Q1 2025 Mister Car Wash Inc Earnings Call
Operator: Good afternoon and welcome to Mister Car Wash first quarter 2025 conference call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.
Good afternoon, and welcome to Mister car wash first quarter 'twenty to 'twenty five conference calls at.
At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. Please.
Operator: Please note that this is being recorded and a reproduction of this call in the whole or in part is not permitted without written authorization from the company.
Please note that this is being recorded and the reproduction of this call and the whole are in part is not permitted without written authorization from the company.
Eddie Plank: I will now turn the conference over to Eddie Plank, Vice President of Investor Relations. Good afternoon, everyone, and thank you for joining us to discuss our first quarter financial results. With me on the call today are John Lai, Chairman and Chief Executive Officer, and Jed Gold, Chief Financial Officer.
Speaker Change: I'll now turn the conference over to Eddie Plank, Vice President of Investor Relations.
Speaker Change: Good afternoon, everyone and thank you for joining us to discuss our first quarter financial results with me on the call today are John Lai, Chairman and Chief Executive Officer, and Jill Golder, Chief Financial Officer, After John and jet have made their formal remarks, we'll open the call to questions.
Eddie Plank: After John and Jed have made their formal remarks, we'll open the call to questions. 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 www.mrcarwash.com.
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.
Eddie Plank: 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. 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 SEC filings, including its most recent 10-K and 10-Q reports, as such factors may be updated from time to time with the Securities and Exchange Commission.
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.
Speaker Change: 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.
Speaker Change: Please review the forward looking statements disclaimer contained in the company's SEC filings, including its most recent 10-K and 10-Q reports as such factors may be updated from time to time with the Securities and Exchange Commission I'll now turn the call over to John.
John Lai: I'll now turn the call over to John. Thanks, Eddie. Good afternoon, everyone. And thanks for joining our first quarter 2025 earnings call. We are very pleased with our continued momentum in Q1, during which we delivered strong comp store sales growth of 6% and record revenues and adjusted EBITDA, which increased 9% and 14% respectively. These results exceeded our expectations, led primarily by strong demand during the quarter and efficient execution by our best in class operations team who maximize throughput and continue to drive UWC membership. Q1 marked eight consecutive quarters of overall comp growth for Mister and the first back-to-back quarters of positive retail comps in three years.
John Lai: Thanks, Eddie good afternoon, everyone and thanks for joining our first quarter 2025 earnings call.
John Lai: We are very pleased with our continued momentum in Q1 during which we delivered strong comp store sales growth of 6% and record revenues and adjusted EBITDA, which increased 9% and 14% respectively.
John Lai: These results exceeded our expectations led primarily by strong demand during the quarter and efficient execution by our best in class operations team, who maximize throughput and continued to drive EWC membership.
John Lai: Q1 marked the eight consecutive quarters of overall comp growth for Mr. And the first back to back quarters of positive retail comps in three years.
John Lai: which also helped fuel better than expected UWC member growth. In terms of industry dynamics, we've seen a steady reprieve to competitive intrusion with a number of competitor new bills opening within a three mile radius of Mr. Becoming less intense since the peak of 2023 We view this along with some of the recent industry restructurings as an opportunity to extend our leadership position and build upon our strong foundation. As the market rationalizes over the next several years, we believe we're optimally positioned to capitalize on the shifting landscape in our space. While there's still uncertainty around the tariff environment, our exposure is primarily limited to the indirect impacts the terrorist may have on consumer spending and on our supplier base.
Which also help fuel better than expected TWC member growth.
John Lai: In terms of industry dynamics, we have seen a steady reprieve to competitive intrusion with a number of competitive new bills opening within a three mile radius of Mr becoming less intense since the peak of 2023.
John Lai: We view this along with some of the recent industry restructurings as an opportunity to extend our leadership position and build upon our strong foundation.
John Lai: As the market rationalize over the next several years, we believe we're optimally positioned to capitalize on the shifting landscape in our space.
John Lai: While there is still uncertainty around the tariff environment. Our exposure is primarily limited to the indirect impacts of the tariffs may have on consumer spending and on our supplier base.
John Lai: As a consumer services company, we are better positioned than most traditional retailers, and our cost structure eliminates most of the direct exposure, keeping it fairly well contained as a percentage of our total spend.
John Lai: As a consumer services company, we are better positioned than most traditional retailers and our cost structure eliminates most of the direct exposure.
John Lai: Keeping it fairly well contained as a percentage of our total spend.
John Lai: Moving forward, we continue to make meaningful progress in our four strategic pillars to drive sustainable long term growth. I'll now provide a brief update on each pillar. starting with expanding our footprint. We opened four new Greenfield stores in the first quarter, fortifying our position in key markets, and we remain on track to add 30 to 35 new stores in 2020. As a reminder, we're taking an even greater data driven approach in our analysis of both core and new markets to identify sites that will generate the highest ROI as we aim to increase our share and expand our store footprint across Given the large opportunity in front of us, we remain confident in our potential to organically double our store count in the US over time.
John Lai: Moving forward, we continue to make meaningful progress on our four strategic pillars to drive sustainable long term growth.
John Lai: I'll now provide a brief update on each pillar.
Starting with expanding our footprint, we opened four new Greenfield stores in the first quarter fortifying our position in key markets and we remain on track to add 30 to 35 new stores in 2025.
John Lai: As a reminder, we're taking an even greater data driven approach and our analysis of both core and new markets to identify sites that will generate the highest ROI as we aim to increase our share and expand our store footprint across the country.
John Lai: Yeah.
John Lai: Given the large opportunity in front of US we remain confident in our potential to organically double our store count in the U S over time.
John Lai: That said, as our history demonstrates, we are agnostic with respect to avenues of growth and will opportunistically pursue M&A where it makes strategic and financial sense.
John Lai: That said as our history demonstrates we are agnostic with respect to avenues of growth and we will opportunistically pursue M&A, where it makes strategic and financial sense.
John Lai: Yeah.
John Lai: Next, increasing our innovative solution. We believe one of our many competitive advantages is our ability to consistently innovate and develop new products and services to create even more value for our customers. Our motivation is to continuously elevate and enhance the customer experience and look for ways to further distinguish ourselves to create an even bigger competitive advantage. Innovations like our proprietary titanium 360 with its mirror like finish and underbody protection developed by our in-house R&D team have had a tremendous impact on our top and bottom line while delivering an exceptional car to our customers. We're also continuously assessing our value to price ratio across the country, and saw an opportunity to implement a $3 price increase in most markets to our base UOBC program.
John Lai: Next increasing our innovative solutions.
We believe one of our many competitive advantages is our ability to consistently to innovate and develop new products and services to create even more value for our customers.
John Lai: Our motivation is to continuously elevate and enhance the customer experience and look for ways to further distinguish ourselves to create an even bigger competitive advantage.
John Lai: Innovations like our proprietary titanium 360 with its mirror like finishes under body protection developed by our in house R&D team they've had a tremendous impact on our top and bottom line, while delivering an exceptional car to our customers.
John Lai: We're also continuously assessing our value to price ratio across the country and saw an opportunity to implement a $3 price increase in most markets to our base CWC program, which represents.
John Lai: which represents approximately 40% of our membership. This puts us in line with many of our competitors as the first increase to our base program since inception.
John Lai: Approximately 40% of our membership tiers.
John Lai: This puts us in line with many of our competitors is the first increase to our base program since inception.
John Lai: moving on to driving traffic and growing membership. We increase UWC membership by 5% year over year in Q1 to over 2.2 million members. As we increase our investment in marketing this year, our goal is to drive retail traffic with messages and offers that resonate down to the individual level. To that end, we're running a media test in six different regions across digital, radio, and paid social to drive visitation. We've also run targeted promotions to increase membership sign As we refine and more fully implement these efforts, we believe it will help expand our customer reach, drive increased traffic, and deliver higher membership.
John Lai: Moving on to driving traffic and growing membership.
John Lai: We increased <unk> membership by 5% year over year in Q1 to over $2 2 million members.
John Lai: As we increase our investment in marketing this year. Our goal is to drive retail traffic with messages and offers that resonate down to the individual level.
John Lai: To that end, we're running a media tested six different regions across digital radio and paid social to drive visitation and we've also run targeted promotions to increase membership sign ups.
John Lai: As we refine and more fully implement these efforts we believe it will help expand our customer reach drive increased traffic and deliver higher membership growth.
John Lai: Yeah.
John Lai: Finally, building a best in class from our senior management team to our rock stars in the store. We continue to strengthen our bench, improve our capabilities, and increase our capacity for growth, while working diligently to improve our culture. In the end, it's all about people. And I couldn't be prouder of our team who have an extraordinary will to succeed and are constantly evolving and getting better each day.
John Lai: Finally building a best in class team.
John Lai: From our senior management team to a rock stars in the stores, we continue to strengthen our bench improve our capabilities and increase our capacity for growth, while working diligently to improve our culture.
John Lai: In the end, it's all about people.
John Lai: And I couldnt be prouder of our team who have an extraordinary well to succeed and are constantly evolving and getting better each day.
John Lai: looking ahead, and with a somewhat uncertain macro environment in the near term. We remain confident in our ability to deliver positive results and build upon our leadership position. The American consumer has embraced express exterior carwashing as part of the regular routine, and the popularity of our subscription program is driven by its convenience and affordability. Over the last 30 years, we've managed through various economic cycles and demonstrated how resilient our service remains.
John Lai: Looking ahead and with the somewhat uncertain macro environment in the near term.
John Lai: We remain confident in our ability to deliver positive results and building upon our leadership position.
John Lai: The American consumer has embraced express exterior car, Washington, as part of their regular routine and the popularity of our subscription program is driven by its convenience and affordability.
John Lai: Over the last 30 years, we've managed through various economic cycles and demonstrated how resilient our service remains.
John Lai: Before I hand the call off to Jed, I want to express our sincere gratitude to our amazing team who shows up every day, works incredibly hard, and makes our strong results possible.
John Lai: Before I hand, the call off to Jed I want to express our sincere gratitude to our amazing team who shows up every day.
John Lai: Works incredibly hard and makes our strong results possible.
Jed Gold: I'll now pass it to Jed to provide more commentary around our financial results.
Chad: I'll now pass it to Chad to provide more commentary around our financial results.
Jed Gold: Thanks, John. And good afternoon, everyone. We are very pleased with our strong start to the year. As John indicated, our results in the first quarter exceeded our expectations, marked by a solid improvement in retail and consistently strong UWC trend. This resulted in a record Q1 by many measures, including revenue, which increased 9%, and adjusted EBITDA, which grew 14%.
Chad: Thanks, John and good afternoon, everyone.
Chad: We are very pleased with our strong start to the year as John indicated our results in the first quarter exceeded our expectations marked by a solid improvement in our retail and consistently strong UW see trends.
Chad: This resulted in a record Q1 by many measures, including revenue, which increased 9% and adjusted EBITDA, which grew 14%.
Jed Gold: Before I get into the details, I'd like to touch on a few highlights. From a top-line perspective, our stronger-than-expected sales were driven by mid-single-digit UWC and retail comp growth. Sales were particularly robust in January, led by a high teens increase in our non-subscription business. This drove healthier membership signups, which combined with our lower, best-in-class churn resulted in total membership growth that exceeded our plan. Converting one time visits into higher UWC membership highlights the real power of our model, as the stickiness of our members provides a durable and long lasting tailwind to revenue. While weather provided a favorable backdrop this quarter, it was our operational strength, coupled with great site layouts, which facilitates strong throughput, that enable this to take advantage of the increase in demand.
Chad: Before I get into the details I'd like to touch on a few highlights.
Chad: From a topline perspective, our stronger than expected sales were driven by mid single digit UW C and retail comp growth.
Chad: Sales were particularly robust in January led by a high teens increase in our non subscription business. This drove healthier membership sign ups, which combined with our lower best in class churn resulted in total membership growth that exceeded our plan.
Chad: Converting onetime visits into higher EWC membership highlights the real power of our model as the stickiness of our members provides a durable and long lasting tailwind to revenue.
Chad: While weather provided a favorable backdrop this quarter. It was our operational strength, coupled with great site layouts, which facilitates strong throughput that enabled us to take advantage of the increase in demand.
Jed Gold: That said, Comp Store Trends moderated through April largely due to a stronger lap and the timing of Easter. Keep in mind that the Easter holiday fell later this year compared to last year, creating a slight headwind to our Q2 comp. Despite these factors, comp store sales are still running positive low single digits. Our subscription business continued to provide us with a meaningful and steady stream of reoccurring revenue, driven by continued strength in our titanium membership. titanium accounted for 23% of our membership mix, contributing to a roughly 6% increase in express revenue per member during the first quarter.
Chad: That said comp store trends moderated through April largely due to a stronger lap and the timing of Easter.
Chad: Keep in mind that the Easter holiday fell later this year compared to last year, creating a slight headwind to our Q2 comp. Despite these factors comp store sales are still running positive low single digits.
Chad: Our subscription business continued to provide us with a meaningful and steady stream of reoccurring revenue driven by continued strength in our titanium membership.
Chad: Titanium accounted for 23% of our membership mix contributing to a roughly 6% increase in express revenue per member during the first quarter.
Jed Gold: We continue to tightly manage our expenses during the quarter, which, along with a timing shift in marketing expenses, allowed us to lever SG&A and drive strong cash flow and adjusted EBITDA levels. Great revenue growth coupled with good expense management delivered strong flow through to EBITDA, as well as a healthy increase to adjusted EBITDA margin. Furthermore, we voluntarily paid down approximately $62 million of debt during the quarter while still maintaining a strong and flexible cash position. As a result, we anticipate that our net leverage ratio will improve to just under two and a half times. adjusted EBITDA by the end of the year.
Chad: We continued to tightly manage our expenses during the quarter, which along with a timing shift in March shift in marketing expenses allowed us to lever SG&A and drive strong cash flow and adjusted EBITDA levels.
Chad: Great revenue growth, coupled with good expense management delivered strong flow through to EBITDA as well as a healthy increase to adjusted EBITDA margin.
Chad: Furthermore, we voluntarily paid down approximately $62 million of debt during the quarter, while still maintaining a strong and flexible cash position.
Chad: As a result, we anticipate that our net leverage ratio will improve to just under two five times.
Chad: Our adjusted EBITDA by the end of the year.
Jed Gold: Finally, and building on John's comments around the competitive environment for a moment. In addition to the rate of competitor new builds slowing down, I'd like to point out that even when competitive intrusion has negatively impacted the performance of our stores, comps at those stores have consistently bounced back over a roughly two-year period to outperform the chain average. This tells us that while customers may initially be tempted to try a new competitor site, over time they eventually come back to Mister for our superior offering and exceptional value proposition.
Speaker Change: Finally, and building on John's comments around the competitive environment for a moment.
Speaker Change: In addition to the rate of competitor Newbuild slowing down I'd like to point out that even when competitive intrusion has negatively impacted the performance of our stores comps at those stores have consistently bounced back over a roughly two year period outperformed the chain average this tells us that while customers may any.
Speaker Change: <unk> be tempted to try a new competitor site overtime. They eventually come back to Mr. <unk> for our superior offering an exceptional value proposition.
Jed Gold: Now let me provide some more details on the first quarter numbers. For simplicity, I'll be referring to adjusted numbers only, which exclude items such as stock-based compensation and gain or loss from the disposition of assets.
Speaker Change: Now let me provide some more details on the first quarter numbers for simplicity I'll be referring to adjusted numbers, only which exclude items such as stock based compensation and gain or loss from the disposition of assets. The reconciliation of adjusted figures can be found in.
Jed Gold: The Reconciliation of Adjusted Figures can be found in our 8K filing and earnings press release. Net revenues increased 9% driven by a combination of 6% comparable store sales growth and the contribution of incremental revenue from new store openings. UWC cells represented 73% of total wash cells, and we ended the quarter with more than 2.2 million UWC members. On a year-over-year basis, the number of UWC members increased by approximately 5%. At the end of the quarter, the membership split among base, platinum, and titanium was approximately 42%, 35%, and 23%, respectively. The average express revenue per member in Q1 increased approximately 6%.
Speaker Change: In our 8-K filings and earnings press release.
Speaker Change: Net revenues increased 9% driven by a combination of 6% comparable store sales growth and the contribution of incremental revenue from new store openings EWC sales represented 73% of total watch sales and we ended the quarter with more than $2 2 million EWC.
Speaker Change: Members on.
On a year over year basis, the number of EWC members increased by approximately 5%.
Speaker Change: At the end of the quarter the membership split among base platinum and titanium was approximately 42%, 35% and 23% respectively.
Speaker Change: The average express revenue per member.
Speaker Change: In Q1 increased approximately 6% to.
Jed Gold: to $28.78, driven primarily by the success of our titanium membership tier. Overall, we are very pleased with the team's focus on expense management. Total operating expenses were $176 million in the quarter. As a percentage of revenue, total operating expenses decreased 130 basis points to 67.3%. Labor and chemicals decreased 160 basis points to 27.3%, driven primarily by leverage on our stronger cells performance, as well as efficiencies we realized from our optimized labor model and some savings in chemical costs. Other store operating expenses increased 90 basis points to 33.3%. primarily driven by higher rent expense related to our new store growth and sell leasebacks, as well as higher utilities.
Speaker Change: To $28 78.
Speaker Change: Driven primarily by the success of our titanium membership tier.
Speaker Change: Overall, we are very pleased with the team's focus on expense management total operating expenses were $176 million in the quarter.
Speaker Change: As a percentage of revenue total operating expenses decreased 130 basis points to 67, 3%.
Speaker Change: Labor and chemicals decreased 160 basis points to 27, 3% driven primarily by leverage on our stronger sales performance as well as efficiencies, we realized from our optimized labor model and some savings and chemical costs.
Speaker Change: Other store operating expenses increased 90 basis points to 33, 3%.
Speaker Change: Primarily driven by higher rent expense related to our new store growth and sale leasebacks as well as higher utilities.
Jed Gold: Equipment and Facilities Maintenance Cost GNA expense decreased 60 basis points to 6.7%, driven primarily by better expense management. In addition, GNA benefited from the shift of roughly $1.5 million of planned marketing spend from Q1 to Q2. Overall, we remain focused on doing more with less, tightly managing expenses, and optimizing the GNA structure of the business. EBITDA increased 14% to $86 million, and EBITDA margin increased 130 basis points to 32.7%. First quarter interest expense decreased 20% to $16 million, primarily due to lower average interest rates year over year and lower borrowings compared to last year. Finally, first quarter net income and net income per diluted share were $35 million and 11 cents respectively.
Speaker Change: Equipment and facilities maintenance costs.
G&A expense decreased 60 basis points to six 7% driven primarily by better expense management and.
Speaker Change: In addition, G&A benefited from the shift of roughly $1 $5 million of planned marketing spend from Q1 to Q2.
Speaker Change: Overall, we remain focused on doing more with less tightly managing expenses and optimizing the G&A structure of the business.
Speaker Change: EBITDA increased 14% to $86 million and EBITDA margin increased 130 basis points to 32, 7%.
Speaker Change: First quarter interest expense decreased 20% to $16 million, primarily due to lower average interest rates year over year, and lower borrowings compared to last year.
Speaker Change: Finally first quarter net income and net income per diluted share were <unk> $35 million at 11, respectively.
Jed Gold: As noted in our earnings press release, our new methodology for calculating adjusted net income and adjusted EPS no longer excludes non-cash rent expense, which totaled approximately $2 million in Q1.
Speaker Change: As noted in our earnings press release, our new methodology for calculating adjusted net income and adjusted EPS no longer excludes noncash rent expense, which totaled approximately $2 million in Q1.
Jed Gold: Moving on to some balance sheet and cash flow highlights at the end of the quarter. Cash and cash equivalents were $39 million. An outstanding long term debt was $858 million, a $67 million sequential decrease, as we opted to pay down a portion of the long term debt. Our balance sheet remains healthy and flexible, and we continue to self-fund our growth and expansion. Although we did not execute any sell-leasebacks in the first quarter, we feel good about trends in the market, and will continue to focus on driving cap rates even lower, giving the strong demand from buyers interested in purchasing Mr. Location.
Speaker Change: Moving on to some balance sheet and cash flow highlights at the end of the quarter cash and cash equivalents were $39 million and outstanding long term debt was $858 million million.
Speaker Change: At $67 million sequential decrease as we opted to pay down a portion of the long term debt.
Speaker Change: Our balance sheet remains healthy and flexible and we continue to self fund our growth and expansion, although we did not execute any sale leasebacks in the first quarter, we feel good about trends in the market and we will continue to focus on driving cap rates, even lower given the strong demand from buyers interested in purchasing Mr locations.
Jed Gold: Now I'll provide an update to our full year outlook. Given our recent momentum, we are even more optimistic on the health of our business and our positioning in the marketplace. As a result, we are revising our guidance to reflect these encouraging trends. Specifically, we are raising the low end of our full year guidance range for Revenue, Comparable Store Sales, and Adjusted EBITDA by flowing through the Q1. embedded in our outlook is a cautious view of the consumer given the current macro backdrop. We are balancing our optimism about our business and momentum against the uncertainty of the consumer environment and the potential economic fallout and turbulence from tariff negotiations.
Speaker Change: Now I'll provide an update to our full year outlook.
Speaker Change: Given our recent momentum we are even more optimistic on the health of our business and our positioning in the marketplace. As a result, we are revising our guidance to reflect these encouraging trends specifically, we are raising the low end of our full year guidance range for revenue comparable store sales and adjusted EBITDA.
Speaker Change: By flowing through the Q1 beat.
Speaker Change: Embedded in our outlook is a cautious view of the consumer given the current macro backdrop.
Speaker Change: We are balancing our optimism about our business and momentum against the uncertainty of the consumer environment and the potential economic fallout and turbulence from tariff negotiations.
Speaker Change: Okay.
Jed Gold: As John mentioned, we are well insulated from the direct tariff exposure. Our chemicals and materials are predominantly sourced within the United States, and we have contracted prices locked in to further hedge our short-term exposure. However, although our cost exposure is indirect, the broader downstream impact on the consumer is unknown and difficult to predict. This could create greater volatility in our business, particularly retail, where we are retaining a measured view on our expectations for the remainder of the year.
Speaker Change: As John mentioned, we are well insulated from the direct tariff exposure.
Speaker Change: Our chemicals and materials are predominantly sourced within the United States and we have contracted prices locked in to further hedge our short term exposure.
Speaker Change: However, although our cost exposure is indirect the broader downstream impact on the consumer is unknown and difficult to predict.
This could create greater volatility in our business, particularly retail where we are retaining a measured view on our expectations for the remainder of the year.
Jed Gold: For additional context and color, I'm including some factors to assist you for modeling purposes. First, we continue to expect total comparable store sales growth to be stronger in the front half of the year compared to the back half, as we lap the full price rollout of titanium in May and then face more challenging comparisons in the back half. The impact, due to the timing of the Easter holiday this year compared to last year, will be an estimated 30 to 40 basis point headwind to our full quarter Q2 con. Number two, we continue to expect the implementation of price increases on our base membership to provide support to revenue per member, helping to offset some of the expected pressure in the back.
Speaker Change: For additional context and color I'm, including some factors to assist you for modeling purposes.
Speaker Change: First we continue to expect total comparable store sales growth to be stronger than the front half of the year compared to the back half as we lap the full price rollout of titanium in May and then face more challenging comparisons in the back half.
Speaker Change: The impact due to the timing of the Easter holiday this year compared to last year will be an estimated 30 to 40 basis point headwind to our full quarter Q2 comp.
Speaker Change: Number two.
Speaker Change: We continue to expect the implementation.
Speaker Change: Price increases on our base membership to provide support to revenue per member helping to offset some of the expected pressure in the back half.
Jed Gold: Number three, as I mentioned earlier, roughly one and a half million dollars of marketing spend shifted from Q1 into Q2. For the full year, we expect a modest uptick in our marketing investments versus last year. Number four, we continue to expect roughly 70% of our new greenfield openings to occur in the second half of this year. And number five, our new methodology for calculating adjusted net income and adjusted EPS no longer excludes non-cash rent expense in the calculation. This results in approximately a $5 million... $0.02 negative impact, respectively, to our full year guidance. Without this change, our outlook for these metrics would have improved to $145 to $152 million.
Speaker Change: Number three as I mentioned earlier, roughly $1 $5 million of marketing spend shifted from Q1 into Q2.
Speaker Change: For the full year, we expect a modest uptick in our marketing investments versus last year.
Speaker Change: Number four we.
Speaker Change: We continue to expect roughly 70% of our new greenfield openings to occur in the second half of this year.
Speaker Change: And number five our new methodology for calculating adjusted net income and adjusted EPS no longer excludes noncash rent expense in the calculation. This results in approximately a $5 million.02 negative impact respectively to our full year guidance.
Speaker Change: Without this change our outlook for these metrics would have improved to $145 million to $152 million and 44%.
Jed Gold: $0.44 to $0.46 respectively.
Speaker Change: To <unk> 46, respectively.
Jed Gold: For even more details, the full list of our initial Outlook ranges for 2025 can be found in the table in today's earnings release.
Speaker Change: For even more details of the full list of our initial outlook ranges for 2025 can be found in.
Speaker Change: In the table in today's earnings release.
Jed Gold: in conclusion As we look at many of the changes occurring across the industry and anticipate where the industry is heading, coupled with our strong positioning, we are optimistic about our long-term outlook, despite a tough macro backdrop. Our operational excellence is unparalleled in the industry, and the depth and experience of our management is second to none. With our strong brand, dedicated team, leading subscription business, and robust unit economics, we are well positioned to drive growth and create long-term value for our shareholders.
Speaker Change: In conclusion.
Speaker Change: As we look at many of the changes occurring across the industry and anticipate where the industry is heading coupled with our strong positioning we are optimistic about our long term outlook, despite a tough macro backdrop.
Speaker Change: Our operational excellence is unparalleled in the industry and the depth and experience of our management is second to none.
Speaker Change: With our strong brand dedicated team, leading subscription business and robust unit economics, we are well positioned to drive growth and create long term value for our shareholders.
Operator: Operator, that concludes our prepared remarks and we will now open the call for questions. We will now begin the question and answer session. To ask a question, please press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.
Speaker Change: Operator that concludes our prepared remarks, and we will now open the call for questions.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question. Please press Star then one on your telephone keypad.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.
Operator: If at any time your question has been addressed and you would like to withdraw your question, please press star then to At this time, we will pause momentarily to assemble our Thank you.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please best Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Operator: Thank you.
Simeon Gutman: Our first question comes from Simeon Gutman from Morgan Stanley. Please go ahead. Hey guys, good quarter. I wanted to ask first about the comp guidance. Jed, I know you just were very detailed on it. I wanted to follow up. So the math on the next three quarters at the high end is just, I think it's just a 2% at this point to get to the high end three. So is that scenario weaker consumer and tough compares? And then at the low end, I think it's just a flat at this point.
Speaker Change: Our first question comes from Simeon Gutman from Morgan Stanley. Please go ahead.
Simeon Gutman: Hey, guys good quarter I wanted to ask first about the comp guidance Jed I know you just were very detailed on it I wanted to follow up so the math on the next three quarters at the high end.
Simeon Gutman: I think it's just a 2% at this point to get to the high end three so is that scenario weaker consumer and tough compares.
Simeon Gutman: And then at the low end I think it is just a flat at this point and so you did say you're confident in the business. You just ran two quarters its fixed granted a tough compare but.
Simeon Gutman: So you did say you're confident in the business, you just ran two quarters of six granted tough compare, but is that are you thinking recession consumer pulls back a lot? How do we get to that low end?
Speaker Change: Is that are you thinking recession consumer pulls back a lot how do we get to that low end. Thank you.
Jed Gold: Thank Yes, I mean, so when we think about first of all, the quarter really, really happy with with what we saw during the quarter plus six testament to 75% of the business subscription, the Unknown AttendeeChallenges, they're just the environment that we're in. And so as we look at where we made changes to the balance of the year, revenue per member growth, still in that plus low single digit to plus mid single digit range, consistent with with the guidance that we had in Q4, comp store member growth, slight positive to low single digit, once again, consistent with with what we laid out on the Q4 call.
Simeon Gutman: Yes.
Simeon Gutman: Yes, Simeon so when we think about first of all the quarter really really happy with what we saw during the quarter plus six testament to 75% of the business subscription.
Simeon Gutman: The.
Simeon Gutman: The challenge there.
Simeon Gutman: The environment that we're in and so as we look at where we made changes to the balance of the year revenue per member member growth still in that plus low single digit two plus mid single digit range consistent with with the guidance that we had in Q4 comp store member growth.
Simeon Gutman: Slight positive to low single digit once again consistent with with what we.
Simeon Gutman: Laid out on our Q4 call and then we gave ourselves just a little bit of room as we looked at retail shelves.
Jed Gold: And then we gave ourselves just a little bit of room as we looked at retail sales. At the high end of the guide, it was a negative mid single digit. comp at the time of the Q4 call. And we've taken that down to negative high single digits. Just given the the choppy backdrop and some of the turbulence that the tariffs and then as is shared in the prepared remarks, we did see a little bit of a moderation in April. Although we're still we're still running. We're positive. So a little bit a little bit cautious and tepid just just given the backdrop that we're in.
Simeon Gutman: At the high end of the guide it was a negative mid single digit.
Simeon Gutman: Comp at the time of the Q4 call and we've taken that down to negative high single digits.
Simeon Gutman: Just given the choppy backdrop and some of the turbulence that the tariffs and then as shared in the prepared remarks, we did see a little bit of a moderation in April although we're still we're still running were positive so.
Simeon Gutman: A little bit cautious and tepid, just just given the backdrop that we're in.
Simeon Gutman: Can I just have an unrelated follow up on free cash flow? Can you just remind us what, how you how you like this philosophy on it? Are you using cash, you know, not just to grow, it looks like you paid some debt down in this first quarter? Are you trying to keep neutral or the business should throw off cash? You know, as it as it continues to grow and build? Yeah, right now, the way that we model it out is roughly neutral. Simeon, if you recall, in the Q4 call, we did pull back the number of new builds just a little bit, and that gave us some excess cash flow that we used to help pay down the debt.
Speaker Change: Okay can I just ask a unrelated follow up on free cash flow can you just remind us what how you how your I guess philosophy on it are you using cash not just to grow it looks like you've paid some debt down in this first quarter are you trying to keep neutral or the business should throw off cash.
Simeon Gutman: As it as it continues to grow and build.
Simeon Gutman: Yeah, right right now the way that we model that out is roughly neutral.
Simeon Gutman: Jamie if you recall on the Q4 call. We did we did pull back the number of new builds just a little bit and that gave us. Some some excess cash flow that we used to to help pay down the debt. So broad level high level. If you look at the high end of the guidance $346 million of adjusted EBITDA, We've got $305 million in Capex.
Jed Gold: So broad level, high level, if you look at the high end of the guidance, $346 million of adjusted EBITDA. We've got $305 million in CapEx. That includes both the core store and the new build CapEx. We've got roughly $50 million in sell leasebacks on the year, $61 million of interest going out the door, and then a little bit for cash tax. So it's roughly a positive $25 million free cash flow on the year.
Simeon Gutman: It includes both the core store and the Newbuild Capex, we've got roughly $50 million in sale leasebacks on the year.
Simeon Gutman: $61 million of interest going out the door and then a little bit for cash tax. So it's roughly a positive $25 million free cash flow on the year.
Simeon Gutman: Okay, thank you.
Simeon Gutman: Okay. Thank you good luck.
Simeon Gutman: Good luck.
Simeon Gutman: Thanks.
Randy Koenig: Your next question comes from Randy Koenig from Jeffreys, please go ahead. Yeah, thanks, guys. And good afternoon. I guess one question. If I looked at the UWC member growth, I believe it's up 5% in the quarter. I believe it's coming out of the fourth quarter was up 2% on a year over year basis. So a nice healthy acceleration sequentially.
Speaker Change: Your next question comes from Randy Clinique from Jefferies. Please go ahead.
Yeah, Thanks, guys and good afternoon.
Randy Clinique: One question, if I look at the EWC number gross I believe is up 5% in the quarter.
Randy Clinique: Coming out of the fourth quarter was up 2% on a year over year basis, a nice healthy acceleration sequentially can you give us some perspective is that kind of just doing a better job on the different marketing tactics any particular kind of reasons for that better conversion. If you will in the quarter sequentially.
Randy Koenig: Can you give us some perspective? Is that kind of just doing a better job on these different marketing tactics? Any particular kind of reasons for that better conversion, if you will, in the quarter, sequentially?
John Lai: Hey, Randy, this is John. I think the plus five that we posted on member growth in Q1 was a direct result of the increase in retail traffic. That also was plus five. So it just proves out that when we get customers in the door, we're able to convert them. Our capture rates have remained steady right around 10% ish. So when we get those retail customers in, we're able to sign up members and that was the direct line to member growth.
John Lai: Hey, Randy This is John I think the plus 5% that we posted on member growth in Q1 was a direct result of the increase in retail traffic.
John Lai: Also was plus five so it just proves out that when we get customers in the door, we're able to convert them our capture rates have remained steady right around 10% ish.
John Lai: So when we get those retail customers and we're able to sign up members and that was the direct line to member growth.
Randy Koenig: Great. And just to follow up there, a follow up.
John Lai: Great and then just to follow up there a follow up.
John Lai: When you look at these, right, just to clarify on the price change on the base, was that a universal or in most markets? I just want to clarify there. And then, as you think about titanium penetration, I think, again, for the second quarter in a row, about 23%. Can you just give us some perspective on any variability by markets to give us to kind of your thoughts on where long term penetration might sit for titanium in the over the next few years?
John Lai: When you look at boots, right just to clarify on the price change and the case was that a universal or most markets I just want to clarify there.
John Lai: As you think about titanium penetration I think again for the second quarter in a row about 23% did you could you just give us some perspective on any variability by markets. It gives us give us to kind of your thoughts on where long term penetration might.
John Lai: For titanium and over the next few years. Thanks.
John Lai: Thanks. Yeah, I'll start with your last question first, Randy. So we're happy with where our titanium mix sits today. As we've shared before, it's been beautifully accretive, and the customer acceptance has exceeded our expectations. So we don't expect any degradation. Again, we're happy with where that sits today. Our approach is more of a pull versus a push, allowing our customers to make their own choice. And they've spoken very loudly. You know, we're enjoying when you look at our membership mix, 22 and a half percent of WC members are in titanium. And that's held steady quarter over quarter.
Randy Clinique: Yes, I'll start with your last question first Randy So we're happy with where our titanium mix sits today.
John Lai: As we've shared before it's been.
John Lai: Beautifully accretive and the customer acceptance has exceeded our expectations. So we don't expect any degradation.
John Lai: Again, we're happy with where that sits today our approach is more of a pull versus a push allowing our customers to make their own choice.
John Lai: And they've spoken very loudly.
John Lai: We are joined up.
John Lai: When you look at our membership mix 22, 5% of our overall.
John Lai: WC members are in titanium.
John Lai: And thats held steady quarter over quarter.
John Lai: I forgot what was the first part of the base price increase? Yes, yes. So the answer to your base price. So in most markets, we are taking a price increase to 2299. And that started roughly a month and a half ago, and it's kind of a rolling rollout, if you will. So we expect the full impact to start hitting the till around May ish.
John Lai: I forgot what was the first part of base price increase yes, yes. So the answer to your base price. So in most markets. We are taking a price increase to 22 99 and.
John Lai: And that started.
John Lai: Roughly a month and a half ish ago, and it's kind of a rolling rollout. If you will so we expect the full impact to start hitting the til.
John Lai: May ish.
John Lai: And then having it fully implemented by June By the way, quick question on that in the markets that haven't seen that saw the base price increase. Have you seen a measurable difference in the uptake of titanium relative to that 23% overall or? No, the mixes remain the same. And we just saw very All right, cool.
John Lai: And then having it fully implemented by June.
John Lai: By the way a quick question on that.
John Lai: The markets that hadn't seen that saw the base price increase having seen a measurable difference in the uptake of titanium relative to that 23% overall or no.
John Lai: No. The mixes remained the same and we just saw a variant.
John Lai: Yes.
Randy Koenig: Thank you.
John Lai: Alright cool thank you.
John Lai: Yeah.
David Bellinger: The next question comes from the line of David Bellinger from Mizuho, please go ahead. Hey, thanks for the question. Good afternoon. I'm understanding this is a very, very fluid consumer backdrop here. But I thought some of the competitive comments were a little different. This afternoon sounds more positive, especially with these restructuring is happening in the space. You had a few quarters of decidedly positive comps here in a row.
Speaker Change: The next question comes from the line of David Bellinger from Mizuho. Please go ahead.
Speaker Change: Hey, Thanks for the question good afternoon.
Speaker Change: Understanding this is a very very fluid consumer backdrop here, but I thought some of the competitive comments were a little different this afternoon's sounded more positive, especially with the restructuring is happening in this space.
You had a few quarters, a decidedly positive comps here in a row.
David Bellinger: So Should we start to think about this as you know, Mr. starting to hit some time at some kind of inflection point here where sales could flow decidedly positive from here on out?
Speaker Change: Should we start to think about this is Mr. Starting to hit some.
Some kind of inflection point here where it.
Speaker Change: Sales could.
Speaker Change: <unk> decidedly positive from here on out.
John Lai: Yeah, hey, David, this is John. I'll start and Jed, you can add, but you know, I think we're very fortunate that demand for express car wash services continues to grow. But consumers have more choice. I think the stuff that's in market today is not going away. So you know, we are in this world where consumers having more choice, we have to get better at our craft and win the war on the ground by delivering exceptional customer experience. So what we've seen whenever there is competitive intrusion, we might see some impact to our business in the first year or year and a half.
Speaker Change: Yeah, Hey, David This is John I'll start and Jay you can add but I think we're very fortunate that demand for express Carwash services continues to grow but consumers have more choice I think the stuff. That's in market today is not going away. So we are in this world where consumers have more choice we have to get <unk>.
Speaker Change: Aircrafts.
Speaker Change: And when the war on the ground by delivering an exceptional customer experience. So what we've seen whenever there is competitive intrusion, we might see some impact to our business in the first year or year and a half, but then we start to see a rebound in those customers coming back so that again gives us some encouragement that we're on the right track.
Jed Gold: But then we start to see a rebound in those customers coming back. So that, again, gives us some encouragement that, you know, we're on the right track, we're, we're from a value proposition delivering on all the fundamental tenants that our customers expect. Yeah, David, it seems like kind of the battle royale kind of peaked in 2023. When we look at The number of new competitor new builds within a three mile radius Q1 of 2025 we had We estimate seven new competitors within a three-mile radius. Q1 of 2025, 15 competitors. And then going back to Q1 of 2023, 33.
Speaker Change: We are.
Speaker Change: From a value proposition delivering on all of the fundamental tenants that our customers expect yes.
Speaker Change: Yes, David It seems like kind of the Battle Royale kind of peaked in 2023, when we look at.
Speaker Change: The number of new competitor Newbuild within a three mile radius Q1 of 2025, we had.
Speaker Change: We estimate seven new competitors within a three mile radius Q1 of 2025 15 competitors and then going back to Q1 of 2023 33. So we were seeing fewer competitors coming within the existing trade areas that we operate but to John's point, there's still.
John Lai: So we're seeing fewer competitors coming within the existing trade areas that we operate. But to John's point, they're still, the ones that came in in 2023, we're still battling it out with them. But ultimately, we believe we're better positioned just with our superior product offering, our team, and all the investments we've been making over the years to prevail. Yeah. And I think, Jed, if I could just add, rationality is setting in as our competitors are reevaluating their growth trajectories and realizing that it's not grow and scale at all costs and they've got to be as smart as us.
Speaker Change: The ones that came in in 2023, we're still we're still battling it out with them.
Speaker Change: But ultimately we believe we are better positioned just.
Speaker Change: With our superior product offering our team and all the investments we've been making over the years to prove out and I think Jeff if I could just add that rationality is setting in.
Speaker Change: As our competitors are reevaluating their growth trajectories in realizing that.
Speaker Change: It's not grow and scale and all cost and they are going to be.
Speaker Change: As smart as us.
David Bellinger: Yeah, thanks for those data points.
Speaker Change: Yeah, Okay. Thanks for those data points incredibly helpful. And then just as my follow up here looking at the new WC as a percentage of total watch sales that went down year over year I think that's the first time, that's happened as a public company.
David Bellinger: Incredibly helpful.
David Bellinger: And then just my follow-up here, looking at the UWC as a percentage of total wash sales, that went down year over year.
John Lai: I think that's the first time that's happened as a public company. So how do you diagnose that? And just understanding that it seems like the retail customers slowed a bit here in April. Stepping back, does UWC down year over year? Is that sort of an indicator that the retail customer could possibly do back? Is that a positive signal from retail? Yeah, the goal is not to get that to 100%. And so what what's happening in Q1, David, what you're seeing is the the plus 5% comp retail growth.
Speaker Change: How do you diagnose that and just understanding that.
Speaker Change: It seems like the retail customers slowing a bit here in April stepping back do WC down year over year is that sort of indicated that the retail customer could possibly back and then a positive signal from from retail.
Speaker Change: Yes, the goal is not to get that to a 100% and so what's happening in Q1, David what you are seeing is the plus 5% comp retail growth.
John Lai: Unknown Attendee That does that retail retail and we get more retail customers coming in it eventually it pulls that number that that subscription mix down just a little bit. So for us, it's it's not something that we get overly concerned about. We look at that data point, but we're not concerned. If anything, it's it's a good thing, especially when we're running 10% capture rates because it translates to two more members Very good.
Speaker Change: There's that retail growth at retail and we get more retail customers coming in at essentially did pulls that number that that subscription mix down just a little bit so for us it's it's.
Speaker Change: Not something that we get overly concerned about we look at that data point, but we're not concerned if anything it's a good thing, especially when we're running at 10% capture rates because it translates to more members.
Randy Koenig: Thanks, guys.
Speaker Change: Very good thanks, guys.
Peter Keith: Our next question comes from Peter Keith from Piper Sandlow. Please go ahead. Hey, thanks, guys.
Speaker Change: Our next question comes from Peter Keith from Piper Sandler. Please go ahead.
Peter Keith: Hey, Thanks, guys nice quarter.
Peter Keith: Nice quarter. The, the tariffs make sense that you wouldn't have any direct exposure on day to day operations. I'm wondering on equipment. And if there could be some equipment from your suppliers that's imported or impacted by steel tariffs, any talk of that coming off the car wash show that that might increase the cost of new builds looking forward. Yes, as Jed mentioned in his prepared remarks, you know, we have multiyear agreements in place with most of our major suppliers that provides a hedge against any inflationary inputs that could cause a spike for those that don't have that in place.
Speaker Change: The tariffs makes sense that you wouldn't have any direct exposure on day to day operations I'm wondering on equipment.
Speaker Change: And if there could be some equipment from your suppliers. That's imported are impacted by steel tariffs any talk of that coming off the carwash show that might increase the cost of new builds and looking forward.
Speaker Change: Yes, as Jed mentioned in his prepared remarks, we have multiyear agreements in place with most of our major suppliers.
Speaker Change: <unk> provides a hedge against any inflationary inputs that could.
Speaker Change: Cause a spike for those that don't have that in place. So we feel pretty good with where we sit and talking to the Oems and some of the key strategic players that we work alongside with.
John Lai: So we feel pretty good with where we sit and talking to the OEMs and some of the key strategic players that we work alongside with. Given our buying power, you know, we feel pretty good with all the knock on woods, that outside of a few things, perhaps, you know, there might be a slight uptick in towels, for example, but outside of that, it won't be material. Right. Okay. That's refreshing to hear.
Speaker Change: Given our buying power, we feel pretty good with all the knock on woods.
Speaker Change: That outside of a few things perhaps.
Speaker Change: Might be a slight uptick in towels for example, but outside of that it won't be material.
Speaker Change: Right Okay.
Speaker Change: <unk> here.
John Lai: Moving on to marketing, so Jed had mentioned a slight uptick in marketing this year. We've done some work with some of your peers, and you guys historically have spent about half a percent on marketing, and it does seem like some of your peers spend more like two to three percent of sales, so notably higher. So, John, I guess, are you still kind of in a testing mode this year? Do you think you'll ever get above one percent of marketing percent of sales? It just seems like there is an opportunity to really drive more traffic here.
Speaker Change: Moving on to marketing so jet had mentioned a slight uptick in marketing. This year. We've done some work so few of your peers.
Speaker Change: You guys historically have spent about.
Speaker Change: Half percent in marketing and does seem like some of your peers.
Speaker Change: Send more like 2% to 3% of sales.
Speaker Change: So, notably higher so John I guess.
Speaker Change: Still kind of in a testing mode. This year do you think you'll ever get above one percentage of marketing as a percent of sales. It just seems like there is an opportunity to really drive more traffic here.
John Lai: Yeah, for sure. And really fair point. So none of us, we all want to increase our ad spend, and drive more retail traffic, which then leads to you know, we see member conversion. But as we've shared, we want to be measured. So while we're accelerating our marketing efforts, you know, we're measuring everything and making sure that the offers are not just targeted, but they're relevant. And then they do ultimately drive incremental growth. And oftentimes measuring that incrementality is can be elusive for not just us, but for our competitors. So once we have more data that supports the return on the advertising investment, we expect to, you know, do more and incrementally grow.
Speaker Change: Yes for sure and really Fairpoint, so none of what we all want to increase our ad spend.
Speaker Change: And drive more retail traffic, which then leads to EWC member conversion.
Speaker Change: But as we've shared we want to be measured.
Speaker Change: So while we are accelerating our marketing efforts.
Speaker Change: We're measuring everything and making sure that the offers were not just targeted but the relevant and then they do ultimately drive incremental growth and oftentimes measuring that incremental 80 is can be elusive.
Speaker Change: For not just us but for our competitors so.
Speaker Change: Once we have more data that supports the return on the advertising investment.
Speaker Change: We expect to.
Speaker Change: Do more in.
Speaker Change: Incrementally grow.
Speaker Change: Yeah.
John Lai: Okay, very good. Thanks so much.
Speaker Change: Okay very good thanks, so much.
Speaker Change: Yes.
Speaker Change: Okay.
Phillip Blee: Our next question comes from Phillip Blee from William Blair. Please go ahead. Hi, guys, afternoon. Thanks. Appreciate the question.
Speaker Change: Our next question comes from Philip <unk> from William Blair. Please go ahead.
Speaker Change: Yeah.
Philip: Hi, guys. Good afternoon. Thanks I.
Phillip Blee: If you're assuming that retail revenues down more high single digits for the year, you're given a potentially softer consumer environment, should we then consider the membership is more flattish or just slightly up quarter over quarter for the remainder of the year? And then you should we consider anything like impacts from churn during a potential recession? Just any color how to think about this metric evolving throughout the year would be very helpful. Yeah, some membership growth, I guess, sequentially. I mean, from a year over year perspective, Phillip, which is how we how we model it out and think about it, we're expecting positive low single digit comp store member growth.
Speaker Change: Appreciate the question.
Speaker Change: If youre, assuming that retail revenues down more high single digits for the year, given potentially softer consumer environment should we then consider the membership is more flattish or slightly up quarter over quarter for the remainder of the year and then should we consider anything like impact from churn during a potential recession, just any color around.
Speaker Change: Think about this metric evolving throughout the year would be very helpful.
Speaker Change: Yes, some membership growth I guess sequentially.
Speaker Change: From a year over year perspective fill up which is how we how we model it out and think about it we're expecting.
Speaker Change: <unk> low single digit comp store member growth.
Jed Gold: And from a churn perspective, we're expecting our core churn levels to be in line with with where we have been one caveat is we built in a small period of elevated churn due to the base price increase. And we saw this in the six stores where we did the test last year. When we push through that that price increase going from 1999 to 2299, we see a slight uptick in churn for about one month. But then, and then churn levels, the churn levels will settle back in going into month two, three post the the price increase.
Speaker Change: And from a <unk>.
Speaker Change: Turn perspective.
Speaker Change: We're expecting our.
Speaker Change: Core churn levels to be in line with with where we have been one caveat is we built in.
Speaker Change: Small period of elevated churn due to the base price increase and we saw this in the six stores, where we did the test last year, when we pushed through that price increase going from 1999 to $22 99, we see a slight uptick in churn for about one month.
Speaker Change: But then that's churn levels the churn levels will settle back in going into a month to three post the price increase so we factored that into the guidance.
Jed Gold: So we factored that into the guidance. We don't expect and consistent with what we saw in the financial crisis, what we saw in COVID, that the subscription business consistent, it's predictable. We don't expect periods of elevated churn. People, people, especially those subscription members, they value a clean car, despite the the macro backdrop, and that's consistent with what we've seen over time.
Speaker Change: We don't expect and consistent with what we saw in the financial crisis, what we saw in Covid.
Speaker Change: The subscription business consistent it's predictable.
Speaker Change: We don't expect periods of elevated churn.
Speaker Change: People people, especially those subscription members they value a clean car.
Speaker Change: Despite the macro backdrop and thats consistent with what we've seen over time.
Speaker Change: Okay, Great and then.
Speaker Change: Just different topic, but understood on the lack of direct tariff impacts, but any color around the materials for greenfield expansion and ability to hit your store target for this year have you seen any early indicators around potential delays or lack of availability of materials.
Speaker Change: Later on this year that could make it harder to hit your full year targets, especially given the second half.
Speaker Change: It has a bigger exposure there. Thank you.
Jed Gold: The pipeline is largely set, not just for 2025, but we're starting to lock in 2026 as well. We haven't heard any early indicators. I mean, some whispering around masonry and concrete indirect through our general contractors, potentially some pressure there, but as we look at the total spend, we don't expect it to have a material impact on the cash on cash returns that we're able to generate. Lumber is another one that we've heard a little bit of pressure with, just with the general contractors. When you think about how we source for our new builds, a lot of that's sourced on more of a regional basis or a site-by-site basis with those general contractors.
Speaker Change: The pipeline is largely set not just for 2025, but we're starting to.
Speaker Change: Lock in 2026 as well.
Speaker Change: We haven't heard any early indicators.
Speaker Change: I mean, some whispering around masonry and concrete indirect through our general contractors potentially some pressure there, but as we look at the total spend.
Speaker Change:
Speaker Change: Yeah.
Speaker Change: We don't expect it to have a material impact on the cash on cash returns that we're able to generate.
Speaker Change: Lumber is another one that we've heard some a little bit of pressure with the just with the general contractors. When you think about how we source for our new builds a lot of that is sourced on more of a regional basis, where a site by site basis with those with those general contractors.
Phillip Blee: Great. Thanks a lot.
Speaker Change: Great. Thanks, a lot.
Michael Lasser: Our next question comes from Michael Lasser from UBS, please go ahead. Good evening. Thank you so much for taking my question.
Michael Lasser: Our next question comes from Michael Lasser from UBS. Please go ahead.
Speaker Change: Good evening. Thank you so much for taking my question John is there a key.
Michael Lasser: John, is there a case where the retail business is simply becoming more volatile from month to month, not just simply because of the overall state of the macro environment, but given how much capacity has been added to the wash industry over the last few years, there are simply fewer unattacked Customers for the retail business, which is going to create more volatility from period to period. And do you think there's any evidence that you saw that from the last four months where it seemed like retail was up double digits in January, and then down to maybe as much as high single digits in April?
Speaker Change: Where the retail business is simply becoming more volatile from month to month, not simply because of the overall eight of the macro environment, but given how much capacity added to the wash industry over the last few years.
Speaker Change: You were unattached.
Speaker Change: Customer wins for the retail business, which is going to create more volatility from period to period and do you think there is any evidence that you saw that from the lab.
Speaker Change: Four months, where it seemed like retail was up double digits in January and then down.
Speaker Change: Maybe a.
Speaker Change: High single digit in April Thank you very much.
Michael Lasser: Thank you very much.
John Lai: Hey, Michael. Thanks for the question. I wholeheartedly reject your premise. And I say that with a smile on my face, because I like to give you a hard time. But no, if you look at Q1, and the plus five that we posted, I think that speaks to the health of our space, it speaks to the health of our business, and how demand for our service is omnipresent and continuous. With respect to the competitive impact and its impact on our retail volume, as I've previously shared, you know, we're seeing a decel in new unit growth coming into the market.
Speaker Change: Hey, Michael Thanks for the question I whole heartedly reject your premise.
Speaker Change: And I'd say that was it.
Speaker Change: While on my face because I would like to give you a hard time.
Speaker Change: But no if you look at Q1 and the plus five that we posted I think that speaks to the health of our space. It speaks to the health of our business.
Speaker Change: <unk> for our service is omni present.
Speaker Change: <unk>.
Speaker Change: With respect to the competitive impact and its impact on our retail volume as I've previously shared.
Speaker Change: We're seeing a T cell and new unit growth coming into the market.
John Lai: So it's slowing down dramatically right now, which, again, is going to be a favorable trend for us. So there'll be less competitive intrusion over time. That said, you know, again, customers have more choices than ever before. And we need to execute store level to win their business, earn their business day in and day out. And that's what we're really good at. Because we have, you know, built, a massive member base of 2.2 million members. We're processing over 100 million cars on an annualized basis. And when you look at the US car park, and the demand, the growing demand for express, express exterior car washes, and what we believe to be an undersubscribed TAM for membership, we're actually very bullish.
Speaker Change: So it's slowing down dramatically right now, which again is going to be a favorable trend for us so there'll be less competitive intrusion over time.
Speaker Change: That said again as customers have more choices than ever before and we need to execute store level too.
Speaker Change: When their business or their business day in and day out and that's what we're really good at.
Speaker Change: Because we have built.
Speaker Change: Massive member base of $2 2 million members.
Speaker Change: We're processing over 100 million cars on an annualized basis.
Speaker Change: When you look at the U S car park and the demand.
Speaker Change: Growing demand for express express exterior car washes in what we believe to be an under Undersubscribed Tam for membership we're actually very bullish.
Michael Lasser: Got you.
Speaker Change: Got you.
Michael Lasser: My following question is, on the heels of raising the base price membership, shortly after rolling out a premium, all of this is happening into what could be an accelerating, broader inflationary environment. So does taking this much price or generating this much additional revenue per member give you pause in what could be a more pressured consumer environment? And if that were the case, given what happened the last time there was a lot of inflation, it did seem like the business slowed a bit. What levers would you push this time in order to drive the business? Thank you.
Speaker Change: My follow up question.
Speaker Change: On the heels of Britain.
Speaker Change: Price membership.
Speaker Change: Absolutely we're rolling out a cleaning in all of this is happening in Q what could be yes.
Speaker Change: Elevating broader inflationary environment.
Speaker Change: Taking this month's price we're generating.
Speaker Change: Additional revenue per member you pause in what could be.
Speaker Change: A more pressured consumer environment.
Speaker Change: If that were the key.
Speaker Change: Given what happened in the last time, there was a lot of inflation. It did seem like the business low to be what levers would you at this time.
Speaker Change: In order to drive the business. Thank you.
John Lai: Thank you, Michael. Fair question. So again, we believe that our membership value offering is strong. And when you look at the $22.99 divided into what is a $10 on average median base retail price point, the consumer is actually getting tremendous value on that third visit, and they do the calculus in their head. So at the third visit, they're getting a real discount. On the fourth visit, in their minds, it's a free car wash. And so the affordability and then the value of membership is actually stronger than it ever has been. And I will add that the $22.99 price increase from $19.99 was, in the overall scheme of things, we believe to be very modest, and one that we held the line for many, many years until we felt the time was right.
Speaker Change: Thank you Michael Fair question. So again, we believe that our membership value value offering.
Speaker Change: Is strong and when you look at the $22 99 divided into what is it $10 on average median base retail price point, the consumers actually getting tremendous value on that third visit and they do the cashless in their heads so third visit they're getting.
Speaker Change: A discount in the fourth visit in their minds as a free car wash.
Speaker Change: And so the affordability and the value of membership.
Speaker Change: It was actually stronger than it ever has been.
Speaker Change: I will add that the 22 99 price increase from 1999 was in the overall scheme of things, we believe to be very modest.
Speaker Change: And one that we held the line for many many years.
Speaker Change: Until we felt the commerce right. So the pass through and what we're seeing right now in the lift in revenues.
John Lai: So the pass-through and what we're seeing right now in the lift in revenues is kind of supporting the decision. it anything on the leverage you might pull in the event there is a slowdown? Listen, we've managed through various economic cycles in the past, and as we ratchet up to continue to build and grow our business, if we were hit with any major headwinds, we would certainly, as a management team, look to ratchet down certain expenditures so we can live to fight another day. But we, you know, our business, Michael, acts a little differently, and I know technically everyone wants to clump it in a consumer discretionary category, but it really acts like a staple.
Speaker Change:
Speaker Change: <unk>.
Speaker Change: It's kind of supporting the decision.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: And anything on the leverage you might all in the event there is a slowdown.
Speaker Change: Yeah.
Speaker Change: Listen we've managed through various economic cycles in the past.
Speaker Change: We ratchet up to continue to build and grow our business. If we were hit with any major headwinds, we would certainly as a management team look to ratchet down certain expenditures. So they can live to fight another day.
Speaker Change: Our business Michael acts, a little differently and I know technically everyone wants a clump at in a consumer discretionary category, but it really acts like a stable.
John Lai: And in good times and in tough times, people want to take care of their assets, they really value their vehicle, and the strong argument that if they're going to forego or delay that new car purchase, they really want to take care of their core assets, and so we benefit on either end.
Speaker Change: And in good times and in tough times people want to take care of their assets. They want they really value their vehicle and a strong argument that if they're going to forgo or delay that new car purchase.
Speaker Change: They really want to take care of their core assets.
Speaker Change: So we benefit on either end.
Michael Lasser: Thank you very much and good luck. Thanks.
Speaker Change: Thank you very much and good luck.
Speaker Change: Yeah.
Speaker Change: Thanks.
Chris Ockel: Our next question comes from Chris Ockel from Stifel. Please go ahead. Thanks. Good afternoon, guys. I had a question about the media test. How do you guys plan to measure the return on that investment? And then I'm also curious how many markets you believe could be media efficient? Yeah, Chris.
Speaker Change: Our next question comes from Chris <unk> from Stifel. Please go ahead.
Speaker Change: Thanks, Good afternoon guys.
Speaker Change: I had a question about the immediate test how do you guys plan to measure the return on that investment and then I'm also curious how many markets you believe could be media efficient.
Speaker Change: Okay.
John Lai: Hey, this is John. So, you know, through the traditional ROAS, you know, we're looking for, you know, with a three-to-one lift when you look at ad spend and then revenue. But for our business, given the longer-term lifetime value of a member, it really does support us doing more, getting an actual better return. So through that traditional lens of a three-to-one ratio, that's how we're measuring the promotional effectiveness of each campaign. But if we apply a LTV target to that number, it actually makes it look like an even smarter investment. Do you have a sense for how many markets could use media?
John Lai: Yeah, Chris Hey, this is John so to the traditional real as you know we're looking for.
John Lai: A three to one lift when you look at the AD spend and then revenue both for our business given the longer term lifetime value of a member.
John Lai: It really does support.
John Lai: US doing more getting actual better return.
John Lai: So to that traditional lens of.
John Lai: Three to one ratio.
John Lai: That's how we're measuring the promotional effectiveness of each campaign.
John Lai: If we apply our LTV target to that number it actually makes it look like an even smarter investment.
Speaker Change: Do you have a sense for how many markets could be you could use media.
John Lai: So right now we're testing across six different markets and for the six we're seeing some very promising results against the controls and then iterating from each of those tests so that we can scale this program but scale it again in a responsible way so over time if it justifies and helps move the needle I could see it applying to almost every market. Yeah, but Chris, you touch on an important point and something that we have had a lot of debate behind the scenes on, and that's the efficiency. So which markets do we go in and test, knowing that that media spend is relatively fixed at the DMA level?
Speaker Change: So right now we're testing across six different markets and for the six we're seeing some very promising results against the controls.
Speaker Change: And then iterating from each of those tests. So that we can scale. This program, but scale again in a responsible way so over time if it justifies.
Speaker Change: Justifies and helps move the needle.
Speaker Change: I could see it applying to almost every market.
Speaker Change: We are a Christian if you can touch on an important point and something that we've we have had a lot of debate behind the scenes on and Thats the efficiency, So which markets do we go in and test knowing that that media spend is relatively fixed at the DMA level and so.
John Lai: And so a DMA where we only have six stores versus a DMA where we have 30 stores, you obviously get a bigger bang for the marketing buck in those markets. But on the other hand, you don't want to completely neglect those stores in the smaller DMA. So a lot of debate that's also part of the calculus when we look at the return, but looking at all of this on a test and then relative to a control group, and how much of an incremental lift are we getting relative to that control? The variable, though, as John said, is just the subscription element of the business and that lifetime value of those subscription members that you're able to convert.
Speaker Change: DMA, where we only have six stores versus the DMA, where we have 30 stores you, obviously get a bigger bang for the marketing Buck.
Speaker Change: Win in those markets, but other hand, you don't want to completely neglect.
Speaker Change: Stores.
Speaker Change: The smaller DMA. So a lot of debate. That's also part of the calculus. When we look at the return, but looking at all of this on a test and then relative to a control group and how much of an incremental lift or we're getting relative to that control.
Speaker Change: The variable, though as John said is that.
Speaker Change: Just the subscription element of the business and our lifetime value of those subscription members that you are able to convert.
John Lai: Okay, that's helpful. And then, John, you mentioned developing innovative solution is obviously one of your strategic pillars in titanium 360 has obviously been a success. But I'm curious, how would you characterize the pipeline of new ideas that you have for maybe future tests? And how are you thinking about potential timing if you've got a new idea that you'd like to roll out? Yeah, I think our cadence for new product solution introductions is roughly 18 to 24 months. And that's the target. So we have some things in the hopper that we're not going to share on this call, that we think are not just going to be transformative, and extremely value added, but creative, ultimately, to our top line.
Speaker Change: Okay.
Speaker Change: It's helpful. And then John you mentioned developing innovative solution is obviously one of your guys' strategic pillars and titanium 360 has obviously been a success, but I'm curious how would you characterize the pipeline of new ideas.
Speaker Change: That you have for maybe future test and how are you thinking about potential timing, if you've got a new idea that you'd like to rollout.
Speaker Change: Yes, I think our cadence for new product solution introductions is roughly 18% to 24 months.
Speaker Change: That's the target. So we have some things in the hopper that we're not going to share on this call that we think are not just going to be transformative and extremely value added but accretive ultimately to our topline.
Speaker Change: And then subsequently our bottom line so.
John Lai: And then subsequently, our bottom line. So how can we create more value for our customers and also increase profitability? That's the goal. And that's what we're working on right now. So we've got some really cool things through our in-house R&D team that they're working on.
Speaker Change: How can we create more value for our customers and also increase profitability.
Speaker Change: That's the goal and.
Speaker Change: That's what we're working on right now so we've got some really cool things through our in house R&D team that they are working on.
John Lai: And we can't wait to share that with you sometime down the road.
Speaker Change: And we can't wait to share that with you sometime down the road.
Justin Kleber: Okay, fair enough. Thanks, guys.
Speaker Change: Okay fair enough thanks, guys.
Speaker Change: Okay.
Justin Kleber: Our next question comes from Justin Kleber from Baird, please go ahead. Hey, good afternoon, guys. Thanks for taking the questions. Wanted to first follow up, Jed, on your churn comment as it relates to the base price increase. I know you're building that into the plan, but just curious, the response you're seeing real time as this price increase has been implemented more broadly, is it consistent with what you saw in the test markets? Just any color on what you're seeing? Yeah, Justin, so when we look at the markets, as we're rolling them out, and just a little bit more color on a price increase, in this market, you can you take the in this industry, you take a, you can take a price increase, and those that are signing up will overnight, they start paying the the new 2299 base price, you have to give a notice to your existing members.
Speaker Change: Our next question comes from Justin Kleber from Baird. Please go ahead.
Justin Kleber: Hey, good afternoon, guys. Thanks for taking the questions I wanted to first follow up Jeff on your churn comment as it relates to the base price increase I know you are building that into the plan, but just curious the response youre seeing real time.
Justin Kleber: This price increase has been implemented more broadly is that consistent with what you saw in the test markets.
Justin Kleber: Any color on what Youre seeing.
Speaker Change: Yes, Justin so when we look at the markets as we're rolling them out in just a little bit more color on our price increase in this market you can you take the in this industry you take.
Speaker Change: You could take a price increase and those that are signing up well overnight they start paying the new.
Speaker Change: 2299 base price you have to give notice to your existing members. So it takes about 30 days before they start to recharge at that new $22 99 price point and.
Jed Gold: So it takes about 30 days before they start to recharge at that new 2299 price point. And So we're watching this this churn closely and so far everything it's it's consistent and in line with with what we saw in the markets that we tested in at the end of last year.
Speaker Change: So we're watching this this churn closely and so far everything it's consistent and in line with with what we saw in the markets that we tested in at the end of last year.
John Lai: Okay, and then just the the, we noticed you're at a higher level and in Minnesota is like 2599. So just curious what's driving that decision? And it should we ultimately expect you to move towards that, that level over time across the chain? Yeah, good call out, you've done your research. So the great state of Minnesota, it's one of our strongest regions. And maybe now's a good time for me to give a shout out to all of Team Minnesota, who absolutely crushed their membership targets and goals. That's also a market where there's just a higher cost of living, higher wage rate.
Speaker Change: Okay and then just.
Speaker Change: We noticed youre at a higher level than in Minnesota is like $25 99. So just curious what's driving that decision and should we ultimately expect you to move towards that that level over time across the chain.
Speaker Change: Yeah, good call out you've done your research so the great state of Minnesota, one of our strongest regions.
Speaker Change: Maybe now is a good time for me to give a shout out to all of team, Minnesota, who absolutely crushed their membership targets and goals.
Speaker Change: That's also a market, where there's just a higher cost of living higher wage rate. So we have as.
John Lai: So we have, as we look at regional pricing, that's one market where we have a slightly different price point that's a little bit higher that's driving that revenue. Yeah, just one of the one of the inputs into this is we look at how we're priced relative to competition and that 22 many of our competitors are already at the higher price point. And we look at that on a regional basis. That's also part of the math. As we look at 2299 versus 2599. But Minnesota is an exception we don't have we don't have that. That's not the goal.
Speaker Change: As we look at regional pricing.
Speaker Change: One market, where we have a slightly different price point, that's a little bit higher that's driving that revenue number.
Speaker Change: Yes, just one of them one of the inputs into this as we look at how we're priced relative to competition in that 'twenty. Two many of our competitors are already at the higher price point and we'd look at that on a regional basis. That's also part of the math.
Speaker Change: We look at 'twenty 299 versus $25 99, but Minnesota.
Speaker Change: An exception, we don't have we don't have.
Speaker Change: That's not the goal it's $22 99 as the.
John Lai: It's 2299 is the is going to be the system average But I think if I can just add one more thing. So even at that elevated price point, the fact that they have had elevated signup numbers, again, speaks to the point that at the end of the day, while price is important, it's not the determining factor of why people choose to sign up for the program.
Speaker Change: It's going to be the system average.
Speaker Change: But I think if I can just add one more thing so even at that elevated price point. The fact that they have had elevated sign up numbers again speaks to the point that at the end of the day, while price is important it's not the determining factor of why people choose to sign up for the program.
Justin Kleber: All right. Thank you, guys.
Speaker Change: Hi, Thank you guys I'll pass it on.
Justin Kleber: I'll pass it on.
Speaker Change: Yeah.
John Heinbockel: Our next question comes from John Heinbockel from Guggenheim. Please go ahead. Hey, John, when you when you look at average per member visitation by month, how does that differ by tier of membership, you know, and geography? And I'm also curious, if you go back, how has that increased over time? I imagine it has increased right over over the last five years. So John, I don't have the membership frequency by tier, but I can get back to you on that one. It's consistent across all tiers. Okay, that's a great point. About three, 3.2 times a month.
Speaker Change: Our next question comes from John Haynesville calls from Guggenheim. Please go ahead.
Speaker Change: Hey, Joe when you when you look at.
Speaker Change: Average per member visitation by month.
Speaker Change: How does that differ.
Speaker Change: By tier of membership.
Speaker Change: And geography and I'm also curious if you can go back.
How has that increased over time.
Speaker Change: I imagine it has increased right over the last five years.
Speaker Change: So John I don't have the membership frequency by tier, but I can get back to you on that one.
Speaker Change: It is across all tiers, okay. So thats a great about three three to three two times or so is it not.
Jed Gold: Oh, is it? Well, I just got educated by Jed. So it's consistent, if you heard that, across all three segments, all three membership tiers, I should say. And then with respect to regionality, again, it's oftentimes the time of year. So during the winter months in the northern climates, we see a higher frequency in the summer months in the northern tiers. But, again, it gets even more nuanced in California, for example, in northern California specifically. You know, the period is summertime when agriculture is at a high. And I can go down to lovebugs down in the southeast.
Speaker Change: Just kind of educated by Jed.
Speaker Change: So it is consistent if you heard that.
Speaker Change: Across all three segments.
Speaker Change: Three membership tiers I should say and then with respect to Regionalisation again oftentimes at the time of year. So during the winter. So the northern climates, we see a higher frequency in the summer months and the northern tiers, but again it gets even more nuanced in.
Speaker Change: For example, in northern California, specifically.
Speaker Change: Gary is the summertime.
Speaker Change: With agriculture.
Speaker Change: Hi.
Speaker Change: And I can go down to love Bugs down in the southeast I mean each market.
Jed Gold: I mean, each market, if you have pollen in Georgia, those really are active spikes to demand in a beautiful way. Yeah, and john, when you look at it, when you look at that frequency of use over the last four or five years, it's been very consistent at that three to three point times per month on You do see, to John's point, a little bit of fluctuation just based on seasonality in the particular market. So Q4, we'll see it'll go from a 3, 3.2 down to a 2.8 to a 3 visits per month, but nothing significant.
Speaker Change: If you have pollen.
Speaker Change: In Georgia, those really active spikes to demand.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: John when you look at it.
Speaker Change: When you look at that frequency of use over the last four or five years, it's been very consistent at that three to three point times per month.
Speaker Change: You do see to John's point, a little bit of fluctuation just based on seasonality and the.
Speaker Change: Think of the market. So Q4 will see it'll go from a 332 down to a two eight to three visits per month, but nothing significant.
John Heinbockel: All right, and then just my quick follow up just on the the mechanics of the price increase. See, you give a 30-day notice, and then the price goes up. Now, but are you going to give, would you give a 30-day notice? you know, all at once, or you'd stagger it, you know, across the year, right? You think about a 15% increase on 40% of your business, right? You're not going to get that lift immediately. Is that like realized over, you know, 12 or 15 month period or sooner than that? Yeah, so it's a little bit more nuanced than that.
Speaker Change: Alright, and then just a quick follow up just on the <unk>.
Speaker Change: <unk> of the price increase.
Speaker Change: Can you give a 30 day notice and then the <unk>.
Speaker Change: Rice goes up.
Speaker Change: But you're going to get would you give a 30 day notice.
Speaker Change: In all at once or you stagger it.
Speaker Change: Across the year, Brian when you think about a 15% increase on 40% of your business.
Speaker Change: Alright, and youre not going to get that lift immediately is that like realized over.
Speaker Change: 12, or 15 month period or sooner than that.
Speaker Change: Yeah, So it's a little bit more nuance in that the way we approach. It is we broke the country into five different.
John Lai: The way we approach it is we broke the country into five different subcategories. And part of it is the training that we need to do with the frontline team. And we don't want to shortchange that. So we're pretty methodical and intentional in making sure that that we give all the tools on the ground so that the team members are prepared to answer any questions should they come their way. And then as we roll it out, I don't want to correct Jed earlier, but it's technically 30 to 60 days after the initial communication when we start to see the lift, right?
Speaker Change: Subcategories and part of it is the training that we need to do with the frontline team and we don't want to <unk>.
Speaker Change: <unk> changed that so we're pretty methodical and intentional and making sure that we give all the tools on the ground. So the team members.
Speaker Change: Our prepared to answer any questions should they come their way.
Speaker Change: And then as we roll it out I don't want to correct jet earlier, but it's technically 30 to 60 days.
Speaker Change: After the initial communication when we start to see the lift right. So the way of our members are billed.
John Lai: So the way our members are billed over the course of a 30-day period, you have kind of an even distribution, if you will, from day one to day 30. So we give a 30-day notice, then the existing members will start to, those that signed up on the first, will see their price increase, and we'll see it rolling there through. Jed, are you following me? I'm following my logic, okay, through 60 days. So bottom line, John, is May is when we're starting to see things hit. Jed, Jed's got a little skip in his step as a result.
Speaker Change: Over the course of a 30 day period.
Speaker Change: You have kind of an even distribution if you will from phase one to date 30. So we give a 30 day notice within the existing members will start to those that signed up on the first well.
Speaker Change: We'll see their price increase and we will see it rolling there through generally following biologic, okay through 60 days. So so bottom line John is okay.
Speaker Change: <unk> is when we're starting to see things hit.
Speaker Change: And.
Jed: Jed just got a little skipping a step as a result.
John Lai: Thank you.
Jed: Thank you.
Jed: Yeah.
Bobby Griffin: Our next question comes from Bobby Griffin from Raymond James, please go ahead. Good afternoon, guys. And congrats on good start to the year. Just two quick questions for me. It might be true. But have you seen anything from a competitive side of things on the markets where you did move the price? I think you mentioned some competitors aren't there yet. Did they come up? Or is there any been any response there to share? Yeah, so to the for the competitors that we compare ourselves against, we were getting to the their median. There are certainly other players out there that have different pricing strategies, and I can't speak to every single one of them.
Speaker Change: Our next question comes from Bobby Griffin from Raymond James. Please go ahead.
Bobby Griffin: Good afternoon, guys and congrats on a good start to the year just two quick questions from me it might be too early but have you seen anything from a competitive side of things on the markets, where you didn't move the price I think you mentioned some competitors aren't there yet did they come up or is there any been any response there to share.
Speaker Change: Yes so.
Speaker Change: To the competitors that we compare ourselves against we were getting to the their median.
Speaker Change: There are certainly other players out there that have different pricing strategies and I can't speak to every single one of them.
John Lai: But we were definitely not the leader in price at 2299. In almost every market where there was a whole bunch of folks that were already there.
Speaker Change: But we were definitely not the leader in price at 22, 99%.
Speaker Change: Almost every market, where there was a whole bunch of folks that were already there.
John Lai: Yeah, I was just curious, did more did they have any changes just where you look at the operating costs of this industry being more expensive than it was a couple years, so everybody's pricing more rationally now, so they took advantage of a, you know, here like you moving up and did they move up or they stayed the same just anything around Yeah, I think it's too early to tell, you know, we continue to monitor and gather, you know, as much competitive data as we can. But it's I'm not in a position to opine on every region.
Speaker Change: Yes, I was just curious it more did they have any changes just where you look at the operating cost of this initially being more expensive than it was a couple of years, so everybody's pricing more rationally now so they took advantage of.
Speaker Change: You're like you're moving up and do they move up or they stayed the same just anything around that.
Speaker Change: Yes, I think it's too early to tell we continue to monitor and gather as much competitive data as we can.
Speaker Change:
Speaker Change: But it's.
Speaker Change: I'm not in a position to opine.
Speaker Change: In every region.
John Lai: Fair enough.
Jed Gold: And then secondly, for me, just on the chemical and labor line, you know, continue nice performance. They're just curious what the guidance embeds for, you know, further labor optimization or chemical savings. Yeah, so so as we had talked on the Q4 call, we have realized most of that chemical optimization and labor optimization during Q1. So the year over year improvement that you've seen, we do not expect that to continue in Q2, three and four, at least at this point. It's all been it's all been flowed through on a year over year basis. Thank you. Very helpful and good luck the rest of the year.
Speaker Change: Fair enough and then secondly for me just on the chemical and Labor line continue nice performance. There just curious what the guidance Embeds for further labor optimization are our chemical savings.
Speaker Change: Yeah. So so as we had talked on the Q4 call we.
Speaker Change: I have realized most of that chemical optimization and labor optimization. During Q1, so the year over year improvement that you've seen we do not expect that to continue in Q2, three and four.
Speaker Change: At least at this point.
Speaker Change: So it's all been it's all been flowed through on a year over year basis.
Speaker Change: Thank you very helpful and good luck the rest of the year.
Tristan Thomas Martin: Thanks. The next question comes from Tristan Thomas Martin from BMO Capital Markets. Please go ahead.
Speaker Change: Thanks.
Speaker Change: The next question comes from Tristan Thomas Martin from BMO Capital markets. Please go ahead.
Speaker Change: Hi, good afternoon.
Speaker Change: Yeah.
John Lai: Just one question for me, you called out kind of trends moderate a little bit in April, anything else to kind of flag whether it's in consumer income demographics or geographic trends in specific markets? Thank you.
Speaker Change: Just one question from me you called out comp trends moderate a little bit in April anything else to kind of flag, whether it's consumer.
Speaker Change: Consumer income demographics or geographic trends in specific markets.
Speaker Change: Thank you.
John Lai: I'll start, you know, I think that the neat thing about our business is that it has universal appeal across all segments of the motoring public. And when we break down the different average household income cohorts, we see consistency across the entire portfolio. And that that's terrific. So you would think that, you know, the lower end might be under more pressure, which again, we're not saying that they're not, but it really hasn't impacted our business. So for that, we feel very fortunate.
Speaker Change: Yeah, I'll start I think the neat thing about our business is that it has universal appeal across all segments of motoring public and when we break down the different.
Speaker Change: Average household income cohorts we.
Speaker Change: We see consistency across the entire portfolio.
Speaker Change: That's terrific.
Speaker Change: So you would think.
Speaker Change: The lower end might be under more pressure, which again, we're not saying that they're not but it really hasnt impacted our business. So for that we feel very fortunate.
Jed Gold: Just to emphasize a couple of points that were made in the prepared remarks. So first of all, I think as we look at April, UWC cells, they remain really strong, resilient, as we've been saying all along, consistent, predictable source of cells. Easter, the timing of Easter, when you look at the impact on the month, it's about 100 basis point impact on the month, which translates to 30 to 40 basis point impact on the on the quarter. So just that the Easter timing and then. If you go back to 2024, there there was some there was some some some weather impact in Q1 and then April came back really strong and and so we had a stronger April lap, particularly on the on the retail side.
Just to emphasize a couple of points that were made in the prepared remarks. So first of all I think because we look at April EWC cells. They remain really strong resilient.
Speaker Change: As we've been saying all along consistent predictable.
Speaker Change: Source of cells.
Easter timing of Easter when you look at the impact on the month, it's about 100 basis point impact on the month, which translates to 30 to 40 basis point impact on the.
Speaker Change: Quarter.
Speaker Change: So just that the Easter timing and then.
Speaker Change: If you go back to 2024.
Speaker Change: There was some.
Speaker Change: There was some some some weather impact in Q1, and then April came back really strong and so we had a stronger April lap, particularly on the on the retail side.
Jed Gold: So total, as we said, total comp store sales, they do remain positive in April and trending to that low single digit range. Got it. Thank you.
Speaker Change: So total as we said total comp store sales they do remain positive.
Speaker Change: April.
Speaker Change: Trending to that low single digit range.
Speaker Change: Got it thank you.
Speaker Change: Okay.
Thomas Wendler: Our next question comes from Thomas Wendler from Stevens. Please go ahead. Hey, good afternoon, everyone. Just one quick one from me. I want to go back to the base membership churn one more time. Do you expect to see those customers returning as they shop around and kind of see your updated pricing is in line with the market? And then what would the timeline look like for those customers to return would be similar to the two year timeframe to outperform when a new competitor moves into the market? Yeah, you know, we saw the in the first month post announcement, a slight uptick in churn.
Speaker Change: Our next question comes from Thomas Wendler from Stephens. Please go ahead.
Thomas Wendler: Hey, good afternoon, everyone. Just one quick one from me I wanted to go back to that base membership churn one more time do you expect to see those customers returning as they shop around and kind of see your updated pricing is in line with the market and then what would the timeline look like for those customers to return would be similar to the two year timeframe to outperform on a new.
Speaker Change: Competitor moves into the market.
Thomas Wendler: Yes, we saw the in.
In the first month post announcement, a slight uptick in churn.
Jed Gold: And then it came back down to historic levels, literally in the second So, immaterial in the overall scheme of things. And again, the very slight uptick in churn was offset by the benefits that we enjoyed from the price increase. Keep in mind, it's the first time we've taken a UWC price increase in years, 15 years. And so, we don't have a lot of data points to say if after six months, a year, two years, these customers eventually come back. So, we did not build any of that into the guidance or the model. But I think it's plausible to say that somewhere over time, if they had a good experience with Mister, they're eventually going to find their way back.
Thomas Wendler: And then it came back down to historic levels literally in the second month.
Thomas Wendler: So.
Immaterial in the overall scheme of things and again.
Thomas Wendler: Very slight uptick in churn was offset by.
Thomas Wendler: The benefits that we enjoyed from the price increase keep in mind. It's the first time, we've taken a UW see price increase in the years 15 years and so we don't have a lot of data points to say if after six months a year two years. These customers eventually come back. So we did not build any of that into the guidance.
Thomas Wendler: The model.
Thomas Wendler: But I think it's plausible to say that somewhere over time, if they had a good experience with Mr. They're eventually going to find their way back.
John Lai: Yeah.
John Lai: And I always have to add, Jed, that unlike a gym, when you cancel your membership, you can't get back into the gym. At Mister Car Wash, oftentimes, people will temporarily suspend their membership if there's seasonal issues or reasons where they're going to their lake house, what have you. But then they'll come back. And so, for us, a churn customer is not a lost customer in most cases. And many times, they default to retail. Perfect. I appreciate the color.
Thomas Wendler: I always have to add Jed that unlike a Jim when you cancel your membership you can't get back into the gym and Mister car wash oftentimes people will temporarily suspend their membership.
Thomas Wendler: If theres seasonal issues or reasons, where theyre going to their lake House, what have you, but then they'll come back and so for US a churn customers not a lost customer in most cases and many times they default to retail.
Thomas Wendler: Yeah.
Speaker Change: Perfect I appreciate the color.
Operator: This concludes our question and answer session.
Speaker Change: This concludes our question and answer session I'll now turn the conference back to John Life for closing comments.
John Lai: I'll now turn the conference back to John Lai for closing comments. Well, thank you all again for joining us today. We appreciate your interest in Mister and look forward to speaking with you again when we report our second quarter results.
Speaker Change: Well. Thank you all again for joining US today. We appreciate your interest in Mr. And look forward to speaking with you again, when we report our second quarter results.
Operator: The conference has now concluded. Thank you for attending today's presentation.
Speaker Change: The conference has now concluded.
Speaker Change: Thank you for attending today's presentation you may now disconnect.
Operator: You may now disconnect.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].