Q1 2024 Mister Car Wash Inc Earnings Call

Operator: Good afternoon, and welcome to Mister Car Wash's conference call to discuss financial results for the first quarter ending March 31st, 2024. At this time, all participants are in a listen-only mode.

Good afternoon, and welcome to Mister car Washes conference call to discuss financial results for the first quarter ending March 31st 2024.

At this time all participants are in a listen only mode.

Operator: Later, we will conduct a question and answer session, and instructions will follow at that time. Please note that this call is being recorded, and a reproduction of this call in whole or in part is not permitted without written authorization from the company. Speaking from management on today's call are John Lai, Chairman and Chief Executive Officer, and Jed Gold, Chief Financial Officer. After John and Jed have made their formal remarks, we will open the call to questions.

Later, we will conduct a question and answer session and instructions will follow at that time.

Note that this call is being recorded and a reproduction of this call in whole or in part is not permitted without written authorization from the company.

Speaking from management on today's call are John Lai, Chairman and Chief Executive Officer.

Jed Gold Chief Financial Officer.

Speaker Change: After John and Chad have made their formal remarks, we will open the call to questions.

Operator: During this conference call, references to non-GAAP financial measures will be made. A complete reconciliation of these measures to the most comparable GAAP measures has been included in the company's earnings press release, issued earlier today, and posted to the Investor Relations section of the company's website at mistercarwash.com. As a reminder, comments made on today's call may include forward-looking statements, which are subject to significant risks and uncertainties that could cause the company's actual results to differ materially from management's current expectations.

Speaker Change: During this conference call references to non-GAAP financial measures will be made a complete reconciliation of these measures to the most comparable GAAP measures have been included in the company's earnings press release issued earlier today and posted to the Investor Relations section of the company's website at Mister car wash Dot com.

Speaker Change: As a reminder comments made on today's call may include forward looking statements, which are subject to significant risks and uncertainties that could cause the company's actual results to differ materially from management's current expectations.

Operator: Please be advised that the statements made today are current only as of this call and are based on the company's present understanding of the market and industry conditions. While the company may choose to update these statements in the future, it is under no obligation to do so unless required by applicable law or regulation. Please review the forward-looking statements disclaimer contained in the company's latest annual 10-K and 10-Q reports, as such factors may be updated from time to time in other filings with the Securities and Exchange Commission. I will now turn the call over to Mr. John Lai. Please go ahead.

Speaker Change: Please be advised that the statements made today are current only as of this call.

Speaker Change: And are based on the Companys present understanding of the market and industry conditions.

Speaker Change: While the company may choose to update these statements in the future. They are under no obligation to do so unless required by applicable law or regulations.

Speaker Change: Please review the forward looking statements disclaimer contained in the company's latest annual 10-K, and 10-Q reports as such factors may be updated from time to time in other filings with the Securities and Exchange Commission.

Speaker Change: I will now turn the call over to Mr. John Lai. Please go ahead.

John Lai: Good afternoon, and thank you for joining our first quarter earnings call. Our overall performance in the first quarter was in line with our expectations, and the trends were a continuation of what we saw in the previous quarter. In the first quarter, sales increased 6% to $239 million, adjusted even to increase 6% to $75 million, comp store sales increased 1%, and we opened six new Greenfield stores and ended the quarter with 482 locations. We added 35,000 UWC members and ended the quarter with over 2.1 million members.

John Lai: Good afternoon, and thank you for joining our first quarter earnings call.

John Lai: Our overall performance in the first quarter was in line with our expectations and the trends were a continuation of what we saw in the previous quarter.

John Lai: In the first quarter sales increased 6% $239 million.

John Lai: Adjusted EBITDA increased 6% to $75 million.

John Lai: Comp store sales increased 1%.

John Lai: We opened six new Greenfield stores and ended the quarter with 482 locations.

We added 35000, you WC members and ended the quarter with over $2 1 million members.

John Lai: Our subscription business, which accounted for about 74% of sales in the first quarter, remains incredibly resilient. But this has been offset by a softer retail environment, which has been driven by a combination of increased competition, intentional greenfield growth, capitalization, and a lower income customer cohort that's been under more pressure. The reason why we enjoy industry-leading AUVs is because we offer tremendous value, execute with efficiency, and get you in and out fast.

John Lai: Our subscription business, which accounted for about 74% of sales in the first quarter remains incredibly resilient.

John Lai: But this has been offset by a softer retail environment, which has been driven by a combination of increased competition.

Greenfield growth.

John Lai: <unk> and.

John Lai: The lower income customer cohort that's been under more pressure.

John Lai: The reason why we enjoy industry, leading <unk> is because we offer tremendous value execute with efficiency and gets you in and out fast.

John Lai: Our value proposition begins with delivering a clean, dry, shiny car, and the cherry on top is the elevated customer service delivered by our amazing team members. The headline for Mister Car Wash is the ongoing progression and momentum we're experiencing after the rollout of Titanium and the incredible response that we're seeing from our customers. Penetration levels are continuing to grow, and I'm happy to report that we were above the 20% level at the end of the first quarter.

John Lai: Proposition begins with delivering a clean dry shiny car and the Cherry on top is the elevated customer service delivered from our amazing team members.

John Lai: Okay.

John Lai: The headline for Mister car wash is the ongoing progression and momentum we're experiencing after the rollout of titanium and.

And the incredible response that we're seeing from our customers.

John Lai: Penetration levels are continuing to grow and I'm happy to report that we're above the 20% level at the end of the first quarter.

John Lai: As promotions are now rolling off, we're beginning to see a healthy lift in revenue per member and expect that to continue throughout the remainder of the year. After testing various titanium price points, we've settled in on $39.99 and are in the process of standardizing this across all regions in a deliberate and measured way so that we don't unnecessarily rattle our customers.

John Lai: As promotions are now rolling off we're beginning to see a healthy lift to revenue per member and expect that to continue throughout the remainder of the year.

John Lai: After testing various titanium price points, we've settled in on 39 99 and are in the process of standardizing this across all regions and a deliberate and measured way so that we don't unnecessarily rattler customers.

John Lai: With the launch of titanium, we have taken a step back and looked at our service and price offerings. We know that there is a large and growing market for premium products, and our titanium and platinum wash packages offer a level of shine and protection that are superior to anything in the market today. We believe we had some room to migrate our platinum program to $32.99 from $29.99 in most markets. Raising the platinum price to $32.99 not only reinforces the premium nature of our platinum package, but it simultaneously decreases the gap between the two programs, which will help incent customers to trade up to titanium.

With the launch of titanium, we have taken a step back and looked at our service and price offerings.

John Lai: We know that there was a large and growing market for premium products in our titanium and platinum wash packages offer a level of shine and protection that are superior to anything in the market today.

John Lai: As a result.

John Lai: We believe we have some room to migrate our platinum program to 30 to 99 from 29 99 in most markets.

John Lai: Raising platinum pricing to 30 to 99, not only reinforces the premium nature of our platinum package, but it simultaneously decreases the gap between the two programs, which will help incent customers to trade up to titanium.

John Lai: When we tested the elasticity of 3299, even after a slight uptick in churn, we found it to be highly accretive. When you factor in our platinum and titanium mix, our premium penetration is now north of 60%, with about 5% of our lift coming from base members. Our Unlimited Wash Club program continues to perform nicely, with capture rates at historic highs, relatively flat core churn, and wash frequency of existing members remaining consistent

John Lai: When we tested the elasticity of 32 99, even after a slight uptick in churn we've found it to be highly accretive.

John Lai: When you factor in our platinum or titanium mix a premium penetration is now north of 60% with about 5% of our lives coming from base members.

John Lai: Our unlimited Wash club program continues to perform nicely with capture rates at historic highs.

John Lai: Relatively flat core churn.

John Lai: Wash frequency of existing members remaining consistent.

John Lai: As previously noted, we've elected to prioritize upgrading existing members over focusing on growing our member base, which will result in more modest net member growth this year. But the lifetime value improvements we're seeing in revenue per member have got us super excited. Zooming out, we still believe the market for subscription plans is underpenetrated, and our opportunity to grow our member base is strong. From a unit growth standpoint, we're on a good path and a healthy cadence with six new greenfields in Q1, which is a record for any quarter.

John Lai: As previously noted we've elected to prioritize upgrading existing members are focusing on growing our member base.

John Lai: Which will result in more modest net member growth this year.

John Lai: But the lifetime value improvements were seen in revenue per member has got a super excited.

John Lai: Zooming out we still believe the market for subscription plans is underpenetrated and our opportunity to grow our member base is strong.

John Lai: From a unit growth standpoint, we're on a good path and a healthy cadence with six new Greenfields in Q1, which is a record for any Q1.

John Lai: We remain confident that we can open approximately 40 stores this year. Our stores are opening with strength and helping us to densify existing markets. And with each new store we open, we continue to create a network effect and offer more options for our members, strengthening our value proposition and extending our competitive moat while simultaneously growing our market share. On the people front, I'm thrilled to announce the appointment of our new Vice President of Marketing, Matt Marakovits, who fills a critical seat for MISTER as we look to advance our efforts across customer acquisition, engagement, loyalty, and subscription.

John Lai: We remain confident that we can open approximately 40 this year.

John Lai: Our stores are opening with strength and helping us to densify existing markets and with each new store. We open we continue to create a network effect and offer more options for our members strengthening our value proposition and extending our competitive mode, while simultaneously growing our market share.

Speaker Change: On the people front I'm thrilled to announce the appointment of our new Vice President of marketing, Matt, Morocco bids, who fills a critical seat for Mr. As we look to advance our efforts across customer acquisition engagement loyalty and subscription.

John Lai: Matt's background at General Mills, Walgreens, and Target brings a wealth of experience and knowledge around digital strategy, customer insights, and omni-channel program development. As we look to double and then triple our footprint, we'll need to double and triple our field leadership team, which will create a number of amazing career opportunities for so many of our talented team members who are hungry for more. We're proud of the fact that every general manager of each of our stores receives equity in the form of restricted stock units, which strengthens our ownership mentality and entrepreneurial spirit while allowing them to participate in the financial success of the company.

Speaker Change: Matt's background of General Mills, Walgreens and target brings a wealth of experience and knowledge around digital strategy customer insights and Omnichannel program development.

Speaker Change: As we look to double and triple our footprint will need to double and triple our field leadership team, which will create a number of amazing career opportunities for so many of our talented team members who are hungry for more.

Speaker Change: We're proud of the fact that every general manager each of our stores received equity in the form of restricted stock units with strengthens our ownership like mentality and entrepreneurial spirit, while allowing them to participate in the financial success of the company.

John Lai: We continue to change lives for the better. And because of that, I'm extremely proud of what we have built and extremely excited about our future. I'd also like to take this opportunity to give a big high five to all the men and women who are representing us so well and working so hard as we fulfill our mission of becoming the preeminent car wash operator in the world. With that, I'll now turn the call over to Jed to provide more commentary on our financial results.

Speaker Change: We continue to change lives for the better and because of that I'm extremely proud of what we've built.

Speaker Change: And extremely excited about our future ahead.

Speaker Change: I'd also like to take this opportunity to give a big high five to all the men and women, who are representing us so well and working so hard as we fulfill our mission of becoming the preeminent car wash operator in the world.

With that I'll now turn the call over to Chad to provide more commentary around our financial results.

Jedidiah Marc Gold: Thank you, John. And good afternoon, everybody.

Chad: Thank you John and good afternoon everybody.

Jedidiah Marc Gold: As John indicated, our results in the first quarter were in line with expectations, and the trends were relatively consistent with what we saw in the previous quarter. Let me touch on a few highlights before we run through the numbers. Our subscription business remains strong, and core churn levels remain within our historic range. We are very pleased with the performance of our new titanium package; customers traded into titanium faster than we expected in the first quarter, and we are confident in meeting or exceeding our penetration target of 15% going forward. The titanium promotions that we ran in the first quarter are rolling off in April and May, and we expect to be largely promotion-free by the end of the second quarter.

Chad: As John indicated our results in the first quarter were in line with expectations and the trends were relatively consistent with what we saw in the previous quarter.

Chad: I'll touch on a few highlights before we run through the numbers.

Chad: Our subscription business remains strong and core churn levels remained within our historic range.

Chad: Sure.

Chad: We are very pleased with the performance of our new titanium package customers traded into titanium faster than we expected in the first quarter and we are confident in meeting or exceeding our penetration target of 15% going forward.

Chad: The titanium promotions that we ran in the first quarter are rolling off in April and May and we expect to see it be largely promotion free by the end of the second quarter.

Jedidiah Marc Gold: Similar to prior periods, we continued to see pressure on the retail side of the business, and the pressure was slightly more pronounced in stores that are in lower income areas where consumers may be more constrained. However, our 2024 Greenfield pipeline is solid. And we are encouraged by the results we're experiencing and our ability to open approximately 40 locations during the year. Each of our greenfield locations ramps a little differently depending on the market, but we continue to see solid year-to-cash on cash returns of about 50% and are seeing paybacks of under three years.

Similar to prior periods, we continued to see pressure on the retail side of the business and the pressure was slightly more pronounced in stores that are in lower income areas, where consumers may be more constrained.

Chad: Our 2024 Greenfield pipeline is solid and.

Chad: And we are encouraged by the results we are experiencing in our ability to open approximately 40 locations during the year.

Chad: Each of our Greenfield locations ramps, a little differently, depending on the market, but we continue to see solid year two cash on cash on cash returns of about 50% and seeing paybacks of under three years.

Jedidiah Marc Gold: Greenfield development, densifying, and expansion into adjoining markets continue to be the highest and best use of our capital. Finally, we tightly managed our expenses during the quarter, which allowed us to lever SG&A and drive strong cash flow and adjusted EBITDA levels. With that said, let me run you through the first quarter numbers.

Chad: Greenfield development densify and expansion to do a joining markets continues to be the highest and best use of our capital.

Finally, we tightly managed our expenses during the quarter, which allowed us to lever SG&A and drive strong cash flow and adjusted EBITDA levels.

Jedidiah Marc Gold: During the first quarter, net revenues increased 6% and comparable store sales increased 1% compared to last year. UWC cells represented nearly 74% of total wash cells, and we added 35,000 net new UWC members in the first quarter. On a year over year basis, the number of UWC members increased by 106,000 members, or 5%.

Speaker Change: With that said, let me run you through the first quarter numbers.

Speaker Change: During the first quarter net revenues increased 6% and comparable store sales increased 1% compared to last year.

Speaker Change: EWC sales represented nearly 74% of total wash cells and we added 35000 net new WC members in the first quarter.

Speaker Change: On a year over year basis, the number of EWC members increased by 106000 members or 5%.

Jedidiah Marc Gold: Adjusted net income and adjusted net income per diluted share, which add back stock-based compensation and certain non-core operating expenses, were $27 million and $0.08, respectively, in the quarter. Adjusted EBITDA was $75 million, up 6% from the first quarter of last year. Adjusted EBITDA margin remained flat at 31.4%. On the expense side of the business, we remain focused on finding efficiencies and optimizing investments we are making to support the long-term growth and development of the business.

Speaker Change: Adjusted net income and adjusted net income per diluted share, which add back stock based compensation and certain non core operating expenses were $27 million.08, respectively. In the quarter adjusted EBITDA was $75 million up 6% from the first quarter of last year.

Speaker Change: Adjusted EBITA margin remained flat at 31, 4%.

Speaker Change: Yeah.

Speaker Change: On the expense side of the business, we remain focused on finding efficiencies and optimizing the investments we are making to support the long term growth and development of the business.

Jedidiah Marc Gold: Total costs and expenses were $197 million in the quarter and included $7 million in stock-based compensation and related taxes and $5 million of one-time professional fees. Excluding these items, total operating expenses as a percentage of revenue were flat at 77.4%.

Total costs and expenses were $197 million in the quarter and included $7 million in stock based compensation and related taxes and $5 million of one time professional fees. Excluding these items total operating expenses as a percentage of revenue was flat at 77, 4% the main driver.

Where labor and chemicals increased 20 basis points to 28, 9%.

Jedidiah Marc Gold: The main drivers were labor and chemicals increased 20 basis points to 28.9%, other store operating expense increased 90 basis points to 40.5%, and G&A expense decreased 50 basis points to 8.7% Commenting on each of these a little further, the increase in labor and chemicals was primarily driven by the increase in stores we operate and higher average hourly wages, which was partially offset by efficiencies and sourcing of our proprietary chemical program. The increase in other store operating expenses was We entered the first quarter with 47 more car wash leases compared to the same time last year, and cash rent expense increased 12% to $26.5 million.

Speaker Change: Other store operating expense increased 90 basis points to 45%.

Speaker Change: And G&A expense decreased 50 basis points to eight 7%.

Speaker Change: Yeah.

Speaker Change: Commenting on each of these a little further the increase in labor and chemicals was primarily driven by the increase in stores. We operate in higher average average hourly wages, which was partially offset by efficiencies and sourcing of our proprietary chemical program.

Speaker Change: The increase in other store operating expenses was.

Speaker Change: Primarily from an increase in rent expense related to our store growth and sale leasebacks. We ended the first quarter with 47 more car car wash leases compared to the same time last year and cash rent expense increased 12% to $26 5 million.

Speaker Change: Okay.

Jedidiah Marc Gold: The decrease in GNA expense was driven by our increased focus on doing more with less tightly managing expenses and optimizing the GNA structure of the business. In the first quarter, interest expense increased to $20 million from $18 million last year due to higher interest rates.

Speaker Change: The decrease in G&A expense was driven by our increased focus on doing more with less tightly managing expenses and optimizing the G&A structure of the business.

In the first quarter interest expense increased to $20 million from $18 million last year due to higher interest rates.

Jedidiah Marc Gold: Moving on to some of the balance sheet and cash flow highlights, at the end of the quarter, cash and cash equivalents were $11 million, and outstanding long-term debt was $920 million. Our balance sheet remains healthy, and we continue to self-fund our growth and expansion. Late during the first quarter, we completed the refinance of our credit agreement, which consisted of upsizing, amending, and extending the maturity of our first lean term loan and revolving commitment to $925 million due in 2031 and $300 million due in 2029, respectively.

Speaker Change: Moving onto some of the balance sheet and cash flow highlights.

Speaker Change: At the end of the quarter cash and cash equivalents were $11 million and outstanding long term debt was $920 million.

Speaker Change: Our balance sheet remains healthy and we continue to self fund our growth and expansion.

Jedidiah Marc Gold: Both amendments removed a 10 basis point credit adjustment spread. As a result, under the newly refinanced credit agreement and at our current leverage levels, our $925 million term loan will be priced at SOFR plus 300 basis points, and our revolving credit facility will be priced at SOFR plus $250,000. The transactions extend Mister's debt maturities and increase liquidity in line with company growth. We do not expect any increase in interest expense as a result of the refinance.

Speaker Change: Late during the first quarter, we completed the refinance of our credit agreement, which consisted of upsizing amending and extending the maturity of our first lien term loan and revolving commitments to $925 million due in 2031 and $300 million due in 2029, respectively.

Speaker Change: Both amendments removed a 10 basis point credit adjustments spread.

Speaker Change: Under the newly refinance credit agreement and at our current leverage levels are $925 million term loan will be priced at sofa, plus 300 basis points.

Speaker Change: And our revolving credit facility will be priced at sofer, plus 250 basis points.

Speaker Change: The transactions extend misters debt maturities and increased liquidity in line with company growth.

Speaker Change: We do not expect any increase in interest expense as a result of the refinance.

Jedidiah Marc Gold: We completed one sell-leaseback transaction involving one car wash location in the first quarter for an aggregate consideration of $5 million. We continue to see healthy demand at favorable rates in the sell-leaseback market. In conclusion, we are reiterating the full year guidance ranges previously provided for fiscal 2024, which is included in today's earnings press release. We are optimistic about the business's long-term outlook. We have the best operations and management team in the industry, with more collective experience operating car washes than anybody else.

Speaker Change: We completed one sale leaseback transaction involving one car wash location in the first quarter for an aggregate consideration of $5 million, we continue to see healthy demand at favorable rates and the sale leaseback market.

Speaker Change: In conclusion, we are reiterating the full year guidance ranges previously provided for fiscal 'twenty 'twenty four which is included in today's earnings press release.

Speaker Change: We are optimistic about the businesses long term outlook.

Speaker Change: We have the best operations and management team in the industry with more collective experience operating car washes than anybody else. The combination of our great brand our great team subscription business model and strong unit economics will enable us to deliver growth and shareholder value creation for years to come.

Jedidiah Marc Gold: The combination of our great brand, our great team, the subscription business model, and strong unit economics will enable us to deliver growth and shareholder value creation for years to come. With that, Operator, we're ready to take any questions.

Speaker Change: With that.

Operator: Operator, we're ready to take any questions.

Operator: Yeah.

Operator: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If you want to withdraw your question, please press star, then 2. Please limit yourself to one question and one follow-up.

Speaker Change: We will now begin the question and answer session.

Speaker Change: To ask a question you May press Star then one on your telephone keypad.

Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys.

To withdraw your question. Please press Star then two.

Speaker Change: Please limit yourself to one question and one follow up.

Operator: If you have further questions, you may re-enter the question queue. At this time, we will pause momentarily to assemble the roster, and our first question will come from David Bellinger of Mizzou Hill. Please go ahead.

Speaker Change: If you have further questions you may reenter the question queue.

Speaker Change: At this time, we will pause momentarily to assemble the roster.

Speaker Change: Yes.

Speaker Change: And our first question will come from David Bellinger of Mizuho.

David Leonard Bellinger: Please go ahead.

David Leonard Bellinger: Hey guys, thanks for taking the question. Can you give us some more detail on trends through the quarter? Any quantification on how much the adverse weather shaved off the comp number? And then, second, any changes you've seen into April as more of the initial titanium promos roll off and even with some of the noise from that lower end customer?

David Leonard Bellinger: Hey, guys. Thanks for taking the question can you give us some more detail on trends through the quarter any quantification on how much the adverse weather shaved off the comp number and then just second any changes you've seen into April as more of that initial titanium promos roll off and even with some of the noise from that lower end customer.

John Lai: Yeah, hey, David, thanks for joining us. So we have a saying internally that we never blame missing budgets or not hitting our numbers on the weather. That said, it was a soft winter across the board. You know, our northern climate stores really got one, maybe two big dumps. And that was followed quickly by rain that washed all the snow away. So for us, snow is like liquid gold, and it really blankets the vehicles. So without that, it did have some effect. But we're not blaming it on the weather.

Speaker Change: Yeah, Hey, David Thanks for joining so we haven't seen internally that we never blame missing budget are not hitting our numbers on the weather that said it was a soft winter across the board.

David Leonard Bellinger: Northern climate stores really got one maybe two big dumps and there was that was followed quickly with rain that whilst all the snow away. So for US snow is like liquid gold and it.

David Leonard Bellinger: It really blankets vehicles, so without that that did have some effect, but we're not blaming it on the weather.

Jedidiah Marc Gold: Yeah, I think David, just a little bit of color around the comp, right? So comp store sales are pretty consistent when you look at it by month. Throughout the first quarter, March was slightly above the average that we saw through the quarter, and it was the highest month during the quarter. But we did see momentum carry into April, and we saw sequential improvement in the comp when we look at April versus March and then March compared to the balance of the quarter, and that's being driven largely by the titanium. As the promotions roll off, we're seeing that revenue per member continue to pick up momentum throughout the quarter.

Speaker Change: I think David just a little bit of color around the comp right. So comp store sales pretty consistent when you look at it by month throughout the first quarter.

Speaker Change: <unk> was slightly above the average that we saw through the quarter. It was the highest month during the quarter.

Speaker Change: But we did see momentum carry into April and we saw sequential improvement in the comp when we look at our.

Speaker Change: April versus March and then and then March compared to the the balance of the quarter.

Speaker Change: And thats being driven largely by the titanium.

Speaker Change: As the promotions roll off we're seeing that revenue per member continues to pick up momentum through throughout the quarter.

David Leonard Bellinger: Got it. That's very helpful.

Speaker Change: Got it that's very helpful. And then just a follow up on the on the membership count so up 5% year over year. This quarter I know, there's been a change in our strategy on going after this higher return T 360 customer so just taking that into account.

Is it a mid single digit type run rate is that a good growth number we should look forward over the balance of the year or is there something different as as trends move through Q2, and Q3 and as we get further out.

John Lai: And then just to follow up on the membership count, so up 5% year over year this quarter. I know there's been a change in the strategy of going after this higher return T360 customer. So just taking that into account, it is a mid single-digit type run rate. Is that a good growth number we should look for over the balance of the years? Or is there something different as trends move through Q2 and Q3 and as we get further out? Yeah, David, I think that

John Lai: Yeah, David, I think that that's right. There's a little bit more focus around trading members up into titanium. And last year, we grew membership by low double digits; we would expect this year to be less than that, because the way we've got a model and the way we're thinking about it is, is kind of that mid single-digit range.

Speaker Change: Yes, David I think.

David Leonard Bellinger: That's right, there's a little bit more focus around it.

Speaker Change: Trading members up into titanium and last year, we grew membership by low double digits. We would expect this year to be less than that that the way. We've got it modeled in the way we're thinking about it is it's kind of that mid single digit range.

Speaker Change: Very good thanks, guys.

John Edward Heinbockel: The next question comes from John Heinbockel of Guggenheim. Please go ahead.

Speaker Change: The next question comes from John <unk> of Guggenheim. Please go ahead.

John Lai: Hey John, I wanted to start a philosophical question, right? You guys have always used retail as a feeder for membership. Is there a thought now, given the softness in that cohort, that maybe you go a different route, you know, in trying to market directly to a different demographic that might be receptive to the premium offering? And if so, you know, how do you think you will execute that, and when will you do that?

Speaker Change: Hey, John I wanted to start philosophical question right you guys have always used our retail as a feeder for our membership.

John Lai: Is there a thought now right given softness in that.

John Lai: Cohort, but.

John Lai: Maybe you go a different route.

John Lai: You know and try to market directly to a different.

John Lai: Mcgrath <unk> that that might be receptive to the premium offering.

So you know how do you think you you execute that and when do you do that.

John Lai: Yeah, hey John, good question. So this time last year, we were really looking at building out our brand, and we focused on more branding, broader brand awareness campaigns, but we realized midway through that we really couldn't justify the return on ad spend and given just the size of our footprint and the amount of dollars involved, you know, we pivoted and shifted our action plan toward more targeted approaches to driving customer acquisition. And to your point, we've done such a great job. You didn't say that we did a great job, but we'll give ourselves a pat on the back here.

Speaker Change: Yeah, Hey, John Good question. So this time last year, we were really looking at building out our brand and we're focused on more brand broader brand awareness campaigns.

John Lai: But we realized midway through that we really couldn't justify the return on AD spend and given just the size of our footprint in the amount of dollars involved we pivoted and shifted our action plan towards more targeted approaches to driving customer acquisition and to your point, we've done such a great job.

John Lai: You didn't say that we did a great job of will give ourselves a pat on the back here, we've done such a great job over the years of converting retail customers into members really the focus now is bringing in those less frequent.

John Lai: We've done such a great job over the years of converting retail customers into members. Really, the focus now is bringing those less frequent users into our mix by offering a promotion that has tremendous value and getting them in the door. When we get them in the door, though, we still have a goal of trading them into membership, and so we've got a number of things in the hopper right now that are very early stage but are promising, and, you know, if this holds true, we expect to deploy those as we continue our march.

John Lai: Users.

John Lai: Into our mix by offering.

John Lai: A promotion that.

John Lai: There's tremendous value.

John Lai: And getting them in the door when we get them in the door, though we still have a goal of trading them into membership and so we've got a number of things in the hopper right now that.

John Lai: A very early stage, but are promising and.

John Lai: If this holds true we expect to deploy that as we continue our March.

John Lai: To an earlier question that was, as we are enjoying it, we're exceeding our expectations on the titanium mix and this upgrade to both platinum and titanium. There will be a point where we reshift our focus towards member conversion, and that's more on a regional and, in some cases, store-specific basis because each store has kind of a unique profile. But just to underscore, you know, we're very, very focused on retail customer acquisition and the marketing team, and we're really, really thrilled, by the way, to have Matt Marakovits in his seat, you know, to have the leader that we've really needed for a long time to help take us to the next level. You know, he's hit the ground running, and the team is; we have some very interesting things that we hope to share with you guys on the next call.

John Lai: To an earlier question, though is we are enjoying.

John Lai: Exceeding our expectations on titanium mix and is this upgrade to both platinum and titanium there'll be a point, where we reshaped our focus towards member conversion.

John Lai: And that's more on a regional and in some cases store specific basis.

John Lai: Because each store has kind of a unique profile.

John Lai: But just to underscore you know, we're very very focused on retail customer acquisition and the marketing team and we're really really thrilled by the way to have met brockovich at his seat.

John Lai: Have the leader that we really needed for a long time.

To help take us to the next level.

John Lai: He's hit the ground running and the team is we have we have some very interesting things that we hope to share with you guys on our next call.

John Lai: Maybe as a follow-up to that, right? What's the timing on migrating to 3299 as a premium? And then, I guess, would you consider 1999 sacred? And if so, is there any room between 1999 and 3299, or is that being too cute?

John Lai: Maybe as a follow up to that right.

John Lai: What's the timing on migrating to $32 99 as the premium.

And then I guess would you consider 1999 sacred.

John Lai: And if so.

John Lai: Is there is there any room between 1990, 9% and $32 99, or that's being too cute.

John Lai: Yeah, so in this kind of environment, we're going to hold sacred the $19.99 for now. Never say never, my mom used to tell me. But offering that value, offering it in our membership plan mix, we think is important. But to the $32.99 price point, we are now in all markets at that price point, and the promotions have all run out, and we are expecting to see lift as we march forward. Yeah, and John, just a little bit more nuanced, a little bit more color around that.

Yes. So in this kind of environment, we're going to hold sacred the 1999 for now never say never my mom used to tell me.

John Lai: But offering that that value offering in our membership plan mix, we think is important.

John Lai: But to the 32 99, we are now.

John Lai: In all markets at that price point and the promotions of all run off and we are expecting to see left as we March forward.

Jedidiah Marc Gold: Yeah, and John, just a little bit more nuanced, a little bit more color around that. About 40% of the stores went to $32.99 as of March 1st or April 1st, and the other 60% had taken platinum up to $32.99 at the time that titanium was launched in those particular markets.

Speaker Change: John just a little bit more nuance to it little bit more color around that about 40% of the stores went to $32 99 as of it was it was March 1st.

April 1st.

Speaker Change: The other 60% they they had taken platinum up to $32 99 at the time that titanium was launched in those particular markets.

Okay. Thank you.

Speaker Change: Okay.

Peter Jacob Keith: The next question comes from Peter Keith of Piper Sandler. Please go ahead.

Speaker Change: The next question comes from Peter Keith of Piper Sandler. Please go ahead.

John Lai: Hey, good afternoon, guys. Thanks for taking the time to answer the question. You know, I guess I just want to understand the timing on T360. We're comping about 1% right now, and it doesn't seem like there's been that much acceleration. T360 has been out for a while. Its pricing and platinum. Is there something that's kind of holding up the T360 list at this point? And maybe to that question: How many stores in April are still under the promo pricing?

Peter Jacob Keith: Hey, good afternoon, guys. Thanks for taking the question.

Yes, I guess I just wanted to understand that.

Peter Jacob Keith: Timing on T G E.

Peter Jacob Keith: Talking about 1% right now.

Peter Jacob Keith: Celebration.

Peter Jacob Keith: <unk> been out for a while pricing in platinum.

Peter Jacob Keith: We're selling is kind of holding up.

Peter Jacob Keith: At this point and maybe to that question.

Peter Jacob Keith: Many stores in April are still under the promo pricing.

John Lai: Yeah, so Peter, good to hear from you. We were holding, holding, holding with respect to keeping the promotions in play until we got to the mixed levels that we were desirous of getting to. Now that we're hitting the numbers and exceeding those numbers, quite frankly, we pulled the plug on those promotional offers, and as of today, there's no more of that discount effect that has acted as kind of downward pressure on our comps, so that is behind us, and we were expecting to see a lift going forward. Yeah, Peter, I think one other thing.

Peter Jacob Keith: Yes.

Speaker Change: So Peter good good to hear from you.

Speaker Change: We were holding holding holding with respect to keeping the promotions in play until we got to the mixed levels that we were.

Speaker Change: Desirous of getting too.

Speaker Change: Now that we're hitting the numbers and exceeding those numbers quite frankly.

Speaker Change: We pulled the plug on those promotional offers.

Speaker Change: And as of today, there is no more of that debt discount effect that has acted as kind of downward pressure on our comps.

And so that that is behind us and we're expecting to see lift going forward.

Jedidiah Marc Gold: Yeah, Peter, I think one other piece, just to provide a little bit more color there, is titanium. We're really pleased with how that's performing. It's mixing even better than we had expected. However, retail softness during Q1 was more than we had expected. So, as we talked about on the Q4 call, what we had originally modeled in was the same negative double-digit trend that we saw in Q4 for the balance of the year. It actually slightly decreased. It worsened just a little bit, and it softened just a little bit during Q1. So that retail softness is offsetting the upside that we're seeing in titanium.

Speaker Change: Yes, Peter I think one other piece just to provide a little bit more color there as titanium, we're really pleased with how thats performing.

Speaker Change: It's it's mixing even better than what we had expected.

Speaker Change: It's retail softness during Q1 was more than what we had expected.

Speaker Change: And so as we talked about on the Q4 call. What we had modeled in originally was the same neck.

Speaker Change: Negative double digit trend that we saw in Q4 for the balance of the year. It actually slightly decreased at worst in just a little bit soften just a little bit during Q1.

Speaker Change: So that retail softness is offsetting the upside that we're seeing a titanium.

Speaker Change: Okay.

Peter Jacob Keith: Um, yeah, I guess that makes some sense. I guess, John, I know you talk to a lot of operators out there.

Speaker Change: Yes.

Speaker Change: Makes some sense I guess.

Speaker Change: John I know you talked a lot of operators out there.

John Lai: Do you feel like you're cropping below a lot of peers right now? Or are you being disproportionately impacted by retail? Obviously, you have higher subscription penetration, so I would think not. But generally, what we hear is that a lot of the operators are cropping a little bit higher than 1% right now.

John Lai: Do you feel like you're Comping below a lot of the peers right now or are you being disproportionately impacted by retail obviously, you have a higher dose.

John Lai: <unk> penetration, so I would think not but generally what we hear that a lot of a lot of the operators are comping, a little bit higher than 1% right now.

John Lai: Yeah, it depends on who you're talking to. We enjoy a very large network of stores, close to, by the end of the year, we'll have 500 stores. So if you're speaking to a platform that is in an earlier stage that has a lot of green, they're naturally going to have higher comps, the youth of their network.

John Lai: Yeah.

Speaker Change: You're talking to.

Speaker Change: We enjoy a very large network of stores of.

Speaker Change: Close to by the end of the year, we'll have 500 stores. So if youre speaking to.

Speaker Change: That form that is earlier stage that has a lot of greenfield mix, they're naturally going to have higher comps.

Jedidiah Marc Gold: So we have this blended number, as you know, of stores that have, you know, been around for a while, coupled with some of the new stores that are mixed. When we look at our Greenfield stores and how those are trending, Jed, do you want to share any data? Yeah, I think Peter should give some data to support what John's talking about here, right? So when you look at the comp store performance within our portfolio by vintage, just picking the 2022 vintage 28 Greenfield stores, if we look at the performance of just those 28 stores, they're comping at 40%.

Speaker Change: So the use of their network so.

Speaker Change: So we have this blended number as you know stores that have been.

Speaker Change: Been around for awhile, coupled with some of the new stores that makes when we look at our Greenfield stores and how those are trending Jed.

Speaker Change: <unk> do you want to share any data yeah, Yeah, I think I think Peter's should give some data to support what John is talking about here right. So when you look when you look at the comp store performance within our portfolio by vintages, just picking the 2022 vintage 28 Greenfield stores. If we look at the performance of just those 28 stores there.

Speaker Change: <unk> at 40%.

Jedidiah Marc Gold: So, 40%, but we have a larger store base, so that 40% isn't as pronounced as some of these other operators that may be seeing that really strong comp lift on their recent new builds on a significantly smaller store base. So, we don't believe we're underperforming; we actually still feel really good about how we're performing relative to the competition.

Speaker Change: So 40%, but we have a larger store base, so that 40% isn't as pronounced as some of these other operators that may be seeing that really strong comp lift on their recent new builds on a on a significantly smaller store base.

Speaker Change: So we don't believe were underperformed, we actually still feel really good about how we're performing relative to the competition.

Peter Jacob Keith: Okay, thank you. That is a helpful data point. I appreciate it, guys, and good luck.

Speaker Change: Okay. Thank you that is helpful data point I appreciate it guys and good luck.

Peter Jacob Keith: Bye-bye.

Chris O'Call: The next question comes from Chris O'Call of Stiefel. Please go ahead.

Speaker Change: The next question comes from Chris <unk> of Stifel. Please go ahead.

John Lai: Yeah, thanks. Good afternoon, guys. You know, John, the number of members added from the fourth quarter to the first quarter period in the UWC program has traditionally been a high-water mark each year. Do you think the lower net additions are the result of slower retail sales over the past several quarters, or is the weather the issue, or just help me understand what other factors may be causing that?

Chris: Yes, thanks, good afternoon guys.

Chris: You know John the members added from the fourth quarter to the first quarter period in the EWC program has traditionally been a high watermark. Each year do you think the lower net additions are the result of slower retail sales over the past several quarters or is the weather the issue or just help me understand what other factors may be causing that.

John Lai: Yes, so a combination of lower retail traffic, which gave us less at-bats. Our capture rates, though, are at historic highs. So when we get customers in the door, the team is doing an amazing job of trading them into membership. And the other factor, which we've shared previously, is that we've really prioritized upgrading existing members into premium versus driving new member growth. But there will be a point when we refocus on net member growth because we've done such an amazing job. We'll continually attempt to try to do both, but it's hard to have dual priorities at store level simultaneously, so we opted to choose one over the other. What are some of them?

John Lai: Yes, so a combination of lower retail traffic, which gave us less at bats, our capture rates, though are at historic highs. So when we get customers in the door, where the team is doing an amazing job of trading them into membership.

John Lai: And the other factor is which we've shared previously is that we've really prioritized upgrading existing members into premium versus driving them.

John Lai: New member growth.

John Lai: But there will be appointment, we we focus on net member growth because we've done such amazing job, we'll continually attempt to try to do both.

John Lai: But it's hard to have dual priorities at store level simultaneously.

John Lai: So we opted to choose one over the other.

John Lai: What are some of the marketing tools that you guys could use to help target less frequent retail users?

John Lai: What are some of the tools marketing tools that you guys could use to help target less frequent retail users.

John Lai: Yeah.

John Lai: So we're pulling out all the stops right now, and there's really nothing off the table. You know, we are doing a blend of social, targeted email, and some paid digital, all within a 10-mile radius of our existing stores to really try to attract the new customer. Again, so much of our growth year over year has been word of mouth and then taking existing members and lifting the lifetime value of those members. But we have prioritized building our brand and driving traffic to our stores. And with the new leadership in marketing and our focus on just that, we expect to, over time, start seeing incremental growth in retail traffic again.

John Lai: So we're pulling out all the stops right now and Theres really nothing off the table.

John Lai: We are doing a blend of social targeted E mail.

John Lai: Some some paid digital.

John Lai: All within a 10 mile radius of our existing stores to really try to attract the new customer against so much of our growth year over year has been word of mouth, and then taken existing members in lifting the lifetime value of those members.

John Lai: But we have prioritized building, our brand and driving traffic to our stores and with the new leadership in marketing and our focus on just that.

John Lai: We expect to.

John Lai: Over time start seeing incremental growth.

John Lai: With retail traffic again.

John Lai: Great. Just lastly, how long did you test the pricing changes and in how many markets and locations was that new pricing structure tested in?

Great and then just lastly, how long did you test the pricing changes and how many markets and locations was that new pricing structure tested in.

John Lai: Oh, gosh, Jed, you can correct me here. It was about 70 locations during the initial launch. And we looked at elasticity, you know, and what the, you know, we knew that there was gonna be some elevated churn, which we expected. But that was offset by the incremental revenue that we enjoyed from those that were willing to accept it. And, you know, it all was accretive at the end of the day, and highly accretive, I should say, which gave us great confidence to extend this plan or extend that move across the entire network. And that's our strategy.

John Lai: Oh Gosh Jed you can correct me here it was about 70 locations during the initial launch and we looked at elasticity.

John Lai: And what the element we knew that there was going be some elevated churn, which we expected but that was offset by the incremental revenue that we enjoyed from those that were willing to accept it.

John Lai: And it all was accretive at the end of the day and highly accretive I should say.

John Lai: Which gave us great confidence to extend this plan or extend that move across the entire network.

John Lai: And that's our strategy, yes, Chris I mean part of that was when we launched titanium and some of the markets last last year. We tried this taking platinum to $32 99, and part of that looking at how titanium behaved in those markets, where you took platinum to 32 99 and he closed the delta between.

Jedidiah Marc Gold: Yeah, and Chris, I mean, part of that was when we launched titanium in some of the markets last year. We tried this, taking platinum to $32.99, and looking at how titanium behaved in those markets where you took platinum to $32.99, and you closed the delta between your titanium package and your platinum package. And when you looked at the whole pie, both obviously platinum and titanium, it was accretive. Hence, we went back, and we relaunched in those markets or took this price adjustment in those markets where we launched titanium without the platinum adjustment. Okay, perfect.

John Lai: Youre titanium plaque package and your platinum package and when you looked at the the whole pie both the obviously pellet platinum and titanium it was accretive.

John Lai: We went back and we've relaunched in those markets or may taken this price adjustment in those markets, where we launched titanium without the platinum adjusted adjustment.

Chris O'Call: Okay. Perfect. Thanks, guys.

Speaker Change: Okay perfect. Thanks, guys.

Yes.

Simeon Ari Gutman: The next question comes from Simeon Gutman of Morgan Stanley. Please go ahead.

The next question comes from Simeon Gutman of Morgan Stanley. Please go ahead.

Jacquelyn Renee Sussman: Hi guys, this is Jackie on behalf of Simeon. Thank you so much for taking our question. Just kind of building on that earlier question on titanium, just in light of the better than expected conversions you guys have had, as well as the raised platinum prices, can you talk about the decision to reiterate the comp guide, or what would be the scenario in which comps don't meaningfully exceed guidance in the back half of the year?

Speaker Change: Hi, guys. This is Jack <unk> on for Simeon. Thank you so much for taking our question.

Jack: Building on that earlier question on titanium.

Jack: Aggregate expected conversions you guys have had as well as our raised platinum pricing can you talk about the decision to reiterate comp guide or what would be.

Jack: Linguists comps don't meaningfully exceed guidance in the back half of the year.

Jack: Yeah.

Jedidiah Marc Gold: don't meaningfully exceed.

Speaker Change: Yeah don't meaningfully exceed yeah, I think so Jackie I think when you when we looked at the guide.

Jedidiah Marc Gold: Yeah, I think so Jack I think when you when we looked at the guide and just our quarterly comp expectations it Really, they were, I think, where we netted out the plus one was was in line with with expectations, but how we got there was a little bit different, right, we had better than expected increase in UWC cells, which was driven driven by titanium, the platinum price adjustment, and so so UWC cells were up, but we it was offset by a lower than expected. Retail Results.

Speaker Change: Our quarterly comp expectations it are.

Speaker Change: Really they were I think.

Speaker Change: Where we netted out the plus one was was in line with expectations, but how we got there was a little bit different.

Speaker Change: Right, we had better than expected increase in UWS C cells, which was driving driven by titanium.

Speaker Change: The platinum price adjustment and so <unk> sales were up but it was offset by a lower than expected.

Jedidiah Marc Gold: So, net-net, the comp came in line, and as we pushed that through to the balance of the year, largely unchanged from where we were at the beginning of the year. I would say when we look at Q2 relative to Q1, we do expect that sequential improvement. We do expect some sequential improvement in Q2 versus Q1.

Speaker Change: Retail results. So net net the comp came in line and as we push that through to the the balance of the year.

Speaker Change: Largely unchanged from where we were at the beginning of the year I would say when we look at Q2 relative to Q1, we do expect that sequential improvement we do expect some sequential improvement in Q2 versus Q1.

Jedidiah Marc Gold: Got it, that's really helpful, and just one quick follow-up: are there any signs already of competitors that have entered the car wash space that are already exiting it, or work capacity is coming out of the market? Any color on that would be really helpful, thanks.

Speaker Change: Got it that's really helpful and just one quick follow up.

Speaker Change: <unk> environment I guess are there any signs already of competitors that have entered the carwash space that are already exiting at work capacity is coming out of the market or.

Speaker Change: Any color on that would be really helpful. Thanks.

John Lai: Yeah, we haven't seen any exits. We have seen a cresting, though, of new units. The rate of new unit growth is cresting, and we expect that to abate into 2025, and I think again there's a little bit of rationalization kind of kicking in. Folks are digesting what they've bitten off. Folks that have been on building sprees are really now focusing on operations and improving those operations, and a lot of that's driven by just the cost of capital, their access to capital, some of the debt that they're currently having to service, etc. This slowdown, if you will, this correction, I think is long overdue and healthy and good for the space because it has gotten a little crazy over the last several years.

Speaker Change: Yeah, we haven't seen any exits.

Speaker Change: We have seen a cresting no new units.

Speaker Change: Great.

Speaker Change: New unit growth is cresting, and we expect that to abate into 2025.

Speaker Change: And I think again, there is a little bit of rationalization kind of kicking in.

Speaker Change: Folks are digesting, what they've bitten off folks that have been on <unk>.

Speaker Change: Building <unk>.

Speaker Change: Really now focusing on operations and improving those operations.

Speaker Change: And a lot of that is driven by just the cost of capital access to capital.

Speaker Change: Some of the debt that they are currently having to service et cetera.

Speaker Change: This slowdown if you will this correction I think is long overdue and healthy.

Speaker Change: And good for the space because it has gotten a little crazy over the last several years.

Jacquelyn Renee Sussman: Got it. Thanks for this. Thanks for the color.

Speaker Change: Got it.

Speaker Change: Thanks for the color.

Justin E. Kleber: The next question comes from Justin Kleber of Baird. Please go ahead.

Speaker Change: The next question comes from Justin Kleber of Baird. Please go ahead.

John Lai: Good afternoon, John and Jed. Thanks for taking the questions. Just a follow-up on the price increases for platinum. In those instances where the customer, I guess, pushes back, are they leaving the UWC ecosystem, or are they trading down to the base?

Justin E. Kleber: Hey, good afternoon, John and Jade Thanks for taking the questions just a follow up on the price increases for platinum in those instances, where the customer I guess pushes back are they leaving the <unk>.

Justin E. Kleber: The EWC ecosystem or are they trading down to the base plan.

John Lai: Yeah, we think the bulk are trading down to the more affordable plan. There have been some that have chosen to leave, but it's a very small number. So again, and then when we look at churn through a historical lens or a traditional lens, you know, the way we define it, some folks that choose to cancel out of their subscription remain customers. So they're technically not a lost customer. And we do see a lot of customers that then or excuse me, members that come back after they've canceled, because once you get used to having your car clean all the time and having to pay as you go, you really miss it. So we have a large percentage of member growth that are former members that come back and, you know, they're kind of coming in and out of the program. Yeah.

Speaker Change: Yes, we take the bulk of trading down to the more affordable plan. There have been some that have chosen chosen to leave but it's a very small number.

Speaker Change: So again and then when we look at churn through a historical lens or traditional lens.

Speaker Change: The way we define it.

Speaker Change: Some folks that choose to cancel out of their subscription remained customers. So they're technically not a lost customer.

Speaker Change: We do see a lot of.

Justin E. Kleber: Customers that then you.

Justin E. Kleber: You should have members that come back after they've canceled because once you get used to having your car cleaning all the time.

Speaker Change: Having to pay as you go you really miss it.

Speaker Change: We have a large percentage of member growth out of our former members that come back.

Speaker Change: And they are kind of coming in and out of the program.

Jedidiah Marc Gold: Yeah, Justin, I would add, I mean, while you see a little bit of elevated churn, it's not much. I mean, this is a... It's relatively price inelastic when you look at this price adjustment on platinum, especially when it's done in conjunction with the rollout of titanium.

Speaker Change: Yes, Justin I would add I mean, while you see a little bit of elevated churn it's not much I mean this is the.

Speaker Change: It's relatively price inelastic when you when you look at the list price adjustment on platinum, especially when it's done in conjunction with the rollout of titanium.

Justin E. Kleber: Okay, yeah, that makes sense. Maybe an unrelated follow-up, Jed, for you on the new store economics. You just talked about the 22 vintage, growing 40% in that first comp year. Where are, or how should we think about year one AUV?

Justin E. Kleber: Okay, Yeah that makes sense.

Speaker Change: Maybe an unrelated follow up Jed for you on the on the New store Economics, you just talked about the 22 vintage.

Jedidiah Marc Gold: Like where are those shaking out for new stores today? How long before those stores hit that? The 2 million chain average. Just trying to understand the same store sales waterfall. As it would seem to me like new store maturation should probably be giving you a couple points of comp as we sit here today. So, any color there would be helpful. Thank you.

Jedidiah Marc Gold: Growing 40% in that first comp year, where our or how should we think about year, one <unk> like where are those shaking out for new stores today.

Speaker Change: How long before those stores hit that.

Jedidiah Marc Gold: $2 million.

Jedidiah Marc Gold: <unk> averaged just trying to understand the same store sales waterfall.

Jedidiah Marc Gold: It would seem to me like new store maturation should probably be giving you a couple of points of comp as we sit here today, so any color there would.

Speaker Change: It would be helpful. Thanks.

Jedidiah Marc Gold: Yeah, so, I mean, just taking a step back and just reminding folks of net investments on a greenfield of about $2 million, right, consisting of about $6.3 million of gross investment offset by a sell-leaseback of $4.3 to $4.5 million, and if you look at that revenue build, it will grow from about a million to a million three in year one, and it will increase up to about $2 to $2.3 million by year three.

Speaker Change: Yeah. So I mean, just just taking a step back and just reminding folks of net investments on a greenfield of about $2 million consisting of about $6 $3 million of gross investment offset by a sale leaseback of $4 30 to $45 $5 million and if you look at that revenue build.

Speaker Change: <unk>.

Speaker Change: It will it will grow from about a million a million three in year, one and it will well increased up to about two to $2 3 million by by year three.

Speaker Change: Yeah.

Justin E. Kleber: All right. Got it. Thanks, guys. I was going to say we had a weighted back half kind of new build as well. That's right.

Speaker Change: But again <unk> got it thanks guys.

Speaker Change: I was going to say, we had a back half weighted kind of.

Speaker Change: Newbuild as well that's right.

Phillip Blee: The next question comes from Phillip Blee of William Blair. Please go ahead.

Speaker Change: The next question comes from Philip Lee of William Blair. Please go ahead.

John Lai: Hi guys, thanks for the question. There's been a lot of discussion around the lower income consumer starting to really show signs of distress, which you touched on around some weakness in your retail customer. But can you provide maybe an updated view on the composition or demographics of your membership base? And maybe just some thoughts on the stickiness of the subscription, what the key drivers are there, especially during periods of volatility? Thanks.

Phillip Blee: Hi, guys. Thanks for the question.

Phillip Blee: There's been a lot of discussion around the lower income consumer is starting to really show signs of distress, which you touched on around some weakness in your retail customer, but can you provide maybe an updated view on the composition of our demographics of your membership base and then maybe just some thoughts on the stickiness of the subscription but the key drivers are there, especially during periods of volatility.

John Lai: Yeah, I'll start by saying, you know, we feel very fortunate to be in a space where we have universal appeal across all demographics. And so everyone loves a car wash, everyone likes to keep their car clean, and in some cases, we see in our lower demographic, stores in our lower demographic markets, you know, enjoy some of the highest ticket averages and highest capture rates, which is kind of a unique phenomenon. But they're also the ones that are under more pressure when their budgets are spread thin.

Speaker Change: Yeah, I'll start by saying, we feel very fortunate to be in this space, where we have universal appeal across all demographics, and so everyone loves a car wash everyone likes to keep their car clean and in some cases, we see in our lower demographic stores and a lower demographic markets.

Speaker Change: Enjoy some of the highest ticket averages and highest capture rates.

Speaker Change: Which is kind of a unique phenomenon, but they're also the ones that are also under more pressure when there their budgets are spread thin and so we have seen in that bottom quartile cohort elevated churn.

John Lai: And so we have seen in that bottom quartile cohort elevated churn and more of an impact on retail volume, which we think is cyclical and will, you know, as the economy improves and consumer confidence comes back, we'll get them back because they're very quick to come back once things are a little bit more flush.

Speaker Change: And more of an.

Speaker Change: Impact on retail volume.

Phillip Blee: Which we think is cyclical and we will.

Phillip Blee: The economy improves and consumer confidence comes back.

Phillip Blee: We'll get them back because they are very quick to come back once things once they become a little bit more flush yeah, and just putting a little bit finer point on that when you look at the 80 stores in the lower two income demographic.

Jedidiah Marc Gold: Yeah, I'm just putting a little bit of a finer point on that when you look at the 80 stores in the lower two income demographic, the stores within the lower income demographics, there are two lowest performing segments across the portfolio, which is why we believe that this is there's certainly some macro pressure on the consumer right now, particularly a lower income consumer.

Phillip Blee: The stores within that the lower income demographics, there are two lowest performing segments across the portfolio.

Phillip Blee: Which is which is why we believe that this is a it's there's certainly some macro pressure on the consumer right now.

Phillip Blee: Particularly at lower income income consumer.

Phillip Blee: Yeah.

John Lai: Okay, great. That's very helpful. Thanks for the color. And then, maybe, on the retail customer, do you think that this quarter's decline is reflective of what we can expect for the remainder of the year? Or are there any changes such as potentially going the other way on pricing and elevating promotional offerings to drive traffic that we should consider where we could see a bigger inflection here?

Speaker Change: Okay, Great. That's very helpful. Thanks for the color and then just on the retail customer maybe do you think that this quarter's decline is reflective of what we can expect for the remainder of the year or are there any changes such as potentially maybe going the other way on pricing and elevating promotional offerings to drive traffic that we should consider where we can see.

Phillip Blee: Bigger inflection here.

Jedidiah Marc Gold: Without tipping our hand to our competitors, as I mentioned earlier, we are turning up the dial on promotional offers for customer acquisition for retail customers. So that will, you know, part of that game plan, part of that action plan is going to be getting a little bit more aggressive on some of those offers, but we have enough room, and again, given the margin profile of our services, we can lean in a little bit on those offers. Without it being, you know, overly dilutive.

Phillip Blee: So without tipping our hand to our competitors as I mentioned earlier, we are turning up the dial on promotional offers for customer retail customer acquisition for retail customers so that will be.

Phillip Blee: Part of that game plan part of that action plan.

Phillip Blee: Can be getting a little more aggressive on some of those offers.

Phillip Blee: But we have enough room.

Phillip Blee: And again, given the margin profile of our services.

Phillip Blee: We can lean in on the dominoes offers without it being overly dilutive. Yes. This is where we're grateful that <unk>.

Phillip Blee: Yeah, this is where we're grateful that roughly 75% of our sales are subscriptions because it's much more predictable, it's consistent, and a little easier to forecast. The retail side of the business is a little more difficult to predict. What we've modeled is we took that Q1 trend and that Q1 retail comp, and we extrapolated that out over the back half of the year. So to the extent retail improves from what we saw in Q1, we would expect, and everything else staying constant, we would expect improved comp performance.

Phillip Blee: Roughly 75% of ourselves our subscription because there it's much more predictable its consistent a little easier to forecast that that retail side of the business is a little more difficult to predict what we've modeled is we took that Q1 trend and.

Phillip Blee: Q1, retail comp and we extrapolated that out over the back half of the year. So to the extent retail improves from what we saw in Q1, we would expect it.

Phillip Blee: And everything else staying constant we would expect our improved comp performance.

Michael Lasser: Okay, great. Thank you guys so much. I appreciate it.

Speaker Change: Okay, great. Thank you guys appreciate it.

Phillip Blee: Okay.

Michael Lasser: The next question comes from Michael Lasser of UBS. Please go ahead.

Phillip Blee: The next question comes from Michael Lasser of UBS. Please go ahead.

Michael Lasser: Good evening. Thank you so much for taking my question. John, how do you think about the risk of raising prices such that you provide a more comfortable umbrella for your competitors to operate under? Meaning, as you raise prices, that is also going to provide more opportunity for your competitors to operate under higher prices, which could sustain their longevity in this marketplace, versus if you should, Pat, put more pressure on some of your competitors, it might have forced more consolidation in the marketplace. Thank you.

Michael Lasser: Good evening. Thank you so much for taking my question.

Michael Lasser: How did you think about the risk of raising pricing.

Michael Lasser: Can you provide a more comfortable umbrella.

Michael Lasser: Are your competitors to operate meaning as you raise prices.

Michael Lasser: It is also going to provide more opportunity for your competitors operate under higher pricing, which could sustain their longevity in this marketplace.

Michael Lasser: That put more pressure on some of your competitors might afford more consolidation in the market.

Michael Lasser: Yes.

John Lai: Hey Michael, as you know, our pricing strategy, our pricing philosophy has always been somewhat conservative. And we're very careful and deliberate and thoughtful and sensitive to, you know, just this demand and elasticity. For example, I think it's important just to highlight that for our membership plan, or the 1999 plan, we have not taken a price increase on that base membership in almost 20 years. Michael. And I can't see your face. I don't know if you're smiling or not. But I'm smiling because we've chosen not to touch.

Michael Lasser: Hey, Michael So as you know our pricing strategy, our pricing philosophy has always been somewhat conservative and.

Speaker Change: And we're very careful.

Speaker Change: Pink deliberate and thoughtful.

Speaker Change: Insensitive to just as demand elasticity curve.

Michael Lasser: I think it's important just to highlight that for our membership plan or 1999 plan, we have not taken a price increase on that base membership in almost 20 years.

John Lai: At $19.99, that offers tremendous value. On our retail pricing, again, we're relatively conservative. We are right at the market median in most markets with a $10 retail-based price point, and we think that that's a tremendous value for almost all motorists. But we're not looking to take prices on that. So the moves that we've made have been on the upper end of our menu portfolio, where we think that the consumer is less price sensitive. There's a saying, we have one of our sales rock stars internally called Courtney Stephenson, and she has a saying internally that says, package buyers buy.

Speaker Change: This is where I dropped the mic Michael.

Speaker Change: And hence your face I don't know, if you're smiling or not but I'm smiling because we.

Speaker Change: We've chosen to not touch at 1999 that offers tremendous value on our retail pricing again, we're relatively conservative we are right at the market median in most markets.

Speaker Change: $10 retail based price point that we think that that's a tremendous value for almost all motorists.

Speaker Change: But we're not looking to take price on that.

Speaker Change: So the moves that we've made have been on the upper end of our our menu portfolio, where we think that the consumer is less price sensitive.

Speaker Change: As you've seen we have one of our sales rock stars internally called Courtney Stefansson and she has a saying internally that says package buyers buy.

Speaker Change: And there was just a very large segment of our customer base when they come in they want the best and so up until now we have had a good better but we haven't had the best and the good better or Hot Shanker Nubian Shield has been just a home run for US now we have titanium.

Michael Lasser: And there's just a very large segment of our customer base where when they come in, they want the best. And so up until now, we have had good, better, but we haven't had the best. And in the good, better, our Hot Shine Carnuba Shield has been just a home run for us. Now we have titanium. And so being able to offer them two premium offerings and the success that we're enjoying with that, it's basically, Michael, a price increase without a price increase.

Speaker Change: So being able to offer them to premium offerings.

Speaker Change: And the success that we're enjoying in that it's basically Michael a price increase without a price increase.

Speaker Change: Thank you.

John Lai: My follow-up question is two parts. One, there are a lot of moving pieces on the changes in pricing between titanium and now that you have that with things like fully deployed and off, mostly off promotional pricing, and then the increase to the platinum program. So can you quantify what you expect the aggregate contribution from those changes to be over the next couple of quarters? And can you also give us a greater sense of how much worse retail decelerated from 4.2 to 1.2? Thank you so much.

Speaker Change: My follow up question two parts one there are a lot of moving pieces on the changes in pricing between titanium and now that you have that.

Speaker Change: Like fully deployed and off mostly off promotional pricing and then the increase of the platinum program.

Speaker Change: Can you quantify what you expect the aggregate contribution from those changes could be over the next couple of quarters and.

Speaker Change: And can you also give us a greater span.

Speaker Change: How much worse.

Speaker Change: Phil.

Speaker Change: Elevated from four to one.

Speaker Change: Thank you so much.

Speaker Change: Yeah.

Jedidiah Marc Gold: Yeah, Michael. So when we look at the balance of the year and what our expectations are, the majority of the comp growth is going to come from titanium and taking our existing members, and trading them up into the titanium package. Keep in mind that 60% of the stores had already seen this $32.99 price adjustment on the platinum side going into either the end of last year or during Q1 of this year. So there'll be some benefit from that price adjustment, but most of it's going to come from titanium and then the increase in revenue per member there. The retail, when you look at Q1 versus Q4, um We were low double-digit negative retail comps in Q4, and when we look at Q1, we were low negative teens. Thank you.

Speaker Change: Yeah, Michael So when we look at.

Speaker Change: When we look at the balance of the year and what our expectations are that the majority of the comp growth is going to come from from titanium.

Tristan M. Thomas: The next question comes from Tristan Thomas-Martin of BMO Capital Markets. Please go ahead.

Speaker Change: And taking our existing members trading them up into into titanium package.

Speaker Change: Keep in mind that 60% of the stores had already seen this 32 99. This this price adjustment on the platinum side.

Speaker Change: Going into Q.

Speaker Change: Either the end of end of last year towards the end of last year or during Q1 of this year. So there'll be some benefit from that price adjustment, but most of it is going to come from from titanium.

Speaker Change: The increase in revenue per member there the retail when you look at Q1 versus Q4.

Speaker Change: We were a.

Speaker Change: Low double digit negative retail comps in Q4, and when we look at Q1, we were a low negative teens.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: The next question comes from Tristan Thomas Martin of BMO Capital markets. Please go ahead.

Speaker Change: Hey, good afternoon.

Speaker Change: Okay.

Speaker Change: Just looking a little further out I think you said the increase in platinum platinum has been driving people titanium if we go out a year or two with the planned period, then raise the price of base, which should then theoretically push people into platinum or higher is that kind of a longer term vision.

John Lai: Again, we don't want to telegraph any pricing moves, given the broad nature of this conference call. But back to my earlier comment, never say never. You know? I think, you know, it would be prudent for us to test and evaluate, in a select market, what that impact would be measured against, you know, what would perhaps be some elevated churn offset by incremental growth and how that affects net member growth over time and the demand for that service.

Speaker Change: Again, we don't want to telegraph any pricing moves given the broad nature of this conference call.

Speaker Change: Back to my earlier comment never say never.

Speaker Change: I think it would be prudent for us to test and evaluate.

Speaker Change: And a select market.

Speaker Change: That impact would be measured against.

Speaker Change: Perhaps be some elevated churn offset by incremental growth and how that affects net member growth over time and the demand for that service. So.

Speaker Change: We will.

John Lai: So, you know, we will always reserve the right to make select moves at the appropriate time. And really, that's a judgment call on this team's part. I think given just the rising input costs that we're experiencing, if margin expansion is one of our objectives, then clearly, at a certain point, we will have to take a price hike. But we're holding the line for now. Yeah, Tristan, the one thing I would, I mean, right, price is one.

Speaker Change: Always reserve the right to make select moves at the appropriate time and really that's a judgment call on this team's part.

Speaker Change: I think given just the rising input costs that.

Speaker Change: We're experiencing.

Speaker Change: If margin expansion is one of our objectives, then clearly at a certain point.

Speaker Change: We'll have to take the price up.

Speaker Change: But we're holding the line for now.

Jedidiah Marc Gold: Yeah, Tristan, the one thing I would say is, right, price is one input in that customer value proposition, but speed, quality, customer service, there's so many different variables that we look at when we're thinking about whether to take a price increase. It's not just looking at the delta between our packages, and so all those factors are going to come into play when we think about the appropriate time to take price increases. Got it. And then just one more. What do you see in M&A?

Speaker Change: The attrition and the one thing I would I mean right prices one input in that in that customer value proposition, but speed quality customer service. There are so many different variables that we look at when we're thinking about whether to take a price increase it's it's not just looking at the delta between our packages and so all those factors are going to come into play when we think of.

Speaker Change: At the appropriate time to take pricing.

Speaker Change: Got it and then just one more what are you seeing the M&A multiple was.

Speaker Change: Thank you.

Tristan M. Thomas: Depends on the asset, depends on. Well, so just the short answer to your question, things are trading today in the 10 to 12 ish range. There's been some folks that have leaned in a little heavier through the lens of what they think they can grow the business to lower that effect of the multiple. But, you know, multiple, there's been some multiple compression. It's been pretty precipitous over the last year.

Speaker Change: Depends on the asset depends on.

Speaker Change: Well so the short answer to your question things are trading today in the 10 to 12 ish range.

Speaker Change: There's been some folks that are leaning a little heavier.

Speaker Change: And through the lens of what they think they can grow the business to to lower that effective multiple.

Speaker Change: But.

Speaker Change: Multiple theres been some multiple compression.

Speaker Change: It's been pretty precipitous over the last year.

Speaker Change: Got it thank you.

John Lai: The next question comes from Christian Carlino of J.P. Morgan. Please go ahead.

Speaker Change: The next question comes from Christian <unk> of Jpmorgan. Please go ahead.

Christian Justin Carlino: Good afternoon. Thanks for taking our question. One point of clarification: when you speak of titanium penetration, is that as a percentage of members or revenues? And when you speak to that 20% penetration, is it, you know, 25 to 30% of members have tried it, and 5 to 10% have either churned or traded back down to platinum? Just help us understand maybe how many have actually tried it out so far and what the retention has been like.

Christian: Hi, good afternoon, thanks for taking our question.

Christian: One point of clarification, when you speak to titanium penetration is that as a percentage of members or our revenues and when you speak to that 20% penetration is at.

Christian: 25% to 30% of members have tried it in 5% to 10% of either churn or trade it back down to platinum and just help us understand maybe how many have actually tried it out so far and what the what the retention it's been like.

John Lai: Yeah, so when we share those numbers, those are members, not revenue, and the numbers that we're sharing with you are net after churn. Um, and so we would never be that company that reports, you know, a promotional number and celebrates that, which is why we're so cautious and, I think, responsible.

Christian: Yes, so when we share those numbers those are members not revenue and the numbers that we're sharing with you our net after churn.

Christian: And so we would never be that company that reports.

Christian: Promotional number in that celebrates that which is why we're so cautious and I think responsible.

Jedidiah Marc Gold: And I think, Christian, just a little bit more color there, right? So we're seeing just north of 20% titanium member mix today. We do expect that to come back, pull back just a little bit as these promotions have recently rolled off. We feel good about, we feel really good about our at least 15% that we communicated on the last call. We actually believe that, longer term, and exactly when, whether that's the end of this year or the middle of next year, we believe that north of 20% is a reasonable goal that we're going to work toward.

Christian: And I think Christian just a little bit more color there right. So we're seeing just just north of 20% titanium member mix today.

Christian: We do expect that to come back pull back just a little bit as these promotions have recently rolled off we feel good about we feel real good about our at least 15% that we communicated on the last call, we actually believe longer term and exactly when whether that's the end of this year or middle of next year, we believe that the north of 20 <unk>.

Christian: Sent.

Christian: It's a reasonable goal that we're going to work toward.

Christian: Yes.

Christian Justin Carlino: Got it, that's helpful. And then, in terms of the competitive backdrop, in some of the markets where you really saw the most competitive intrusion in the past couple of years, are you starting to see things turn back into your favor? And then to clarify an earlier question, did you say that 25 unit growth should actually continue to slow relative to 24? Any, any reads there on just given the length of the development pipelines?

Speaker Change: Got it that's helpful and then in terms of the competitive backdrop in some of the markets, where you really saw the most competitive intrusion in the past couple of years are you starting to see things turn back into your favor and then to clarify an earlier question did you say that 20.

Speaker Change: 25 unit growth should actually continue to slow relative to 'twenty four and just any any read there on just given the length of the development pipeline.

John Lai: Yes, I would say there's no one market where we've seen more competitive intensity than any other. It's been pervasive across the country.

Speaker Change: Yes, I would say there is no one market, where we've seen more competitive intensity than any other it's been pervasive across the country.

Speaker Change: And then to the second part of your question and by the way competition is not new to us we've been.

John Lai: And then to the second part of your question, and by the way, competition is not new to us. We've been, we have had competition within a three mile radius and over half of our portfolio for years. And we believe, it's our belief that the best operator, the one that's delivering the most value and the best customer experience will ultimately prevail. And so what we focus on, we don't obsess over the competition, we focus on what we can control, which is, you know, speed, quality, as Jed mentioned, customer experience, and then wowing them. We got to earn that business every single day. And so you can build a brand new shiny box, and it could look really sexy and cool. You may want to try it.

Speaker Change: Competition within a three mile radius over half of our portfolio for years.

Speaker Change: And we believe it is our belief that the best operator in the one that's delivering the most value and the best customer experience will ultimately prevail and so what we focus on we don't obsess over the competition, we focus on what we can control, which is speed quality as Jed mentioned customer experience and then wowing them. We've got to earn that business every single day and see you.

Speaker Change: You can build a brand new shiny box and it could look really sexy and cool you may go try it but we've seen time and time again customers coming back to that business that actually delivers upon that value prop and again, where we elevated where we hear time and time again is that it's our people and the customer service that.

Jedidiah Marc Gold: But we've seen time and time again customers coming back to that business that actually delivers on that value prop. And again, where we elevate, what we hear time and time again, is that it's our people and the customer service that they deliver. And, you know, we are in the hospitality business, and we're service providers providing great customer service, and that's what we do really, really well. The second part of your question was about 2025.

Speaker Change: They deliver and we are in the hospitality business and where service providers, providing great customer service.

Speaker Change: And that's what we do really really well.

Jedidiah Marc Gold: And, you know, again, just to reiterate, we expect the rate of growth to decline in terms of new units coming into the market, but they're still at a high rate compared to where it was, you know, five years ago, 10 years ago.

Speaker Change: The second part of your question was on 2025.

Speaker Change: And.

Speaker Change: Again, just to reiterate we expect the rate of growth to decline.

Speaker Change: Is it new units coming to the market, but there is still is still at a high rate compared to where it was.

Speaker Change: Five years ago 10 years ago.

Christian Justin Carlino: And I think just so while we're looking at that kind of macro picture, as we look at our pipeline and what we expect from our pipeline, obviously, there's a 20 to 20 month development cycle. We've got pretty good visibility into 2025, and we expect our unit growth to continue at a similar pace to what we're seeing here. We do not expect them to slow down on the Greenfield side of things.

Speaker Change: And I think just just so while we that's kind of the macro picture as we look at our pipeline and what we expect with with our pipeline, obviously theres a its a 20 about 20 month development cycle, we've got pretty good visibility into 2025, and we expect our unit growth to continue at a similar pace to what we're seeing.

Speaker Change: Here, we do not expect us to slow down on.

Speaker Change: On the Greenfield side of things.

Speaker Change: Got it. Thank you very much best of luck.

Speaker Change: Okay.

David Michael Lantz: Got it. Thank you very much. The next question comes from David Lantz of Wells Fargo.

Speaker Change: The next question comes from David Lance of Wells Fargo. Please go ahead.

David Michael Lantz: This question comes from David Lantz of Wells Fargo. Please go ahead. Hey guys, thanks for taking my question. Can you talk about the drivers of the cost of labor?

David Michael Lantz: Hey, guys. Thanks for taking my question could you talk about the drivers of cost of labor and chemicals deleveraging in a bit more detail and considering rising input costs. How are you thinking about this line item over the balance of the year.

Jedidiah Marc Gold: Yeah, so when you look at the cost of labor and chemicals, about 90% of that line is the labor expense. And during the quarter, during the first quarter, we saw about three and a half percent wage inflation on our frontline team members. Most of that is driven by the annual merit cycle where general managers and team members are given an annual adjustment as part of our merit process.

David Michael Lantz: Yeah. So when you look at the cost of labor and chemicals about 90% of that line is the labor expense.

David Michael Lantz: And <unk>.

David Michael Lantz: During the quarter during the first quarter, we saw about three 5% wage inflation on our frontline.

David Michael Lantz: Team members most of that is driven by the annual merit cycle, where general managers and team members, who are given an annual adjustment as part of our process.

Jedidiah Marc Gold: So we'd expect that to hold relatively consistent with what we saw in Q1. On the chemical side, we had some pretty good efficiencies there, just from the sourcing side of things, but then also being able to identify some efficiencies in our chemical usage. And we were able to help drive some savings on our chemicals to where when we look at our chemical cost per car during the quarter, it's lower than what it's historically been.

David Michael Lantz: So we would expect that too to help hold relatively consistent with what we saw in Q1 on the chemical side, we had some pretty good efficiencies there.

David Michael Lantz: From a just from a sourcing side of things, but then also being able to identify some efficiencies in our chemical usage.

David Michael Lantz: And we were able to to help drive some savings on our chemical to where when you look when we look at our chemical cost per car during the quarter, it's lower than what it's what has historically been.

Jedidiah Marc Gold: And we would expect that to continue. Through the balance of the year, where we really got the leverage on the cost side was on the G&A side of the business. Some of that was timing.

David Michael Lantz: And we would expect that to continue.

David Michael Lantz: Through the balance of the year, where we really got the leverage on the cost side was on on the G&A side of the business. When you look at the G&A improvement year over year. Some of that was was timing.

David Michael Lantz: So we don't expect all of that to continue into the second half of the year. The one other little nuance that I think, David, is worth noting as we look at the first half, the second half, and that store-level labor is just the cadence of our greenfields. About 35 percent of our greenfields we expect to be in the first half, and 65 percent we expect to be in the second half. And just having to staff those greenfields with a full labor load, but they haven't fully ramped up, it creates just a little bit of a margin pinch the more new greenfields that you have coming online.

David Michael Lantz: So we don't we don't expect all of that to continue into the second half of the year.

David Michael Lantz: The one other little nuance that I think David worth, noting as we look at first half second half and that store level labor.

David Michael Lantz: Is just the cadence of our Greenfields about 35% of our Greenfields, we expect to be in the first half, 65%, we expect to be in the second half and the just the <unk>.

David Michael Lantz: Having to staff those greenfields with a full labor load, but they haven't fully ramped it creates just a little bit of a margin pinch.

David Michael Lantz: The more new Greenfields that you have coming online.

David Michael Lantz: Got it. That's helpful. And then just last one for me: How did retail comps in lower income demographics compare to that chain average of down low teen? Yeah, the lower income demographics, the 80 stores that I referenced earlier. They were, they were, yeah, so, flat to negative for both of those quadrants, for those segments. Great, thanks. The next question comes from Vicky Liu.

Speaker Change: Got it that's helpful. And then just last one for me how did retail comps and in lower income demographics compare to that chain average of down low teens.

Speaker Change: Yes.

Speaker Change: Lower income demographics, the 80 stores that I referenced earlier.

Speaker Change: They were they were.

Speaker Change: Yeah, so far.

Speaker Change: Flat to negative for both of those quadrants.

David Michael Lantz: Those segments.

Speaker Change: Great. Thanks.

Speaker Change: Okay.

Vicky Liu: The next question comes from Vickie Liu of Bank of America. Please go ahead.

Speaker Change: The next question comes from Vicky Lou of Bank of America. Please go ahead.

Vicky Lou: Good afternoon. Thank you for taking our questions. This is sticky on for Robbie <unk>.

Vicky Lou: My first question is you mentioned that premium penetration is now above 60% over the long term just curious what is your target split between all three types of memberships.

John Lai: Yeah, you know, again, I don't want to dodge that question. You know, today, we feel really, really fortunate to have a mix of about 40% in our base plan, 20% in our titanium, and then another, call it 40%, in our platinum program. And those are just rounded numbers. We think that that's a really healthy mix. And, you know, the fact that we've got 60% of our 2.1 million members now on the premium plans, that if I can just say our high margin, you know, is awesome. You know, how high can trees grow?

Vicky Lou: Yeah.

Speaker Change: Again, I don't want to Dodge that question today.

Speaker Change: We feel really really fortunate to have a mix of about 40% in our base plan, 20% in our titanium.

Speaker Change: And then another call it 40% in our platinum program and those are just rounded numbers.

Speaker Change: We think that that's a really healthy mix and the fact, we've got 60% of our $2 1 million members now in the premium plans.

Speaker Change: If I can just say our high margin.

Speaker Change: As awesome.

Speaker Change: <unk>.

John Lai: How many more customers can we trade into that? You know, we're still kind of in the early stages of this launch, and so we're not done continuing to try and grow that side of the business. But we feel really good with where we sit. Yeah, I think I think

Speaker Change: How high can the trees grow.

Speaker Change: How many more customers, we can trade into that.

Speaker Change: We're still kind of in the early stages of this launch and so we're.

Speaker Change: We're not done continue to try and grow that side of the business, but we feel really good with where we said yes.

Jedidiah Marc Gold: Yeah, I think there's always been a natural premiumization in the business, right? Going back to just before we launched titanium, where we just had a base and a platinum. It was roughly 55% platinum and 45% base. But if you go back five years before that, it was actually the inverse. We had more base members than we had platinum, so there's always been this natural tailwind of customers over time trading into those more premium packages. It's really difficult to say where it taps out, and the goal is to continue to grow it as high as we can get it. Yeah, thank you. And then my follow-up question, so

Speaker Change: Yes, I think I think there's always been a natural premium innovation.

Speaker Change: And the business right going back to just before we launched titanium or we just had a base and a platinum.

Speaker Change: It was it was roughly 55% platinum 45% base you go back five years before that it was actually the inverse we have more base members than we had had platinum.

Speaker Change: So there's always been this natural tailwind of customers over time trading into those more premium packages.

Speaker Change: Okay.

Speaker Change: It was really difficult to say, where it taps out and the goal is to continue to grow that as high as we can get it.

Speaker Change: Yeah. Thank you and then my follow up question, so with the high level of competition in this space and a soft retail environment are you seeing any trends in member acquisition cost.

Speaker Change: Okay.

Vicky Liu: No, so our customer acquisition costs or member conversion costs are relatively negligible because, again, our focus, the beauty of our business is we're taking an existing customer and trading them in. We don't have to go spend money to get them in the door. So if there's any customer acquisition investment, it will be on the retail side, which we could probably apply some of that to membership CAC as well as we trade them in. So that's the journey, that's the path, but the overall expense is negligible.

Speaker Change: No so our customer acquisition costs or member conversion costs, they're there they're relatively negligible because again our focus is.

Speaker Change: <unk> of our businesses were taking an existing customer and train them in we're not having to go spend money too.

Speaker Change: Get them in the door.

Speaker Change: So if there is any customer acquisition investments.

Speaker Change: We'll be on the retail side, which we could probably apply some of that too.

Speaker Change: Membership CAC as well.

Speaker Change: As we trade them in so.

Speaker Change: So that's the journey that's the path.

Speaker Change: But the overall expenses negligible.

Speaker Change: Today.

Speaker Change: Thank you.

Speaker Change: Thanks Becky.

Operator: This concludes our question and answer session. I'd like to turn the conference back over to John Lai for any closing remarks.

Speaker Change: This concludes our question and answer session I'd like to turn the conference back over to John Locke for any closing remarks.

John Lai: Thanks, operator. And thanks, everyone, for joining our call today. At Mister Car Wash, we have a massive growth opportunity in front of us, and we're in the early innings of our life cycle. We're being very deliberate and focused as we execute against our plan, and we're very optimistic about what lies ahead of us as we build for the long term. We look forward to talking to you guys again in 90 days, and thank you so much. The conference is now concluded. Thank you for attending today's presentation.

John Lai: Thanks, operator, and thanks, everyone for joining our call today at Mister car wash, we have a massive growth opportunity in front of us.

John Lai: And we're in the early innings of our lifecycle.

John Lai: We're being very deliberate and focused as we execute against our plan and we're very optimistic about what lies ahead of us as we build for the long term.

Speaker Change: We look forward to talking to you guys again in 90 days. Thank you so much.

Operator: The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.

Speaker Change:

Speaker Change: [music].