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European Wax Center, Inc.

EWCZ
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Business Summary

European Wax Center, Inc. (EWCZ) operates as the leading franchisor and operator of out-of-home (OOH) waxing services in the United States, with a network of 1,047 centers across 44 states as of January 3, 2026 . The company's business model is highly franchised, with 1,042 centers operated by franchisees and five corporate-owned centers . EWCZ positions itself as a trusted, efficacious, and accessible brand, emphasizing a superior guest experience through licensed, EWC-trained estheticians, a proprietary Comfort Wax formulation, and technology-enabled guest interfaces for appointment scheduling and remote check-in . The company estimates the total addressable domestic market for OOH waxing to be over $7 billion , and it believes it is approximately six times larger than its closest waxing-focused competitor by center count and approximately 10 times larger by system-wide sales . The market remains highly fragmented, with over 10,000 independent waxing operators and nearly 100,000 beauty salons offering waxing as a minor service .

The core business model revolves around an asset-light franchise platform, generating revenue primarily through product sales to franchisees, ongoing royalty fees, and marketing fund contributions. The company also earns revenue from its corporate-owned centers and other sources. The Wax Pass program, a pre-paid service offering, is a key loyalty driver, with approximately 62% of transactions conducted using Wax Passes in 2025 , fostering repeat visits and predictable revenue streams.

For the fiscal year ended January 3, 2026, EWCZ reported total revenue of $206.626 million , a decrease of 4.7% from $216.916 million in the prior fiscal year . Gross profit, calculated as total revenue less cost of revenue, was $152.792 million for fiscal 2025, resulting in a gross margin of 73.9% . Operating income for the period was $43.002 million , representing an operating margin of 20.7% . Net income for fiscal 2025 was $11.869 million , down 19.2% from $14.681 million in fiscal 2024 . Diluted EPS for Class A Common Stock was $0.20 in fiscal 2025, compared to $0.22 in fiscal 2024. Cash and cash equivalents stood at $76.060 million as of January 3, 2026, while total long-term debt (including current portion) was $386.000 million . Net cash provided by operating activities was $52.999 million for fiscal 2025.

Year-over-year, total revenue decreased by $10.290 million , or 4.7% . Product sales, which constituted 54.5% of total revenue in fiscal 2025 , decreased by $8.887 million , or 7.3% , primarily due to fewer transactions at existing centers and increased franchisee incentives. Royalty fees, representing 25.3% of total revenue , decreased by $0.685 million , or 1.3% , largely due to 31 center closures offsetting 11 new center openings . Marketing fees, 14.6% of total revenue , saw a slight decrease of $0.064 million , or 0.2% . Other revenue, including corporate-owned center service revenues and franchise fees, decreased by $0.654 million , or 5.4% . Operating expenses decreased by $5.530 million , or 3.3% , driven by lower cost of revenue and advertising expenses, partially offset by a $3.3 million increase in payroll and benefits due to the new executive leadership team and transformation efforts.

During fiscal 2025, the company's center count decreased to 1,047 from 1,067 in fiscal 2024, reflecting 11 new openings and 31 closures . System-wide sales declined slightly to $947.273 million from $950.981 million in fiscal 2024. Same-store sales, however, showed a modest increase of 0.2% for both fiscal 2025 and 2024, driven by an increase in average transaction size, partially offset by a decrease in the number of transactions . A new executive leadership team, including CEO Chris Morris and CFO Thomas Kim, was appointed in 2025 . The company also enhanced its site selection process and introduced new tools to support center performance . Post-fiscal year end, on February 9, 2026, EWCZ entered into a Merger Agreement with Glow Midco, LLC, an affiliate of its largest stockholder, General Atlantic, to be acquired for $5.80 per share of Class A common stock .

Business Outlook

EWCZ's outlook is significantly shaped by the pending Merger Agreement with Glow Midco, LLC, an affiliate of General Atlantic, its largest stockholder. The agreement, entered into on February 9, 2026, proposes that each share of Class A common stock will be converted into the right to receive cash in an amount equal to $5.80 . The consummation of this merger is subject to various conditions, including affirmative votes from a majority of all outstanding shares of common stock and a majority of shares held by stockholders unaffiliated with the Buyer Parties . The Merger Agreement includes termination rights, with the Company potentially paying a $6.6 million fee to Parent or Parent paying the Company a $19 million fee, plus enforcement costs not exceeding $2 million , if the transaction is not completed by August 9, 2026 . There is no assurance that the merger will be consummated .

The company's growth strategy focuses on sustainable, disciplined expansion by reinforcing the foundation of its business and improving existing centers' productivity and unit economics. While new market opportunities exist, a significant portion of the whitespace opportunity is within existing markets, allowing EWCZ to leverage established brand awareness and operational infrastructure for more efficient expansion . The company plans to continue investing in initiatives designed to strengthen the maturation curve and drive increased transactions and profitability at its centers .

EWCZ aims to grow brand awareness and accelerate guest acquisition through several strategies. These include performance marketing, deploying data-driven marketing across digital channels to drive reservations, and brand marketing through public relations, events, social media, and partnerships . The company is also investing in its digital experience to educate consumers and streamline reservation booking, alongside personalized communication strategies and re-engagement campaigns to enhance guest retention and repeat visits . Local marketing efforts are supported in partnership with franchisees .

To drive system-wide sales growth, EWCZ is focused on increasing Wax Pass adoption rates, which reached approximately 62% of transactions in 2025 . The company plans to expand and refine this program to convert more non-member guests and leverage email marketing to educate new guests about its benefits . EWCZ also intends to expand its share of guests' personal-care expenditures by broadening its offerings, leveraging the trusted relationships between guests and wax specialists . Furthermore, the company is developing new use cases from its guest database and expanding advanced data analysis capabilities to improve guest visit frequency and loyalty through timely and hyper-personalized communications .

In terms of operational outlook, EWCZ expects to expand its profit margins and generate robust free cash flow. Given its scale, the company believes it can procure high-quality products and supplies at lower prices than smaller independent providers . Over the long term, EWCZ anticipates generating operating leverage due to its relatively fixed corporate cost structure, which, combined with low capital expenditures and working capital needs, should lead to improved operating margins and strong free cash flow . The company's short-term strategy prioritizes realigning the business to improve existing centers' productivity and unit economics, which is expected to support thoughtful center growth in the future .

Planned capital allocation includes an ongoing share repurchase program, with $45.857 million cumulatively repurchased as of January 3, 2026, out of a $50.0 million authorization approved on May 13, 2024 . The company expects to pay $22.765 million in fiscal year 2026 for purchase commitments, primarily related to inventory, technology, and advertising . Future payments under the Tax Receivable Agreement (TRA) are expected to aggregate to approximately $201.5 million over 18 years, based on a closing share price of $3.44 per share of Class A common stock and assuming all future Share Exchanges and Cash Exchanges occurred on January 3, 2026 . These payments are contingent on the realization of tax benefits from attributes subject to the TRA .

Risk Factors

EWCZ faces several material risks, including the uncertainty surrounding the Merger Agreement, which may not be adopted by stockholders and could lead to increased stock price volatility and substantial costs, including a potential $6.6 million termination fee payable to Parent or a $19 million fee payable by Parent to the Company, plus enforcement costs not exceeding $2 million . The company's business is highly dependent on the financial results and operational success of its franchisees, who may face challenges in securing financing, selecting suitable sites, or maintaining quality standards, which could harm the brand and reduce royalty payments. EWCZ relies on a limited number of key suppliers, including international ones, for its Comfort Wax and branded retail products, exposing it to supply chain disruptions, increased commodity prices, and geopolitical instability, which could adversely affect supply costs and product sourcing revenue. The company is also exposed to litigation risks, including a class-action lawsuit filed on July 1, 2025, asserting privacy-related claims, for which an estimated loss of $5.0 million is probable, though the impact to the Consolidated Statement of Operations is not expected to exceed the $250,000 policy deductible due to anticipated insurance recovery. Furthermore, the company's substantial indebtedness, including $386.000 million in Class A-2 Notes, and the obligations under the Tax Receivable Agreement, which has future payments expected to be $201.5 million , could significantly impact liquidity and financial condition, especially if cash flows are insufficient or if rapid amortization events are triggered under the securitization facility.

Management Priorities

Management's message to shareholders emphasizes a focus on reinforcing the business foundation and positioning the company for sustainable, disciplined growth. This includes a commitment to improving existing centers' productivity and unit economics, which is seen as a prerequisite for thoughtful future center growth. The company highlights the appointment of a new executive leadership team in 2025, including CEO Chris Morris and CFO Thomas Kim, as instrumental in driving strategic priorities and deepening franchisee partnerships. Management is actively investing in initiatives designed to strengthen the maturation curve of centers and drive increased transactions and profitability. The company also disclosed a significant forward-looking event: the Merger Agreement entered into on February 9, 2026, with Glow Midco, LLC, an affiliate of its largest stockholder, General Atlantic, to acquire the company for $5.80 per share of Class A common stock . This transaction, if consummated, would result in the company becoming a privately held entity.

View Source Annual Report on SEC.gov ↗

References

  1. [1] Item 1, Business — Overview
  2. [2] Item 1, Business — Overview
  3. [3] Item 1, Business — Overview
  4. [4] Item 1, Business — Market Opportunity
  5. [5] Item 1, Business — Market Opportunity
  6. [6] Item 1, Business — Market Opportunity
  7. [7] Item 1, Business — Employ Strategies to Drive System-Wide Sales Growth
  8. [8] Item 7, MD&A — Results of Operations
  9. [9] Item 7, MD&A — Results of Operations
  10. [10] Item 7, MD&A — Results of Operations (Calculated as Total Revenue - Cost of Revenue)
  11. [11] Item 7, MD&A — Results of Operations (Calculated as Gross Profit / Total Revenue)
  12. [12] Item 7, MD&A — Results of Operations
  13. [13] Item 7, MD&A — Results of Operations (Calculated as Income from operations / Total revenue)
  14. [14] Item 7, MD&A — Results of Operations
  15. [15] Item 7, MD&A — Results of Operations
  16. [16] Item 8, Consolidated Statements of Operations
  17. [17] Item 8, Consolidated Statements of Operations
  18. [18] Item 8, Consolidated Balance Sheets
  19. [19] Item 8, Consolidated Balance Sheets
  20. [20] Item 8, Consolidated Statements of Cash Flows
  21. [21] Item 7, MD&A — Comparison of the Years Ended January 3, 2026 and January 4, 2025 — Total Revenue
  22. [22] Item 7, MD&A — Comparison of the Years Ended January 3, 2026 and January 4, 2025 — Total Revenue
  23. [23] Item 7, MD&A — Components of Results of Operations — Revenue
  24. [24] Item 7, MD&A — Comparison of the Years Ended January 3, 2026 and January 4, 2025 — Product Sales
  25. [25] Item 7, MD&A — Comparison of the Years Ended January 3, 2026 and January 4, 2025 — Product Sales
  26. [26] Item 7, MD&A — Components of Results of Operations — Revenue
  27. [27] Item 7, MD&A — Comparison of the Years Ended January 3, 2026 and January 4, 2025 — Royalty Fees
  28. [28] Item 7, MD&A — Comparison of the Years Ended January 3, 2026 and January 4, 2025 — Royalty Fees
  29. [29] Item 7, MD&A — Key Business Metrics — The table below presents changes in the number of system-wide centers for the periods indicated
  30. [30] Item 7, MD&A — Key Business Metrics — The table below presents changes in the number of system-wide centers for the periods indicated
  31. [31] Item 7, MD&A — Components of Results of Operations — Revenue
  32. [32] Item 7, MD&A — Comparison of the Years Ended January 3, 2026 and January 4, 2025 — Marketing Fees
  33. [33] Item 7, MD&A — Comparison of the Years Ended January 3, 2026 and January 4, 2025 — Marketing Fees
  34. [34] Item 7, MD&A — Comparison of the Years Ended January 3, 2026 and January 4, 2025 — Other Revenue
  35. [35] Item 7, MD&A — Comparison of the Years Ended January 3, 2026 and January 4, 2025 — Other Revenue
  36. [36] Item 7, MD&A — Comparison of the Years Ended January 3, 2026 and January 4, 2025 — Total Operating Expenses
  37. [37] Item 7, MD&A — Comparison of the Years Ended January 3, 2026 and January 4, 2025 — Total Operating Expenses
  38. [38] Item 7, MD&A — Comparison of the Years Ended January 3, 2026 and January 4, 2025 — Selling, General and Administrative
  39. [39] Item 7, MD&A — Key Business Metrics — Number of system-wide centers (at period end)
  40. [40] Item 7, MD&A — Key Business Metrics — Number of system-wide centers (at period end)
  41. [41] Item 7, MD&A — Key Business Metrics — The table below presents changes in the number of system-wide centers for the periods indicated
  42. [42] Item 7, MD&A — Key Business Metrics — The table below presents changes in the number of system-wide centers for the periods indicated
  43. [43] Item 7, MD&A — Key Business Metrics — System-wide sales
  44. [44] Item 7, MD&A — Key Business Metrics — System-wide sales
  45. [45] Item 7, MD&A — Key Business Metrics — Same-store sales
  46. [46] Item 7, MD&A — Key Business Metrics — Same-store sales
  47. [47] Item 1, Business — Experienced and Passionate Management Team Investing in the Next Phase of Our Growth
  48. [48] Item 7, MD&A — Overview
  49. [49] Item 1, Business — Merger Agreement with Principal Stockholder
  50. [50] Item 1, Business — Merger Agreement with Principal Stockholder
  51. [51] Item 1, Business — Merger Agreement with Principal Stockholder
  52. [52] Item 1, Business — Merger Agreement with Principal Stockholder
  53. [53] Item 1, Business — Merger Agreement with Principal Stockholder
  54. [54] Item 1, Business — Merger Agreement with Principal Stockholder
  55. [55] Item 1, Business — Merger Agreement with Principal Stockholder
  56. [56] Item 1, Business — Merger Agreement with Principal Stockholder
  57. [57] Item 1, Business — Our Growth Strategies — Grow Our National Footprint Across New and Existing Markets
  58. [58] Item 7, MD&A — Overview
  59. [59] Item 1, Business — Our Growth Strategies — Grow Our Brand Awareness and Accelerate Our Guest Acquisition
  60. [60] Item 1, Business — Our Growth Strategies — Grow Our Brand Awareness and Accelerate Our Guest Acquisition
  61. [61] Item 1, Business — Marketing Support
  62. [62] Item 1, Business — Employ Strategies to Drive System-Wide Sales Growth
  63. [63] Item 1, Business — Employ Strategies to Drive System-Wide Sales Growth
  64. [64] Item 1, Business — Employ Strategies to Drive System-Wide Sales Growth
  65. [65] Item 1, Business — Employ Strategies to Drive System-Wide Sales Growth
  66. [66] Item 1, Business — Expand Our Profit Margins and Generate Robust Free Cash Flow
  67. [67] Item 1, Business — Expand Our Profit Margins and Generate Robust Free Cash Flow
  68. [68] Item 7, MD&A — Significant Factors Impacting Our Financial Results — New Center (Closures) Openings
  69. [69] Item 5, Issuer Purchases of Equity Securities
  70. [70] Item 5, Issuer Purchases of Equity Securities
  71. [71] Item 5, Issuer Purchases of Equity Securities
  72. [72] Item 10, Commitments and contingencies — Purchase Commitments
  73. [73] Item 10, Commitments and contingencies — Purchase Commitments
  74. [74] Item 7, MD&A — Liquidity and Capital Resources
  75. [75] Item 7, MD&A — Liquidity and Capital Resources
  76. [76] Item 7, MD&A — Tax Receivable Agreement
  77. [77] Item 1A, Risk Factors — The Merger Agreement we entered into may not be adopted by our stockholders, may increase the volatility of the market price of our common stock and will result in certain costs and expenses.
  78. [78] Item 1A, Risk Factors — The Merger Agreement we entered into may not be adopted by our stockholders, may increase the volatility of the market price of our common stock and will result in certain costs and expenses.
  79. [79] Item 1A, Risk Factors — The Merger Agreement we entered into may not be adopted by our stockholders, may increase the volatility of the market price of our common stock and will result in certain costs and expenses.
  80. [80] Item 10, Commitments and contingencies — Litigation
  81. [81] Item 10, Commitments and contingencies — Litigation
  82. [82] Item 8, Long-term debt
  83. [83] Item 7, MD&A — Liquidity and Capital Resources
  84. [84] Item 1, Business — Merger Agreement with Principal Stockholder

Analysis on 5/21/2026