EUROPEAN WAX CENTER: Discussion and analysis of the financial and earnings situation by the management (Form 10-Q)

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You should read the following discussion of our historical performance,
financial condition and future prospects in conjunction with the management's
discussion and analysis of financial conditions and results of operations and
the audited consolidated financial statements included in our prospectus dated
August 4, 2021, filed with the Securities and Exchange Commission (the "SEC") on
August 6, 2021 pursuant to Rule 424(b)(4) of the Securities Act of 1933, as
amended (referred to herein as the "Prospectus"). The following discussion and
analysis should also be read in conjunction with our unaudited condensed
consolidated financial statements and the notes thereto included elsewhere in
this quarterly report on Form 10-Q. The information provided below supplements,
but does not form part of, our predecessor's financial statements. This
discussion contains forward-looking statements that are based on the views and
beliefs of our management, as well as assumptions and estimates made by our
management. Actual results could differ materially from such forward-looking
statements as a result of various risk factors, including those that may not be
in the control of management. For further information on items that could impact
our future operating performance or financial condition, see the sections titled
"Risk Factors" and "Forward-Looking Statements" included in our Prospectus.

We conduct substantially all of our activities through our direct, wholly owned
subsidiary, EWC Ventures, LLC and its subsidiaries. We operate on a fiscal
calendar widely used by the retail industry that results in a given fiscal year
consisting of a 52- or 53-week period ending on the Saturday closest to December
31. Our fiscal quarters are composed of 13 weeks each, except for 53-week fiscal
years for which the fourth quarter will be composed of 14 weeks.

overview

We are the largest and fastest-growing franchisor and operator of out-of-home
("OOH") waxing services in the United States by number of centers and
system-wide sales. We delivered over 21 million waxing services in 2019 and over
13 million waxing services in 2020 generating $687 million and $469 million of
system-wide sales, respectively, across our highly-franchised network. We have a
leading portfolio of centers operating in 815 locations across 44 states as of
June 26, 2021. Of these locations, 810 are franchised centers operated by
franchisees and five are corporate-owned centers.

The European Wax Center brand is trusted, efficacious and accessible. Our
culture is obsessed with our guest experience and we deliver a superior guest
experience relative to smaller chains and independent salons. We offer guests
high-quality, hygienic waxing services administered by our licensed, EWC-trained
estheticians (our "wax specialists"), at our accessible and welcoming locations
(our "centers"). Our technology-enabled guest interface simplifies and
streamlines the guest experience with automated appointment scheduling and
remote check-in capabilities, ensuring guest visits are convenient, hassle-free,
and consistent across our network of centers. Our well-known, pre-paid Wax Pass
program makes payment easy and convenient, fostering loyalty and return visits.
Guests view us as a non-discretionary part of their personal-care and beauty
regimens, providing us with a highly predictable and growing recurring revenue
model.

Our asset-light franchise platform delivers capital-efficient growth,
significant cash flow generation and resilience through economic cycles. Our
centers are 99% owned and operated by our franchisees who benefit from superior
unit-level economics, with mature centers generating annual cash-on-cash returns
in excess of 60%. The highly consistent and recurring demand for our services
and the competitive advantages provided by our scale have resulted in ten
consecutive years of same-store sales and system-wide sales growth through 2019.

In partnership with our franchisees, we protect our differentiators that attract new guests, build meaningful relationships, and foster lasting loyalty. Our Net Promoter Score (“NPS”) shows our guests’ dedication to our brand. We are so convinced of our ability to inspire that we have always given all of our guests their first wax.

Hair removal solutions are consistently in demand, given the recurring nature of
hair growth. The OOH waxing market is the fastest-growing hair removal solution
in the United States, defined by a total addressable market of $18 billion with
annualized growth that is approximately twice as high as other hair removal
alternatives. European Wax Center has become the category-defining brand within
this rapidly growing market and became so by professionalizing a highly
fragmented sector where service consistency, hygiene, and customer trust were
not historically offered. We are approximately six times larger than the next
largest waxing-focused competitor by center count and approximately ten times
larger by system-wide sales. Our unmatched scale enables us to drive broader
brand awareness, ensures our licensed wax specialists are universally trained at
the highest standards and drive consistent financial performance across each
center.

Under the stewardship of our CEO, David Berg, and the other management team
members, we have prioritized building a culture of performance, success, and
inclusivity. Additionally, we have intensified our focus on enhancing the guest
experience and have invested significantly in our corporate infrastructure and
marketing capabilities to continue our track record of sustainable growth. The
foundation for our next chapter of growth is firmly in place.

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Growth strategy and outlook

We plan to grow our business primarily by opening new franchised centers and
then additionally increasing our same-store sales and leveraging our corporate
infrastructure to expand our profit margins and generate robust free cash flow.

We believe our franchisees' track record of successfully opening new centers and
consistently generating attractive unit-level economics validates our strategy
to expand our footprint and grow our capacity to serve more guests. We aspire to
grow between 7% to 10% of our center count each year. Our center count grew 6%
and 5% during fiscal year 2020 and fiscal year 2019, respectively, and has grown
each year since 2010. Our thoughtful approach to growth ensures each center is
appropriately staffed with the high-quality team and licensed, highly-trained
wax specialists that our brand has been known for since our initial opening.
None of our existing markets are fully penetrated, and we believe we have a
significant whitespace opportunity of approximately 3,000 locations for our
standard center format across the United States. Our centers have a long track
record of sustained growth delivering ten consecutive years of positive
same-store sales growth through 2019 with resilient performance through economic
cycles. We intend to continue increasing our same-store sales growth by, among
other things:

• Increase brand awareness to accelerate guest acquisition;

• Increase our Wax fun Adoption rates;

• Increasing our share of the expenses for the personal care of our guests;

• Increase our transaction retention rate, which we define as the percentage of transactions involving the purchase of a retail product of the total number of transactions; and

• Increase in guest loyalty through data analysis.

Our straightforward, asset-light franchise platform and our proven track record
of increasing profitability will continue to drive EBITDA margin accretion and
free cash flow generation as we expand our national footprint. We have invested
in building our scalable support infrastructure, and we currently have the
capabilities and systems in place to drive revenue growth and profitability
across our existing and planned franchise centers.

Important business metrics

We track the following key business metrics to evaluate our performance,
identify trends, formulate financial projections, and make strategic decisions.
Accordingly, we believe that these key business metrics provide useful
information to investors and others in understanding and evaluating our results
of operations in the same manner as our management team. These key business
metrics are presented for supplemental information purposes only, should not be
considered a substitute for financial information presented in accordance with
GAAP, and may be different from similarly titled metrics or measures presented
by other companies.

Number of Centers. Number of centers reflects the number of franchised and
corporate-owned centers open at the end of the reporting period. We review the
number of new center openings, the number of closed centers and the number of
relocations of centers to assess net new center growth, and drivers of trends in
system-wide sales, royalty and franchise fee revenue and corporate-owned center
sales.

System-Wide Sales. System-wide sales represent sales from same day services,
retail sales and cash collected from wax passes for all centers in our network,
including both franchisee-owned and corporate-owned centers. While we do not
record franchised center sales as revenue, our royalty revenue is calculated
based on a percentage of franchised center sales, which are 6.0% of sales, net
of retail product sales, as defined in the franchise agreement. This measure
allows us to better assess changes in our royalty revenue, our overall center
performance, the health of our brand and the strength of our market position
relative to competitors. Our system-wide sales growth is driven by net new
center openings as well as increases in same-store sales.

Same-Store Sales. Same-store sales reflect the change in year-over-year sales
from services performed and retail sales for the same-store base. We define the
same-store base to include those centers open for at least 52 full weeks. This
measure highlights the performance of existing centers, while excluding the
impact of new center openings and closures. We review same-store sales for
corporate-owned centers as well as franchisee-owned centers. Same-store sales
growth is driven by increases in the number of transactions and average
transaction size.

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New Center Openings. The number of new center openings reflects centers opened
during a particular reporting period for both franchisee-owned and
corporate-owned centers, less centers closed during the same period. Opening new
centers is an integral part of our growth strategy, and we expect the majority
of our future new centers to be franchisee-owned. Before we obtain the
certificate of occupancy or report any revenue from new corporate-owned centers,
we incur pre-opening costs, such as rent expense, labor expense and other
operating expenses. Some of our centers open with an initial start-up period of
higher-than-normal marketing and operating expenses, particularly as a
percentage of monthly revenue.

Average Unit Volume ("AUV"). AUV consists of the average annual system-wide
sales of all centers that have been open for a trailing 52-week period or
longer. This measure is calculated by dividing system-wide sales during the
applicable period for all centers being measured by the number of centers being
measured. AUV allows management to assess our franchisee-owned and
corporate-owned center economics. Our AUV growth is primarily driven by
increases in services and retail product sales as centers fill their books of
reservations, which we refer to as maturation of centers.

Wax Pass Utilization. We define Wax Pass utilization as the adoption of our Wax
Pass program by guests, measured as a percentage of total transactions conducted
using a Wax Pass. Wax Pass utilization allows management to better assess the
recurring nature of our business model because it is an indication of the
magnitude of transactions by guests who have made a longer-term commitment to
our brand by purchasing a Wax Pass.



(in thousands, except         Thirteen Weeks       Thirteen Weeks         Twenty-Six           Twenty-Six
operating data and                Ended                 Ended             Weeks Ended          Weeks Ended
percentages)                  June 26, 2021         June 27, 2020        June 26, 2021        June 27, 2020
Number of system-wide
centers (at period
  end)                                    815                  774                  815                  774
System-wide sales            $        218,499      $        40,252      $       375,462      $       198,256
Same-store sales(1)                       6.9 %              (76.3 )%               1.3 %              (44.3 )%
New center openings                         7                    8                   19                   24




(1) Same-store sales increase for the 13 and 26 weeks ended June 26, 2021 is
calculated in comparison to the 13 and 26 weeks ended June 29, 2019 due to the
significant decline in our sales in 2020 due to COVID-19. We believe this
presents a more meaningful comparison of same-store sales. As described below,
we typically remove stores from our calculation of same-store sales if they are
closed for more than six consecutive days. However, given the widespread and
unprecedented impact of COVID-19 same-store sales for the 13 and 26 weeks ended
June 27, 2020 were calculated without removing stores that were closed for
longer than six days due to COVID-19.

The table below presents changes in the number of system-wide centers for the
periods indicated:



                           For the Thirteen             For the Twenty-Six
                             Weeks Ended                    Weeks Ended
                      June 26,         June 27,      June 26,        June 27,
                        2021             2020          2021            2020
System-wide Centers
Beginning of Period         808              766           796             750
Openings                      8               10            21              26
Closures                     (1 )             (2 )          (2 )            (2 )
End of Period               815              774           815             774




Recent Developments

As described in more detail in the appendix to the abridged consolidated financial statements in this quarterly report on Form 10-Q, in August 2021 We have completed a number of transactions including:

?
Reorganization Transactions, which among other things, resulted in European Wax
Center, Inc. (the "Corporation") being appointed as the sole managing member of
the Company and the Corporation entering into the Tax Receivable Agreement
?
The initial public offering of the Corporation's class A common stock; and
?
Entry into a new term loan and revolving credit facility which replaced our
Senior Secured Credit Facility

Further information on these transactions can be found in the Notes to the Condensed Consolidated Financial Statements (Note 13 – Subsequent Events) in this quarterly report on Form 10-Q.

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Effects of COVID-19

The Company is continuing to monitor the ongoing COVID-19 pandemic and its
impact on its business. Beginning in March 2020, in response to the COVID-19
pandemic, most franchisees temporarily closed their centers in order to promote
the health and safety of its members, team members and their communities. In
April 2020, the entire franchise network was temporarily closed. Beginning in
May 2020, certain governors announced steps to restart non-essential business
operations in their respective states and certain centers began to re-open. As
of June 2021, all of the Company's nationwide network of centers had re-opened.

There is a significant amount of uncertainty about the duration and severity of
the consequences caused by the COVID-19 pandemic. While governmental and
non-governmental organizations are engaging in efforts to combat the spread and
severity of the COVID-19 pandemic and related public health issues, the full
extent to which outbreaks of COVID-19 could impact our business, results of
operations and financial condition is still unknown and will depend on future
developments, including new variants of the virus and spikes in cases in the
areas where we operate, which are highly uncertain and cannot be predicted.
However, such effects may be material. Our financial statements reflect
judgments and estimates that could change in the future as a result of the
COVID-19 pandemic.

Material factors that affect our financial results

We believe there are several important factors that have impacted, and that we
expect will continue to impact, our business and results of operations. These
factors include:

New Center Openings. We expect that new centers will be a key driver of growth
in our future revenue and operating profit results. Opening new centers is an
important part of our growth strategy, and we expect the majority of our future
new centers will be franchisee-owned. Our results of operations have been and
will continue to be materially affected by the timing and number of new center
openings each period. As centers mature, center revenue and profitability
increase significantly. The performance of new centers may vary depending on
various factors such as the effective management and cooperation of our
franchisee partners, whether the franchise is part of a multi-unit development
agreement, the center opening date, the time of year of a particular opening,
the number of licensed wax specialists recruited, and the location of the new
center, including whether it is located in a new or existing market. Our planned
center expansion will place increased demands on our operational, managerial,
administrative, financial, and other resources. Managing our growth effectively
will require us to continually attract strong and well capitalized franchisee
partners into our development pipeline and to enhance our center management
system controls and information systems.

Sales growth in the same business. Revenue growth in the same business is a major driver of our business. Several factors affect sales in the same store, including:

• Consumer preferences and general economic trends;

• the recurring, non-discretionary nature of personal care services and purchases;

• our ability to identify and effectively respond to guest preferences and trends;

• our ability to offer a variety of service offerings that result in new and repeat visits to our centers;

• the guest experience we offer in our centers;

• the availability of experienced wax specialists;

• our ability to source and deliver products accurately and on time;

• Changes in service or product prices, including promotional activities;

• the number of services or items purchased per center visit;

• Center closings in response to state or local regulations due to the COVID-19 pandemic or other health concerns; and

• the number of centers that have been in operation for more than 52 full weeks.

A new center is included in the same-store sales calculation beginning 52 full
weeks after the center's opening. If a center is closed for greater than six
consecutive days, the center is deemed a closed center and is excluded from the
calculation of same-store sales until it has been reopened for a continuous 52
full weeks.

Overall Economic Trends. Macroeconomic factors that may affect guest spending
patterns, and thereby our results of operations, include employment rates,
business conditions, changes in the housing market, the availability of credit,
interest rates, tax rates and fuel and energy costs. However, we believe that
our guests see our services as non-discretionary in nature, given the rebound in
performance in the second half of fiscal year 2020 despite the COVID-19
pandemic. Therefore, we believe that overall economic trends and related

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changes in consumer behavior have less of an impact on our business than they
may have for other industries subject to fluctuations in discretionary consumer
spending.

Guest Preferences and Demands. Our ability to maintain our appeal to existing
guests and attract new guests depends on our ability to develop and offer a
compelling assortment of services responsive to guest preferences and trends. We
estimate that more than two-thirds of OOH waxing consumers start waxing by age
29 or earlier. We also believe that OOH waxing is a recurring need that brings
guests back for services on a highly recurring basis which is reflected in the
predictability of our financial performance over time. Our guests' routine
personal-care need for OOH waxing is further demonstrated by the top 20% of
guests who visit us, on average, nearly every four weeks.

Our Ability to Source and Distribute Products Effectively. Our revenue and
operating income are affected by our ability to purchase our products and
supplies in sufficient quantities at competitive prices. While we believe our
vendors have adequate capacity to meet our current and anticipated demand, our
level of revenue could be adversely affected in the event we face constraints in
our supply chain, including the inability of our vendors to produce sufficient
quantities of some products or supplies in a manner that matches market demand
from our guests, leading to lost revenue. We depend on two key suppliers to
source our proprietary wax and one key supplier to source our branded retail
products and we are thus exposed to concentration of supplier risk.

Our Ability to Recruit and Retain Qualified Licensed Wax Specialists for our
Centers. Our ability to operate our centers is largely dependent upon our
ability to attract and retain qualified, licensed wax specialists. Our unmatched
scale enables us to ensure that we universally train our wax specialists at the
highest standards, ensuring that our guests experience consistent level of
quality, regardless of the specific center they visit. The combination of
consistent service delivery, across our trained base of wax specialists, along
with the payment ease and convenience of our well-known, pre-paid Wax Pass
program fosters loyalty and return visits across our guest base. Over time, our
ability to build and maintain a strong pipeline of licensed wax specialists is
important to preserving our current brand position.

Seasonality. Our results are subject to seasonality fluctuations in that
services are typically in higher demand in periods leading up to holidays and
the summer season. The resulting demand trend yields higher system-wide sales in
the second and fourth quarter of our fiscal year. In addition, our quarterly
results may fluctuate significantly, because of several factors, including the
timing of center openings, price increases and promotions, and general economic
conditions.

Components of the earnings situation

revenue

Product Sales: Product sales consist of revenue earned from sales of proprietary
wax, other products consumed in administering our wax services and retail
merchandise to franchisees, as well as retail merchandise sold in
corporate-owned centers. Revenue on product sales is recognized upon transfer of
control. Our product sales revenue comprised 55.4% and 63.3% of our total
revenue for the 13 weeks ended June 26, 2021 and June 27, 2020, respectively,
and 55.7% and 57.7% of our total revenue for the 26 weeks ended June 26, 2021
and June 27, 2020, respectively.

Royalty Fees: Royalty fees are earned based on a percentage of the franchisees'
gross sales, net of retail product sales, as defined in the applicable franchise
agreement, and recognized in the period the franchisees' sales occur. The
royalty fee is 6.0% of the franchisees' gross sales for such period and is paid
weekly. Our royalty fees revenue comprised 25.1% and 19.4% of our total revenue
for the 13 weeks ended June 26, 2021 and June 27, 2020, respectively, and 24.7%
and 25.2% of our total revenue for the 26 weeks ended June 26, 2021 and June 27,
2020, respectively.

Marketing Fees: Marketing fees are earned based on 3.0% of the franchisees'
gross sales, net of retail product sales, as defined in the applicable franchise
agreement, and recognized in the period the franchisees' sales occur.
Additionally, the Company charges a fixed monthly fee to franchisees for search
engine optimization and search engine marketing services, which is due on a
monthly basis and recognized in the period when services are provided. Our
marketing fees revenue comprised 13.8% and 11.3% of our total revenue for the 13
weeks ended June 26, 2021 and June 27, 2020, respectively, and 13.7% and 11.0%
of our total revenue for the 26 weeks ended June 26, 2021 and June 27, 2020,
respectively.

Other Revenue: Other revenue primarily consists of service revenues from our
corporate-owned centers and franchise fees, as well as technology fees, annual
brand conference revenues and training, which together represent 5.7% and 6.0%
of our total revenue for the 13 weeks ended June 26, 2021 and June 27, 2020,
respectively, and 5.9% and 6.1% of our total revenue for the 26 weeks ended June
26, 2021 and June 27, 2020, respectively. Service revenues from our
corporate-owned centers are recognized at the time services are provided.
Amounts collected in advance of the period in which service is rendered are
recorded as deferred revenue. Franchise fees are paid upon commencement of the
franchise agreement and are deferred and recognized on a straight-line basis
commencing at contract inception through the end of the franchise license term.
Franchise agreements generally have terms of ten years beginning on the date the
center is opened, which is an average of two years from the date the franchise
agreement is signed. Therefore, the franchise fees are typically amortized over
a 12-year period. Deferred franchise fees expected to be recognized in periods
greater than 12 months from the

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reporting date are classified as long-term on the condensed consolidated balance
sheets. Technology fees, annual brand conference revenues and training are
recognized as the related services are delivered and are not material to the
overall business.

Costs and Expenses

Cost of Sales: The cost of sales consists primarily of the direct costs associated with wholesale products and retail merchandise sold, including distribution and outbound freight costs and fees for obsolete inventory, as well as material and labor costs for services provided in our corporate centers.

Selling, General and Administrative Expenses: Selling, general and
administrative expenses primarily consist of wages, benefits and other
compensation-related costs, rent, software, and other administrative expenses
incurred to support our existing franchise and corporate-owned centers, as well
as expenses attributable to growth and development activities. Also included in
selling, general and administrative expenses are accounting, legal, marketing
operations, and other professional fees.

Advertising expenses: Advertising expenses include advertising, public relations and administrative expenses that are incurred to increase sales and further improve the company’s public image European wax center Brand.

Depreciation and Amortization: Depreciation and amortization includes
depreciation of property and equipment and capitalized leasehold improvements,
as well as amortization of intangible assets, including franchisee relationships
and reacquired area representative rights. Area representative rights represent
an agreement with area representatives to sell franchise licenses and provide
support to franchisees in a geographic region. From time to time, the Company
enters into agreements to reacquire certain area representative rights.

Interest Expense: Interest expense consists of interest on our long-term debt,
including amounts outstanding under our revolving credit facility, as well as
the amortization of deferred financing costs.

Non-controlling interests and expenses after the offer

In connection with the Reorganization Transactions and our initial public
offering described under "Recent Developments" and in the notes to the condensed
consolidated financial statements included in this quarterly report on Form
10-Q, we were appointed as the sole managing member of EWC Ventures. Because we
manage and operate the business and control the strategic decisions and
day-to-day operations of EWC Ventures and also have a substantial financial
interest in EWC Ventures, we will consolidate the financial results of EWC
Ventures, and a portion of our net income (loss) will be allocated to the
non-controlling interest to reflect the entitlement of the EWC Ventures Post-IPO
Members to a portion of EWC Ventures' net income (loss).

Following the consummation of this offering, we became subject to U.S. federal,
state and local income taxes with respect to our allocable share of any taxable
income of EWC Ventures and will be taxed at the prevailing corporate tax rates.
In addition to tax expenses, we also will incur new expenses related to our
operations as a public company, plus payments under the Tax Receivable
Agreement.

See "Unaudited Pro Forma Consolidated Financial Information" in the Prospectus
for more information regarding the post- offering non-controlling interest and
expenses.

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Results of Operations



The following tables presents our condensed consolidated statements of
operations for each of the periods indicated (amounts in thousands, except
percentages):



                                            For the Thirteen Weeks Ended
                                           June 26,             June 27,             $            %
                                             2021                 2020            Change        Change
Revenue:
Product sales                            $      26,524       $         6,838     $  19,686        287.9 %
Royalty fees                                    12,030                 2,101         9,929        472.6 %
Marketing fees                                   6,632                 1,225         5,407        441.4 %
Other revenue                                    2,716                   649         2,067        318.5 %
Total revenue                                   47,902                10,813        37,089        343.0 %
Operating expenses:
Cost of revenue                                 11,540                 3,717         7,823        210.5 %
Selling, general and administrative             12,212                 6,340         5,872         92.6 %
Advertising                                      6,515                 2,603         3,912        150.3 %
Depreciation and amortization                    5,271                 5,040           231          4.6 %
Total operating expenses                        35,538                17,700        17,838        100.8 %
Income (loss) from operations                   12,364                (6,887 )      19,251        279.5 %
Interest expense                                 4,635                 4,485           150          3.3 %
Net income (loss)                        $       7,729       $       (11,372 )   $  19,101        168.0 %




                                         For the Twenty-Six Weeks Ended
                                            June 26,           June 27,          $             %
                                              2021               2020         Change        Change
Revenue:
Product sales                            $       47,141       $   25,183     $  21,958          87.2 %
Royalty fees                                     20,880           11,002         9,878          89.8 %
Marketing fees                                   11,566            4,784         6,782         141.8 %
Other revenue                                     4,972            2,667         2,305          86.4 %
Total revenue                                    84,559           43,636        40,923          93.8 %
Operating expenses:
Cost of revenue                                  21,471           12,395         9,076          73.2 %
Selling, general and administrative              23,278           16,718         6,560          39.2 %
Advertising                                      11,399            6,291         5,108          81.2 %
Depreciation and amortization                    10,409            9,938           471           4.7 %
Total operating expenses                         66,557           45,342        21,215          46.8 %
Income (loss) from operations                    18,002           (1,706 )      19,708       1,155.2 %
Interest expense                                  9,171            8,707           464           5.3 %
Net income (loss)                        $        8,831       $  (10,413 )   $  19,244         184.8 %




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The following table shows the components of our condensed consolidated income statement for each of the specified periods as a percentage of sales:



                                       For the Thirteen Weeks Ended         

For the twenty-six weeks over

                                         June 26,          June 27,          June 26,                June 27,
                                           2021              2020              2021                    2020
Revenue:
Product sales                                   55.4 %          63.3 %               55.7 %                  57.7 %
Royalty fees                                    25.1 %          19.4 %               24.7 %                  25.2 %
Marketing fees                                  13.8 %          11.3 %               13.7 %                  11.0 %
Other revenue                                    5.7 %           6.0 %                5.9 %                   6.1 %
Total revenue                                  100.0 %         100.0 %              100.0 %                 100.0 %
Costs and expenses:
Cost of revenue                                 24.1 %          34.4 %               25.4 %                  28.4 %
Selling, general and administrative             25.5 %          58.6 %               27.5 %                  38.3 %
Advertising                                     13.6 %          24.1 %               13.5 %                  14.4 %
Depreciation and amortization                   11.0 %          46.6 %               12.3 %                  22.8 %
Total operating expenses                        74.2 %         163.7 %               78.7 %                 103.9 %
Income (loss) from operations                   25.8 %         (63.7 )%              21.3 %                  (3.9 )%
Interest expense                                 9.7 %          41.5 %               10.9 %                  20.0 %
Net income (loss)                               16.1 %        (105.2 )%              10.4 %                 (23.9 )%



Comparison of the thirteen completed weeks June 26, 2021 and June 27, 2020

revenue

Total revenue increased $37.1 million, or 343.0%, to $47.9 million during the 13
weeks ended June 26, 2021, compared to $10.8 million for the 13 weeks ended June
27, 2020. The increase in total revenue was largely due to our results for the
13 weeks ended June 27, 2020 being severely impacted by center closures stemming
from the COVID-19 pandemic. In addition, we had 41 new center openings which
became operational during the period from June 27, 2020 to June 26, 2021.

Product sales

Product sales increased $19.7 million, or 287.9%, to $26.5 million during the 13
weeks ended June 26, 2021, compared to $6.8 million for the 13 weeks ended June
26, 2020. The increase in product sales during the 13 weeks ended June 26, 2021
was primarily due to the negative impact of center closures resulting from the
COVID-19 pandemic on product sales during the 13 weeks ended June 27, 2020. In
addition, the increase in product sales was also partially attributable to new
center openings which became operational during the period from June 27, 2020 to
June 26, 2021.

Royalty Fees

Royalty fees increased $9.9 million, or 472.6%, to $12.0 million during the 13
weeks ended June 26, 2021, compared to $2.1 million for the 13 weeks ended June
26, 2020. The increase in royalty fees during the 13 weeks ended June 26, 2021
was the result of the negative impact of the COVID-19 pandemic on network
revenues during the 13 weeks ended June 27, 2020. In addition, the increase in
royalty fees was also partially attributable to new center openings which became
operational during the period from June 27, 2020 to June 26, 2021.

Marketing fees

Marketing fees increased $5.4 million, or 441.4%, to $6.6 million during the 13
weeks ended June 26, 2021, compared to $1.2 million for the 13 weeks ended June
27, 2020. Marketing fees increased primarily due to the negative impact of the
COVID-19 pandemic on network revenues during the 13 weeks ended June 27, 2020.

                                       27

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Other revenue

Other revenue increased $2.1 million or 318.5%, to $2.7 million during the 13
weeks ended June 26, 2021, compared to $0.6 million for the 13 weeks ended June
27, 2020. The increase in other revenue during the 13 weeks ended June 26, 2021
was primarily due to the negative impact of corporate-owned center closures
resulting from the COVID-19 pandemic on other revenue during the 13 weeks ended
June 27, 2020. In addition, we waived technology fees for closed centers in 2020
to provide relief to our franchisees from the adverse impact of the COVID-19
pandemic.

Costs and Expenses

Cost of Revenue

Cost of revenue increased $7.8 million, or 210.5%, to $11.5 million during the
13 weeks ended June 26, 2021, compared to $3.7 million for the 13 weeks ended
June 27, 2020. The increase in cost of revenue was largely the result of higher
revenues in the current year period as compared to our revenues for the 13 weeks
ended June 27, 2020, which were severely impacted by center closures stemming
from the COVID-19 pandemic.

Sales general and administration

Selling, general and administrative expenses increased $5.9 million, or 92.6%,
to $12.2 million during the 13 weeks ended June 26, 2021, compared to $6.3
million for the 13 weeks ended June 27, 2020. The increase in selling, general
and administrative expenses was primarily due to increased payroll and benefits
expense resulting from our reduction and temporary furlough of certain corporate
employees in the prior year and increased professional fees in the current year
arising from preparations for our initial public offering.

advertising

Advertising expenses increased $ 3.9 million, or 150.3% $ 6.5 million in the 13 weeks to end June 26, 2021, compared to $ 2.6 million for the 13 weeks to end June 27, 2020. The increase in advertising expenses is mainly due to our discontinuation of marketing activities in the previous year in connection with the center closings due to the COVID-19 pandemic.

Depreciation

Depreciation and amortization increased $0.2 million, or 4.6%, to $5.3 million
during the 13 weeks ended June 26, 2021, compared to $5.0 million for the 13
weeks ended June 27, 2020. The increase in depreciation and amortization expense
was primarily driven by an increase in amortization expense for the additional
reacquired rights from area representatives completed during fiscal years 2020
and 2021.

Interest Expense

Interest expense increased $0.2 million, or 3.3%, to $4.6 million during the 13
weeks ended June 26, 2021, compared to $4.5 million for the 13 weeks ended June
27, 2020. The increase in interest expense was primarily due to the additional
$10.0 million borrowed under our revolving credit facility in May 2020, which
was outstanding during the entire period in the current year.

Comparison of the twenty six completed weeks June 26, 2021 and June 27, 2020

revenue

Total revenue increased $40.9 million, or 93.8%, to $84.6 million during the 26
weeks ended June 26, 2021, compared to $43.6 million for the 26 weeks ended June
27, 2020. The increase in total revenue was largely due to our results for the
26 weeks ended June 27, 2020 being severely impacted by center closures stemming
from the COVID-19 pandemic. In addition, we had 41 new center openings which
became operational during the period from June 27, 2020 to June 26, 2021.

Product sales

Product sales increased $22.0 million, or 87.2%, to $47.1 million during the 26
weeks ended June 26, 2021, compared to $25.2 million for the 26 weeks ended June
26, 2020. The increase in product sales during the 26 weeks ended June 26, 2021
was primarily due to the negative impact of center closures resulting from the
COVID-19 pandemic on product sales during the 26 weeks ended June 27, 2020. In
addition, the increase in product sales was also partially attributable to
shipments of a new product line to franchisees in the current year and new
center openings which became operational during the period from June 27, 2020 to
June 26, 2021.

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License fees

Royalty fees increased $9.9 million, or 89.8%, to $20.9 million during the 26
weeks ended June 26, 2021, compared to $11.0 million for the 26 weeks ended June
26, 2020. The increase in royalty fees during the 26 weeks ended June 26, 2021
was the result of the negative impact of the COVID-19 pandemic on network
revenues during the 26 weeks ended June 27, 2020. In addition, the increase in
royalty fees was also partially attributable to new center openings which became
operational during the period from June 27, 2020 to June 26, 2021.

Marketing fees

Marketing fees increased $6.8 million, or 141.8%, to $11.6 million during the 26
weeks ended June 26, 2021, compared to $4.8 million for the 26 weeks ended June
27, 2020. Marketing fees increased primarily due to the negative impact of the
COVID-19 pandemic on network revenues during the 26 weeks ended June 27, 2020.

Other revenue

Other revenue increased $2.3 million or 86.4%, to $5.0 million during the 26
weeks ended June 26, 2021, compared to $2.7 million for the 26 weeks ended June
27, 2020. The increase in other revenue during the 26 weeks ended June 26, 2021
was primarily due to the negative impact of corporate-owned center closures
resulting from the COVID-19 pandemic on other revenue during the 26 weeks ended
June 27, 2020. In addition, we waived technology fees for closed centers in 2020
to provide relief to our franchisees from the adverse impact of the COVID-19
pandemic.

Costs and Expenses

Cost of Revenue

Cost of revenue increased $9.1 million, or 73.2%, to $21.5 million during the 26
weeks ended June 26, 2021, compared to $12.4 million for the 26 weeks ended June
27, 2020. The increase in cost of revenue was largely the result of higher
revenues in the current year period as compared to our revenues for the 26 weeks
ended June 27, 2020, which were severely impacted by center closures stemming
from the COVID-19 pandemic

Sales general and administration

Selling, general and administrative expenses increased $6.6 million, or 39.2%,
to $23.3 million during the 26 weeks ended June 26, 2021, compared to $16.7
million for the 26 weeks ended June 27, 2020. The increase in selling, general
and administrative expenses was primarily due to increased payroll and benefits
expense resulting from our reduction and temporary furlough of certain corporate
employees in the prior year and increased professional fees and corporate
reorganization costs in the current year arising from preparations for our
initial public offering. These increases were partially offset by a decrease in
commissions resulting from the reacquisition of rights from certain area
representatives and a decrease in relocation costs in the first 26 weeks of 2021
compared to the first 26 weeks of 2020.

advertising

Advertising expenses increased $ 5.1 million, or 81.2%, too $ 11.4 million during the 26 weeks ended June 26, 2021, compared to $ 6.3 million for the 26 weeks to end June 27, 2020. The increase in advertising expenses is mainly due to our discontinuation of marketing activities in the previous year in connection with the center closings due to the COVID-19 pandemic.

Depreciation

Depreciation and amortization increased $0.5 million, or 4.7%, to $10.4 million
during the 26 weeks ended June 26, 2021, compared to $9.9 million for the 26
weeks ended June 27, 2020. The increase in depreciation and amortization expense
was primarily driven by an increase in amortization expense for the additional
reacquired rights from area representatives completed during fiscal years 2020
and 2021.

Interest expense

Interest expense increased $0.5 million, or 5.3%, to $9.2 million during the 26
weeks ended June 26, 2021, compared to $8.7 million for the 26 weeks ended June
27, 2020. The increase in interest expense was primarily due to the additional
$10.0 million borrowed under our revolving credit facility in May 2020, which
was outstanding during the entire period in the current year.

                                       29

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Non-GAAP Financial Measures

In addition to our GAAP financial results, we believe the non-GAAP financial
measures EBITDA and Adjusted EBITDA are useful in evaluating our performance.
Our non-GAAP financial measures should not be considered in isolation from, or
as substitutes for, financial information prepared in accordance with GAAP.
These non-GAAP financial measures are presented for supplemental information
purposes only and may be different from similarly titled metrics or measures
presented by other companies. A reconciliation of the non-GAAP financial
measures to the most directly comparable financial measure stated in accordance
with GAAP and a further discussion of how we use non-GAAP financial measures is
provided below.

EBITDA and Adjusted EBITDA. We define EBITDA as net income (loss) before
interest, taxes, depreciation and amortization. We believe that EBITDA, which
eliminates the impact of certain expenses that we do not believe reflect our
underlying business performance, provides useful information to investors to
assess the performance of our business. We define Adjusted EBITDA as net income
(loss) before interest, taxes, depreciation and amortization, adjusted for the
impact of certain additional non-cash and other items that we do not consider in
our evaluation of ongoing performance of our core operations. These items
include exit costs related to leases of abandoned space, IPO-related costs,
non-cash equity-based compensation expense, corporate headquarters office
relocation, and other one-time expenses. We believe that Adjusted EBITDA is an
appropriate measure of operating performance in addition to EBITDA because it
eliminates the impact of other items that we believe reduce the comparability of
our underlying core business performance from period to period and is therefore
useful to our investors in comparing the core performance of our business from
period to period. EBITDA and Adjusted EBITDA may not be comparable to other
similarly titled captions of other companies due to differences in methods of
calculation.

A reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA is shown below for the periods indicated:


                                           Thirteen Weeks Ended          Twenty-Six Weeks Ended
                                          June 26,       June 27,       June 26,         June 27,
                                            2021           2020           2021             2020
(in thousands)
Net income (loss)                        $     7,729     $ (11,372 )   $     8,831       $ (10,413 )
Interest expense                               4,635         4,485           9,171           8,707
Provision for income taxes                         -             -               -               -
Depreciation                                     413           400             841             771
Amortization                                   4,858         4,640           9,568           9,167
EBITDA                                   $    17,635     $  (1,847 )   $    28,411       $   8,232
Exit costs - lease abandonment(1)                  -             -               -             159
Corporate headquarter relocation(2)                -            63               -             546
Share-based compensation(3)                      259           419             557           1,246
IPO-related costs(4)                           1,859           100           2,982             100
Other compensation-related costs(5)               43           186             380             350
Adjusted EBITDA                          $    19,796     $  (1,079 )   $    32,330       $  10,633




(1)
Represents exit costs related to abandoned leases resulting from our corporate
headquarters relocation.
(2)
Represents costs related to employee relocation, severance and moving fees
resulting from our corporate headquarter relocation.
(3)
Represents non-cash equity-based compensation expense.
(4)
Represents legal, accounting and other costs incurred in preparation for initial
public offering.
(5)
Represents costs related to reorganization driven by COVID-19 and buildup of
executive leadership team.

Liquidity and capital resources

We measure liquidity in terms of our ability to fund the cash requirements of
our business operations, including working capital needs, capital expenditures,
contractual obligations and debt service with cash flows from operations and
other sources of funding. Our primary sources of liquidity and capital resources
are cash provided from operating activities, cash and cash equivalents on hand,
proceeds from our secured term loan and revolving credit facility and proceeds
from the issuance of equity to our members. We had cash and cash equivalents of
$35.2 million as of June 26, 2021.

                                       30

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In August 2021, concurrent with our initial public offering, we entered into a
new credit agreement providing for a new $180.0 million term loan and a $40.0
million revolving credit facility. The proceeds from the new term loan were used
together with proceeds from our initial public offering to fully repay and
terminate the Senior Secured Credit Facility. See the notes to the condensed
consolidated financial statements (Note 13-Subsequent Events) contained
elsewhere in this quarterly report on Form 10-Q for more information.

We believe that our sources of liquidity and capital will be sufficient to
finance our continued operations and growth strategy for at least the next
twelve months. Our primary requirements for liquidity and capital are working
capital, capital expenditures to grow our network of centers, debt servicing
costs, and general corporate needs. We have in the past, and may in the future,
refinance our existing indebtedness with new debt arrangements and utilize a
portion of borrowings to return capital to our stockholders. We anticipate
additional cash obligations as a result of the Tax Receivable Agreements
described in the notes to condensed consolidated financial statements included
in Item 1 of this quarterly report on Form 10-Q. During the 26 weeks ended June
26, 2021 there were no material changes in our contractual obligations from
those described in the Prospectus.

Our assessment of the period of time through which our financial resources will
be adequate to support our operations is a forward-looking statement and
involves risks and uncertainties. Our actual results and our future capital
requirements could vary because of many factors, including our growth rate, the
timing and extent of spending to acquire new centers and expand into new
markets, and the expansion of sales and marketing activities. We may, in the
future, enter into arrangements to acquire or invest in complementary
businesses, services and technologies. We have based this estimate on
assumptions that may prove to be wrong, and we could use our available capital
resources sooner than we currently expect. We may be required to seek additional
equity or debt financing. In the event that additional financing is required
from outside sources, we may not be able to raise it on terms acceptable to us
or at all. If we are unable to raise additional capital when desired, or if we
cannot expand our operations or otherwise capitalize on our business
opportunities because we lack sufficient capital, our business, results of
operations and financial condition would be adversely affected.

Senior Secured Credit Facility

Our Senior Secured Credit Facility consists of a $245.0 million term loan and a
revolving credit facility. Borrowings under the term loan bear interest at an
index rate as defined in the credit agreement plus an applicable margin of 5.5%
(6.5% at June 26, 2021), payable quarterly through December 28, 2019 and monthly
thereafter. The term loan requires principal payments equal to approximately
$2.4 million per fiscal year, payable in quarterly installments with the final
scheduled principal payment on the outstanding term loan borrowings due on
September 25, 2024. Beginning in fiscal year 2020, additional principal payments
could become due in May of each year, which are based upon a calculation of
Excess Cash Flow, as defined by the credit agreement. No such additional
principal payments were required in May 2021 or 2020.

In May 2020, we amended the Senior Secured Credit Facility to increase the
borrowing capacity under the revolving credit facility by $10.0 million, to an
aggregate amount of up to $30.0 million. Borrowings under the revolving credit
facility bear interest at an index rate defined in the credit agreement plus an
applicable margin of 3.5% (4.25% at June 26, 2021), payable monthly. The
revolving credit facility was fully drawn as of June 26, 2021 and expires on
September 25, 2024.

In consideration of the increased capacity on the revolving credit facility, the
applicable margin on the term loan increased by 1.0%, to 5.5%. Additionally,
beginning with the month ended June 27, 2020 and for the 12 months thereafter,
we are required to maintain $6.0 million of minimum liquidity, as defined by the
credit agreement. During such period, the financial covenant requiring us to
maintain a maximum net leverage ratio (as described below) is not in effect.

The credit agreement governing our Senior Secured Credit Facility requires us to
comply with a number of affirmative and negative covenants, including certain
restrictions on additional indebtedness, liens against our assets, sales of our
assets and other restrictions on payments. The credit agreement also contains a
quarterly maintenance covenant that requires us to maintain a net leverage ratio
(as defined in the credit agreement) that does not exceed 8.75 to 1.00. As
described above and in accordance with the terms of the May 2020 amendment to
the credit agreement, this maintenance covenant is not in effect beginning with
the month ended June 27, 2020 and for the 12 months thereafter. The requirement
to be in compliance with the maintenance covenant will resume beginning with the
fiscal period beginning June 27, 2021. Failure to comply with our covenants
would result in an event of default under our Senior Secured Credit Facility
unless waived by our Senior Secured Credit Facility lenders. An event of default
under our Senior Secured Credit Facility can result in the acceleration of our
indebtedness under the facility. As of June 26 2021, the minimum net leverage
ratio covenant was not in effect as a result of the amendment to the credit
agreement described above. For additional information regarding our long-term
debt activity, see the notes to the condensed consolidated financial statements
(Note 7-Long-term debt, net) contained elsewhere in this quarterly report on
Form 10-Q.

                                       31
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Derivative instruments and hedging activities

In December 2018, we entered an interest rate cap derivative instrument which
was designated as a cash flow hedge at inception. Our objective is to mitigate
the impact of interest expense fluctuations on our profitability resulting from
interest rate changes by capping the LIBOR component of the interest rate at
4.5% on $175.0 million of our long-term debt, as the interest rate cap provides
for payments from the counterparty when LIBOR rises above 4.5%. The interest
rate cap has a $175.0 million notional amount and is effective December 31,
2018, for the monthly periods from and including January 31, 2019 through
September 25, 2024. The interest rate cap has a deferred premium; accordingly,
the Company will pay a monthly premium for the interest rate cap over the term
of the agreement. The annual premium is equal to 0.11486% on the notional
amount.

Changes in the cash flows of interest rate cap derivatives designated as hedges
are expected to be highly effective in offsetting the changes in interest
payments on a principal balance equal to the designated derivative's notional
amount, attributable to the hedged risk.

We recognize as assets or liabilities at fair value the estimated amounts we
would receive or pay upon a termination of the interest rate cap prior to the
scheduled maturity date. As of June 26, 2021, the fair value of the interest
rate cap derivative instrument was estimated to be a liability of $0.3 million,
with $0.2 million classified within Other current liabilities and $0.1 million
within Other long-term liabilities on the condensed consolidated balance sheet.
The fair value is based on information that is model-driven and whose inputs
were observable.

Tax Receivable Agreement

Generally, we are required under the Tax Receivable Agreement, which is
described more fully in "Risk Factors-Risks Related to Our Organization and
Structure-We will be required to pay the Company's pre-IPO members for certain
tax benefits we may claim, and the amounts we may pay could be significant" and
"Certain Relationships and Related Party Transactions-Tax Receivable Agreement"
in the Prospectus to make payments to the Company's pre-IPO members that are
generally equal to 85% of the applicable cash tax savings, if any, that we
actually realize (or are deemed to realize, calculated using certain
assumptions) as a result of (i) increases in our allocable share of certain
existing tax basis of the Company's assets resulting from the Corporation's
acquisition of EWC Ventures Units in the IPO and future Share Exchanges and Cash
Exchanges (ii) our utilization of certain tax attributes of the Blocker
Companies (including the Blocker Companies' allocable share of certain existing
tax basis of the Company's assets) and (iii) certain other tax benefits related
to entering into the Tax Receivable Agreement, including tax benefits
attributable to payments under the Tax Receivable Agreement. Assuming no
material changes in the relevant tax law and that we earn sufficient taxable
income to realize in full the potential tax benefit described above, we estimate
that payments under the Tax Receivable Agreement would aggregate to
approximately $234.8 million over 18 years from the date of the completion of
our IPO, based on the initial public offering price of $17.00 per share of Class
A common stock and assuming all future Share Exchanges and Cash Exchanges
occurred on the date of our IPO. The actual amounts we will be required to pay
may materially differ from these hypothetical amounts, because potential future
tax savings that we will be deemed to realize, and the Tax Receivable Agreement
payments made by us, will be calculated based in part on the market value of our
Class A common stock at the time of each Share Exchange or Cash Exchange and the
prevailing applicable federal tax rate (plus the assumed combined state and
local tax rate) applicable to us over the life of the Tax Receivable Agreement
and will depend on our generating sufficient taxable income to realize the tax
benefits that are subject to the Tax Receivable Agreement. Subject to the
discussion in the following paragraph below, payments under the Tax Receivable
Agreement will occur only after we have filed our U.S. federal and state income
tax returns and realized the cash tax savings from the favorable tax attributes.
The first payment would be due after the filing of our tax return for the year
ended December 25, 2021, which is due March 15, 2022, but the due date can be
extended until September 15, 2022. Future payments under the Tax Receivable
Agreement in respect of future Share Exchanges and Cash Exchanges would be in
addition to these amounts. We currently expect to fund these payments from cash
flow from operations generated by our subsidiaries as well as from excess tax
distributions that we receive from our subsidiaries. To the extent we are unable
to make payments under the Tax Receivable Agreement for any reason (including
because our credit agreement restricts the ability of our subsidiaries to make
distributions to us), under the terms of the Tax Receivable Agreement such
payments will be deferred and accrue interest until paid. If we are unable to
make payments due to insufficient funds, such payments may be deferred
indefinitely while accruing interest until paid, which could negatively impact
our results of operations and could also affect our liquidity in future periods
in which such deferred payments are made.

                                       32

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Under the Tax Receivable Agreement, as a result of certain types of transactions
and other factors, including a transaction resulting in a change of control, we
may also be required to make payments to the Company's pre-IPO members in
amounts equal to the present value of future payments we are obligated to make
under the Tax Receivable Agreement. If the payments under the Tax Receivable
Agreement are accelerated, we may be required to raise additional debt or equity
to fund such payments. To the extent that we are unable to make payments under
the Tax Receivable Agreement for any reason (including because our credit
agreement restricts the ability of our subsidiaries to make distributions to
us), under the terms of the Tax Receivable Agreement such payments will be
deferred and will accrue interest until paid. If we are unable to make payments
due to insufficient funds to make such payments, such payments may be deferred
indefinitely while accruing interest until paid, which could negatively impact
our results of operations and could also affect our liquidity in future periods
in which such deferred payments are made.

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