I'll start there. You know, we saw a very significant increase in Q one, as a result of these kind of negotiated cost savings that we've had. I would expect to continue to see an improvement over the balance of the year, not to the size of what we saw in Q one, but certainly, as we get to the back half, we're going to start anniversarying some of those cost savings that we started to see at the end of 23.
Stacie R. Shirley: From the other guidance that we provided, we didn't quantify the impact of the shift in timing of professional fees and technology. The biggest thing to take into account in Q2 is what we said about advertising, that we would expect about a 400 basis point increase as a percentage of revenue for the quarter as we are again ramping up these initiatives to support that and then also getting more in line with just the seasonal trends.
Speaker Change: For our mature centers and high single digit for ramping and we believe that we still have the opportunity to get back there and as we progress through the year, we will get closer, especially on the mature centers are getting back to that long term ramp assuming that again, the things that David talked about before a stable environment as well as these initiatives really starting to materialize. So we still believe that that is something that we can achieve.
Speaker Change: In this model.
Speaker Change #100: Okay. Thanks, Thanks again.
Stacie R. Shirley: Thank you. You're welcome.
Speaker Change: You.
Speaker Change #101: One moment for the next question.
Operator: One moment for the next question. The next question comes from Simeon Gutman with Morgan Stanley. Your line is open.
Speaker Change: Okay.
The next question comes from John <unk> with Guggenheim Partners. Your line is open.
David: Hey, David can you.
John Edward Heinbockel: Expand on the field training initiative right in terms of what what parents what Theyre specifically.
Speaker Change #103: Working on I don't know, if theyre training whack specialist managers et cetera.
Speaker Change #104: <unk> talked about Kpis right. So what are the what are the Kpis that you think are most critical and then lastly, I'm just curious obviously youre going to have multiple trainers doing a lot of stores I'm. Just curious ultimately is this a 50 person effort is at a 100 person what is the size of it.
Simeon Ari Gutman: Good morning. I want to ask you about a new center of productivity. I think it's hard for us to get the correct math. And then following up, getting to the, looks like you need to do three comps the rest of the year to get to the guidance range, at least the low end. You had about 100 stores coming into this year; you'll have another 100 through this year. So the ability to get to that comp range with, you know, nearly 20% more units as well, and how that may interact with the trajectory of the year.
Speaker Change #105: Got it.
John Edward Heinbockel: Yes, John Thanks for the question.
David L. Willis: Yes, I mean, on the new center productivity, as I mentioned earlier, it's a very small data set, at least those centers that open with our NCO playbook requirements. But we're very pleased.
Speaker Change #105: So.
Speaker Change #106: Today, we have we have less than 10 field trainers. So I wanted to give this some level of context, while we while we would like to expand this team we're not signaling.
Speaker Change #107: Fundamental change in our Opex structure I think the impact these folks can drive and center are.
Speaker Change #107: Flows through very nicely, both to our revenue and ultimately to our EBITDA line.
David L. Willis: I mean, their ticket trajectory, their revenue trajectory, a few weeks to a few months, in some cases with some of these centers, looks like centers pre-COVID in terms of what their productivity is. Now, having said that, our guides, I mean, I think you mentioned 100 centers this year; our guide for unit development is 75. Oh, I got 75 to 80 for the full year. But we do expect to hit within our guidance, we fully acknowledge this is a quarter over quarter over quarter improvement in our comp, and the initiatives that we've talked about in the early data points are giving us that confidence that these will materialize and drive greater impact as we progress quarter to quarter.
Stacie R. Shirley: Thanks for that. On expenses, I think Stacie said, I was going to ask how much expenses shift from Q1 to Q2. I don't think you're quantifying that. And then the IPO awards. Can you just refresh what that was from and then is this the new run rate going forward, or do we see some of that expense come back at any point?
Stacie R. Shirley: So in Q1 last year, there was almost four million dollars of kind of, let's say, a one-time or not one time but an outsized amount related to the pre-IPO grants so that you can completely take that out as it relates to the ongoing run rate. And so what you would see quarter over quarter is pretty consistent. It's, you know, I think we'd call it out. It's roughly, you know, $2 million, something like that. I got it.
Speaker Change #108: When I look at it given market so John the way. We're approaching this is go to a given market and that market may be.
Speaker Change #108: Larger franchisee group, maybe it's one franchisee.
Speaker Change #108: A market that has a collection of smaller groups the.
Speaker Change #109: The combination of our field business consultant and field trainers really deploying to that market.
Speaker Change #109: They live in that market for weeks at a time. So instead of just checking on the centers are doing a quarterly business review they embed themselves in the markets to evaluate are the centers properly staffed are they following the playbooks and really hands on coaching mentoring guiding.
Speaker Change #109: At the very.
Speaker Change #110: The very playbooks that we put out to the network. The kpis that we're focused on and that we're moving the needle on our <unk> conversion.
Speaker Change #110: Guests retention. So we measure guest retention is that guests visited your center did they either rebook or.
Speaker Change #110: Rebook to visit that sooner within the next 60 days and driving retail attachment.
Speaker Change #111: So it's a different approach than just kind of a couple of times a year four times a year touch base with the franchisee on here's your opportunities to drive improvement in your centers, it's very much a hands on.
Speaker Change #112: Approach and we're very pleased with kind of the early reads. Thus far we've been we had the one pilot center in Q4 of last year. We went to another market late Q1 of this year and so our goal and plan is to further scale. This program as we progress through the year.
Speaker Change #113: Alright, maybe as a follow up to that if we take if you think about the ramp in system wide sales.
Speaker Change #114: Right from where we are now to let's say the fourth quarter.
Speaker Change #115: You put it into four buckets right, you've got core and non core and then you got right.
Speaker Change #116: Traffic and spend.
Speaker Change #117: Where do you think the biggest ramp is.
Speaker Change #118: Most significant ramp is going to come in those buckets.
John can you clarify core noncore right well I think you said, Greg core is I want to make it simple bread as opposed to wax pass on and.
Speaker Change #118: And.
Speaker Change #119: Tangible so if I think about quarters, 75% noncore.
Speaker Change #119: 25, right, so I think about that.
Speaker Change #120: <unk> 75 in the 25% and then when you think about right traffic and spend in each of those so those four buckets.
Speaker Change #120: You said this one or one or two we're going to drive.
Speaker Change #120: Disproportionate.
Speaker Change #121: Ramp what would that be.
Speaker Change #122: I don't know that Theres, one thats going to drive a disproportionate ramp if I think of our existing guests so both core and noncore IC.
Speaker Change #122: A decent part of this ramp through the year coming from the existing guest file so of our core guest we wanted to get a greater share of wallet. So are probably best opportunity. They are already coming on a regular cadence is probably drive better retail attachment or an add on service the.
Speaker Change #122: The opportunity for our non core guests that are coming less frequency is can we get them on a wax pass to get them on that regular routine. So if I look at kind of as we expect the ramp I think the lion's share of that is going to come from the existing guests file getting more visits and more dollars per ticket.
Speaker Change #122: And I think we talked briefly on this in our prepared remarks, I think we have a huge opportunity in terms of attracting more new guests to the brand.
Speaker Change #122: In this environment, we get that consumers that are not already on a waxing routine might be a little more challenging to convince them to start waxing, but we're very pleased with the early reads from our National Media program and we're encouraged with the very early reads of our local digital agency program. So hopefully that gives you a little more color.
Speaker Change #123: John on how we're thinking about it thank.
John: Thank you.
Speaker Change #124: As a reminder to ask a question. Please press star one one on your telephone one moment for the next question.
Speaker Change #125: The next question comes from Kelly Crago with Citi. Your line is now open.
Operator: Got it. Okay. Thanks, everyone. Good luck.
Kelly Crago: Hi, everyone. Thanks for taking our question I just wanted to focus in on the comp performance in one queue. So X X the timing shifts in closures and a slightly positive comp. It was below how consensus is modeling. So I'm just curious how the comp performance.
Operator: One moment for the next question. The next question comes from Jonathan Komp with Bayer. Your line is now open.
Jonathan Robert Komp: Yeah, hi, good morning. If I could just follow up on the plan for unit development here in 2024, I think Yeah, three quarters back half weighted is more weighted to the back half than we've typically seen. Can you maybe just comment on any individual circumstances leading to the shape of the year and really visibility to that second half ramp?
David L. Willis: Yeah, John, a good question. Thank you.
David L. Willis: It is more back-half-weighted than what we saw last year, with three of those in the Northeast just having some permitting delays. Three of those lease negotiations with landlords took an extended period of time. We have every confidence that all six of those centers will open in 2024. While we are back half loaded, I don't have any concerns that this is going to push further as of today, John. Our franchisees remain committed to developing with the brand, and they continue to make solid cash on cash returns. So hopefully, that addresses your specific question.
Kelly Crago: Was relative to your plan going into the quarter.
Speaker Change #127: You mentioned I mean, we've talked a lot about the weakness.
Speaker Change #127: That you saw from new guests.
Speaker Change #127: What you expected given you did have this partnership.
Speaker Change #127: With the New Media Agency and then just secondly, any color on them.
Speaker Change #127: More color on that episodic gas performance versus expectations. Given there are so there are more susceptible to fluctuations in the macro.
Stacie R. Shirley: Yeah, that's really helpful. Maybe just one other broader question as you think about, you know, really the right same-store sales run rate for this business over time, so not directly tied to 2024, but over time, how are you thinking about same-store sales? I know at one point, you know, the view was towards high single-digit comps. I don't know if you have any updated thoughts relative to that. Thanks again.
Speaker Change #127: Great. Thanks, Kelly as far as the comp in Q1. So we don't really provide one as you know we don't provide specific quarterly guidance or kind of what our internal expectations are however, we did say on our call in March we expected Q1 to be the low point of the year due to the rollout of these initiatives and that was taking sorry.
Operator: Yeah, I appreciate the question. You know, clearly, that is where our long-term algorithm is. That's what we have spoken about, and to get there, it's a low single digit for mature centers and a high single digit for ramping. And we believe that we still have the opportunity to get back there. And as we progress through the year, we'll get closer, especially at the mature centers, to getting back to that long-term ramp, assuming again the things that David talked about before, a stable environment, as well as these initiatives really starting to materialize. So we still believe that that is something that we can achieve in this.
Operator: One moment for the next question. The next question comes from John Heinbockel with Guggenheim Partners. Your line is open.
Kelly Crago: To materialize and of course at that point, we were aware of weather and the impact of Easter and so we still maintain that expectation that Q1 is going to be the low point for the year and we reiterated as you know the guide for 2% to 5% for the full year. So that's.
David L. Willis: Yeah, John, thanks for the question. You know, today we have less than 10 field trainers. So I want to give this some level of context, while we would like to expand this team, we're not signaling a fundamental change in our OPEX structure. I think the impact these folks can drive and center flows through very nicely, both to our revenue and ultimately to our EBIT outline. When I look at a given market, John, the way we're approaching this is to go to a given market, and that market may be, you know, it's a larger franchisee group, maybe it's one franchisee, if it's a market that has a collection of smaller groups.
John Edward Heinbockel: Hey David, can you, uh... Spend on the field training initiative, right? In terms of what they're specifically working on, I don't know if they're training wax specialists, managers, et cetera. You talked about KPIs, right? So what are the KPIs that you think are most critical? And then lastly, I'm just curious, right? Obviously, you're gonna have multiple trainers doing a lot of stores. I'm just curious, ultimately, is this a 50 person effort? Is it a hundred person effort? What's the size of it if you think about it?
Speaker Change #128: That's kind of where we're sitting today Kelly.
David L. Willis: The combination of our field business consultant and field trainers really deploy to that market, and they live in that market for weeks at a time. So instead of just checking on the centers or doing a quarterly business review, they embed themselves in the markets to evaluate, are the centers properly staffed? Are they following the playbook?
Speaker Change #129: Kelly I would just add in terms of the episodic guests in Q1, we actually saw that part of the file remained stable in terms of the curve visit frequency and her spend.
David L. Willis: and really hands-on coaching, mentoring, and guiding the very playbooks that we put out to the network. The KPIs that we're focused on and that we're moving the needle on are Wax Fast Conversion, and Guest Retention. So we measure guest retention. Has that guest visited your center? Did they either rebook or rebook to visit that center within the next 60 days? And Driving Retail Attachments. So it's a different approach than just kind of a couple of times a year, four times a year, touch base with the franchisee on here are your opportunities to drive improvement in your centers.
David L. Willis: It's very much a hands-on approach, and we're very pleased with kind of the early reads thus far. We had one pilot center in Q4 of last year, we went to another market late in Q1 of this year, and so our goal and plan is to further scale this program as we progress through the year. All right.
David L. Willis: All right, maybe as a follow-up to that, right? If you think about the ramp and system-wide sales right from where we are now to, let's say, the fourth quarter. And you put it into four buckets, right? You got core and non-core. And then you got, right, you know, traffic and spend. Where do you think the most significant ramp is going to come in those buckets?
Speaker Change #129: Our biggest opportunity as we talked earlier is really attracting more new guests to the brand and we expect more new guests added to our file as we progressed through the year again part related to our National Media agency, but we expect more momentum to come from the local digital agencies in these local grassroots efforts were.
David L. Willis: John, can you clarify core and non-core? Right. Well, I think so.
David L. Willis: Right. Well, I think you said the core is I want to make it simple, right, as opposed to wax pass and, and, and, you know, casual. So I think about core is 75% non-core. I think that's 25, right? So I think about that, you know, 75 and the 25. And then I think about, right, traffic and time spent in each of those. So those four buckets, you know, if you said this one or one or two were going to drive a disproportionate ramp, what would that be?
Speaker Change #129: Seeing already that the franchisees embracing this grassroots marketing playbook are making a difference in their centers.
David L. Willis: I don't know that there's one that's going to drive a disproportionate ramp. If I think of our existing guests, both core and non-core, I see a decent part of this ramp through the year coming from the existing guest file. So for our core guests, we wanted to get a greater share of wallets. So our probably best opportunity there, they're already coming on a regular cadence, is probably to drive better retail attachment or an add-on service.
David L. Willis: The opportunity for our non-core guests that are coming less frequently is can we get them on a wax pass to get them on that regular routine. So if I look at kind of as we expect the ramp, I think the lion's share of that is going to come from the existing guest file, getting more visits and more dollars per ticket. And I think we talked briefly about this in our prepared remarks.
Speaker Change #130: Got it and just one more from me.
David L. Willis: I think we have a huge opportunity in terms of attracting more new guests to the brand. In this environment, we understand that consumers that are not already on a waxing routine might be a little more challenging to convince to start waxing. But we're very pleased with the early reads from our national media program, and we're encouraged by the very early reads of our local digital agency program. So hopefully, that gives you a little more color, John, on how we're thinking about it. Thank you.
Operator: As a reminder, to ask a question, please press star 11 on your telephone. One moment for the next question. The next question comes from Kelly Crago on Civi. Your line is now open.
On the King of.
Speaker Change #131: The comps extra shifts did you and the closures can.
Speaker Change #132: Can you just give any color on maybe.
Speaker Change #132: The comp performance progressed during the quarter or two to kind of better understand the run run rate on <unk>.
Kelly Crago: Great. Thanks, Kelly.
Operator: Hi everyone. Thanks for taking our question. I just wanted to focus in on the comp performance in OneCue. So X, the timing, shifts, and closures, the slightly positive comp, was below how consensus is modeling it. So I'm just curious how the comp performance was relative to your plan going into the quarter. You mentioned, and we talked a lot about the weakness that you saw from new guests. Was that what you expected given you did have this partnership with this new media agency? And then, just secondly, any more color on that episodic guest performance versus expectations given there are some, they're more susceptible to fluctuations in the macro.
Stacie R. Shirley: As far as the COMP and Q1, we don't really provide one, as you know, we don't provide specific quarterly guidance or kind of what our internal expectations are. However, you know, we did say on our call in March that we expected Q1 to be the low point of the year due to the rollout of these initiatives and those taking, you know, starting to materialize. And, of course, at that point, we were aware of the weather and the impact of Easter.
Yeah.
Speaker Change #133: We don't provide that monthly performance metrics. However, obviously January was where we were significantly impacted as I mentioned before you know estimated about a 300 store days of closures and then of course in market with the ship, but we haven't quantified it further than that other than say you know in Q2, we are tracking to where we think we the expectation.
Stacie R. Shirley: And so we still maintain that expectation that Q1 is going to be the low point for the year. And we reiterated, you know, as you know, the guide for two to five. That's kind of where we're sitting. Yeah, Kelly, I would just
David L. Willis: Yeah, Kelly, I would just add, in terms of the episodic guests, in Q1, we actually saw that part of the file remain stable in terms of her visit frequency and her spin. Our biggest opportunity, as we talked earlier, is really attracting more new guests to the brand, and we expect more new guests to be added to our file as we progress through the year. Again, part related to our national media agency, but we expect more momentum to come from the local digital agencies and these local grassroots efforts. We're already seeing that the franchisees embracing this grassroots marketing playbook are making a difference.
David L. Willis: And just one more for me, on the cadence of the comps, you know, X to shift, did you, in the closures, can you just give any color on maybe how the comp performance progressed through the quarter to kind of better understand the run rate out? One cue. Yeah.
Stacie R. Shirley: Yeah, you know, we don't provide the monthly performance metrics, you know, however, obviously, January was where we were significantly impacted, as I mentioned before, estimated about 300 SOAR days of closures. And then, of course, in March, it was the shift, but we haven't quantified it further than that. Other than say, you know, in Q2, we are tracking to where we think we will meet the expectations that we have for the year.
Speaker Change #133: That we have for the year so.
Speaker Change #134: Thank you.
Operator: I have no further questions in the queue at this time. I would now like to turn the call back to David Willis for closing remarks.
I show no further questions in the queue at this time I would now like to turn the call back to David Willis for closing remarks.
David L. Willis: Thanks, Michelle, and thank you everyone for your time on the call today. We look forward to speaking with you in the days and weeks to come and to delivering on our long-term growth objectives. Thanks for attending the call.
David L. Willis: Thanks, Michelle and thank you everyone for your time on the call today, we look forward to speaking with you in the days and weeks to come and to delivering on our long term growth objectives.
Operator: This does conclude today's conference call. Thank you for participating. You may now disconnect.
Speaker Change #136: Thanks for attending the call.
Speaker Change #137: This does concludes today's conference call. Thank you for participating you may now disconnect.
Speaker Change #137: Okay.
Speaker Change #137: Okay.
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