v3.25.2
Equity Based Compensation
 6 Months Ended
Jul. 05, 2025
E W C Ventures L L C And Subsidiaries [Member]  
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]  
Equity Based Compensation

6. Equity-Based Compensation

2025 Inducement Plan

On March 21, 2025, the board of directors of the Company (the “Board”) approved the European Wax Center, Inc. 2025 Inducement Plan (the “2025 Inducement Plan”). In accordance with Nasdaq Listing Rule 5635(c)(4), the Company did not seek approval of the 2025 Inducement Plan by its stockholders. Pursuant to the Inducement Plan, the Company may grant nonqualified stock options, stock appreciation rights, restricted stock units and certain other stock-based awards for up to a total of 4,000,000 shares of Class A Common Stock of the Company, par value $0.00001 per share, to employees entering into employment or returning to employment after a bona fide period of non-employment with the Company.

Restricted Stock Units

During the 13 and 26 weeks ended July 5, 2025, we granted 268,839 and 1,884,621 restricted stock units (“RSUs”), respectively, to certain employees and directors under the 2021 Omnibus Incentive Plan (the “2021 Incentive Plan”). In addition, during the 13 and 26 weeks ended July 5, 2025, we granted 200,000 and 444,000 RSUs, respectively, to certain employees under the 2025 Inducement Plan. During the 13 and 26 weeks ended July 6, 2024, we granted 41,940 and 398,667 RSUs, respectively, to certain employees and directors under the 2021 Incentive Plan. The RSUs granted generally vest on the anniversaries of the date of grant over a period of two to four years, subject in all cases to continued employment on the applicable vesting date. The total grant date fair value of the RSUs will be recognized as equity-based compensation expense over the vesting period. The weighted average grant date fair values of the RSUs granted during the 13 and 26 weeks ended July 5, 2025 were $4.68 and $4.94, respectively. The weighted average grant date fair values of the RSUs granted during the 13 and 26 weeks ended July 6, 2024 were $11.62 and $14.40 respectively. The weighted average grant date fair values of the RSUs granted were equal to the closing price of the underlying Class A common stock on the grant dates.

 

Class A Common Stock Options

During the 26 weeks ended July 5, 2025, we granted 1,767,187 options to certain employees under the 2021 Incentive Plan. There were no options granted under the 2021 Incentive Plan during the 13 weeks ended July 5, 2025. In addition, during the 13 and 26 weeks ended July 5, 2025, we granted 735,000 and 1,635,000 options, respectively, to certain employees under the 2025 Inducement Plan. The weighted average exercise prices of options granted during the 13 and 26 weeks ended July 5, 2025 were $7.55 and $8.05 per share, respectively. During the 13 and 26 weeks ended July 6, 2024, we granted 17,550 and 326,326 options, respectively, to certain employees under the 2021 Incentive Plan. The weighted average exercise prices of options granted during the 13 and 26 weeks ended July 6, 2024 were $13.46 and $17.51 per share, respectively. The options granted have a ten-year contractual term and will cliff vest on either the third or fourth anniversary of the grant date, subject in all cases to continued employment on the applicable vesting date. The weighted average grant date fair values of the options were $2.08 and $3.17 for the 13 and 26 weeks ended July 5, 2025, respectively, and $6.41 and $8.29 for the 13 and 26 weeks ended July 6, 2024, respectively. The total grant date fair value of the stock options will be recognized as equity-based compensation expense over the vesting period. As these options were granted with exercise prices 20% higher than the closing price, it was determined that the options contained an implicit market condition. As such, the Company estimated the fair value of the options using a trinomial lattice model.

 

The following table presents the weighted average assumptions used in the lattice model to determine the fair value of the options granted during the 13 and 26 weeks ended July 5, 2025 and July 6, 2024:

 

 

 

For the Thirteen Weeks Ended

 

 

For the Twenty-Six Weeks Ended

 

 

July 5, 2025

 

 

July 6, 2024

 

 

July 5, 2025

 

 

July 6, 2024

 

Expected dividend yield

 

 

0.0

%

 

 

0.0

%

 

 

0.0

%

 

 

0.0

%

Expected volatility

 

 

69.0

%

 

 

56.0

%

 

 

68.0

%

 

 

56.0

%

Risk-free rate

 

 

3.9

%

 

 

4.3

%

 

 

4.3

%

 

 

4.1

%

Suboptimal exercise factor

 

2.5x

 

 

2.5x

 

 

2.5x

 

 

2.5x

 

 

A description of each of the inputs to the lattice model is as follows:

•
Expected dividend yield - The expected dividend yield is based on our history of not paying regular dividends in the past and our current intention to not pay regular dividends in the foreseeable future. An increase in the expected dividend yield would decrease compensation expense.
•
Expected volatility - This is a measure of the amount by which the price of the equity instrument has fluctuated or is expected to fluctuate. The expected volatility was based on the historical volatility of the Company as well as that of a group of guideline companies. An increase in expected volatility would increase compensation expense.
•
Risk-free interest rate - This is the U.S. Treasury rate as of the measurement date having a term approximating the contractual term of the award. An increase in the risk-free interest rate would increase compensation expense.
•
Suboptimal exercise factor - The multiple of the exercise price at which an option exercise would be expected to occur. An increase in the suboptimal exercise factor would increase compensation expense.