Q2 2024 European Wax Center Inc Earnings Call

August 14, 2024

Speaker Change: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to European Wax Center's second quarter fiscal 2024 earnings call. At this time, all participants are on a listen-only mode.

Operator: Welcome to European Wax Cntr's second quarter fiscal 2024 earnings call.

Operator: At this time all participants on a listen only mode. After this previous presentation, there'll be a Q&A session. In order to facilitate as many participants as possible, we, as a you, please limit yourself to one question and one follow-up.

Speaker Change: After this previous presentation, there will be a Q&A session. In order to facilitate as many participants as possible, we ask that you please limit yourself to one question and one follow-up.

Operator: During the Q&A session, if you have additional questions, you may rejoin to Q.

Bethany Johns: during the Q&A session. If you have additional questions, you may rejoin the queue. On the call today are David Burr, Chief Executive Officer, and Stacie Shirley, Chief Financial Officer. I would now like to turn the conference over to Bethany Johns, Director of Investolations. Ma'am, you may begin.

Operator: On the call today are David Bird, Chief Executive Officer, and Stacie Shirley, Chief Financial Officer.

Bethany Johns: I would not like to send a conference over to Bethany Johns, Director of Investulations; then he may begin.

Bethany Johns: Thank you and welcome to European Wax Cntr's second quarter fiscal 2024 earnings call.

David Bird: On today's call, David Bird will begin with a brief review of our second quarter performance and discuss our priorities for the balance of 2024. Then Stacie will provide additional details regarding our financial performance and updates to our fiscal 2024 outlook. Following the prepared remarks, the team will begin with a brief review of our second quarter performance and discuss our priorities for the balance of 2024. Then Stacie will provide additional details regarding our financial performance and updates to our fiscal 2024 outlook.

Speaker Change: On today's call, David Berg will begin with a brief review of our second quarter performance and discuss our priorities for the balance of 2024. Then, Stacie will provide additional details regarding our financial performance and updates to our fiscal 2024 outlook. Following the prepared remarks, the team will be available to take questions.

David Bird: Following the prepared remarks, the team will be available to take questions.

Operator: 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.

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.

Speaker Change: These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings as well as our earnings release issued today for a more detailed description of the risk factors that may affect our results.

Operator: Please refer to our SEC filings as well as our earnings release issued today for a more detailed description of the risk factors that may affect our results. Please also note that the short-term results of these forward-looking statements reflect our opinions only as of the date of this call.

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.

Operator: 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.

Operator: 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. A live broadcast of this call is also available on the Investor Relations section of our website.

Speaker Change: 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.WACCenter.com

David Bird: I will now turn the call over to David Berg. Thanks, Bethany, and good morning, everyone. Thank you for joining us today.

Speaker Change: I will now turn the call over to David Berg.

David Berg: Thanks, Bethany, and good morning, everyone. Thank you for joining us today.

David Bird: Let me start by saying how excited I am to be back at European Lack Center, speaking with you all today as CEO once again. I first joined EWC six years ago and was energized by the opportunity to build and expand an iconic, one-of-a-kind brand. I was most excited about the company's undisputed leadership position, significant white space, passionate associates, and consistent recurring revenue model that allowed our franchise partners to generate strong financial returns and reinvest in the brand. What I learned over the course of the past six years is there is a deep love for this brand, from our guests, from our franchisees, and also from our associates who are guided by our core values while feeling empowered to be their authentic selves.

David Berg: Let me start by saying how excited I am to be back at European Wax Center, speaking with you all today as CEO once again.

David Berg: I first joined EWC six years ago and was energized by the opportunity to build and expand an iconic, one-of-a-kind brand.

David Berg: I was most excited about the company's undisputed leadership position, significant white space, passionate associates, and consistent recurring revenue model that allowed our franchise partners to generate strong financial returns and reinvest in the brand.

David Berg: What I learned over the course of the past six years is there is a deep love for this brand.

David Berg: from our guests, from our franchisees, and also from our associates, who are guided by our core values while feeling empowered to be their authentic selves, all of which make European Wax Center a great place to work.

David Bird: All of which make European Lack Center a great place to work. These unique attributes still exist at EWC today, and I remain excited and optimistic about the potential that lies ahead for our company.

David Berg: These unique attributes still exist at EWC today, and I remain excited and optimistic about the potential that lies ahead for our company.

Bethany Johns: Welcome to European Wax Cntr's second quarter fiscal 2024 earnings call. At this time all participants on a listen only mode. After this previous presentation there'll be Q&A session.

Bethany Johns: In order to facilitate as many participants as possible, we as a you please limit yourself to one question and one follow up. During the Q&A session, if you have additional questions you may rejoin to Q.

David Bird: At the same time, I know there is much work to be done to realize our potential and reposition EWC for sustainable long-term growth. We're navigating an ongoing difficult macroeconomic environment that is affecting consumer spending across many categories and income levels. Yet it is our job to do everything we can do to drive growth despite the external challenges we are facing. There is strong alignment between the board and the executive team on what needs to be done to deliver long-term value to our guests, franchisees, associates, and shareholders.

David Berg: At the same time, I know there is much work to be done to realize our potential and reposition EWC for sustainable, long-term growth.

Speaker Change: We're navigating an ongoing, difficult macroeconomic environment that is affecting consumer spending across many categories and income levels.

Bethany Johns: On the call today are David Bird, Chief Executive Officer, and Stacie Shirley, Chief Financial Officer.

Speaker Change: Yet, it is our job to do everything we can do to drive growth despite the external challenges we are facing.

Speaker Change: There is strong alignment between the board and the executive team on what needs to be done to deliver long-term value to our guests, franchisees, associates, and shareholders.

Bethany Johns: I would not like to send a conference over to Bethany Johns, Director of Investulations, then he may begin. Thank you and welcome to European Wax Cntr's second quarter fiscal 2024 earnings call. On today's call David Bird will begin with a brief review of our second quarter performance and discuss our priorities for the balance of 2024. Then Stacie will provide additional details regarding our financial performance and updates to our fiscal 2024 outlook.

David Bird: I believe that we have built a solid foundation from which to address those challenges, but it is important to refocus on the strategies that will move the needle and ultimately drive results.

Speaker Change: I believe that we have built a solid foundation from which to address those challenges, but it is important to refocus on the strategies that will move the needle and ultimately drive results.

David Bird: Before I jump into the details of the quarter and our outlook, I would also like to extend a thank you to David Willis for all he's done for EWC in his eight-year tenure and for being an invaluable partner to me over the past six years. He played an integral part of our unit growth and development story, and I truly wish him all the best in his future endeavors.

Bethany Johns: Following the prepared remarks, the team will begin with a brief review of our second quarter performance and discuss our priorities for the balance of 2024. Then Stacie will provide additional details regarding our financial performance and updates to our fiscal 2024 outlook. Following the prepared remarks, the team will be available to take questions.

David Willis: Before I jump into the details of the quarter and our outlook, I would also like to extend a thank you to David Willis for all he's done for EWC in his eight-year tenure and for being an invaluable partner to me over the past six years.

Bethany Johns: 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 issue 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 issue today for a more detailed description of the risk factors that may affect our results.

Bethany Johns: Please also note that the short-term results of 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-gap financial measures, which adjust our gap results to eliminate the impact of certain items. You will find additional information regarding these non-gap financial measures and a reconciliation of these non-gap to gap measures in our earnings release. A live broadcast of this call is also available on the Investor Relations section of our website.

David Willis: He played an integral part of our unit growth and development story, and I truly wish him all the best in his future endeavors.

David Bird: Now let me turn to a brief recap of our second court performance. Our outlook and my key priorities as I step back into the CEO role. During the second quarter, our top line was modestly below our expectations. Systemwide sales grew 2.3% to $260 million. Total revenue was just under $60 million, and same-store sales increased 1.6%. We also opened at eight net new centers in the quarter.

Speaker Change: Now let me turn to a brief recap of our second court performance, our outlook and my key priorities as I step back into the CEO role.

Speaker Change: During the second quarter, our top line was modestly below our expectations.

Speaker Change: System-wide sales grew 2.3% to $260 million. Total revenue was just under $60 million. And same-store sales increased 1.6%.

Speaker Change: We also opened at eight net new centers in the quarter I will go into more detail on our unit growth strategy in a few moments

David Bird: I will go into more detail on our unit growth strategy in a few moments. We manage bottom line performance well, with adjusted EBITDA coming in at $20.6 million and adjusted EBITDA margin of 34.5%. During the second quarter, we continue to see a challenging macro environment with consumers being more selective with their spend. Last quarter, we highlighted a few key initiatives designed to drive transaction volume in our centers, which we expected to ramp up substantially in the back half of this year. While delivering some improvement, the impact from these initiatives has not been large enough to offset software transaction and new guest growth in this environment.

Speaker Change: We manage bottom line performance well, with adjusted EBITDA coming in at $20.6 million and adjusted EBITDA margin of 34.5%.

David Bird: I will now turn the call over to David Berg. Thanks, Bethany and good morning, everyone. Thank you for joining us today.

Speaker Change: During the second quarter, we continued to see a challenging macro environment, with consumers being more selective with their spend.

Speaker Change: Last quarter, we highlighted a few key initiatives designed to drive transaction volume in our centers.

Speaker Change: which we expected to ramp up substantially in the back half of this year. While delivering some improvement, the impact from these initiatives has not been large enough to offset softer transaction and new guest growth in this environment.

David Bird: As a result, we are reducing our outlook for the back half of 2024. Stacy will cover our updated guidance in a few minutes. We recognize we need to improve the effectiveness of our efforts to better position our franchise partners for long-term success. Driving transaction growth in ramping and mature centers is a top priority for both our franchisees and management, and we are actively collaborating with the network to refine our plans and achieve this objective. In pursuit of our shared goals and in light of the current operating environment, we have been working with our franchise partners over the past several weeks to re-evaluate near-term development plans and extend the timeline of new center openings.

Speaker Change: As a result, we are reducing our Outlook for the back half of 2024. Stacie will cover our updated guidance in a few minutes.

David Bird: What I learned over the course of the past six years is there is a deep love for this brand, from our guests, from our franchisees, and also from our associates who are guided by our core values while feeling empowered to be their authentic selves. All of which make European Lack Center a great place to work. These unique attributes still exist at EWC today and I remain excited and optimistic about the potential that lies ahead for our company.

Stacie: We recognize we need to improve the effectiveness of our efforts to better position our franchise partners for long-term success.

Stacie: Driving transaction growth in ramping and mature centers is a top priority for both our franchisees and management. And we are actively collaborating with the network to refine our plans and achieve this objective.

Stacie: In pursuit of our shared goals and in light of the current operating environment, we have been working with our franchise partners over the past several weeks to re-evaluate near-term development plans and extend the timeline of new center openings.

David Bird: As a result, we are lowering our unit growth outlook for 2024. While we don't take this action lightly, it is the right thing to do. As we believe it will provide us and our franchise partners with more capacity and resources to address near-term macro-related challenges. Additionally, we are actively working with franchisees in certain geographies who are facing increased rent and labor costs to mitigate potential closures, including facilitating transfers to stronger operators. We continue to be pleased with the desire of our franchisee group to expand with the brand and support the network through these efforts. Importantly, existing franchisees remain committed to their long-term development plans.

Stacie: As a result, we are lowering our unit growth outlook for 2024.

Stacie: While we don't take this action lightly, it is the right thing to do, as we believe it will provide us and our franchise partners with more capacity and resources to address near-term macro-related challenges.

Stacie: Additionally, we are actively working with franchisees in certain geographies who are facing increased rent and labor costs to mitigate potential closures, including facilitating transfers to stronger operators.

Stacie: We continue to be pleased with the desire of our franchisee group to expand with the brand and support the network through these efforts.

Stacie: Importantly, existing franchisees remain committed to their long-term development plans.

David Bird: The health of our franchisees remains strong, as does our robust pipeline of over 370 locations.

Stacie: The health of our franchisees remains strong, as does our robust pipeline of over 370 locations.

David Bird: Before I jump into the details of the quarter and our outlook, I would also like to extend a thank you to David Willis for all he's done for EWC in his eight-year tenure and for being an invaluable partner to me over the past six years. He played an integral part of our unit growth and development story and I truly wish him all the best in his future endeavors.

David Bird: We are focused on the long-term success of the network. Our franchisees have helped make us the undisputed leader in out-of-home waxing. They are the ones who serve our guests day in and day out, and our job is to ensure they can do that to the best of their ability. Therefore, we have and will continue to explore ways to support them as we navigate the most important time together.

Stacie: We are focused on the long-term success of the network. Our franchisees have helped make us the undisputed leader in out-of-home waxing.

Stacie: They are the ones who serve our guests day in and day out, and our job is to ensure they can do that to the best of their ability. Therefore, we have and will continue to explore ways to support them as we navigate this important time together.

David Bird: Now let me turn to a brief recap of our second court performance. Our outlook and my key priorities as I step back into the CEO role. During the second quarter, our top line was modestly below our expectations. Systemwide sales grew 2.3% to $260 million. Total revenue was just under $60 million and same-store sales increased 1.6%. We also opened at eight net new centers in the quarter. I will go into more detail on our unit growth strategy in a few moments.

David Bird: So, what are we doing? What are our focus areas? Our financial performance and our new center productivity are inextricably linked, and the underlying drivers for the accelerating both to a level that meet our expectations are the same, namely, one, driving new guests to the brand, two, reactivating lapsed guests, three, fostering an amazing guest experience, and four prudently investing in capabilities that will enhance financial performance. And above all, maintaining a close connection with our franchisees to confirm we are hearing our guests as we work together to grow four-wall profitability.

Stacie: So what are we doing?

Speaker Change: What are our focus areas?

Speaker Change: Our financial performance and our new center productivity are inextricably linked.

Speaker Change: and the underlying drivers for accelerating both to a level that meet our expectations are the same. Namely, one, driving new guests to the brand.

Speaker Change: Two, reactivating lapsed guests. Three, fostering an amazing guest experience. And four, prudently investing in capabilities that will enhance financial performance.

David Bird: We manage bottom line performance well with adjusted EBITDA coming in at $20.6 million and adjusted EBITDA margin of 34.5%. During the second quarter, we continue to see a challenging macro environment with consumers being more selective with their spend. Last quarter, we highlighted a few key initiatives designed to drive transaction volume in our centers, which we expected to ramp up substantially in the back half of this year. While delivery some improvement, the impact from these initiatives has not been large enough to offset software transaction and new guest growth in this environment.

Speaker Change: And above all, maintaining a close connection with our franchisees to confirm we are hearing our guests as we work together to grow four-wall profitability.

David Bird: Let me double-click on each of these in detail where our opportunities lie. We must first and foremost stay focused. The business model remains sound. Our franchisees are engaged. Our guests love the brand and the services they receive. Thus, our focused efforts will be, first, inviting new guests to the brand. Our enhanced data analytics capabilities allow us to verify that we capture a high ROI on our marketing spend using the right channels and the right creative. We are pleased with the progress we are making, and media efforts are driving incremental reservations, but we must build on this.

Speaker Change: Let me double-click on each of these and detail where our opportunities lie. We must, first and foremost, stay focused.

Speaker Change: The business model remains sound, our franchisees are engaged, our guests love the brand and the services they receive. Thus, our focused efforts will be, first, inviting new guests to the brand.

Speaker Change: Our enhanced data analytics capabilities allow us to verify that we capture a high ROI on our marketing spend using the right channels and the right creative.

Speaker Change: We are pleased with the progress we are making and media efforts are driving incremental reservations, but we must build on this.

David Bird: We know, as the category leader in what is still a vastly fragmented market, that we have significantly more advertising dollars than the competition to deploy towards attracting new guests. Specifically, we are targeting both current laxers and those new to waxing. We must continue to optimize our use of franchisees, marketing funds to be as efficient as possible in supporting our network so we can put more dollars towards actively recruiting new guests to the brand.

Speaker Change: We know, as the category leader in what is still a vastly fragmented market, that we have significantly more advertising dollars than the competition to deploy towards attracting new guests.

David Bird: In pursuit of our shared goals and in light of the current operating environment, we have been working with our franchise partners over the past several weeks to re-evaluate near term development plans and extend the timeline of new center openings. As a result, we are lowering our unit growth outlook for 2024. While we don't take this action lightly, it is the right thing to do. As we believe it will provide us and our franchise partners with more capacity and resources to address near-term macro-related challenges.

Speaker Change: Specifically, we are targeting both current waxers and those new to waxing.

Speaker Change: We must continue to optimize our use of franchisees' marketing funds to be as efficient as possible in supporting our network, so we can put more dollars towards actively recruiting new guests to the brand.

David Bird: Second, we must do better at reactivating last guests. This is our bring them back strategy. We know the ongoing challenging macroeconomic situation has impacted consumers' behavior across many categories, including ours. We are fortunate that our core wax pass and routine guests who comprise of approximately 75% of our sales consider out of home waxing with EWC to be non-discretionary and their spend and visit frequency has remained stable, providing predictable and recurring revenue for us and our franchisees. However, we need to be better at re-engaging guests already in our system. We have an opportunity to be more aggressive in our efforts to get lapsed guests back.

Speaker Change: Second, we must do better at reactivating last guests. This is our bring them back strategy.

David Bird: Additionally, we are actively working with franchisees in certain geographies, who are facing increased rent and labor costs to mitigate potential closures, including facilitating transfers to stronger operators. We continue to be pleased with the desire of our franchisee group to expand with the brand and support the network through these efforts. Importantly, existing franchisees remain committed to their long-term development plans. The health of our franchisees remain strong, as does our robust pipeline of over 370 locations.

Speaker Change: We know the ongoing challenging macroeconomic situation has impacted consumers' behavior across many categories, including ours.

Speaker Change: We are fortunate that our core wax past and routine guests who comprise of approximately 75% of our sales

Speaker Change: Consider out-of-home waxing with EWC to be non-discretionary.

Speaker Change: and their spend and visit frequency has remained stable, providing predictable and recurring revenue for us and our franchisees.

Speaker Change: However, we need to be better at reengaging guests already in our system. We have an opportunity to be more aggressive in our efforts to get lapsed guests back.

David Bird: We believe we have untapped potential in delivering great service to these guests and converting them into core guests over time, thereby increasing their loyalty to both their waxing routine and our brand.

Speaker Change: We believe we have untapped potential in delivering great service to these guests and converting them into core guests over time, thereby increasing their loyalty to both their waxing routine and our brand. Our leadership position provides us with this unique capability.

David Bird: Our leadership position provides us with this unique capability.

David Bird: Our third focused effort, we must foster an amazing experience at center level. We are relentlessly focused on partnering with our franchisees and deepening our relationship with our Franchise Advisory Council so they have the support they need and deserve from us. To start, as you may know, we launched a program referred to as Operation Elevate, the goal of which is to elevate four-wall performance and select markets through training, coaching, and ongoing development by our field trainers. We are encouraged by the early results here. On a per center basis, participants are demonstrating sustainable improvement in dollars for ticket, wax path sales, product purchases, and other key KPI.

Speaker Change: Our third focused effort, we must foster an amazing experience at center level. We are relentlessly focused on partnering with our franchisees and deepening our relationship with our franchise advisory council so they have the support they need and deserve from us.

Speaker Change: To start, as you may know, we launched a program referred to as Operation Elevate, the goal of which is to elevate four-wall performance and select markets through training, coaching, and ongoing development by our field trainers.

Speaker Change: We are encouraged by the early results here. On a per-center basis, participants are demonstrating sustainable improvement in dollars per ticket, wax pass sales, product purchases, and other key KPIs.

David Bird: However, we have an opportunity to accelerate adoption as we continue to scale the program. We're making informed adjustments to enhance its impact. We've also seen promising results from our new center pre-opening playbook. New centers opened in Q2 using the playbook are outperforming the 2022 and 2023 cohorts with notably higher sales and transactions in their first three months.

Speaker Change: However, we have an opportunity to accelerate adoption. As we continue to scale the program, we're making informed adjustments to enhance its impact.

Speaker Change: We've also seen promising results from our new center pre-opening playbook. New centers opened in Q2 using the playbook are outperforming the 2022 and 2023 cohorts with notably higher sales and transactions in their first three months.

David Bird: We will take those applicable learnings and operationalize them in mature centers as well.

Speaker Change: We will take those applicable learnings and operationalize them in mature centers as well.

David Bird: Next, we will continue to focus on staffing levels. We know that properly staffed centers produce better results, so we will do a thorough review and ensure franchisees feel properly supported in this area. Finally, European Wax Center has always been known for cleanliness, hygiene, efficiency, and expertise. This is demonstrated by our net promoter scores, which continue to be best in class. We must maintain this competitive advantage across all centers and continue to delight our guests with every service so they can walk in and strut out.

Speaker Change: Next, we will continue to focus on staffing levels. We know that properly staffed centers produce better results, so we will do a thorough review and ensure franchisees feel properly supported in this area.

David Bird: We are pleased with the progress we are making and media efforts are driving incremental reservations, but we must build on this. We know as the category leader in what is still a vastly fragmented market that we have significantly more advertising dollars than the competition to deploy towards attracting new guests. Specifically, we are targeting both current laxers and those new to waxing. We must continue to optimize our use of franchisees, marketing funds to be as efficient as possible in supporting our network so we can put more dollars towards actively recruiting new guests to the brand.

Speaker Change: Finally, European Wax Center has always been known for cleanliness, hygiene, efficiency, and expertise. This is demonstrated by our net promoter scores which continue to be best in class.

Speaker Change: We must maintain this competitive advantage across all centers and continue to delight our guests with every service So they can walk in and strut out

David Bird: And finally, our fourth and final focus effort. We will make thoughtful investments to support our goals of driving new guests and elevating the guest experience. In the past, I've led successful gain share structure agreement. We plan to evaluate partnerships with experts in marketing and technology, including AI, to help drive transactions and incentivize those partners based upon delivering improved performance. We also have the opportunity to leverage our significant customer base and seek brand partnerships that can cast a wider net and introduce EWC to new guests. Even as the leader in this highly fragmented category, we have less than 15% market share.

Speaker Change: And finally, our fourth and final focus effort, we will make thoughtful investments to support our goals of driving new guests and elevating the guest experience.

David Bird: Second, we must do better at reactivating last guests. This is our bring them back strategy. We know the ongoing challenging macroeconomic situation has impacted consumers' behavior across many categories, including ours. We are fortunate that our core wax pass and routine guests who comprise of approximately 75% of our sales consider out of home waxing with EWC to be non discretionary and their spend and visit frequency has remained stable, providing predictable and recurring revenue for us and our franchisees.

Speaker Change: In the past, I've led successful gain-share structured agreements. We plan to evaluate partnerships with experts in marketing and technology, including AI, to help drive transactions and incentivize those partners based upon delivering improved performance.

Speaker Change: We also have the opportunity to leverage our significant customer base and seek brand partnerships that can cast a wider net and introduce EWC to new guests.

Speaker Change: Even as the leader in this highly fragmented category, we have less than 15% market share. Gaining market share remains a large opportunity, and we are pleased to have already driven a 22% increase in brand awareness year over year.

David Bird: Gaining market share remains a large opportunity, and we are pleased to have already driven a 22% increase in brand awareness year over year. We need to make deliberate investments in our app and website to make it easy for a guest to book an appointment at the center of their choice for the time they want and the service they desire. Finally, we continue to advance our laser hair removal pilot, which has proven to be a valuable opportunity to add new guests to the brand and increase share wallet from existing customers. We have made specific investments in laser expertise and marketing talent dedicated to this initiative.

David Bird: However, we need to be better at re-engaging guests already in our system. We have an opportunity to be more aggressive in our efforts to get lapsed guests back. We believe we have untapped potential in delivering great service to these guests and converting them into core guests over time, thereby increasing their loyalty to both their waxing routine and our brand. Our leadership position provides us with this unique capability. Our third focused effort, we must foster an amazing experience at center level.

Speaker Change: We need to make deliberate investments in our app and website to make it easy for guests to book an appointment at the center of their choice, for the time they want, and the service they desire.

Speaker Change: Finally, we continue to advance our laser hair removal pilot, which has proven to be a valuable opportunity to add new guests to the brand and increase share of wallet from existing customers.

Speaker Change: We have made specific investments in laser expertise and marketing talent dedicated to this initiative. We plan to further expand the test to Florida, Pennsylvania, and Ohio.

David Bird: We are relentlessly focused on partnering with our franchisees and deepening our relationship with our franchise advisory council so they have the support they need and deserve from us. To start, as you may know, we launched a program referred to as Operation Elevate, the goal of which is to elevate four wall performance and select markets through training, coaching and ongoing development by our field trainers. We are encouraged by the early results here.

David Bird: We plan to further expand the test to Florida, Pennsylvania, and Ohio. bringing us to approximately 30 pilot centers in four states by the end of Q3.

Speaker Change: bringing us to approximately 30 pilot centers in four states by the end of Q3.

David Bird: As I mentioned, our financial performance and our new center productivity are inextricably linked, driving and retaining new guests and improving transaction counts. Feed the flywheel for center development and expansion. When new centers ramp faster, our franchisees can generate higher four-wall EBITDA, and in turn continue to reinvest in the brand.

Speaker Change: As I mentioned, our financial performance and our new center productivity are inextricably linked. Driving and retaining new guests and improving transaction counts feed the flywheel for center development and expansion.

David Bird: On a per center basis, participants are demonstrating sustainable improvement in dollars for ticket, wax path sales, product purchases, and other key KPI. However, we have an opportunity to accelerate adoption as we continue to scale the program we're making informed adjustments to enhance its impact. We've also seen promising results from our new center pre-opening playbook. New centers opened in Q2 using the playbook are outperforming the 2022 and 2023 cohorts with notably higher sales and transactions in their first three months.

Speaker Change: When new centers ramp faster, our franchisees can generate higher forewall EBITDA and in turn continue to reinvest in the brand.

David Bird: In closing, my commitment to our associates, guests, franchise partners, and shareholders is that we will continue to be guided by our values and relentlessly focused on driving new guests, retaining existing guests, and making them loyalists to the brand while improving our financial performance and expanding our leadership position. While it will take some time for us to get back to our full potential, we can assure you we are incredibly action-oriented at EWC with a can-do attitude. I know I can count on our amazing associates and franchisees to keep accelerating EWC forward. I'm encouraged by our franchisees' long-term commitments to drive continued, predictable unit growth, as reflected in our robust pipeline.

Speaker Change: In closing, my commitment to our associates, guests, franchise partners, and shareholders is that we will continue to be guided by our values.

Speaker Change: and relentlessly focused on driving new guests, retaining existing guests, and making them loyalists to the brand, while improving our financial performance and expanding our leadership position.

Speaker Change: While it will take some time for us to get back to our full potential, we can assure you we are incredibly action-oriented at EWC with a can-do attitude.

David Bird: We will take those applicable learnings and operationalize them in mature centers as well. Next, we will continue to focus on staffing levels. We know that properly staff centers produce better results, so we will do a thorough review and ensure franchisees feel properly supported in this area. Finally, European wax center has always been known for cleanliness, hygiene, efficiency, and expertise. This is demonstrated by our net promoter scores which continue to be best in class. We must maintain this competitive advantage across all centers and continue to delight our guests with every service so they can walk in and strut out.

Speaker Change: I know I can count on our amazing associates and franchisees to keep accelerating EWC forward. I'm encouraged by our franchisees' long-term commitments to drive continued predictable unit growth as reflected in our robust pipeline.

David Bird: By narrowing our focus on the key priorities I highlighted earlier, I am confident that our sazen dues will match as we move forward and earn back your trust.

Speaker Change: By narrowing our focus on the key priorities I highlighted earlier, I am confident that our say's and do's will match as we move forward and earn back your trust.

David Bird: I was excited about this brand's prospects when I joined the CEO in 2018, and as I rejoined as CEO in 2024, I have even more conviction that our best days are ahead of us.

Speaker Change: I was excited about this brand's prospects when I joined as CEO in 2018, and as I rejoin as CEO in 2024, I have even more conviction that our best days are ahead of us.

Stacie Shirley: We will update you as we progress in our journey, and with that, I'd like to hand the call over to Stacy Shirley to discuss our Q2 financial performance and guidance for the balance of the year.

Speaker Change: We will update you as we progress in our journey, and with that, I'd like to hand the call over to Stacie Shirley to discuss our Q2 financial performance and guidance for the balance of the year.

David Bird: And finally, our fourth and final focus effort. We will make thoughtful investments to support our goals of driving new guests and elevating the guest experience. In the past, I've led successful gain share structure agreement. We plan to evaluate partnerships with experts in marketing and technology including AI to help drive transactions and incentivize those partners based upon delivering improved performance. We also have the opportunity to leverage our significant customer base and seek brand partnerships that can cast a wider net and introduce EWC to new guests.

Stacie Shirley: Stacy? Thanks, David, and welcome back. 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 SEC today. As a reminder, both fiscal years 2022 and 2023 included a 53rd week, but fiscal 2024 returns to a 52-week year.

Stacie Shirley: Thanks, David, and welcome back. 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.

Stacie Shirley: As a reminder, both fiscal years 2022 and 2023 included a 53rd week, but fiscal 2024 returns to a 52-week year.

Stacie Shirley: Now let's begin with our second quarter of financial results. We added eight net new centers during the quarter, and system-wide sales increased 2.3 percent to 260.2 million dollars. During our semi-annual wax past promotional period, wax past conversion grew solidly year-over-year and demonstrated both the value of our wax past as well as the continued stability of our wax past guest. Same source sales increased 1.6 percent, and total revenue, which includes wax and retail products we sell to the network, increased 1.3 percent to 59.9 million dollars. As expected, gross margin improved 180 basis points to 73.2 percent, primarily due to product cost savings versus the prior year.

David Bird: Even as the leader in this highly fragmented category, we have less than 15% market share. Gaining market share remains a large opportunity and we are pleased to have already driven a 22% increase in brand awareness year over year. We need to make deliberate investments in our app and website to make it easy for a guest to book an appointment at the center of their choice for the time they want and the service they desire.

Stacie Shirley: Now let's begin with our second quarter financial results.

Stacie Shirley: We added 8 net new centers during the quarter and system-wide sales increased 2.3% to $260.2 million.

Stacie Shirley: During our semi-annual Wax Pass promotional period, Wax Pass conversion grew solidly, year over year, and demonstrated both the value of our Wax Pass, as well as the continued stability of our Wax Pass guests.

David Bird: Finally, we continue to advance our laser hair removal pilot which has proven to be a valuable opportunity to add new guests to the brand and increase share wallet from existing customers. We have made specific investments in laser expertise and marketing talent dedicated to this initiative. We plan to further expand the test to Florida, Pennsylvania and Ohio, bringing us to approximately 30 pilot centers in four states by the end of Q3. As I mentioned, our financial performance and our new center productivity are inextricably linked, driving and retaining new guests and improving transaction counts, feed the flywheel for center development and expansion.

Stacie Shirley: Same store sales increased 1.6% and total revenue, which includes wax and retail products we sell to the network, increased 1.3% to $59.9 million.

Stacie Shirley: As expected, gross margin improved 180 basis points to 73.2%.

Stacie Shirley: primarily due to product cost savings versus the prior year.

Stacie Shirley: Q2 SGNA decreased 8.7 percent to 12.9 million and improved 230 basis points to 21.6 percent of revenue. SG&A this year benefited from lower incentive compensation expense and the receipt of legal judgment. investment proceeds, partially offset by an increase in technology expense. The improvements in growth margin in SGNA I just described were more than offset by a $2.9 million or $460 basis point increase in Q2 advertising spend year over year, which was in line with the expectations we communicated last quarter. This planned investment largely contributed to the second quarter adjusted EBITDA decrease of 2.6% to $20.6 million and adjusted EBITDA margin decrease of 140 basis points to 34.5%.

Stacie Shirley: Q2 SG&A decreased 8.7% to $12.9 million and improved 230 basis points to 21.6% of revenue.

Stacie Shirley: SG&A this year benefited from lower incentive compensation expense and the receipt of legal judgment proceeds.

Stacie Shirley: partially offset by an increase in technology expense.

David Bird: When new centers ramp faster, our franchisees can generate higher four-wall EBITDA and in turn continue to reinvest in the brand. In closing, my commitment to our associates, guests, franchise partners and shareholders is that we will continue to be guided by our values and relentlessly focused on driving new guests, retaining existing guests and making them loyalists to the brand while improving our financial performance and expanding our leadership position. While it will take some time for us to get back to our full potential, we can assure you we are incredibly action oriented at EWC with a can-do attitude.

Speaker Change: The improvements in growth margin in SG&A I just described were more than offset by a $2.9 million or 460 basis point increase in Q2 advertising spend year-over-year, which was in line with the expectations we communicated last quarter.

Speaker Change: This planned investment largely contributed to the second quarter adjusted EBITDA decrease of 2.6% to $20.6 million.

Speaker Change: An adjusted EBITDA margin decrease of 140 basis points to 34.5%.

Stacie Shirley: With higher interest income in 2024, net interest expense decreased to $6.4 million from $6.8 million in the same period last year. Income tax expense decreased to $1.7 million from $2.8 million last year as our effective tax rate improved to 22.5% from 33.1%. Gap net income increased 7.3% to $6 million, and adjusted net income through 4% to $7.3 million. Turning to the balance sheet, we ended Q2 with $55.7 million in cash and net cash provided by operating activities with $14.4 million compared to less than 200,000 in investing outflows. One of the most attractive characteristics of European Wax Center is our ability to generate strong free cash flow.

Speaker Change: With higher interest income in 2024, net interest expense decreased to $6.4 million from $6.8 million in the same period last year.

David Bird: I know I can count on our amazing associates and franchisees to keep accelerating EWC forward. I'm encouraged by our franchisees long-term commitments to drive continued predictable unit growth as reflected in our robust pipeline. By narrowing our focus on the key priorities I highlighted earlier, I am confident that our sazen dues will match as we move forward and earn back your trust. I was excited about this brand's prospects when I joined the CEO in 2018 and as I rejoined as CEO in 2024, I have even more conviction that our best days are ahead of us.

Speaker Change: Income tax expense decreased to $1.7 million from $2.8 million last year, as our effective tax rate improved to 22.5% from 33.1%.

Speaker Change: Gap net income increased 7.3 percent to 6 million dollars and adjusted net income grew 4 percent to 7.3 million dollars.

Speaker Change: Turning to the balance sheet, we ended Q2 with $55.7 million in cash, and net cash provided by operating activities was $14.4 million, compared to less than $200,000 in investing outflows.

Stacie Shirley: We will update you as we progress in our journey and with that, I'd like to hand the call over to Stacy Shirley to discuss our Q2 financial performance and guidance for the balance of the year. Stacy? Thanks David and welcome back.

Speaker Change: One of the most attractive characteristics of European Wax Center is our ability to generate strong free cash flow. Even in a constrained macro environment, our asset light, capital light model generates excess liquidity.

Stacie Shirley: Even in a constrained macro environment, our asset light, capital light model generates excess liquidity. During the Q4, we deployed $10 million of that cash flow to repurchase Class A shares, demonstrating our conviction in the underlying value of our business model and its long-term financial potential. We have $40 million remaining under our current share repurchase authorization, and our $40 million revolver remains fully undrawn. At Q4 end, we had $392 million outstanding under our senior secured notes and net leverage with 4.3 times adjusted EBITDA.

Stacie Shirley: 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 10Q filed with SEC today. As a reminder, both fiscal years 2022 and 2023 included a 53rd week, but fiscal 2024 returns to a 52-week year.

Speaker Change: During the quarter, we deployed $10 million of that cash flow to repurchase Class A shares, demonstrating our conviction in the underlying value of our business model and its long-term financial potential.

Speaker Change: We have $40 million remaining under our current share repurchase authorization and our $40 million revolver remains fully undrawn.

Speaker Change: At quarter end, we had $392 million outstanding under our senior secured notes and net leverage was 4.3 times adjusted EBITDA.

Stacie Shirley: Now let's begin with our second quarter of financial results. We added eight net new centers during the quarter and system-wide sales increased 2.3 percent to 260.2 million dollars. During our semi-annual wax past promotional period, wax past conversion grew solidly year-over-year and demonstrated both the value of our wax past as well as the continued stability of our wax past guest. Same source sales increased 1.6 percent and total revenue, which includes wax and retail products we sell to the network, increased 1.3 percent to 59.9 million dollars.

Stacie Shirley: Turning now to our revised outlook for the balance of 2024. As we shared last quarter, our initial 2024 guidance was predicated on both a stable macro environment and the ramping impact of our key early stage initiatives that would primarily benefit the second half of the year. Our national media, local marketing, and operational initiatives are each driving improvement in their respective areas. However, as David noted, that improvement has not been sufficient to overcome the softer macro environment and its impact on new guests in transaction growth. As a result, we are revising our financial guidance to reflect current trends through the back half of 2024.

Speaker Change: Turning now to our revised outlook for the balance of 2024. As we shared last quarter, our initial 2024 guidance was predicated on both a stable macro environment and the ramping impact of our key early stage initiatives that would primarily benefit the second half of the year.

Speaker Change: Our national media, local marketing, and operational initiatives are each driving improvement in their respective areas.

Speaker Change: However, as David noted, that improvement has not been sufficient to overcome the softer macro environment and its impact on new guests and transaction growth.

Stacie Shirley: As expected, gross margin improved 180 basis points to 73.2 percent, primarily due to product cost savings versus the prior year. Q2 SGNA decreased 8.7 percent to 12.9 million and improved 230 basis points to 21.6 percent of revenue. SGNA this year benefited from lower incentive compensation expense and the receipt of legal judgment, investment proceeds, partially offset by an increase in technology expense. The improvements in growth margin in SGNA I just described were more than offset by a $2.9 million or $460 basis point increase in Q2 advertising spend year over year which was in line with the expectations we communicated last quarter.

Speaker Change: As a result, we are revising our financial guidance to reflect current trends through the back half of 2024.

Stacie Shirley: As we learn more about what is resonating with guests in this environment, we will make adjustments to our current initiatives to increase their effectiveness while also exploring new opportunities to drive guest acquisition and transactions. As David mentioned, given lower than expected transaction volumes, we have partnered with franchisees to reevaluate near-term development plans. Translating to a revised 2024 outlook of 27 to 32 next. News center openings. We believe this reset will allow us and the network to devote resources to driving more new guests and increasing transactions, which we expect will support higher average unit volumes. We believe that the re-exceleration of center openings will be closely tied to rebound and transaction growth at existing centers.

Speaker Change: As we learn more about what is resonating with guests in this environment, we will make adjustments to our current initiatives to increase their effectiveness, while also exploring new opportunities to drive guest acquisition and transactions.

Speaker Change: As David mentioned, given lower-than-expected transaction volumes, we have partnered with franchisees to re-evaluate near-term development plans, translating to a revised 2024 outlook of 27 to 32 net new center openings.

David: We believe this reset will allow us and the network to devote resources to driving more new guests and increasing transactions, which we expect will support higher average unit volumes.

Stacie Shirley: This planned investment largely contributed to the second quarter adjusted EBITDA decrease of 2.6% to $20.6 million and adjusted EBITDA margin decrease of 140 basis points to 34.5%. With higher interest income in 2024 net interest expense decreased to $6.4 million from $6.8 million in the same period last year. Income tax expense decreased to $1.7 million from $2.8 million last year as our effective tax rate improved to 22.5% from 33.1%. Gap net income increased 7.3% to $6 million and adjusted net income through 4% to $7.3 million.

David: We believe that the re-acceleration of center openings will be closely tied to the rebound and transaction growth at existing centers.

Stacie Shirley: I do want to reiterate David's comments that we remain confident in the strength of our 370-unit pipeline, as well as our long-term market opportunity. Returning to our 2024 financial guidance, our system-wide sales outlook for the year now moves to a range of 930 to 950 million dollars. Adjusting for the 53rd week of fiscal 2023, our revised guidance translates to approximately flat growth at the midpoint. We expect same-store sales to be in the range of down 1.5% to up 1.5%, with total revenue of 216 to 221 million dollars. Our current trends are tracking in line with these ranges.

David: I do want to reiterate David's comments that we remain confident in the strength of our 370-unit pipeline, as well as our long-term market opportunity.

Speaker Change: Returning to our 2024 financial guidance, our system-wide sales outlook for the year now moves to a range of $930 to $950 million.

Speaker Change: Adjusting for the 53rd week of fiscal 2023, a revised guidance translates to approximately flat growth at the midpoint.

Speaker Change: We expect same-store sales to be in the range of down 1.5% to up 0.5%, with total revenue of $216 to $221 million.

Stacie Shirley: Turning to the balance sheet, we ended Q2 with $55.7 million in cash and net cash provided by operating activities with $14.4 million compared to less than 200,000 in investing outflows. One of the most attractive characteristics of European Wax Center is our ability to generate strong free cash flow. Even in a constrained macro environment our asset light capital light model generates excess liquidity. During the Q4 we deployed $10 million of that cash flow to repurchase class A shares demonstrating our conviction in the underlying value of our business model and its long term financial potential.

Speaker Change: Our current trends are tracking in line with these ranges.

Stacie Shirley: In terms of profitability, we continue to expect the cost savings will drive growth margin improvement to approximately 73% for the year. We now expect adjusted EBITDAW between $70 and $74 million, which continues to include an incremental investment of up to $4 million of operating expenses to support the expansion of our laser hair removal pilot, the majority of which will be spent in the coming quarters. Higher interest income is benefiting net interest expense, and as a result, our full-year interest expense outlook is now $26.5 million. We are currently projecting our 2024 effective tax rate will be approximately 25% before discrete items. 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 their Class B shares for Class A shares.

Speaker Change: In terms of profitability, we continue to expect that cost savings will drive growth margin improvement to approximately 73% for the year.

Speaker Change: We now expect adjusted EBITDA between $70 and $74 million.

Speaker Change: which continues to include an incremental investment of up to $4 million of operating expenses to support the expansion of our laser hair removal pilot, the majority of which will be spent in the coming quarters.

Speaker Change: Higher interest income is benefiting net interest expense, and as a result, our full-year interest expense outlook is now $26.5 million.

Stacie Shirley: We have $40 million remaining under our current share repurchase authorization and our $40 million revolver remains fully undrawn. At Q4 end we had $392 million outstanding under our senior secured notes and net leverage with 4.3 times adjusted EBITDA.

Speaker Change: We are currently projecting our 2024 effective tax rate will be approximately 25% before discreet items.

Speaker Change: Given our capital structure, we expect our blended statutory tax rate will be approximately 20% and expected to increase over time as pre-IPO shareholders exchange their Class B shares for Class A shares.

Stacie Shirley: Turning now to our revised outlook for the balance of 2024. As we shared last quarter our initial 2024 guidance was predicated on both a stable macro environment and the ramping impact of our key early stage initiatives that would primarily benefit the second half of the year. Our national media, local marketing and operational initiatives are each driving improvement in their respective areas. However, as David noted, that improvement has not been sufficient to overcome the softer macro environment and its impact on new guests in transaction growth.

Stacie Shirley: As a result we are revising our financial guidance to reflect current trends through the back half of 2024. As we learn more about what is resonating with guests in this environment we will make adjustments to our current initiatives to increase their effectiveness while also exploring new opportunities to drive guest acquisition and transactions. As David mentioned, given lower than expected transaction volumes, we have partnered with franchisees to reevaluate near term development plans.

Stacie Shirley: As a result, we expected adjusted net income between $19 million and $22 million.

Speaker Change: As a result, we expected just a net income between $19 million and $22 million and $20 million.

Stacie Shirley: And finally, for following purposes, we currently expect that fourth quarter top line and bottom line dollars will look fairly similar to the first quarter of this year.

Speaker Change: And finally, for modeling purposes, we currently expect that fourth quarter top line and bottom line dollars will look fairly similar to the first quarter this year.

Stacie Shirley: While the majority of our remarks today have been on near-term dynamics, I'd like to take a moment to focus on the long-term opportunity that remains core to the European Wax Center story. We have a highly cashed, generative, and asset-like model that gives us the ability to invest in our business and drive shareholder value. Even in a challenging operating environment, we believe EWC's cash-on-cash returns remain compelling on both an absolute and relative basis, and our franchise partners remain committed to developing their portfolios over time. In turn, we remain committed to driving new guests to the brand, supporting our franchise partners in generating long-term shareholder returns.

Speaker Change: While the majority of our remarks today have been on near-term dynamics, I'd like to take a moment to focus on the long-term opportunity that remains core to the European Wax Cntr story.

Speaker Change: We have a highly cash-generative and asset-light model that gives us the ability to invest in our business and drive shareholder value.

Speaker Change: Even in a challenging operating environment, we believe EWC's cash-on-cash returns remain compelling on both an absolute and relative basis, and our franchise partners remain committed to developing their portfolios over time.

Speaker Change: In turn, we remain committed to driving new guests to the brand, supporting our franchise partners, and generating long-term shareholder returns.

Stacie Shirley: With approximately 1,060 centers today and a long growth runway ahead of us, we remain confident in our unmatched leadership position in the highly fragmented, out-of-home hair removal industry.

Stacie Shirley: Translating to a revised 2024 outlook of 27 to 32 next. News Center openings. We believe this reset will allow us and the network to devote resources to driving more new guests and increasing transactions, which we expect will support higher average unit volumes. We believe that the re-exceleration of center openings will be closely tied to rebound and transaction growth at existing centers. I do want to reiterate David's comments that we remain confident in the strength of our 370 unit pipeline, as well as our long-term market opportunity.

Speaker Change: With approximately 1,060 centers today and a long growth runway ahead of us, we remain confident in our unmatched leadership position in the highly fragmented out-of-home hair removal industry.

Operator: We now like to turn over the call for questions. Operators... Thank you.

Speaker Change: We'd now like to turn over the call for questions. Operator?

Operator: Please, and gentlemen, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. And as a minor, please limit yourself to one question and follow up to the opposition of the question who may rejoin the cube. Please send by, while we compile the K&A roster.

Speaker Change: Thank you. Ladies and gentlemen, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. And as a reminder, please limit yourself to one question and follow up. If you have additional questions, you may rejoin the queue. Please stand by while we compile the Q&A roster.

Stacie Shirley: Returning to our 2024 financial guidance, our system-wide sales outlook for the year now moves to a range of 930 to 950 million dollars. Adjusting for the 53rd week of fiscal 2023, our revised guidance translates to approximately flat growth at the midpoint. We expect same-store sales to be in the range of down 1.5% to up 1.5%, with total revenue of 216 to 221 million dollars. Our current trends are tracking in line with these ranges.

Speaker Change: Now, first question, coming from the line of Randy Koenig with Jeffrey, Ceylon is open.

Randal Konik: And good morning, everybody. I just say, as a point of clarification, and when I'm looking at the revised guidance, you know, the EBITDA dollar guide is not all that, you know, no, it's not down significantly. I think you spoke about some cost saves. Are those, as we think about, you know, beyond this year and into the coming years, are those cost saves kind of temporary, or are they permanent? I'm just trying to get a sense of, you know, you have been a very high margin structure.

Randy Koenig: Yeah, thanks a lot and good morning everybody. I guess Stacie, as a point of clarification, when I'm looking at the revised guidance,

Speaker Change: The EBITDA dollar guide is not all that, you know, it's not down significantly. I think you spoke about some cost saves. Are those, as we think about, you know,

Speaker Change: So, beyond this year and into the coming years, are those cost saves kind of temporary? Are they permanent? I'm just trying to get a sense of, you know, you have a very high margin structure that seems sticky and I want to just kind of get some perspective on, you know, is it in fact going to remain sticky, you know, in the out years going forward? Thanks.

Stacie Shirley: That seems sticky, and I want to just kind of get some perspective on, you know, is it in fact, and remain sticky, you know, in the out years going forward?

Randal Konik: Thanks.

Stacie Shirley: Good morning. Thanks, Randy, for the question. Yeah, so a couple of things. One, as you, as we've talked about and seen the past couple quarters, are gross margin, right? We've seen an improvement there year over year. And we talked about that from a cost-saving perspective, and we would expect that that would continue. We're expecting to be around that 73% for the full year. And there's no reason for us to anticipate that that would go down in future years. And then, from an expense perspective, we would expect to leverage that top line. We did have some favorability in the quarter, some of which was timing and some of it is just, you know, trying to be obviously as conscious as we can from an expense standpoint in this, you know, very difficult environment.

Speaker Change: Good morning. Thanks, Randy, for the question. Yeah, so a couple of things. One, as you, as we've talked about and seen the past couple quarters, our gross margin, right, we've seen an improvement there year over year, and we've talked about that from a cost savings perspective, and we would expect that that would continue. We're expecting to be around that 73% for the full year.

Speaker Change: And there's no reason for us to anticipate that that would go down in future years.

Stacie Shirley: We are currently projecting our 2024 effective tax rate will be approximately 25% before discrete items. 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 their class B shares for class A shares. As a result, we expected adjusted net income between $19 million and $22 million. And finally, for following purposes, we currently expect that fourth quarter top line and bottom line dollars will look fairly similar to the first quarter of this year.

Speaker Change: And then from an expense perspective, we would expect to leverage that top line. We did have some favorability in the quarter, some of which was timing and some of it is just, you know, trying to be obviously as conscious as we can from an expense standpoint in this, you know, very difficult environment.

David Bird: Yeah, Randy, I think, listen, we've been consistent in this story that as we grow top line, we've got the opportunity to expand EBITDA margin. Our cost structure here at HQ does not require continued, you know, adding a adding of heads and expense. So, as Stacey said, as we grow top line, we would continue to believe that EBITDA margins will expand.

Speaker Change: Yeah, Randy, I think, listen, we've been consistent in this story that as we grow top line, we've got the opportunity to expand EBITDA margin. Our cost structure here at HQ does not require continued, you know, adding of heads and expense.

Randy Koenig: As Stacie said, as we grow top line, we would continue to believe that EBITDA margins will expand.

Randal Konik: Got it, and I guess David just lastly for you, he gives a couple of, you know, a number of points that you're focused on. Maybe give us some perspective on, you know, the top one or two things you're kind of really focused on day to day. I just want to like how you're prioritizing all the different points. You kind of that source on the call this morning, you know, what's most important to you. And to the army of the employee base, what are you most kind of getting? What are the top one or two messages you want to get across them, you know, over the coming six months and year.

Randy Koenig: Got it. I guess, David, just lastly for you.

Speaker Change: You gave us a couple, you know, a number of points that you're focused on.

Speaker Change: Maybe give us some perspective on

Speaker Change: The top one or two things you're really focused on day-to-day, how you're prioritizing all the different points.

Speaker Change: that source.

Speaker Change: on the call this morning. What's most important to you and to the army of the employee base? What are you most kind of getting? What are the top one or two messages you want to get across to them, you know, over the coming six months and year? Yeah, Randy, thanks for the question. Listen, I think you know me and one of my...

David Bird: Yeah, yeah, Randy, thanks for the question. Listen, I think you, you know me and one of my key tenants in our leadership responsibility is to be crystal clear about what we're focused on and what our priorities are. If I sort of canvas what I've heard from franchisees and what we think is the most important thing in this business, it's two things, and they're really kind of the top two priorities that I spoke to. One is, how do we drive more new guests into this brand? How do we attract more? And then second, how do we drive transactions?

Speaker Change: Key tenants in our leadership responsibility is to be crystal clear about what we're focused on and what our priorities are.

Speaker Change: If I sort of canvass what I've heard from franchisees and what we think is the most important thing in this business, it's two things, and they're really kind of the top two priorities that I spoke to. One is...

Operator: We now like to turn over the call for questions. Operators... Thank you.

Speaker Change: How do we drive more new guests into this brand? How do we attract more?

David Bird: If we, you know, this flywheel that where we can get centers that have faster ramping better for while EBITDAH, that just is an opportunity for our franchisees to reinvest into this amazing brand and that flywheel just keeps moving. We've got to do a better job at number one, driving new guests into the brand, retaining them, and increasing transactions. Those are the top two probably key priorities.

Speaker Change: And then second, how do we drive transactions? If we, you know this flywheel, that where we can get centers that have faster ramping, better four-wall EBITDA, that just is an opportunity for our franchisees to reinvest in this amazing brand and that flywheel just goes.

Operator: Please, and gentlemen, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. And as a minor, please limit yourself for one question and follow up to the opposition of question who may rejoin the cube. Please send by, while we compile the K&A roster.

Speaker Change: Keeps moving. We've got to do a better job at number one, driving new guests into the brand, retaining them, and increasing transactions. Those are the top two key priorities for the organization.

Randal Konik: for the organization.

Operator: Super helpful. Thanks, guys.

Operator: All right, Randy, thank you.

Speaker Change: Super helpful. Thanks, guys. All right, Randy. Thank you.

Scott Rallywood-Truis: And our next question coming from the line-up, Scott Rallywood-Truis, Selenis Open.

Randal Konik: And good morning, everybody.

Randal Konik: I just say, as a point of clarification, and when I'm looking at the revised guidance, you know, the EBITDA dollar guide is not all that, you know, no, it's not down significantly. I think you spoke about some cost saves are those as we think about, you know, beyond this year and into the coming years, are those cost saves kind of temporary, are they permanent? I'm just trying to get a sense of, you know, you have been a very high margin structure.

Randy Koenig: Thank you.

Speaker Change: And our next question, coming from the line-up, Scott Ciccarelli with Truett, the line is open.

Joshua Young: Good morning. This is Josh Young on first, Scott. You know, so obviously the new center openings are down significantly for 24, but can you just give us any idea when you think you might be able to get back to a more normal pace here? You know, is it something that happened in 25, or do you think that's further out?

Speaker Change: Hey, good morning. This is Josh Young on for Scott.

Josh Young: You know, so obviously the new center openings are down significantly for 24, but can you just give us any idea when you think you might be able to get back to a more normal pace here? You know, is it something that could happen in 25 or you think that's further out?

David Bird: Hey, Josh, thanks for the question. You know, listen, I think you're, it's a great question because we really view the action that we took, and as we said, not a decision that we took lightly. This is a temporary reset. We think it's really important in the concert with our franchisees to really focus on driving those top two initiatives that we spoke to.

Randal Konik: That seems sticky, and I want to just kind of get some perspective on, you know, is it in fact, and remain sticky, you know, in the out years going forward? Thanks. Good morning. Thanks, Randy, for the question. Yeah, so a couple of things. One, as you, as we've talked about and seen the past couple quarters are gross margin, right? We've seen an improvement there year over year. And we talked about that from a cost saving perspective, and we would expect that that would continue.

Josh Young: Hey Josh, thanks for the question. You know, listen, I think it's a great question because we really view the action that we took, and as we said, not a decision that we took lightly. This is a temporary reset. We think it's really important, in concert with our franchisees,

Josh Young: to really focus on driving those top two initiatives that we spoke to. Our view is we get tickets back on track, we get new guest counts moving in the direction that we want, and we will go back to the kind of growth that we're accustomed to in terms of new center openings. We feel incredibly confident as we look long-term given our pipeline and given our franchisees.

David Bird: Our view is we get tickets back on track, we get new guest counts moving in the direction that we want, and we will go back to the kind of growth that we're accustomed to in terms of new center openings. We feel incredibly confident as we look long-term given our pipeline and given our franchisees' real desire to continue to invest in this brand. So this is a temporary reset, a temporary hold, and we expect to get back on track to our normal growth rates in NCOs as soon as possible.

Randal Konik: We're expecting to be around that 73% for the full year. And there's no reason for us to anticipate that that would go down in future years. And then from an expense perspective, we would expect to leverage that top line. We did have some favorability in the quarter, some of which was timing and some of it is just, you know, trying to be obviously as conscious as we can from an expense standpoint in this, you know, very difficult environment.

Josh Young: Real desire to continue to invest in this brand, so this is a temporary reset, a temporary hold, and we expect to get back on track to our normal growth rates and NCOs as soon as possible.

Randal Konik: Yeah, Randy, I think listen, we've been consistent in this story that as we grow top line, we've got the opportunity to expand EBITDA margin, our cost structure here at HQ does not require continued, you know, adding a adding of heads and expense. So, as Stacey said, as we grow top line, we would, we would continue to believe that EBITDA margins will expand. Got it, and I guess David just lastly for you, he gives a couple of, you know, a number of points that you're focused on.

Stacie Shirley: Yeah, that's helpful. Thank you, and then just one other one. So it sounds like the four-while productivity has come down quite a bit for some centers here.

Speaker Change: Yeah, that's helpful. Thank you. And then, just one other one. So, sounds like the four-wall productivity has come down quite a bit for some centers here. Can you just help quantify that decline for us? And then, is that widespread across the base or are there more, you know, there were specific regions or pockets where you're seeing that more pronounced?

Stacie Shirley: Can you just help quantify that decline for us, and then is that widespread across the base, or are there more specific regions or pockets where you're seeing that more pronounced? So I'll start this in maybe you can add any color, but yeah, certainly the four-while profitability has been pressured as we've been very challenged from standpoints and new guests in the transaction. As it relates to geography, there are certain geographies that are more impacted. We've talked before about the West Coast as it relates to higher rents and higher labor costs, and that certainly has put more pressure and cash flow perspective on some of those particular franchises centers.

Speaker Change: So I'll start this and maybe you can add any color, but yeah, certainly the the four wall profitability has been pressured as we've been, you know, very challenged from the standpoint of the new guests.

Randal Konik: Maybe give us some perspective on, you know, the top one or two things you're kind of really focused on day to day. I just want to like how you're prioritizing all the different points, you kind of that source on the call this morning, you know, what's most important to you. And to the army of the employee base, what are you most kind of getting what are the top one or two messages you want to get across them, you know, over the coming six months and year.

Speaker Change: and the Transaction.

Speaker Change: As it relates to geography, there are certain geographies that are more impacted. We've talked before about the West Coast, as it relates to higher rents and higher labor costs, and that certainly has put more pressure on the cash flow.

Speaker Change: to give us a bit of a cash flow perspective on some of those particular franchisee centers.

Stacie Shirley: Okay, that's helpful. Thank you.

Speaker Change: Okay, that's helpful. Thank you. Thanks, Josh.

Randal Konik: Yeah, yeah, Randy, thanks for the question. Listen, I think you, you know me and one of my key tenants in our leadership responsibility is to be crystal clear about what we're focused on and what our priorities are. If I sort of canvas what I've heard from franchisees and what we think is the most important thing in this business, it's two things and they're really kind of the top two priorities that I spoke to one is, how do we drive more new guests into this brand?

Dana Telsey: Thank you, and our next question coming from the line-out.

Speaker Change: Thank you. And our next question coming from the line out.

Dana Telsey: Dana Telsi would tell you advisory group, Elon is open. Hi, good morning, everyone, and nice to hear from you again, David. David, if you think about, if you think about your two initiatives of driving new guests to the brand and at reactivating lapse guests, at this time is one weaker than the other? Is the cadence of what you expected from new guests weaker than what you're seeing in reactivating lapse guests. Second, you had a new national media agency hired. You were testing some local media agencies. Is that initiative still in place in what you're learning?

Speaker Change: Dana Telsey with Telsey Advisory Group. Your line is open.

Randal Konik: How do we attract more? And then second, how do we drive transactions? If we, you know this flywheel that where we can get centers that have faster ramping better for while EBITDAH, that just is an opportunity for our franchisees to reinvest into this amazing brand and that flywheel just keeps moving. We've got to do a better job at number one, driving new guests into the brand, retaining them and increasing transactions.

Speaker Change: Hi, good morning, everyone, and nice to hear from you again, David. David, if you think about...

David: As you think about your two initiatives of driving new guests to the brand and reactivating lapsed guests, at this time, is one weaker than the other? Is the cadence of what you expected from new guests weaker than what you're seeing in reactivating lapsed guests? Is the cadence of what you expected from new guests weaker than what you're seeing in reactivating

Speaker Change: Second, you had a new national media agency you hired, you were testing some local media agencies. Is that initiative still in place and what are you learning? And lastly, you mentioned higher rents and...

Randal Konik: Those are the top two probably key priorities, for the organization. Super helpful. Thanks, guys. All right, Randy, thank you.

Speaker Change: potential center closings. Have you seen that at all and is there any adjustments that you need to make to the franchise model in terms of fees that the franchisees are asking for? Thank you.

Scott Rallywood-Truis: And our next question coming from the line-up, Scott Rallywood-Truis, Selenis Open.

David Bird: Yeah, thanks, Dana. Listen, I think if you look at those top two priorities, probably the driving of new guests outweighs the retention. I think the opportunity for us with lapse guests, given our enhanced capabilities and data analytics, we can really identify those guests that haven't visited us in six months. That's what we define as a last guest. So we can go back and target that guest very specifically. As I mentioned in my opening remarks, how do we get a bit more aggressive in terms of getting that guest back so that we can wow her with an amazing experience when she comes into the center?

Speaker Change: Yeah, thanks Dana Listen, I think if you look at those top two priorities probably the the driving of new guests outweighs the the retention I think I think the the opportunity for us with lapsed guests given our

Scott Rallywood-Truis: Good morning. This is Josh Young on first Scott. You know, so obviously the new center openings are down significantly for 24, but can you just give us any idea when you think you might be able to get back to a more normal pace here? You know, is it something that happened in 25 or you think that's further out? Hey, Josh, thanks for the question. You know, listen, I think you're, it's a great question because we really view the action that we took, and as we said, not a decision that we took lightly, this is a temporary reset.

Speaker Change: enhanced capabilities and data analytics, we can really identify those guests that haven't been visited us in six months. That's what we define as a last guest.

Speaker Change: So we can go back and target that guest very specifically, as I mentioned in my opening remarks, how do we get a bit more aggressive in terms of getting that guest back, so that we can wow her with an amazing experience when she comes into the center. But if I had to handicap both of those or prioritize both of those, really driving new guests, continuing to drive new guests into the brand is the top priority.

David Bird: But if I had the handicap, both of those, or prioritize both of those, really driving new guests continue to drive new guests and the brand is the top priority. We talked about those initiatives that you called out that help drive new guests, the national media change, as well as an increased focus on local marketing. We have been very pleased with the results that we've seen there in terms of driving reservations. But remember that those marketing efforts are just one piece of, or one leg of maybe a four or five-legged stool in terms of driving new guests in.

Scott Rallywood-Truis: We think it's really important in the concert with our franchisees to really focus on driving those top two initiatives that we spoke to. Our view is we get tickets back on track, we get new guests counts moving in the direction that we want, and we will go back to the kind of growth that we're accustomed to in terms of new center openings. We feel incredibly confident as we look long-term given our pipeline and given our franchisees real desire to continue to invest in this brand.

Speaker Change: We talked about those initiatives that you called out that helped drive new guests, the national media change, as well as an increased focus on local marketing. We have been very pleased with the results that we've seen there in terms of driving reservations.

Speaker Change: But remember that those marketing efforts are just one piece of, or one leg of, maybe a four or five-legged stool in terms of driving new guests in. And we'll continue to invest those dollars that have the highest ROI from a marketing standpoint to drive new guests. So we're pleased with those, Dana. We'll continue those. And it's our job to think of some other opportunities where we can attract new guests into the brand.

David Bird: And we'll continue to invest those dollars that have the highest ROI from a marketing standpoint to drive new guests. So we're pleased with those, Dana. We'll continue those. And it's our job to think of some other opportunities where we can attract new guests into the brand. I think the higher rents and the closures, we wanted to be open with that and transparent about, particularly in California where rent rates have gone up, certainly labor costs. We're all aware of what's going on, even at entry-level positions, that is impacting particularly our California centers. The team has done an amazing job where we might have a center or group of centers that just say, hey, it's gotten a little bit too tough that we brought in stronger operators to take over some of those locations. That's happened in California.

Scott Rallywood-Truis: So this is a temporary reset, a temporary hold, and we expect to get back on track to our normal growth rates in NCOs as soon as possible.

Scott Rallywood-Truis: Yeah, that's helpful, thank you, and then just one other one. So it sounds like the four-while productivity has come down quite a bit for some centers here. Can you just help quantify that decline for us, and then is that wide spread across the base, or are there more specific regions or pockets where you're seeing that more pronounced? So I'll start this in maybe you can add any color, but yeah, certainly the four-while profitability has been pressured as we've been very challenged from standpoints and new guests in the transaction.

David Willis: and David Willis.

Speaker Change: I think the higher rents and the closures, we wanted to be open with that and transparent about particularly in California, where rent rates have gone up, certainly labor costs, we're all aware of what's going on, even at entry level positions, that that is impacting particularly our California centers.

Speaker Change: The team has done an amazing job where we might have a center or a group of centers that just say, hey, it's gotten a little bit too tough that we brought in stronger operators to take over some of those locations. That's happened in California, so that gives us great encouragement that we've got franchisees in this brand that love this brand and are absolutely willing to step in and help. So we continue to mitigate that. Joel Larkin and his team are working constantly with our franchisees on if they've got a rent renegotiation, how we manage those labor costs. I alluded to the notion of labor staffing is really critically important for all of our centers. So those are things that we just continue to work with our franchisees on every day.

Scott Rallywood-Truis: As it relates to geography, there are certain geographies that are more impacted. We've talked before about the West Coast as it relates to higher rents and higher labor costs, and that certainly has put more pressure and cash flow perspective on some of those particular franchises centers.

David Bird: So that gives us great encouragement that we've got franchisees in this brand that love this brand and are absolutely willing to step in and help. So we continue to mitigate that Joel Larkin and his team are working constantly with our franchisees on if they've got a rent re-negotiation, how we manage those labor costs. I alluded to the notion of labor staffing is really critically important for all of our centers. So those are those are things that we just continue to work with our franchisees on every day.

David Bird: If I get, if I'm not sure, Dana, I understood that the fees comment, but at this point we don't see any change to our structure in our franchise or marketing fees. at this time. One thing I would add to that as it relates to the centers, you know, let's not forget that, you know, from a cash-on-cash perspective, they are still very, very strong, you know, plus 50%. And so, although there has been some pressure with the tickets and transactions overall, they're still overall a really incredible four-wall profitability model. Yeah, I say to the great point and Dana. I mean, one of the things we really haven't done in a conservative effort because we've got such a great group of franchisees that reinvest in this brand.

Scott Rallywood-Truis: Okay, that's helpful, thank you. Thanks, Josh.

Speaker Change: If I got, if I'm not sure, Dane, I understood the fees comment, but at this point we don't see any change to our structure in our franchise or marketing fees at this time.

Dana Telsey: Thank you, and our next question coming from the line-out. Dana Telsi would tell you advisory group, Elon is open. Hi, good morning, everyone, and nice to hear from you again, David.

Dane: One thing I would just I would add to that as it relates to the centers, you know, let's not forget that, you know, from a cash on cash perspective, they are still very, very strong.

Long: Long, plus 50% and so although there has been some pressure.

Dana Telsey: David, if you think about, if you think about your two initiatives of driving new guests to the brand and at reactivating lapse guests, at this time is one weaker than the other, is the cadence of what you expected from new guests weaker than what you're seeing in reactivating lapse guests. Second, you had a new national media agency hired. You were testing some local media agencies. Is that initiative still in place in what you're learning?

Long: With the tickets and transactions overall, they're still overall a really incredible four-wall profitability model.

Long: Yes, Stacie, that's a great point. And Dana, I mean, one of the things we really haven't done in a...

Dana Telsey: And lastly, you mentioned higher rents and potential center closings. Had you seen that at all? And is there any adjustments that you need to make to the franchise model in terms of fees that the franchisees are asking for? Thank you. Yeah, thanks, Dana. Listen, I think if you look at those top two priorities, probably the driving of new guests outweighs the retention. I think the opportunity for us with lapse guests, given our enhanced capabilities and data analytics, we can really identify those guests that haven't haven't been visited us in six months.

Speaker Change: conservative effort because we've got such a great group of franchisees that reinvest in this brand.

David Bird: And we know that even at, you know, 20% four-wall EBITDA margins, this is a very attractive model for franchisees. And as Stacie said, 50 plus percent cash-on-cash returns, we've got folks that are continually looking to come into the brand. And we will we will ramp up our efforts to bring more, more folks into this franchise network because the business model is so strong. And we've got it; we've got a real high demand. There are folks that want to come in. So that's a, again, I think a real real positive for the brand.

Speaker Change: We know that even at 20% four-wall EBITDA margins, this is a very attractive model for a franchisee. And as Stacie said, 50-plus percent cash-on-cash returns.

Speaker Change: We've got folks that are continually looking to come into the brand, and we will ramp up our efforts to bring more folks into this franchise network because the business model is so strong. And we've got a real high demand there of folks that want to come in. So that's, again, I think a real positive for the brand.

Dana Telsey: That's what we define as a last guest. So we can go back and target that guest very specifically. As I mentioned in my opening remarks, how do we get a bit more aggressive in terms of getting that guest back so that we can wow her with an amazing experience when she comes into the center? But if I had the handicap, both of those, or prioritize both of those, really driving new guests continue to drive new guests and the brand is the top priority.

Operator: Thank you. Okay, thank you.

Speaker Change: Thank you.

Operator: Thank you.

Speaker Change: All right, Dana, thank you.

Lauren Hutchinson: And our next question coming from the line off, Lauren Hutchinson with Bank of America, you're on a soap. Hey, Lauren.

Dana: Thank you.

Dana: And our next question coming from the line of Lauren Hutchinson with Bank of America, your line is open.

Lauren Hutchinson: Good morning, David. I just wanted to follow up on the decision to delay some of the new central opening with that, something that was driven by franchisees or purely EWC decision, and also are you hearing any callback of concern and the long term pipeline of franchisee interest? Yeah, Lauren, thanks for the question.

Lauren Hutchinson: Hey, Lorraine. Good morning. Good morning, David.

Lauren Hutchinson: I just wanted to follow up on the decision to delay some of the new center openings. Was that something that was driven by franchisees or purely an EWC decision? And also, are you hearing any pullback or concern in the long-term pipeline of franchisee interest?

Dana Telsey: We talked about those initiatives that you called out that help drive new guests, the national media change, as well as an increase focus on local marketing. We have been very pleased with the results that we've seen there in terms of driving reservations. But remember that those marketing efforts are just one piece of or one leg of maybe a four or five legged stool in terms of driving new guests in. And we'll continue to invest those dollars that have the highest ROI from a marketing standpoint to drive new guests.

David Bird: It was, as you know, we, we try very hard to make sure that we've got a great relationship with all of our franchisees and particularly our Franchise Advisory Council. So, we're in conversations with them at all times. We thought the initiatives that we launched in Q1 were going to have a faster impact when those things did not quite develop as fast as we thought, given the macroeconomic situation. We started having conversations with our franchisees, and as Q2 results kind of unfolded, went back to our franchisees, talked with them and just said, hey, what, what makes the best sense?

David: Yeah, Lorraine, thanks for the question. Um, it was, as you know, we we try very hard to make sure that we've got a great relationship with

David: all of our franchisees, and particularly our Franchise Advisory Council. So we're in conversations with them at all times.

Dana Telsey: So we're pleased with those Dana. We'll continue those. And it's our job to think of some other opportunities where we can we can attract new guests into the brand. I think the higher rents and the closures, we wanted to be open with that and transparent about particularly in California where rent rates have gone up certainly labor costs. We're all aware of what's going on even at entry level positions that that is impacting particularly our California centers.

David: We thought the initiatives that we launched in Q1 were going to have a faster impact when those things did not quite develop as fast as we thought given the macroeconomic situation.

David: We started having conversations with our franchisees, and as Q2 results kind of unfolded, went back to our franchisees, talked with them, and just said, hey, what makes the best sense? And we agreed in concert with them that the right thing to do is to focus on the key initiatives that we have to drive our business.

David Bird: And we, we agreed in concert with them that the right thing to do is to focus on the key initiatives that we have to drive our business.

David Bird: I want to reassure you and all the folks on the call that the long-term development goals are the same for us. So this is just moving things out a bit so that we can focus on this, this near term opportunity. We've got with the current situation, but we feel incredibly confident of our growth rate of our franchisees' commitment to continue to develop. And as I said in my, in my opening comments, this is really just a short-term pause to get us back on track and get the business right it on a sort from, from a, from a core, core level.

Dana Telsey: The team has done an amazing job where we might have a center or group of centers that just say, hey, it's gotten a little bit too tough that we brought in stronger operators to take over some of those locations that's happened in California. So that gives us great encouragement that we've got franchisees in this brand that love this brand and are absolutely willing to step in and help. So we continue to mitigate that Joel Larkin and his team are working constantly with with our franchisees on if they've got a rent re-negotiation, how we manage those labor costs.

David: I want to reassure you and all the folks on the call that the long-term development goals are the same for us. So this is just moving things out a bit so that we can focus on this near-term opportunity we've got with.

David: with the current situation. But we feel incredibly confident of our growth rate, of our franchisees' commitment to continue to develop. And as I said in my opening comments, this is really just a short-term pause to get us back on track and get the business righted from a core level.

Lauren Hutchinson: Thank you. Thanks, Ryan.

Dana Telsey: I alluded to the notion of labor staffing is really critically important for for all of our centers. So those are those are things that we just continue to work with our franchisees on every day. If I get, if I'm not sure Dana, I understood that the fees comment, but at this point we don't see any any change to our structure in our franchise or marketing fees, at this time. One thing I would add to that as it relates to the centers, you know, let's not forget that, you know, from a cash on cash perspective, they are still very, very strong, you know, plus 50%.

Speaker Change: Thank you.

Operator: Thank you.

Speaker Change: Thanks Lorraine. Thank you.

Korinne Wolfmeyer: And our next question coming from the line up, Corinne, will you fly with Liper Sunler? You want to open?

Speaker Change: And our next question coming from the line of Corinne Wolfmeyer with Piper Semler. You may let us open.

Korinne Wolfmeyer: Thank you, Martin. Thanks for taking the question. You had commented that the economics for the franchisees are actually still pretty good, and the cash generation is still pretty good.

Corinne Wolfmeyer: Hey, good morning team. Thanks for taking the question. You had commented that the economics for the franchisees are actually still pretty good and the cash generation is still pretty good. What are you hearing from them around their motivation to continue growing even further and generate even stronger returns, especially the ones that are just sitting kind of comfortably with where they're currently at? Thanks.

David Bird: What are you hearing from them around their motivations to continue growing even further and, in general, even stronger returns, especially the ones that are just sitting kind of comfortably with where they're currently at. Yeah, I think there's probably two things I would comment on. Number one is that we've got an incredibly robust pipeline of three hundred and seventy-plus locations. We have not had anybody kind of back off those development obligations, Grinne, in the out years. And then second, as I alluded to in my comments, we have stronger operators that have stepped up and say, "Hey, where somebody wants to exit the system or isn't it performing to the degree that they think they can operate a store."

Dana Telsey: And so although there has been some pressure with the tickets and transactions overall, they're still overall a really incredible four wall profitability model. Yeah, I say to the great point and Dana, I mean, one of the things we really haven't done in a in a conservative effort because we've got such great group of franchisees that that reinvest in this brand. And we know that even at, you know, 20% four wall EBITDA margins, this is a very attractive model for franchisee.

Speaker Change: Yeah, I think there's probably two things I would comment on. Number one is that we've got an incredibly robust pipeline of 370 plus locations. We have not had anybody kind of back off those development obligations, Corinne, in the out years. And then second, as I alluded to in my comments, that we have stronger operators that have stepped up and say, hey, where somebody wants to exit the system or isn't it performing to the degree that they think they can operate a store, we absolutely have them coming in and taking over. So we believe that our franchisee base, and obviously in close concert with our Franchise Advisory Council, hearing what their concerns are, but we're not hearing a concern about, boy, we don't want to continue to grow with this brand. We've said it before.

Dana Telsey: And as Stacie said, 50 plus percent cash on cash returns, we've got folks that are continually looking to come into the brand. And we will we will ramp up our efforts to bring more, more folks into this into this franchise network because the business model is so strong. And we've got it, we've got a real high demand, there are folks that want to come in. So that's a, again, I think a real real positive for the brand. Thank you.

Dana Telsey: Okay, thank you.

David Bird: We absolutely have them coming in and taking over. So we believe that our franchisee pace, and obviously in close concert with our franchise advisory council, hearing what their concerns are, but we're not hearing a concern about, boy, we don't want to we don't want to continue to grow with this brand.

Dana Telsey: Thank you.

David Bird: We've said it before; we have franchisees that have multiple concepts, and we've seen them exit other concepts and double down their investment in EWC. We continue to feel very strong about our long-term growth opportunities in terms of unit growth.

Lauren Hutchinson: And our next question coming from the line off, Lauren Hutchinson with Bank of America, you're on a soap. Hey, Lauren. Good morning, David. I just wanted to follow up on the decision to delay some of the new central opening with that, something that was driven by franchisees or purely EWC decision and also are you hearing any callback of concern and the long term pipeline of franchisee interest? Yeah, Lauren, thanks for the question.

Speaker Change: we've had we have franchisees that have multiple concepts and we've seen them exit other concepts and double down their investment in EWC and we continue to feel very strong about our long-term growth opportunities in terms of unit growth.

Korinne Wolfmeyer: Great. Thank you.

Stacie Shirley: And then if you could just provide a little bit of clarity on around the back half phasing with Q3 and Q4. I think you provide a provided a little bit of color with Q4 looking similarly to Q1. Was that on a dollar basis?

Speaker Change: Great, thank you. And then if you could just provide a little bit of clarity around the back half phasing with Q3 and Q4, I think you provided a little bit of color with Q4 looking similarly to Q1. Was that on a dollar basis? And then how should we think about the new unit growth in Q3 versus Q4? Thank you.

Stacie Shirley: And then how should we think about the new unit growth in Q3 versus Q4? Thank you.

Lauren Hutchinson: It was, as you know, we, we try very hard to make sure that we've got a great relationship with all of our franchisees and particularly our franchise advisory council. So we're, we're in conversations with them at all times. We thought the initiatives that we launched in Q1, we're going to have a faster impact when those things did not quite develop as fast as we thought, given the macroeconomic situation. We started having conversations with our franchisees and as Q2 results kind of unfolded, went back to our franchisees, talked with them and just said, hey, what, what makes the best sense?

Stacie Shirley: Sure. Thanks for the question. So, as you think about Q3, Q4, yes, we made a comment about Q4 being similar in dollars to Q1. Obviously, it's going to depend on where you're going to fall out in the overall range, but that is what we intended on that.

Speaker Change: Sure, sure. Thanks for the question. So as you think about Q3 and Q4, yes, we made a comment about Q4 being similar in dollars to Q1. Obviously, it's going to depend on where you're going to fall out in the overall range, but that is what we intended on that.

Stacie Shirley: The only other thing I would say as you think about the cadence of the quarters, Q3 will have a little bit heavier expense space based on a higher investment in advertising as we think about the quarters. We want to spend more sooner to drive transactions and try to get those new guests into the center. And then professional fees will be a little bit higher in Q3 as well. And that's really just a function of timing.

Speaker Change: The only other thing I would say, as you think about the cadence of the quarters, Q3 will have a little bit heavier expense base based on...

Speaker Change: A higher investment in advertising, as we think about the quarters we want to spend more sooner to drive transactions and try to get those new guests into the center. And then professional fees will be a little bit higher in Q3 as well, and that's really just a function of timing.

Lauren Hutchinson: And we, we agreed in concert with them that the right thing to do is to focus on the key initiatives that we have to drive our business. I want to reassure you and all the folks on the call that the long term development goals are the same for us. So this is just moving things out a bit so that we can focus on this, this near term opportunity. We've got with the current situation, but we feel incredibly confident of our growth rate of our franchisees commitment to continue to develop.

Stacie Shirley: Great. Thank you.

Speaker Change: Great, thank you.

Simeon Gutman: And our next question coming from the line of Simeon Cunman with Mark and Stanley on a soap. Hi, good morning, everyone.

Speaker Change: Thank you.

Simeon government: And our next question coming from the line of Simeon Gutman with Morgan Stanley , your line is open.

Simeon Gutman: Hi, David. I wanted to have a lap. Yes.

Simeon government: Hi, good morning, everyone. Hi, David. I wanted to ask our last guest.

Simeon Gutman: Can you talk about if there is a number one reason or if there's multiple reasons why to guess lapses and I want to also talk about wax or turnover? It seems like that could be at the crux of it and thinking about the labor model, the pay model.

Lauren Hutchinson: And as I said in my, in my opening comments, this is really just a short term pause to get us back on track and get the business right it on a sort from, from a, from a core, core level. Thank you. Thanks, Ryan.

Simeon Gutman: Can you talk about if there is a number one reason or if there's multiple reasons why the guest lapses and I want to also talk about wax or turnover?

Lauren Hutchinson: Thank you.

Speaker Change: It seems like that could be, you know, at the crux of it, and thinking about the labor model.

David Bird: Is there anything special in all the years of looking at this business that can be done to ensure that the continuity of the person doing the waxing is still there?

Korinne Wolfmeyer: And our next question coming from the line up, Corinne, will you fly with Liper Sunler? You want to open? Thank you, Martin. Thanks for taking the question. You had commented that the economics for the franchisees are actually still pretty good and the cash generation is still pretty good. What are you hearing from them around their motivations to continue growing even further and in general, even stronger returns, especially the ones that are just sitting kind of comfortably with where they're currently at.

Speaker Change: The pay model, you know, is there anything special in all the years of looking at this business that can be done to ensure that, you know, the continuity of the person doing the waxing is still there?

David Bird: Yes, I mean, hey, thanks. Thanks for the question. I'm on lapscats, as I as I mentioned, sort of are really the enhanced capability we've got around data analytics and CRM to really get at that lapscats and find out why she hasn't visited us in six months is much more robust than it has been. So that allows Andrea and her team to really give a tailored message out to those guests. You know, probably in broad strokes, there is a group of that guest that just it's gotten too expensive. It's gotten tough in this macroeconomic situation to come in.

Speaker Change: Yeah, Simeon, hey, thanks for the question. On Lapscus, as I mentioned, sort of our...

Speaker Change: really the enhanced capability we've got around data analytics and CRM to really get at that LAPS guest and find out why she hasn't visited us in six months.

Speaker Change: is much more robust than it has been. So that allows Andrea and her team to really give a tailored message out to those guests.

Korinne Wolfmeyer: Yeah, I think there's probably two things I would comment on. Number one is that we've got an incredibly robust pipeline of three hundred and seventy plus locations. We have not had anybody kind of back off those development obligations, Grinne in the out years. And then second, as I alluded to in my comments that we have stronger operators that have stepped up and say, Hey, where somebody wants to exit the system or isn't it performing to the degree that they think they can operate a store.

Speaker Change: You know, probably in broad strokes, there is a group of that guest that just, it's gotten too expensive. It's gotten tough in this macroeconomic situation to come in. We hear from our guest surveys that that has impacted their decision and their frequency of visit. So, we've got opportunities, Simeon, to go address that concern with that last guest, but I will tell you that our ability to really hone in on why somebody hasn't come back in six-plus months is much better than it has been and allows us to be very specific in the offer and the attraction.

David Bird: We hear from our guest surveys that has impacted their decision and their frequency of visit. So we've got opportunities to me and to go address that concern with our with that lapscats, but I will tell you that our ability to really hone in on why somebody hasn't come back in six plus months is much better than it has been and allows us to be very specific in the offer and the attraction or the offer to get them back in. Clearly, we think once we get you into the center, it's our opportunity to show you an amazing experience and in the best in class.

Korinne Wolfmeyer: We absolutely have them coming in and taking over. So we believe that our franchisee pace and obviously in close concert with our franchise advisory council hearing what their concerns are, but we're not hearing a concern about boy, we don't want to we don't want to continue to grow with this brand. We've said it before, we've had we have franchisees that have multiple concepts and we've seen them exit other concepts and double down their investment in EWC and we continue to feel very strong about our long-term growth opportunities in terms of unit growth.

Simeon: the offer to get them back in. Clearly we think once we get you into the center it's our opportunity to show you an amazing experience and the best in class.

David Bird: environment at EWC and get you on as a wax fast holder longer term. So that's the goal and kind of the track, retain and reward that guess as they come in.

Simeon: environment at EWC and get you on as a wax pass holder

Simeon: Attract, retain, and reward that guest as they come in.

David Bird: Wax return over really not an issue. We certainly coming out of COVID, and for many quarters while I was in the chair, we talked a lot about the supply of wax specialists. We feel great about that. The industry relations team has done an amazing job at fostering relationships so that we feel very good about that pipeline. My comment in my opening remarks was how do we think about really revenue optimization for per wax week and that involves the right labor staffing model. We think we can work with our franchisees to help with that so that we're properly staffed at the right hours so that we do maximize the return on those waxers.

Speaker Change: Waxer turnover really not an issue. We, you know, certainly coming out of COVID and for many quarters while I was in the chair, we talked a lot about the supply of wax specialists. We feel great about that. The industry relations team has done an amazing job at fostering relationships so that we feel very good about that pipeline. My comment in my opening remarks was

Korinne Wolfmeyer: Great. Thank you. And then if you could just provide a little bit of clarity on around the back half phasing with Q3 and Q4. I think you provide a provided a little bit of color with Q4 looking similarly to Q1. Was that on a dollar basis? And then how should we think about the new unit growth in Q3 versus Q4? Thank you. Sure. Thanks for the question. So as you think about Q3, Q4, yes, we made a comment about Q4 being similar in dollars to Q1.

Speaker Change: How do we think about really revenue optimization for per wax suite? And that involves the right labor staffing model. We think we can work with our franchisees to help with that so that we're properly staffed, staffed at the right hours, so that we do maximize the return on those waxers.

David Bird: As you know, legally, the compensation structure for associates in the franchisee wax centers is up to that franchisee. We certainly have conversations with them about what is the best incentive program for those waxers. How do we incentive them to rebook guess? How do we incentive to add on a retail product? How do we incentive them to get another service? And that's another opportunity for us to take that best-in-class learning for those centers that have had great retention of wax specialists that are driving the most revenue per wax week. So those are things that we continue to share out with our franchisee network.

Korinne Wolfmeyer: Obviously, it's going to depend on where you're going to fall out in the overall range, but that is what we intended on that. The only other thing I would say as you think about the cadence of the quarters Q3 will have a little bit heavier expense space based on a higher investment in advertising as we think about the quarters. We want to spend more sooner to drive transactions and try to get those new guests into the center. And then professional fees will be a little bit higher in Q3 as well. And that's really just a function of timing.

Speaker Change: As you know, legally, the compensation structure for associates in the franchisee wax centers is up to that franchisee. We certainly have conversations with them about what is the best incentive program for those waxers. How do we incent them to rebook guests? How do we incent them to add on a retail product? How do we incent them to get another service? And that's another opportunity for us to take that best-in-class learning for those centers that have had great retention of wax specialists that are driving the most revenue per wax suite. So those are things that we continue to share out with our franchisee network.

Korinne Wolfmeyer: Great. Thank you.

Simeon Gutman: Okay.

Simeon Gutman: And follow up thinking about the entire footprint in the US.

Simeon Gutman: And our next question coming from the line of Simeon Cunman with Mark and Stanley on a soap. Hi, good morning, everyone. Hi, David.

Speaker Change: Okay, and follow up, thinking about the entire footprint in the US.

David Bird: Would we be surprised at how similar performance looks across markets, mature, immature geographies? Are there anything, you know, is there anything standout thinking about both network, network footprint, you know, franchise development and then overall performance? As far as performance, I mean, certainly as you, you know, cut it into different regions, you're going to see some variation, right? And again, same thing that we've been talking about with the West Coast being more pressured because of their cost structure overall.

Speaker Change: Would we be surprised at how similar performance looks across markets, mature, immature, geographies? Are there anything, you know, is there anything stand out? Thinking about both network footprint, you know, franchise development, and then overall performance.

Simeon Gutman: I wanted to have a lap. Yes. Can you talk about if there is a number one reason or if there's multiple reasons why to guess lapses and I want to also talk about wax or turnover? It seems like that could be at the crux of it and thinking about the labor model, the pay model.

Speaker Change: I'll start with the performance. I mean, certainly as you, you know, cut it into different regions, you're gonna see some variation, right? And again, same thing that we've been talking about with the West Coast being more pressured because of their cost structure overall. So that's...

David Bird: Is there anything special in all the years of looking at this business that can be done to ensure that the continuity of the person doing the waxing is still there? Yes, I mean, hey, thanks. Thanks for the question. I'm on lapscats as I as I mentioned sort of are really the enhanced capability we've got around data analytics and CRM to really get at that lapscats and find out why she hasn't visited us in six months is much more robust than it has been.

David Bird: So that's, you know, that's probably the biggest callout, I would say. Yeah, I mean, see me and listen. We're disproportionate in kind of five or six states that really drive a significant portion of our business. I think from a growth standpoint, you know, there are bigger. We continue to look at those top five six states where there are growth opportunities. We want to protect and expand where we've got good, you know, market penetration, and make sure that we're doing what's right in terms of making sure we are the place of choice. But also, take our brand and expand it into areas that makes sense.

Speaker Change: You know, that's that's probably the biggest call out, I would say.

Speaker Change: Yeah, I mean, Simeon, listen, we're disproportionate in kind of five or six states that really drive a significant portion of our business.

Speaker Change: I think from a growth standpoint, we continue to look at those top 5-6 states where there are growth opportunities. We want to protect and expand where we've got good market penetration and make sure that we're doing what's right in terms of making sure we are the place of choice. But also take our brand and expand it into areas that make sense. So I think the...

David Bird: So that allows Andrea and her team to really give a tailored message out to those guests, you know, probably in broad strokes, there is a group of that guest that just it's gotten too expensive. It's gotten tough in this macroeconomic situation to come in. We hear from our guest surveys that has impacted their decision and their frequency of visit. So we've got opportunities to me and to go address that concern with our with that lapscats, but I will tell you that our ability to really hone in on why somebody hasn't come back in in six plus months is much better than it has been and allows us to be very specific in the offer and the attraction or the offer to get them back in.

David Bird: So I think the good news about our geographic expansion on new center development is that it's in places where we're well known, but we've also got opportunities in new areas. But I think that we've highlighted kind of those higher cost areas in California, specifically in rent and labor. They continue to, we continue to work with those franchisees on how to best maximize their four walls.

Speaker Change: The good news about our geographic expansion on new center development is that it's in places where we're well known, but we've also got opportunities in new areas. But I think that we've highlighted kind of those higher cost areas in California, specifically in rent and labor, that we continue to work with those franchisees on how to best maximize their forewall.

Simeon Gutman: Great.

Operator: Thanks.

Operator: Take care.

Operator: Good luck.

Operator: One real quick follow-up. I miss corn when you asked about the split of the NTOs over the balance of the year as we're looking at that Q3 Q4. It's pretty evenly balanced between the two quarters.

Speaker Change: Great. Thanks. Take care.

David Bird: Clearly, we think once we get you into the center, it's our opportunity to show you an amazing experience and in the best in class, environment at EWC and get you on as a wax fast holder longer term. So that's the goal and kind of the track retain and reward that guess as they come in.

Speaker Change: One real quick follow-up I missed, Corinne, when you asked about the split of the NCOs over the balance of the year, as we're looking at that Q3-Q4, it's pretty evenly balanced between the two quarters.

Operator: Thanks, I mean. Thank you.

Speaker Change: Thanks, Simeon.

Jonathan Komp: In our next question coming from the line up, Jonathan, come with beer. Yeah, hi. Good morning. Hi, David.

Speaker Change: Thank you. And our next question coming from the line up, Jonathan Komp with Bay Area Telenus Open.

David Bird: Wax return over really not an issue. We certainly coming out of COVID and for many quarters while I was in the chair, we talked a lot about the supply of wax specialists. We feel great about that. The industry relations team has done an amazing job at fostering relationships so that we feel very good about that pipeline. My comment in my opening remarks was how do we think about really revenue optimization for per wax week and that involves the right labor staffing model.

David Bird: We think we can work with our franchisees to help with that so that we're properly staffed at the right hours so that we do maximize the return on those waxers. As you know, legally, the compensation structure for associates in the franchisee wax centers is up to that franchisee. We certainly have conversations with them about what is the best incentive program for those waxers. How do we incentive them to rebook guess? How do we incentive to add on a retail product?

Jonathan Komp: Hey, John, how are you? Good. Thank you.

Jonathan Cumpwitz: Yeah, hi, good morning. Hi, David. Hey, John , how are you?

Jonathan Komp: I want to follow up just as you look at the second half performance. I think you're involved in same store sales, slightly negative overall and certainly, you know, looks like maybe more pressure on mature stores. So could you maybe just comment a little bit more broadly on what you're seeing at mature stores?

Jonathan Cumpwitz: Good, thank you. I want to follow up just as you look at the...

Jonathan Cumpwitz: Second half performance, I think you're implying same store sales, slightly negative overall, and certainly, you know, looks like maybe more pressure on mature stores. So could you maybe just comment a little bit more broadly what you're seeing at mature stores?

David Bird: And then David, as you think about moving the needle, is it really refocusing on, you know, a few specific initiatives that are ready in place, or are there more new initiatives needed within the action plans? I'll start. So yeah, that's fair what you said. More pressure on the mature centers. You know, if you think about those ramping centers, you know, there's more of a tailwind there, just based on the function of, you know, being new to market, et cetera. And also what we called out that although a small, you know, small group or NCOs that have started out with the new playbook have been doing very, very well, but as we look between ramping and mature definitely more pressure on the mature centers to get that new guest and to build on the transactions.

David: And then, David, as you think about moving the needle, is it really refocusing on a few specific initiatives already in place, or are there more new initiatives needed within the action plans? Thank you. Thank you. Thank you.

David: I'll start. So yeah, that's fair, what you said more pressure on the mature centers, you know, if you think about those ramping centers, you know, there's more of a tailwind there just based on the function of, you know, being new to market, etc. And also, we called out that, although a small, you know,

David Bird: How do we incentive them to get another service? And that's another opportunity for us to take that best in class learning for those centers that have had great retention of wax specialists that are driving the most revenue per wax week. So those are things that we continue to share out with our franchisee network.

Speaker Change: small group, our NCOs that have started out with the new playbook have been doing very, very well. But as we look between ramping and mature, definitely more pressure on the mature centers to get that new guest and to build on the transaction. And so that's where you think about the second half, exactly what you said is accurate.

David Bird: And so that's where you think about the second half; exactly what you said is accurate.

David Bird: Okay. And follow up thinking about the entire footprint in the US. Would we be surprised at how similar performance looks across markets, mature, immature geographies? Are there anything, you know, is there anything standout thinking about both network, network footprint, you know, franchise development and then overall performance? As far as performance, I mean, certainly as you, you know, cut it into different regions, you're going to see some variation, right? And again, same thing that we've been talking about with the West Coast being more pressured because of their cost structure overall.

David Bird: And John, listen, I think at a high level, first and foremost, it's just, it's just those focus on the key three or four things that I outlined in my opening comments. To your question about, hey, are there some things that we need to do differently? The answer is yes. We will continue to focus on those initiatives that we launched in Q1 that are working, particularly the national media spend and the emphasis on local marketing. But we know we need to do more. They have not, for those initiatives on their own, have not produced enough. So that's part of our challenge and our opportunity working with our franchisees to really identify what are those couple of things, and we've got some, we've got some ideas that will certainly keep you apprised of as we move along in our journey.

Speaker Change: And John, listen, I think at a high level, first and foremost, it's just those focus on the key three or four things that I outlined in my opening comments. To your question about, hey, are there some things that we need to do differently, the answer is yes.

Speaker Change: We will continue to...

Speaker Change: focus on those initiatives that we launched in Q1 that are working, particularly the national media.

Speaker Change: Spend and the emphasis on local marketing, but we know we need to do more. Those initiatives on their own have not produced enough. So that's part of our challenge and our opportunity working with our franchisees to really identify what are those couple of things, and we've got some ideas that we'll certainly keep you apprised of as we move along in our journey. But we're going to stay hyper-focused on those key priorities and not get distracted, but really drive new guests and increase transactions that, again, feed that flywheel that allows our franchisees to continue to reinvest in this amazing brand.

David Bird: So that's, you know, that's probably the biggest callout I would say. Yeah, I mean, see me and listen, we're disproportionate in kind of five or six states that really drive a significant portion of our business. I think from a growth standpoint, you know, there are bigger, we continue to look at those top five six states where there are growth opportunities. We want to protect and expand where we've got good, you know, market penetration and make sure that we're doing what's right in terms of making sure we are the place of choice.

David Bird: But we're going to stay hyper-focused on those key priorities and not get distracted, but really drive new guests and increase transactions that, again, feeds that flywheel that allows our franchisees to continue to reinvest in this amazing brand.

Stacie Shirley: As it relates to the guide overall, I would also say, you know, when you look at the 930 to 950 and that second half, it certainly is assuming that there is continued pressure in the second half. The 950 would assume that we're basically kind of where we have been. On the 930, though, that's going to assume that there is potential allowance for a downtrend and how we've looked at it.

Speaker Change: As it relates to the guide overall, I would also say, you know, when you look at the 930 to 950 in that second half, it certainly is assuming that there is continued pressure in the second half. The 950 would assume that we're basically kind of where we have been. On the 930, though, that's going to assume that there is some potential allowance for a downtrend. That's how we've looked at it.

David Bird: But also, take our brand and expand it into areas that makes sense. So I think the good news about our geographic expansion on new center development is that it's in places where we're well known, but we've also got opportunities in new areas. But I think that we've highlighted kind of those higher cost areas in California, specifically in rent and labor. They continue to, we continue to work with those franchisees on how to best maximize their four walls.

Stacie Shirley: Okay, that's helpful. Thank you.

John Heinbockel: And then David, since you know, this is the first time to speak with you in a while. Could you just maybe show your thoughts on the laser initiative, you know, why is that the right thing to focus on at this stage as you're refocusing on the overall base board. So differently, is it something you think could materially move the needle on unit economics going into next year? Just, you know, curious your thoughts there.

Speaker Change: Okay, that's helpful. Thank you. And then, David, since this is the first time to speak with you in a while, could you just maybe share your thoughts on the laser initiative? Why is that the right thing? Sure.

Simeon Gutman: Great. Thanks. Take care. Good luck.

Simeon Gutman: One real quick follow-up. I miss corn when you asked about the split of the NTOs over the balance of the year as we're looking at that Q3Q4. It's pretty evenly balanced between the two quarters. Thanks, I mean. Thank you.

Speaker Change: I think to focus on at this stage is you're refocusing on the overall base awards. So differently, is it something you think could materially move the needle on unit economics going into next year or just curious your thoughts there? Thanks again.

John Heinbockel: Thanks again. Yep. Thank you, John. Hey, listen, I think we start with, you know, what is the brand give us permission to do and what is our guest give us permission to do. So, as we thought about, and John, you know me well enough that I'm not going to do things that are sort of six rings outside the bullseye hair removal via another modality. IE laser made sense to us, and our guests told us yes, we would be willing to do that, and we would trust EWC to deliver that service. So we felt like we absolutely had permission from a brand standpoint and a guest standpoint when we did sort of the business case around this; it can have a material impact on the financial health of our franchise ease.

Jonathan Komp: In our next question coming from the line up, Jonathan, come with beer. Yeah, hi. Good morning. Hi, David. Hey, John, how are you? Good. Thank you. I want to follow up just as you look at the second half performance. I think you're involved in same store sales, slightly negative overall and certainly, you know, looks like maybe more pressure on mature stores. So could you maybe just comment a little bit more broadly what you're seeing at mature stores?

David: Yep, thank you, John . Hey, listen, I think we start with, you know, what does the brand give us permission to do and what does our guests give us permission to do? So as we thought about, and John , you know me well enough that I'm not going to do things that are sort of six rings outside the bullseye.

Jonathan Komp: And then David, as you think about moving the needle, is it really refocusing on, you know, a few specific initiatives are ready in place or are there more new initiatives needed within the action plans? I'll start. So yeah, that's fair what you said. More pressure on the mature centers. You know, if you think about those ramping centers, you know, there's more of a tailwind there, just based on the function of, you know, being new to market, et cetera.

David: Hair removal via another modality, i.e. laser, made sense to us. And our guests told us, yes, we would be willing to do that and we would trust EWC to deliver that service. So we felt like we absolutely had permission from a brand standpoint and a guest standpoint. When we did sort of the...

David: business case around this, it can have a material impact on the financial financial health of our franchisees. So we're excited about, you know, a just the the opportunity to show our expertise in another modality of hair removal.

John Heinbockel: So we're excited about, you know, age is the opportunity to show our expertise in another modality of hair removal. And we're very excited about what this can do from a full wall standpoint for our franchise ease. That's why we're expanding the pilot. The initial rollout of the pilot in New York has gone very well. We have franchise ease that are raising their hands, saying, hey, I want to try this. I want to put this into our center, and we'll continue to, as we said before, be very thoughtful about the pilot, but we do think this could be a materially positive impact on those centers that take up laser as a.

David: And we're very excited about what this can do from a four-wall standpoint for our franchisees. That's why we're expanding the pilot, the initial...

Jonathan Komp: And also what we called out that although a small, you know, small group or NCOs that have started out with the new playbook have been doing very, very well, but as we look between ramping and mature definitely more pressure on the mature centers to get that new guest and to build on the transactions. And so that's where you think about the second half, exactly what you said is accurate. And John, listen, I think at a high level, first and foremost, it's just, it's just those focus on the key three or four things that I outlined in my opening comments.

David: rollout of the pilot in New York has gone very well. We have franchisees that are raising their hands saying, hey, I want to try this. I want to put this into our center. And we'll continue to, as we've said before, be very thoughtful about the pilot. But we do think this could be a materially positive impact on those centers that take up laser.

John Heinbockel: at the additional service.

David: as an additional service.

John Heinbockel: Great, thank you. Thank you, John.

Speaker Change: Great, thank you.

Kelly Crago: Thank you.

John: Thank you, John .

Kelly Crago: And as a minded to ask a question, please press star 11 on the next question coming from the line of Kelly Crago with City, Elena Sultman. Hi, thank you.

Speaker Change: Thank you and as a reminder to ask a question please press star 1 1. Our next question coming from the line of Kelly Crago with City, your line is open.

Jonathan Komp: To your question about, hey, are there some things that we need to do differently? The answer is yes. We will continue to focus on those initiatives that we launched in Q1 that are working, particularly the national media spend and the emphasis on local marketing. But we know we need to do more. They have not, for those initiatives on their own, have not produced enough. So that's part of our challenge and our opportunity working with our franchisees to really identify what are those couple of things and we've got some, we've got some ideas that will certainly keep you a prize of as we move along in our journey.

Jonathan Komp: But we're going to stay hyper focused on those key priorities and not get distracted but really drive new guests and increase transactions that again feeds that flywheel that allows our franchisees to continue to reinvest in this amazing brand. As it relates to the guide overall, I would also say, you know, when you look at the 930 to 950 and that second half, it certainly is assuming that there is continued pressure in the second half.

Kelly Crago: Welcome back, David. I have a question on the macro.

Kelly Tringo: Hi, thank you. Welcome back, David. There's a question on the macro.

David Bird: Can you just talk about what you're seeing from a customer cohort perspective, maybe an income perspective, what happens throughout the quarter versus your expectations and versus one queue, just given the call out of the weakening macro?

Kelly Tringo: Can you just talk about what you're seeing from a customer cohort perspective, maybe an income perspective?

Speaker Change: what happened throughout the quarter versus your expectations and versus 1Q, just given the call out of the weakening macro. And then just secondly,

David Bird: And then just secondly, I'm just curious, if you're planning to deal with the promotional strategy, are you going to use the wax pass promotions as a tool to kind of go after those last and you get. Thank you.

Speaker Change: I'm just curious if you're what you're planning to do with the promotional strategy, are you going to use the wax pass promotions as a tool to kind of go after those last and new guests? Thank you.

David Bird: Yeah, Kelly, thanks. I think from a macro standpoint that the great news is that, you know, still approximately 75% of our revenue is coming from our core guests. I guess it has a wax pass or is there on a regular basis. So we feel good about that portion of it. And candidly, that customer segment for us has higher household income, is probably a bit more immune to the macroeconomic situation. Where we've seen the drop-off is in what we historically call that episodic guest or the guest that comes in on occasion. And we, through our consumer surveys, we've seen that the macroeconomic situation has impacted that guest.

Jonathan Komp: The 950 would assume that we're basically kind of where we have been. On the 930 though, that's going to assume that there is potential allowance for a downtrend and how we've looked at it. Okay, that's helpful. Thank you.

Speaker Change: Yeah, Kelly, thanks. I think from a macro standpoint, the great news is that still approximately 75% of our revenue is coming from our core guests. That guest that has a wax pass is there on a regular basis. So we feel good about that portion of it. And candidly, that customer segment for us,

Speaker Change: has higher household income, is probably a bit more immune to the macroeconomic situation. Where we've seen the drop-off is in what we, you know, historically have called that episodic guess, or the guess that comes in on occasion.

John Heinbockel: And then David, since, you know, this is the first time to speak with you in a while. Could you just maybe show your thoughts on the laser initiative, you know, why is that the right thing to focus on at this stage as you're refocusing on the overall base board. So differently, is it something you think could materially move the needle on unit economics going into next year, just, you know, curious your thoughts there.

Speaker Change: And we, through our consumer surveys, we've seen that the macroeconomic situation has impacted that guest. So we need to be creative about how we get that guest back into the center. But it is a very positive note that the behavior, the frequency, the rate with which our best guests are coming in continue to do so.

David Bird: So we need to be creative about how we get that guest back into the center. But it is a very positive note that the behavior, the frequency, the rate with which our best guests are coming in continue to do so. We've got to drive new guests into the system that, as we talked about, a key priority. But that's really sort of how that breaks out from that guest cohort. You know, promotional strategy, obviously we have those promotions around the 9 plus 3. We need to think more creatively about other opportunities. We launched a 6 plus 2 wax pass out in California to help those folks that might not be able to afford a 9 plus 3.

Speaker Change: We've got to drive new guests into the into the system that as we talked about a key priority But that that's really sort of how that breaks out from from from that guest cohort

John Heinbockel: So we felt like we absolutely had permission from a brand standpoint and a guest standpoint when we did sort of the business case around this, it can have a material impact on the financial financial health of our franchise ease. So we're excited about, you know, age is the opportunity to show our expertise in another modality of hair removal. And we're very excited about what this can do from a full wall standpoint for our franchise ease.

Speaker Change: You know, promotional strategy, obviously we have those promotions around the 9 plus 3. We need to think more creatively about are there other opportunities. We launched a 6 plus 2 wax pass out in California to help those folks that might not be able to afford a 9 plus 3, that was taken up very well. So we will continue to look at.

David Bird: That was taken up very well. So we will continue to look at, you know, do we have the right pricing? Do we have the right promotional strategy? By no means will EWC ever be a discount brand. We don't need to do that. But where we can get the use of promotion is really to get that guest, that new guest into the center or a laps guest back into the center so that again, with the services that we provide, we can get them on that wax pass and make them a loyal EWC guest.

Speaker Change: You know, do we have the right pricing? Do we have the right promotional strategy? By no means will EWC ever be a discount brand. We don't need to do that. But where we can get the use of promotion is really to get that guest, that new guest into the center or elapsed guest back into the center. So that again, with the services that we provide, we can get them on that wax pass and make them a loyal EWC guest.

Operator: Thank you. Just a question on the sort of implied, well, I guess speaking specifically about your 2024 cohort of new stores just based on the revised guidance. It doesn't look like you're expecting much of a contribution from new stores. Maybe there's something else offsetting that, like, you know, even excluding the 53rd week impact. Yeah, it doesn't seem like the same for the system; like sales guidance expects much contribution from that.

Speaker Change: Thank you.

John Heinbockel: That's why we're expanding the pilot, the initial the initial rollout of the pilot in New York has gone very well. We have franchise ease that are raising their hands saying, hey, I want to try this. I want to put this into our center and we'll continue to, as we said before, be very thoughtful about the pilot, but we do think this could be a materially positive impact on those centers that take up laser as a, at the additional service. Great, thank you. Thank you, John.

Speaker Change: Just a question on the sort of implied, well, I guess speaking specifically about your 2024.

Speaker Change: cohort of new stores.

Speaker Change: Just based on the revised guidance, it doesn't look like you're expecting much of a contribution from new stores. Maybe there's something else.

Speaker Change: offsetting that, like, you know, even excluding the 53rd week impact.

Speaker Change: It doesn't seem like the system-wide sales guidance expects much contribution for that, so just curious how that 2024 new SOAR cohort is performing versus expectations in your outlook for the year.

Stacie Shirley: So just curious how that 2024 new store cohort is performing versus expectations in your outlook for the Sure. So, let's start with expectation. So, we launched the NCO Playbook late in Q1. And so, Q2 with the eight net nurse that we have opened, we've seen really good results from a standpoint of system-wide sales as well as their tickets. And that's a function of them really following this playbook, making sure that they were spending money, you know, local marketing, that they were staffed appropriately and that they had a strong guest list that, you know, an opening day.

Kelly Crago: Thank you. And as a minded to ask a question, please press star 11 on next question coming from the line of Kelly Crago with City, Elena Sultman. Hi, thank you.

Speaker Change: Sure. So, let's start with expectations. So, we launched an NCO playbook late in Q1, and so Q2, with the eight NETnews Centers that we have opened, we've seen really good results from a standpoint of some wide sales as well as their tickets.

Kelly Crago: Welcome back, David. I have a question on the macro. Can you just talk about what you're seeing from a customer cohort perspective, maybe an income perspective, what happens throughout the quarter versus your expectations and versus one queue, just given the call out of the weakening macro? And then just secondly, I'm just curious, if you're planning to deal with the promotional strategy, are you going to use the wax pass promotions as a tool to kind of go after those last and you get.

Speaker Change: And that's a function of them really following this playbook, making sure that they were spending money, you know, in local marketing, that they were staffed appropriately, and that they had a strong guest list, you know, at open house.

Stacie Shirley: So, that has been very exciting to see, and we feel very good about that. As far as the overall impact, you know, with that number 27 to 32, there's not a huge impact on the top line of what we're expecting from a system-wide sales. So, you're correct in that regard. Thank you.

Speaker Change: opening day. So that has been very

Speaker Change: very exciting to see and we feel very good about that. As far as the overall impact, you know, with that number 27 to 32, there's not a huge impact on the top line of what we were expecting from a system-wide sale, so you're correct in that regard.

Speaker Change: Thank you.

Kelly Crago: Thank you. Yeah, Kelly, thanks. I think from a macro standpoint that the great news is that, you know, still approximately 75% of our revenue is coming from our core guests. I guess it has a wax pass or is there on a regular basis. So we feel good about that portion of it. And candidly, that customer segment for us has higher household income is probably a bit more immune to the macroeconomic situation.

Speaker Change: Thank you.

Operator: One moment for next question.

Operator: And again, to ask a question, please press R11.

Speaker Change: One moment for next question and again to ask a question please press star 1 1

Operator: Okay.

Kelly Crago: Where we've seen the drop off is in what we historically call that episodic guest or the guest that comes in on occasion. And we through our consumer surveys, we've seen that the macroeconomic situation has impacted that guest. So we need to be creative about how we get that guest back into the center. But it is a very positive note that the behavior, the frequency, the rate with which are our best guests are coming in continue to do so.

John Heinbockel: And, John, hi, Buckle.

Speaker Change: [inaudible]

John Heinbockel: Your line is now open. Hey, David. I wanted to start with you. When you look at new guests, I don't know what the volume is, right, that you're bringing it in here. But maybe remind us the percent of new guests that are waxed past the percent that start episodic. And then, you know, you've got new content out there, new creative around really focusing on the wax specialists, which I think is quite differentiated. When you think about the opportunity, is the message the right one, but maybe not in the right channels? What do you think the message still needs to be refined?

Speaker Change: And John Heinbacher, your line is now open.

David: David, I wanted to start with, when you look at new guests, I don't know what the volume is, right, that you're bringing in a year, but maybe remind us the percent of new guests that are wax past the percent that start episodic.

David: And then, you know, you've got new content out there, right, new creative around really focusing on the wax specialist, which I think is quite differentiated.

Kelly Crago: We've got to drive new guests into the into the system that as we talked about a key priority. But that's really sort of how that breaks out from that guest cohort. You know, promotional strategy, obviously we have those promotions around the 9 plus 3. We need to think more creatively about other opportunities. We launched a 6 plus 2 wax pass out in California to help those folks that might not be able to afford a 9 plus 3.

Speaker Change: When you think about the opportunity, is the message the right one, but maybe not in the right channels?

John Heinbockel: Where's the bigger opportunity, the message, or how you're delivering it?

Speaker Change #100: What do you think the message still needs to be refined? Where's the bigger opportunity, the message or how you're delivering it?

David Bird: Hey, John. So, I was worried when I didn't hear you asking a question that maybe you were boycotting me. So, there's a nice, nice hearing voice. Thanks.

Speaker Change #101: Jesus Christ!

Speaker Change #101: Hey, John , so I was worried when I didn't hear you asking questions that maybe you were boycotting me. So it's nice to hear your voice again, John .

Kelly Crago: That was taken up very well. So we will continue to look at, you know, do we have the right pricing? Do we have the right promotional strategy? By no means will EWC ever be a discount brand. We don't need to do that. But where we can get the use of promotion is really to get that guest, that new guest into the center or a laps guest back into the center so that again, with the services that we provide, we can get them on that wax pass and make them a loyal EWC guest. Thank you.

David Bird: Listen, on new guests, we have a very deliberate sort of selling process to get them into a wax pass, right? And as you know, we've had a first wax-free promise since the inception of the brand. And that continues to help us drive new guests into the brand. And what we've seen is that there is an opportunity to offer that guest on their first visit, a pretty attractive pre-plus-one opportunity, right? We're testing this. We think that makes sense. While we have the guests in there, they've been wowed. That's a little bit of a departure from the past, but to try to get them into the system faster.

Speaker Change #102: Listen, on New Guest we have a very deliberate sort of selling process to get them into a wax pass, right? And as you know, we've had a first wax-free promise since the inception of the brand that continues to help us drive New Guest into the brand. And what we've seen is that there is an opportunity

Kelly Crago: Just question on the sort of implied, well, I guess speaking specifically about your 2024 cohort of new stores just based on the revised guidance. It doesn't look like you're expecting much of a contribution from new stores. Maybe there's something else offsetting that, like, you know, even excluding the 53rd week impact. Yeah, it doesn't seem like the same for the system like sales guidance expects much contribution from that. So just curious how that 2024 new store cohort is performing versus expectations in your outlook for the Sure.

Speaker Change #102: to offer that guest.

Speaker Change #102: on their first visit, a pretty attractive 3 plus 1 opportunity, right? We're testing this. We think that makes sense.

Speaker Change #102: While we have the guests in there, they've been wowed. That's a little bit of a departure from the past, but to try to get them into the system faster. And we think that's something that we continue to roll out with our franchise and work on to get them back into the center, rather than kind of wait to the third or fourth visit. And so, as you know, once we convert those folks to a Wax Pass, that essentially becomes a membership light model, and we get to enjoy more lifetime value from them.

David Bird: And we think that's something that we continue to roll out with our franchise and work on to get them into the back end of the center, rather than kind of wait to the third or fourth visit. And so, as you know, once we convert those folks to Wax Pass, that essentially becomes a membership light model. And we get to enjoy a more lifetime value from them.

David Bird: On the marketing piece, we feel great about our creative. As I said in my opening comments that, you know, we're going to continue to focus on ROI on our marketing spend. So, right channel, right creative, right, right messaging. We continue to refine that. Andrea and her team are always looking at, you know, what makes sense. We think highlighting the wax specialists made absolute sense. They are the ones that they have the most trusted relationship with our guests and highlight why we're the best in the industry to do that. But that's something we continually tweak to make sure we're sending the right message and driving the right results.

Speaker Change #102: On the marketing piece, we feel great about our creative. As I said in my opening comments that, you know, we're going to continue to focus on ROI and our marketing spend, so right channel, right creative, right messaging. We continue to refine that. Andrea and her team are always looking at, you know, what makes sense. We think highlighting the wax specialists made absolute sense. They are the ones that have the most trusted relationship with our guests and highlight why we're the best in the industry to do that. But that's something we continually tweak to make sure we're sending the right message and driving the right results.

Kelly Crago: So, let's start with expectation. So, we launched the NCO playbook late in Q1. And so, Q2 with the eight net nurse that we have opened, we've seen really good results from a standpoint of system wide sales as well as their tickets. And that's a function of them really following this playbook, making sure that they were spending money, you know, local marketing, that they were staffed appropriately and that they had a strong guest list that, you know, an opening day.

Kelly Crago: So, that has been very exciting to see and we feel very good about that. As far as the overall impact, you know, with that number 27 to 32, there's not a huge impact on the top line of what we're expecting from a system wide sales. So, you're correct in that regard. Thank you. Thanks, Kelly. Thank you. One moment for next question. And again, to ask a question, please press R11. Okay. And, John, hi, Buckle.

John Heinbockel: And maybe, because I know you lapse guests are not as important in the scheme of things, right, as new guests, but can you size that? When I think about how many laps guests you have, right? I don't know if it's several hundred thousands; it's probably not a million, but maybe it is the size of that. And what you think is 10% a fair conversion rate, or is that overly optimistic?

Speaker Change #103: And maybe, because I know lapsed guests are not as important in the scheme of things, right, as new guests, but can you size that, when I think about how many lapsed guests you have, right, I don't know if it's

Speaker Change #103: several hundred thousands, it's probably not a million, but maybe it is. The size of that, and what you think, is 10% a fair conversion rate, or is that overly optimistic?

David Bird: On new guests or laps guests, John? Yeah, I think that's fair. One of the things that we've probably got a million plus email addresses of guests that have not visited us in the past six months, so our opportunity to go drive that those folks back into the system is critically important. We have new guest targets; we have conversion rate targets that we want to get back to get those folks back into the system. Again, that laps guests, a lot of the feedback has been, it's a more challenging economic situation these days for those guests, and we've seen that challenge, so we continue to think about how we're creative and how we can be really offer unique opportunities to incense them to come back in.

Speaker Change #104: On new guests or last guests, John ? Last guests. Right. Yeah. Good.

Speaker Change #105: Yeah, I think that's fair. One of the things that we probably got...

Speaker Change #106: A million plus emails, addresses of guests that have not visited us in the past six months. So our opportunity to go drive those folks back into the system is critically important. We have new guest targets. We have conversion rate targets that we want to get back to, get those folks back into the system.

Kelly Crago: Your line is now open. Hey, David. I wanted to start with you. When you look at new guests, I don't know what the volume is, right, that you're bringing it in here. But maybe remind us the percent of new guests that are waxed past the percent that start episodic. And then, you know, you've got new content out there, new creative around really focusing on the wax specialists, which I think is quite differentiated.

Speaker Change #106: Again, that last guest, a lot of the feedback has been it's a more challenging economic situation these days for those guests, and we've seen that challenge, so we continue to think about how we're creative and how we can really offer unique opportunities to incent them to come back in.

David Bird: But I think from a prioritization, because I got asked the question, laps guests are incredibly important because they've come to us. It's very rare that we see guests, I'm not coming back there because I had a lot of the experience. That's not the situation, so we know we've got guests out there that would love to come back; we just got to make it worth their while to come back in.

Speaker Change #106: I think from a prioritization, because I got asked the question, LAPS guests are incredibly important to us because they've come to us. It's very rare that we see guests, I'm not coming back there because I had a lousy experience, that's not the situation. So we know we've got guests out there that would love to come back, we've just got to make it worth their while to come back in.

Kelly Crago: When you think about the opportunity, is the message is the right one, but maybe not in the right channels? What do you think the message still needs to be refined? Where's the bigger opportunity, the message, or how you're delivering it? Hey, John. So, I was worried when I didn't hear you asking a question that maybe you were boycotting me. So, there's a nice, nice hearing voice. Thanks. Listen, on new guests, we have a very deliberate sort of selling process to get them into a wax pass, right?

John Heinbockel: Okay, thank you. All right, John, thank you.

Speaker Change #106: Okay, thank you. All right, John , thank you.

Operator: Thank you. I'm showing no further questions in the queue at this time.

Speaker Change #107: Thank you and I'm showing no further questions in the queue at this time. I will now turn the conference back to Mr. David Burke for any closing remarks.

David Bird: I will now turn the conference back to him, so David worked for any closing remarks. Hi, thank you, operator. Thank you all very much for joining us. Again, as I said at the outset, I was excited, as I was when I came on board in 2018. That enthusiasm, optimism, and excitement is back in tenfold as I reenter. I've gotten, even in the few short hours that I've been here, an incredibly strong welcome from our associates, from franchisees, and we certainly look forward to keeping you all posted on the progress for making. Again, in the coming weeks and months, so thank you all for joining us today.

David Burke: Hi. Thank you, operator. Thank you all very much for joining us. Again, as I said at the outset, I'm as excited as I was when I came on board in 2018. That enthusiasm, optimism, and excitement is back tenfold as I reenter. I've gotten, even in the few short hours that I've been here, an incredibly strong welcome from our associates, from franchisees, and we certainly look forward to keeping you all posted on the progress we're making in the coming weeks and months. So thank you all for joining us today.

Kelly Crago: And as you know, we've had a first wax free promise since the inception of the brand. And that continues to help us drive new guests into the brand. And what we've seen is that there is an opportunity to offer that guest on their first visit, a pretty attractive pre-plus-one opportunity, right? We're testing this. We think that makes sense. While we have the guests in there, they've been wowed. That's a little bit of a departure from the past, but to try to get them into the system faster.

Operator: Thank you for your participation.

Kelly Crago: And we think that's something that we continue to roll out with our franchise and work on to get them into the back end of the center, rather than kind of way to the third or fourth visit. And so, as you know, once we convert those folks to wax pass, that essentially becomes a membership light model. And we get to enjoy a more lifetime value from them. On the marketing piece, we feel great about our creative.

Speaker Change #109: Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.

Operator: You may now disconnect.

Kelly Crago: As I said in my opening comments that, you know, we're going to continue to focus on ROI on our marketing spend. So, right channel, right creative, right, right messaging. We continue to refine that. Andrea and her team are always looking at, you know, what makes sense. We think highlighting the wax specialists made absolute sense. They are the ones that they have the most trusted relationship with our guests and highlight why we're the best in the industry to do that.

Kelly Crago: But that's something we continually tweak to make sure we're sending the right message and driving the right results. And maybe, because I know you lapse guests are not as important in the scheme of things, right, as new guests, but can you size that? When I think about how many laps guests you have, right? I don't know if it's several hundred thousands, it's probably not a million, but maybe it is the size of that and what you think is is 10% a fair conversion rate, or is that overly optimistic?

Kelly Crago: On new guests or laps guests, John? Yeah, I think that's fair. One of the things that we've probably got a million plus emails addresses of guests that have not visited us in the past six months, so our opportunity to go drive that those folks back into the system is critically important. We have new guest targets, we have conversion rate targets that we want to get back to get those folks back into the system.

Speaker Change #110: Thank you. Thank you.

Kelly Crago: Again, that laps guests, a lot of the feedback has been, it's a more challenging economic situation these days for those guests, and we've seen that challenge, so we continue to think about how we're creative and how we can be really offer unique opportunities to incense them to come back in. But I think from a prioritization, because I got asked the question, laps guests are incredibly important because they've come to us, it's very rare that we see guests, I'm not coming back there because I had a lot of the experience.

Speaker Change #110: Thank you. Thank you.

Kelly Crago: That's not the situation, so we know we've got guests out there that would love to come back, we just got to make it worth their while to come back in. Okay, thank you. All right, John, thank you. Thank you. I'm showing no further questions in the queue at this time.

David Bird: I will now turn the conference back to him, so David worked for any closing remarks. Hi, thank you operator. Thank you all very much for joining us. Again, as I said at the outset, I was excited as I was when I came on board in 2018. That enthusiasm, optimism and excitement is back in tenfold as I reenter. I've gotten even in the few short hours that I've been here, an incredibly strong welcome from our associates from franchisees, and we certainly look forward to keeping you all posted on the progress for making. Again, in the coming weeks and months, so thank you all for joining us today. Thank you for your participation.

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Operator: You may now disconnect. [inaudible] Thank you for your time, thank you[inaudible] Thank you for your time, thank you for your time, thank you for your time, thank you[inaudible] Thank you for your time, thank you for your time, thank you[inaudible] Thank you for your time, thank you for your time, thank you[inaudible] Stacie Shirley, John Heinbockel, John Heinbockel, John Heinbockel, John Heinbockel Stacie Shirley, John Heinbockel, John Heinbockel, John Heinbockel, John Heinbockel, John Heinbockel, John Heinbockel, John Heinbockel, John Heinbockel,[inaudible] Heinbockel, John Heinbockel John Heinbockel[inaudible] John Heinbockel, John Heinbockel Stacie Shirley, John Heinbockel, John Heinbockel, John Heinbockel, John Heinbockel, John Heinbockel, John Heinbockel, John Heinbockel, John Heinbockel, John Heinbockel, John Heinbockel, John Heinbockel, John Heinbockel, John Heinbockel, John Heinbockel, John Heinbockel,[inaudible] Heinbockel, John Heinbockel John Heinbockel

Speaker Change #111: Music Music Music Music Music Music Music Music Music Music

Speaker Change #111: [inaudible]

Speaker Change #111: . . . . . .

Speaker Change #112: Thanks for watching!

Speaker Change #112: Dr. Bethany Johns, David Willis, David Willis, David Willis, David Willis, David Willis, David

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