Mister Car Wash Inc Q4 2024 Earnings Call Transcript

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

Question: John Heinbockel - Guggenheim Securities - Analyst : Hey guys I wanted to start with pricing and marketing. So, what percent of the car wash base are you taking the base pricing up in? And I think is it $22.99 is the right number to think about? And then maybe, John, from a marketing standpoint, what's the right level for you guys to spend at over the longer term? And how much do you -- when do you want to get there? Is that a multiyear journey or you get there this year?

Question: John Heinbockel - Guggenheim Securities - Analyst : And then maybe the follow-up. Maybe talk about your pipeline, right, the 30 to 35, what's the greenfield pipeline look like? And is the idea that finally, we're seeing some separation between the leaders and some others. Is the idea to keep some room there, some financial firepower to buy assets that might shake free over the next year or so?

Question: David Bellinger - Mizuho - Analyst : Hey, everyone. Thanks for the questions. So comps up 6% this quarter. If you're guiding to the 1% to 3% next year, and understanding your conservative approach here, just help us bridge that delta? Is there anything in Q4 that was one-time like whether it was weather or the positive retail comp? And just to frame this up, can you talk about what you've seen Q1 to-date and just any type of slowdown in the business or anything that give us more clearance in that 1% to 3%?

Question: David Bellinger - Mizuho - Analyst : Great, thanks for all that detail. And then my follow-up on the Titanium mix, I think it was 23% this quarter, that's a step back versus Q3, I think at 24%. So you're starting to see that penetration rate begin to top out in any way? And what are your assumptions within the 2025 guide for [Q3 60]?

Question: David Bellinger - Mizuho - Analyst : Got it. Thank you.

Question: Simeon Gutman - Morgan Stanley - Analyst : Hey, guys. Good quarter. My first question, it's back to this comp and the difference between the quarter and then the guidance. Would you say then -- I don't know, Jed or John, if maybe December is representative, you say, bounce back? Was it also helped by weather? And I'm trying to reconcile, I guess, the midpoint of two because I think that implies the way you said it, Jed, is that the discretionary customer, the retail customer, is less bad. So I assume that's flat or negative. So yeah, if you can put all of that together, would December be the proper run rate that's unencumbered by weather?

Question: Simeon Gutman - Morgan Stanley - Analyst : Yes. A follow-up, and I'm going to make it two parts because of that response, John. The retail customer coming back, do you think it's inflation or was capacity, meaning competition that was the biggest holdback? And then the question I wanted to ask is a competitor private who declared bankruptcy. Curious about location overlap, the asset quality. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 19, 2025 / 9:30PM, MCW.OQ - Q4 2024 Mister Car Wash Inc Earnings Call And then there's other assets for sale up there, and I heard how you're approaching asset, either acquisition or growth. I guess, I mean, the dominos seem to be starting to fall, and I think that's what your model was prepped to benefit from. Are any of these initial ones should help the business next year? Is that in the guidance range? I don't know what happens with these assets, but should there be a benefit to that as well? Thanks.

Question: Simeon Gutman - Morgan Stanley - Analyst : Thank you both.

Question: Justin Kleber - Baird - Analyst : Hey, good afternoon, everyone. Thanks for taking the question. John or Jed, just a follow-up on the M&A front. You guys, obviously, are in a good spot to take a leading role in consolidating the industry. Just curious what your appetite is to take on additional leverage just given the current rate backdrop?

Question: Justin Kleber - Baird - Analyst : Okay. Yeah, that makes sense. Thanks for that, both of you. And just an unrelated follow-up on as we decompose the revenue growth for 2025, just any color how you're thinking about or how you're modeling UWC member growth this year?

Question: Justin Kleber - Baird - Analyst : Alright, thanks guys. Best of Luck.

Question: Michael Lasser - UBS - Analyst : Good evening. Thank you so much for taking my question. John, are you seeing evidence that the consumers attitude towards signing up for a wash subscription is changing, particularly versus a couple of years ago when the novelty of this innovation and introduction in the industry was newer. And the reason I ask is while retail trends are better, the weather -- the business does seem to be coming more weather-sensitive and member per location has been under pressure probably in part by some of the newer locations that you have added and those are still ramping up. But it does seem like member growth is subdued and Jed just mentioned that you only expect modest growth in total members or same-store members at the high end. So presumably, you're expecting some degradation in members at the low end of the comp range. Thank you.

Question: Michael Lasser - UBS - Analyst : Thank you for that. My follow-up question is, as you laid out your one to three comp expectation for the year with stronger trends in the in the first half and soft returns in the back half. And the comment that you have started off January with double-digit retail comp, would you expect at the low end of the range for comps to be negative in the second half of 2025? And why would that be the case?

Question: Michael Lasser - UBS - Analyst : Thank you very much and good luck.

Question: Chris O`Cull - Stifel - Analyst : Thanks. First, I had a follow-up question, Jed, on regards to the recent comp trend. And how should we think about the impact of weather and its impact on the subsequent period? For example, I think you said October was strong because of the weather, but November was a sharp pullback, is that type of dynamic we should think about when a period is impacted by strong weather?

Question: Chris O`Cull - Stifel - Analyst : Yes. That's helpful. And then I know you have several marketing tests and programs underway. But John, what do you believe will be the key drivers for retail sales growth this year?

Question: Chris O`Cull - Stifel - Analyst : Great. Thanks guys.

Question: Phillip Blee - William Blair - Analyst : Okay. Thanks for the question. Your 2025 earnings outlook has been higher than expected under this kind of comp sales scenario. Can you talk about your confidence there generally around expense control versus some of these pressures from labor costs that you've talked about? And then how we should think about any potential for incremental margin fall-through on sales upside here?

Question: Phillip Blee - William Blair - Analyst : Okay, great, excellent color. And then, I just wanted to ask a quick question, then going back to kind of the competitive space. You spoke a bit about it, your expectation for this to be rationalizing over the next few years. Can you maybe double-click on that with more of a focus on 2025. Have you started to see some of these share gains materialize with some of this early rationalization? Any sort of that embedded in your current outlook? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 19, 2025 / 9:30PM, MCW.OQ - Q4 2024 Mister Car Wash Inc Earnings Call

Question: Phillip Blee - William Blair - Analyst : Okay, great, thank you. Guys appreciate it.

Question: Peter Keith - Piper Sandler - Analyst : Hey. Good afternoon. Nice quarter guys. John, I think you have a really good view of the industry. And I'm wondering if you could frame up what you believe the number of new openings industry-wide were in 2024 and then if you have an estimate on where that could land for 2025?

Question: Peter Keith - Piper Sandler - Analyst : Well, I'll try to get back to you on 2025, myself. Maybe I can pivot to Jed. So the sale-leaseback proceeds are stepping down quite a bit year-on-year. I don't think it's going to have an impact, but I did want to ask about that large bankruptcy and if that's caused any volatility in the sale-leaseback market, that's always been a concern amongst a lot of operators that could kind of dry-up sale-leaseback proceeds. Is that an impact for you this year? Or is it just more of a timing dynamic with the pace of openings in recent years?

Question: Peter Keith - Piper Sandler - Analyst : Okay, very good. Thanks so much.

Question: Tristan Thomas-Martin - BMO Capital - Analyst : Hi, good afternoon. Just one question for me. The base price increases, could this may be a leading indicator of a more normalized cadence of price increases? We all see one before another 15?

Question: Tristan Thomas-Martin - BMO Capital - Analyst : It does not.

Question: Tristan Thomas-Martin - BMO Capital - Analyst : Okay, thank you.

Question: Robert Ohmes - Bank of America Securities - Analyst : Hey, guys. Thanks for taking my question. Actually, just one question. I apologize if I missed this, but I saw that you guys put in the guidance CapEx of $275 million to $305 million. I think it's been running more like $330 million the last couple of years. Can you just remind me what the changes this year versus the last couple of years?

Question: Robert Ohmes - Bank of America Securities - Analyst : Terrific. Thanks that clarifies for me. Thanks so much.

Question: Christian Carlino - JPMorgan - Analyst : Hi, good afternoon. Thanks for taking our question. You had previously talked about opening more than 40 locations this year and understanding you're being more surgical about your opening plans. So could you just speak to what was it about these stores that don't fit the updated rubric? And given the time line to open a store, are these sites where you're just delaying construction that will open next year? And then just to wrap that up, I guess, what is this refreshed approach to greenfield openings mean for your long-term unit growth expectations beyond '25?

Question: Christian Carlino - JPMorgan - Analyst : Got it. That's helpful. And a follow-up, that's my -- to follow up on some of the earlier questions, you said there's no near-term impact from the competitor bankruptcy. But in that context and the fact that the industry is slowing openings significantly relative to the past few years, what does this mean at a high level for the industry? Like is this recent competitor unique? Or are there other big platforms in a similar position? And, sort of, a tangent is -- does that steep deceleration in openings for the industry have any implications for your own growth plans with respect to your equipment supplier's financial position? Thank you.

Question: Christian Carlino - JPMorgan - Analyst : Got it. Thank you very much. Best of luck.