Mister Car Wash Inc Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Simeon Gutman - Morgan Stanley - Analyst : Good quarter. I wanted to ask first about the comp guidance. Jed. I know you just were very detailed on it. I wanted to follow up. So the math on the next 3 quarters at the high end is just -- I think it's just a 2% at this point to get to the high end 3. So is that scenario weaker consumer and tough compares? And then at the low end, I think it's just a flat at this point. And so you did say you're confident in the business. You just ran 2 quarters of 6 granted a tough compare, but -- is that -- are you thinking recession, consumer pulls back a lot? How do we get to that low end?

Question: Simeon Gutman - Morgan Stanley - Analyst : Can I just ask an unrelated follow-up on free cash flow. Can you just remind us what -- like this philosophy on it, are you using cash not just to grow. It looks like you paid some debt down in this first quarter. Are you trying to keep neutral or the business should draw off cash as it continues to grow and build. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2025 / 8:30PM, MCW.OQ - Q1 2025 Mister Car Wash Inc Earnings Call

Question: Randal Konik - Jefferies - Analyst : I guess one question. If I look at the UWC member growth, I believe it was up 5% in the quarter. I believe coming out of the fourth quarter was up 2% on a year-over-year basis. So a nice healthy acceleration sequentially. Can you give us some perspective? Is that kind of just doing a better job on these different marketing tactics and in particular, kind of reasons for that better conversion, if you will, in the quarter sequentially.

Question: Randal Konik - Jefferies - Analyst : Great. And then just to follow up there, a follow-up. When you look at the right, just to clarify on the price change on the base, was that a universal or in most markets? I just want to clarify there. And then as you think about titanium penetration, I think, again, for the second quarter in a row, about 23%. Could you just give us some perspective on any variability by markets to give us to kind of your thoughts on where long-term penetration might stick for titanium over the next few years?

Question: Randal Konik - Jefferies - Analyst : By the way, a quick question on that. In the markets that haven't seen -- that saw the base price increase, have you seen a measurable difference in the uptake of titanium relative to that 23% overall, or no?

Question: David Bellinger - Mizuho Securities USA - Analyst : Understanding. This is a very, very fluid consumer backdrop here. But I thought some of the competitive comments were a little different this afternoon. It sounds more positive, especially with these restructurings happening in the space. You had a few quarters of decidedly positive comps here in a row. So should we start to think about this as Mister is starting to hit some kind of inflection point here where sales could slow decidedly positive from here on out?

Question: David Bellinger - Mizuho Securities USA - Analyst : Thanks for those data points, incredibly helpful. And then just my follow-up here. Looking at the UWC as a percentage of total wash sales, that

Question: Peter Keith - Piper Sandler Companies - Analyst : Thanks. Nice quarter. The tariffs make sense that you wouldn't have any direct exposure on day-to-day operations. I'm wondering on equipment and if there could be some equipment from your suppliers that's imported or impacted by steel tariffs, any talk of that coming off the carwash show that might increase the cost of newbuilds looking forward?

Question: Peter Keith - Piper Sandler Companies - Analyst : Great. Okay. That's refreshing to hear. Moving on to marketing. So Jed had mentioned a slight uptick in marketing this year. We've done some work here over your peers. And you guys historically have spent about 0.5% in marketing. And it does seem like some of your peers spend more like 2% to 3% of sales, so notably higher. So John, I guess, are you still kind of in a testing mode this year? Do you think you'll ever get above 1% of marketing as a percent of sales. It just seems like there is an opportunity to really drive more traffic here. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2025 / 8:30PM, MCW.OQ - Q1 2025 Mister Car Wash Inc Earnings Call

Question: Phillip Blee - William Blair - Analyst : If you're assuming that retail revenue is down more high single digits for the year, given a potentially softer consumer environment. Should we then consider the membership is more flattish or just slightly up quarter-over-quarter for the remainder of the year? And then should we consider anything like impacts from churn during a potential recession? Just any color how to think about this metric evolving throughout the year would be very helpful.

Question: Phillip Blee - William Blair - Analyst : Okay. Great. And then it's just a different topic, but understood on the lack of direct tariff impact, but -- any color on the materials for greenfield expansion and ability to hit your store target for this year? Have you seen any early indicators around potential delays or lack of availability in materials later on this year that could make it harder to hit your full year target, especially given the second half has a bigger exposure there.

Question: Michael Lasser - UBS Equities - Analyst : John, is there a case where the retail business is simply becoming more volatile from month to month, not just simply because of the overall state of the macro environment, but given how much capacity has been added to the wash industry over the last few years, there are simply fewer unattached customers for the retail business which is going to create more volatility from period to period. And do you think there's any evidence that you saw that from the last 4 months where it seemed like retail was up double digits in January and then down to maybe as much as high single digits in April.

Question: Michael Lasser - UBS Equities - Analyst : Got you. My follow-up question is on the heels of reason the base price membership at rolling out a premium, all of this is happening into what could be an accelerating broader inflationary environment. So it is taking this much price we're generating this much additional revenue per member give you pause in what could be a more pressured consumer environment. And if that were the case, given what happened the last time there was a lot of deflation. It did seem like the business slowed a bit. What levers would you push this time in order to drive the business.

Question: Michael Lasser - UBS Equities - Analyst : And anything on the leverage you might call in the event there is a slowdown?

Question: Christopher O'Cull - Stifel Nicolaus and Company, Incorporated - Analyst : I had a question about the media test. How do you guys plan to measure the return on that investment? And then I'm also curious how many markets you believe could be media efficient.

Question: Christopher O'Cull - Stifel Nicolaus and Company, Incorporated - Analyst : Do you have a sense for how many markets could be -- could use media?

Question: Christopher O'Cull - Stifel Nicolaus and Company, Incorporated - Analyst : Okay. That's helpful. And then, John, you mentioned developing innovative solution is obviously 1 of our strategic pillars, and Titanium 360 has obviously been a success. But I'm curious, how would you characterize the pipeline of new ideas that you have for maybe future tests and how are you thinking about potential timing if you've got a new idea that you'd like to roll out?

Question: Justin Kleber - Baird - Analyst : I wanted to first follow up, Jed, on your churn comment as it relates to the base price increase. I know you're building that into the plan, but just curious the response you're seeing real time as this price increase has been implemented more broadly? Is it consistent with what you saw in the test markets? Just any color on what you're seeing.

Question: Justin Kleber - Baird - Analyst : Okay. And then just the -- we noticed you're at a higher level in Minnesota, it's like $25.99. So just curious what's driving that decision? And should we ultimately expect you to move towards that that level over time across the chain. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2025 / 8:30PM, MCW.OQ - Q1 2025 Mister Car Wash Inc Earnings Call

Question: John Heinbockel - Guggenheim - Analyst : John, when you look at average per member visitation by month, how does that differ by tier of membership and geography? And I'm also curious if you go back, how has that increased over time. I imagine it has increased, right, over the last five years?

Question: John Heinbockel - Guggenheim - Analyst : All right. And then just a quick follow-up, just on the mechanics of the price increase. So you give a 30-day notice and then the price goes up. But are you going to get -- would you give a 30-day notice all at once or you'd stagger it across the year, right? Because you think about a 15% increase on 40% of your business, you're not going to get that lift immediately. Is that like realized over a 12- or 15-month period or sooner than that?

Question: Robert Griffin - Raymond James - Analyst : Good start to the year. Just two quick questions for me. It might be there, but have you seen anything from a competitive side of things on the markets where you did move the price, I think you mentioned some competitors aren't there yet. Did they come up? Or is there any response there to share? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2025 / 8:30PM, MCW.OQ - Q1 2025 Mister Car Wash Inc Earnings Call

Question: Robert Griffin - Raymond James - Analyst : Yes, I was just curious more -- did they have any changes just where you look at the operating cost of this industry being more expensive than it was a couple of years. So everybody is pricing more rationally now. So they took advantage of a peer like you moving up and did they move up or they stayed the same, just anything around that?

Question: Robert Griffin - Raymond James - Analyst : Fair enough. And then secondly for me, just on the chemical and labor line, continued nice performance there. Just curious what the guidance embeds for further labor optimization or chemical savings?

Question: Robert Griffin - Raymond James - Analyst : Very helpful, and good luck the rest of the year.

Question: Tristan Thomas-Martin - BMO Capital Markets - Analyst : Just one question from me. You called out comp trends moderate a little bit in April. Anything else to kind of flag whether it's consumer income demographics or geographic trends in the specific markets would be helpful.

Question: Thomas Wendler - Stephens Inc. - Analyst : Just one quick one from me. I want to go back to the base membership churn 1 more time. Do you expect to see those customers returning as they shop around and kind of see your updated pricing is in line with the market. And what would the timeline look like for those customers to return would it be similar to the two-year time frame to outperform when a new competitor moves into the market?