Quarterly Report for Quarter Ending April 4, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

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 annual report on Form 10-K for the fiscal year ended January 3, 2026. 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. 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 Part I, "Item 1A. Risk Factors" included in our annual report on Form 10-K for the fiscal year ended January 3, 2026 and "Cautionary Note Regarding Forward-Looking Statements" included in this quarterly report on Form 10-Q.

We conduct substantially all of our activities through our 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 leading franchisor and operator of out-of-home ("OOH") waxing services in the United States. We delivered approximately 23 million waxing services in both 2025 and 2024. Throughout our highly franchised network, we generated system-wide sales of $947 million and $951 million in fiscal 2025 and 2024, respectively. Our portfolio of centers operate in 1,047 locations across 44 states as of January 3, 2026. Of these locations, 1,042 are franchised centers operated by franchisees and five are corporate-owned centers.

We believe that 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, with a goal of making guest visits 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. Many of our loyal guests view us as a non-discretionary part of their personal-care and beauty regimens.

We believe that our asset-light franchise platform delivers capital-efficient growth with strong cash flow generation. Our centers are 99% owned and operated by our franchisees who benefit from strong unit-level economics.

In partnership with our franchisees, we fiercely protect our points of differentiation that attract new guests, build meaningful relationships and promote lasting retention.

Merger Agreement with Principal Stockholder

On February 9, 2026, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Glow Midco, LLC, a Delaware limited liability company and an affiliate of General Atlantic, our largest stockholder ("Parent"), Glow Merger Sub 1, Inc., a Delaware corporation and wholly owned subsidiary of Parent ("Merger Sub Inc."), Glow Merger Sub 2, LLC, a Delaware limited liability company and wholly owned subsidiary of Parent ("Merger Sub LLC," and together with Parent and Merger Sub Inc., the "Buyer Parties") and EWC Ventures, LLC, a Delaware limited liability company and subsidiary of the Company ("EWC Ventures"), providing for (i) the merger of Merger Sub Inc. with and into the Company, with the Company continuing as the surviving corporation, and (ii) the merger of Merger Sub LLC with and into EWC Ventures, with EWC Ventures continuing as the surviving limited liability company (collectively, the "Mergers"). A special committee (the "Special Committee") of independent and disinterested members of the Company's board of directors (the "Board") unanimously adopted resolutions recommending that the Board approve the Merger Agreement and the transactions contemplated thereby and recommending that the Company's stockholders unaffiliated with the Buyer Parties approve and adopt the Merger Agreement. Thereafter, the Board unanimously approved the Merger Agreement and resolved to recommend that the stockholders of the Company adopt the Merger Agreement. The Mergers closed on May 8, 2026 and pursuant to the Merger Agreement, each share of class A common stock outstanding as of the effective time of the Mergers was cancelled and extinguished and automatically converted into the right to receive cash in an amount equal to $5.80, each share of class B common stock outstanding as of the effective time of the Mergers was cancelled and extinguished and automatically converted into the right to receive cash in an amount equal to $0.00001, and each unit of EWC Ventures was cancelled and extinguished and automatically converted into the right to receive cash in an amount equal to $5.80 (less the class B common stock consideration per share).

Key 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. System-wide sales growth is typically driven by net new center openings as well as increases in same-store sales, whereas system-wide sales decline is typically driven by net center closures as well as decreases in same-store sales. System-wide sales of $228.9 million in the 13 weeks ended April 4, 2026 increased 1.3% from $225.9 million in the 13 weeks ended April 5, 2025, primarily driven by an increase in cash collected from wax pass sales, partially offset by a decrease in same day services and retail 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. 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. This measure highlights the performance of existing centers, while excluding the impact of net new center (closures) openings. We review same-store sales for corporate-owned centers as well as franchisee-owned centers. Same-store sales growth is typically driven by increases in the number of transactions and average transaction size, whereas same-store sales decline is typically driven by decreases in the number of transactions and average transaction size. Same-store sales of 2.0% for the 13 weeks ended April 4, 2026 was primarily due to an increase in both the average transaction size and the number of transactions at centers opened for at least 52 full weeks.

Net New Center Closures. The number of net new center closures 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 long-term 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 lease costs, 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. 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. Similarly, AUV declines are typically caused by decreases in services and retail product sales.

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

Significant Factors Impacting 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:

Net New Center Closures. 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 and closures each period. As centers mature, center revenue and profitability typically 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 long-term center expansion will place increased demands on our operational, managerial, administrative, financial, and other resources. Given the current macroeconomic environment, our short-term strategy involves a focus on realigning the business to improve existing centers' productivity and unit economics, which we believe will allow us to continue thoughtful center growth in the future.

System-Wide Sales Growth or Decline. System-wide sales is a key driver of our business. Various factors affect system-wide sales, including:

Overall Economic Trends. Macroeconomic factors that may affect guest spending patterns, and thereby our results of operations, include employment rates, the rate of inflation, business conditions, changes in the housing market, the availability of credit, interest rates, tax rates and fuel and energy costs. However, we believe that many of our guests see our services as largely non-discretionary in nature. Therefore, while overall economic trends and related changes in consumer behavior have impacted us and may impact us in the future, we believe that such changes have less of an impact on our business than they may have for other companies that have a significant portion of their sales attributed to 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 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, approximately every five 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 Comfort Wax and two key suppliers to source our branded retail products and we are thus exposed to concentration of supplier risk. Our supply chain incorporates both domestic and international procurement. However, more than half of our product cost is subject to various global tariffs. While the majority of our branded retail products are sourced domestically, our Comfort Wax is sourced from Europe and a portion of our medical supplies and retail product components are sourced from China. To address the recent increase in tariffs on internationally sourced products, we continue to deploy alternative sourcing strategies and are evaluating alternatives to mitigate cost increases.

Our Ability to Recruit and Retain Qualified Licensed Wax Specialists for our Franchised Centers. Our franchisees' ability to operate their centers is largely dependent upon their 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 has historically yielded 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 Results of Operations

Revenue

Product Sales: Product sales consist of revenue earned from sales of Comfort 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 55.9% and 56.1% of our total revenue for the 13 weeks ended April 4, 2026 and April 5, 2025, 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 24.8% and 24.2% of our total revenue for the 13 weeks ended April 4, 2026 and April 5, 2025, 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 14.0% and 14.0% of our total revenue for the 13 weeks ended April 4, 2026 and April 5, 2025, respectively.

Other Revenue: Other revenue primarily consists of service revenues from our corporate-owned centers and franchise fees, as well as technology fees and training, which together represent 5.3% and 5.7% of our total revenue for the 13 weeks ended April 4, 2026 and April 5, 2025, 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 10 years beginning on the date the center is opened and the initial franchise fees are amortized over a period approximating the term of the agreement. Deferred franchise fees expected to be recognized in periods greater than 12 months from the reporting date are classified as long-term on the condensed consolidated balance sheets. Technology fees and training are recognized as the related services are delivered and are not material to the overall business.

Costs and Expenses

Cost of Revenue: Cost of revenue primarily consists of the direct costs associated with wholesale product and retail merchandise sold, including distribution and outbound freight costs and provision for inventory obsolescence, as well as the cost of materials and labor for services rendered in our corporate-owned centers.

Selling, General and Administrative Expenses: Selling, general and administrative expenses primarily consist of wages, benefits and other compensation-related costs, third-party warehousing costs, corporate marketing 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. Third-party warehousing costs recorded as a component of selling, general and administrative expenses, which consists primarily of logistics services in the form of warehouse inventory storage management and fulfillment costs, were $0.6 million and $0.6 million for the 13 weeks ended April 4, 2026 and April 5, 2025, respectively. Corporate marketing costs recorded as a component of selling, general and administrative expenses, which consists primarily of local and corporate marketing initiatives, sponsorships and influencers, were $0.6 million and $0.4 million for the 13 weeks ended April 4, 2026 and April 5, 2025, respectively.

Advertising Expenses: Advertising expenses consist of advertising, public relations, and administrative expenses incurred to increase sales and further enhance the public reputation of the 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, net: Interest expense, net consists of interest on our long-term debt, including amounts outstanding under our revolving financing facility, amortization of debt discount and deferred financing costs, gains and losses on debt extinguishment as well as interest income from short-term, highly-liquid investments.

Other (Income) Expense: Other (income) expense consists of non-cash gains and losses related to the remeasurement of our tax receivable agreement liability and contractual cash interest paid on our tax receivable agreement liability.

Income Tax Expense: We are subject to U.S. federal, state and local income taxes with respect to our taxable income, including our allocable share of any taxable income of EWC Ventures and are taxed at the prevailing corporate tax rates. Income tax expense includes both current and deferred income tax expense.

Noncontrolling Interests: We are 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 consolidate the financial results of EWC Ventures, and a portion of our net income is allocated to the noncontrolling interests to reflect the entitlement of the EWC Ventures Post-IPO Members to a portion of EWC Ventures' net income.

Results of Operations

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

The following table presents the components of our condensed consolidated statements of operations for each of the periods indicated, as a percentage of revenue:

Comparison of the Thirteen Weeks Ended April 4, 2026 and April 5, 2025

Total Revenue

Total revenue decreased $0.3 million, or 0.6%, to $51.1 million during the 13 weeks ended April 4, 2026, compared to $51.4 million for the 13 weeks ended April 5, 2025. The decrease in total revenue was primarily due to net center closures during the period from April 6, 2025 to April 4, 2026 and partially offset by an increase in transactions at existing centers.

Product Sales

Product sales decreased $0.3 million, or 1.0%, to $28.6 million during the 13 weeks ended April 4, 2026, compared to $28.9 million for the 13 weeks ended April 5, 2025. The decrease in product sales was primarily due to net center closures during the period from April 6, 2025 to April 4, 2026 which resulted in less wax supplies and Comfort Wax to our franchisees and was partially offset by an increase in transactions at existing centers.

Royalty Fees

Royalty fees increased $0.3 million, or 2.2%, to $12.7 million during the 13 weeks ended April 4, 2026, compared to $12.4 million for the 13 weeks ended April 5, 2025. The increase in royalty fees during the 13 weeks ended April 4, 2026 was primarily the result of higher royalty fees received from existing and new centers and was partially offset by 25 center closures during the period from April 6, 2025 to April 4, 2026.

Marketing Fees

Marketing fees decreased $0.1 million, or 0.9%, for the 13 weeks ended April 4, 2026 to $7.1 million compared to $7.2 million for the 13 weeks ended April 5, 2025. Marketing fees decreased as a result of 25 center closures during the period from April 6, 2025 to April 4, 2026 and was partially offset by 7 centers that opened during the same period.

Other Revenue

Other revenue decreased $0.2 million, or 6.8%, for the 13 weeks ended April 4, 2026 to $2.7 million compared to $2.9 million for 13 weeks ended April 5, 2025, primarily due to a decrease in franchise fees that resulted from decreased franchised center transfers in the current period.

Costs and Expenses

Cost of Revenue

Cost of revenue increased $0.4 million, or 2.9%, to $13.7 million during the 13 weeks ended April 4, 2026, compared to $13.3 million for the 13 weeks ended April 5, 2025. The increase in cost of revenue was primarily due to an increase in the landed cost of our wholesale products and was partially offset by the decrease in product sales.

Selling, General and Administrative

Selling, general and administrative expenses decreased $1.7 million, or 11.1%, to $13.6 million during the 13 weeks ended April 4, 2026, compared to $15.3 million for the 13 weeks ended April 5, 2025. The decrease in selling, general and administrative expenses was primarily due to a $1.6 million decrease in payroll and benefits expense and other miscellaneous decreases, and was partially offset by an increase in professional fees of $0.5 million.

The decrease in payroll and benefits expense was primarily due to $0.5 million in executive severance during the 13 weeks ended April 5, 2025 that did not recur during the 13 weeks ended April 4, 2026, as well as a $0.7 million decrease in equity compensation. The increase in professional fees was primarily related to an increase in business transformation costs.

Advertising

Advertising expenses increased $2.0 million, or 28.0%, to $9.3 million during the 13 weeks ended April 4, 2026, compared to $7.2 million for the 13 weeks ended April 5, 2025, primarily due to timing of various advertising initiatives. Looking forward, we continue to invest in flexible, high-performing advertising channels and optimize our advertising spending to drive revenue growth and guest engagement.

Depreciation and Amortization

Depreciation and amortization for the 13 weeks ended April 4, 2026 was up 8.3%, or $0.4 million, at $5.4 million compared to $5.0 million during the 13 weeks ended April 5, 2025. This increase was due to an increase in assets placed in service during the period from April 6, 2025 to April 4, 2026 related to our ongoing investments in marketing and technology.

Interest Expense, net

Interest expense, net increased $0.1 million, or 1.4%, to $6.7 million during the 13 weeks ended April 4, 2026, compared to $6.6 million for the 13 weeks ended April 5, 2025. The increase was primarily due to a decrease in interest income from the Company's short-term investments during the 13 weeks ended April 4, 2026.

Income Tax Expense

We recorded $0.9 million and $1.4 million of income tax expense for the 13 weeks ended April 4, 2026 and April 5, 2025, respectively. Income tax expense recognized in the 13 weeks ended April 4, 2026 differs from the federal statutory income tax rate primarily as a result of non-taxable income attributable to nondeductible officer compensation, noncontrolling interest, state taxes and the tax effects of stock compensation. Income tax expense recognized in the 13 weeks ended April 5, 2025 differs from the federal statutory income tax rate primarily as a result of non-taxable income attributable to noncontrolling interest, state taxes and the tax effects of stock compensation.

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 non-cash equity-based compensation expense, non-cash gains and losses on remeasurement of our tax receivable agreement liability, contractual cash interest on our tax receivable agreement liability, loss on disposal or impairment of assets, transaction costs, business transformation costs and other one-time expenses and/or gains. Business transformation costs primarily include expenses related to our business transformation and optimization efforts that do not qualify as capital expenditures under applicable accounting principles. 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 to EBITDA and Adjusted EBITDA is set forth below for the periods indicated:

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 have been cash provided from operating activities, cash and cash equivalents on hand, proceeds from our Class A-2 Notes and Variable Funding Notes and proceeds from the issuance of equity to our stockholders. We had cash and cash equivalents of $71.7 million as of April 4, 2026.

Future payments under the TRA with respect to the purchase of EWC Ventures Units which occurred as part of the IPO and through April 4, 2026 are currently expected to be $202.0 million. Such amounts will be paid when such deferred tax assets are realized as a reduction to income taxes due or payable. That is, payments under the TRA are only expected to be made in periods following the filing of a tax return in which we are able to utilize certain tax benefits to reduce our cash taxes paid to a taxing authority. The impact of any changes in the projected obligations under the TRA as a result of changes in the geographic mix of the Company's earnings, changes in tax legislation and tax rates or other factors that may impact the Company's tax savings will be reflected in other expense on the condensed consolidated statements of operations in the period in which the change occurs. During the 13 weeks ended April 4, 2026 there were no material changes in our contractual obligations from those described in our annual report on Form 10-K for the fiscal year ended January 3, 2026.

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.

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.

Securitized Financing Facility

On April 6, 2022, the Master Issuer completed a securitization transaction pursuant to which it issued $400.0 million in aggregate principal amount of Class A-2 Notes. The net proceeds from the issuance of the Class A-2 Notes were used to repay our previous term loan, fund certain reserve amounts under the securitized financing facility, pay the transaction costs associated with the securitized financing facility, and fund a one-time special dividend to stockholders.

In connection with the issuance of the Class A-2 Notes, the Master Issuer also entered into (i) a revolving financing facility that allows for the issuance of up to $40.0 million in Variable Funding Notes, and certain letters of credit and (2) an advance funding facility with BofA, whereby BofA and any other advance funding provider thereunder will, in certain specified circumstances, make certain debt service advances and collateral protection advances. The Variable Funding Notes were undrawn as of April 4, 2026. The Class A-2 Notes and the Variable Funding Notes are referred to collectively as the "Notes."

The Notes are subject to a series of covenants and restrictions customary for transactions of this type, including (i) that the Master Issuer maintains specified reserve accounts to be used to make required payments in respect of the Notes, (ii) provisions relating to optional and mandatory prepayments and the related payment of specified amounts, including specified make-whole payments in the case of the Class A-2 Notes under certain circumstances, (iii) certain indemnification payments in the event, among other things, the transfers of the assets pledged as collateral for the Notes are in stated ways defective or ineffective and (iv) covenants relating to recordkeeping, access to information and similar matters. The Notes are also subject to customary rapid amortization events provided for in the Base Indenture, dated April 6, 2022 (the "Indenture"), including events tied to failure to maintain a stated debt service coverage ratio, the sum of system-wide sales being below certain levels on certain measurement dates, certain manager termination events (including in certain cases a change of control of EWC Ventures, LLC), an event of default and the failure to repay or refinance the Notes on the applicable anticipated repayment date. The Notes are also subject to certain customary events of default, including events relating to non-payment of required interest, principal or other amounts due on or with respect to the Notes, failure to comply with covenants within certain time frames, certain bankruptcy events, breaches of specified representations and warranties, failure of security interests to be effective and certain judgments.

For additional information regarding our long-term debt activity, see the notes to the condensed consolidated financial statements (Note 5-Long-term debt) contained elsewhere in this quarterly report on Form 10-Q.

Tax Receivable Agreement

Generally, we are required under the TRA, which is described more fully in Part 1 "Item 1A. Risk Factors" in our annual report on Form 10-K for the fiscal year ended January 3, 2026 in the section entitled "Risks Relating to Our Organization and Structure-We are

required to pay the EWC Ventures' pre-IPO members for certain tax benefits we may claim, and the amounts we may pay could be significant" to make payments to the EWC Ventures 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 tangible and intangible assets of the Company and adjustments to the tax basis of the tangible and intangible assets of the Company, in each case as a result of (a) the purchases of EWC Ventures Units (along with the corresponding shares of our Class B common stock) from certain of the EWC Ventures Post-IPO Members using a portion of the net proceeds from the initial and secondary public offerings or in any future offering or (b) Share Exchanges and Cash Exchanges by the EWC Ventures pre-IPO members (or their transferees or other assignees) in connection with or after the initial public offering, (ii) our utilization of certain tax attributes of certain affiliates of General Atlantic (the "Blocker Companies") (including the Blocker Companies' allocable share of certain existing tax basis of EWC Ventures' assets) and (iii) certain other tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA.

Subject to the discussion in the following paragraph below, payments under the TRA 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. Future payments under the TRA in respect of future purchases of EWC Ventures Units, Share Exchanges and Cash Exchanges would be in addition to these amounts. Payments under the TRA are computed by reference to realized tax benefits from attributes subject to the TRA and are expected to be funded by tax distributions made to us by our subsidiaries similar to how cash taxes would be funded to the extent these attributes did not exist. To the extent we are unable to make payments under the TRA for any reason (including because the Company's securitized financing facility restricts the ability of our subsidiaries to make distributions to us), under the terms of the TRA 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.

Under the TRA, 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 EWC Ventures pre-IPO members in amounts equal to the present value of future payments we are obligated to make under the TRA. If the payments under the TRA 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 TRA for any reason (including because the Company's securitized financing facility restricts the ability of our subsidiaries to make distributions to us), under the terms of the TRA 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.

Summary Statements of Cash Flows

The following table sets forth the major components of our condensed consolidated statements of cash flows for the periods presented (amounts in thousands):

Operating Activities

During the 13 weeks ended April 4, 2026, net cash provided by operating activities was $0.6 million and consisted of $1.6 million net income combined with $9.5 million of non-cash items, consisting primarily of depreciation and amortization, equity compensation and deferred income taxes and was partially offset by $10.5 million of net cash used in working capital and other activities. Cash used in working capital and other activities during the 13 weeks ended April 4, 2026 reflected increases in prepaid expenses and other assets, accounts receivable, and inventory, net, of $3.2 million, $1.8 million and $0.9 million, respectively, as well as decreases in accounts payable and accrued liabilities, other long-term liabilities, and deferred revenue of $3.5 million, $0.6 million and $0.5 million, respectively. The $12.1 million decrease in cash provided by operating activities during the 13 weeks ended April 4, 2026 as compared to the 13 weeks ended April 5, 2025 was primarily the result of a decrease in net cash provided by working capital and other activities of $10.3 million, a decrease in non-cash items of $0.8 million, as well as the $1.0 million decrease in net income.

Investing Activities

In the 13 weeks ended April 4, 2026, we used $1.7 million of cash for purchases of property and equipment, compared to $0.7 million of cash for purchases of property and equipment during the 13 weeks ended April 5, 2025.

Financing Activities

Cash used in financing activities was $3.2 million and $3.5 million during the 13 weeks ended April 4, 2026 and April 5, 2025, respectively. Financing activities during the 13 weeks ended April 4, 2026 consisted of the following payments:

Financing activities during the 13 weeks ended April 5, 2025 consisted of the following payments:

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates. There have been no changes to our critical accounting estimates from those described under "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the fiscal year ended January 3, 2026.

JOBS Act

The Company is an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 ("JOBS Act") and may take advantage of reduced reporting requirements that are otherwise applicable to public companies. Section 107 of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with those standards. We have elected to use the extended transition period for complying with new or revised accounting standards. This may make it difficult to compare our financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used.

Recent Accounting Pronouncements

See Note 2-Summary of significant accounting policies to the condensed consolidated financial statements included in this quarterly report on Form 10-Q for more information about recent accounting pronouncements, the timing of their adoption and our assessment, to the extent we have made one, of the potential impact of the pronouncements on our financial condition and results of operations and cash flows.