Mister Car Wash, Inc. (NASDAQ:MCW) Q3 2025 Earnings Call Transcript

Mister Car Wash, Inc. (NASDAQ:MCW) Q3 2025 Earnings Call Transcript October 30, 2025

Operator: Good afternoon, and welcome to Mister Car Wash Third Quarter 2025 Conference Call. [Operator Instructions] Please note that this is being recorded, and a reproduction of this call, in whole or in part, is not permitted without written authorization from the company. I will now turn the call over to Eddie Plank, Vice President of Investor Relations.

Edward Plank: Good afternoon, everyone, and thank you for joining us to discuss our third quarter financial results. With me on the call today are John Lai, Chairman and Chief Executive Officer; and Jed Gold, Chief Financial Officer. 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 mistercarwash.com. As a reminder, comments made on today’s call may include forward-looking statements, which are subject to significant risks and uncertainties that could cause the company’s actual results to differ materially from management’s current expectations.

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. I’ll now turn the call over to John.

John Lai: Thanks, Eddie. Good afternoon, everyone, and thanks for joining our third quarter 2025 earnings call. We are very pleased with our performance in Q3. Our team delivered strong growth with revenue up 6% to $263 million and adjusted EBITDA increasing 10% to $87 million. In addition, our 3.1% comparable store sales growth marks the tenth consecutive quarter of comp gains. These results were fueled by strong UWC growth and exceptional execution from our powerhouse operations team, who consistently raised the bar and reset our high standard for excellence. We ended Q3 with approximately 2.2 million UWC members, a 6% increase year-over-year. I’m particularly pleased with the continued strong capture rates experienced across our stores.

Our UWC performance was led by our Titanium 360 tier, which reached approximately 25% penetration of our total membership base. During the quarter, we completed the rollout of our base membership price increase and are encouraged by the member adoption and retention trends to date. These initial results demonstrate the strong price-to-value relationship and speaks to future opportunities to drive revenue growth. Importantly, our commitment to delivering high-quality service at an accessible price point continues to be a key objective for our brand. Separately, after the quarter closed, we announced the acquisition of five stores in Lubbock, Texas. This expands our footprint in this market to nine locations, more than doubling our market share and offering customers greater convenience and more choices, amplifying our network effect.

We have a strong track record of successfully acquiring and integrating businesses and look forward to reopening under the Mister flag once all the value-added improvements have been put in place. As the industry continues to streamline and consolidate, we anticipate further opportunities to drive growth through strategic M&A. Building on that thought, we believe the industry is entering a healthier, more rational phase. The pace of new competitor openings in our markets continues to moderate, reducing pressure on trade areas. Over time, we also expect the rapid expansion that peaked in 2023 to lead to some capacity exiting the market creating room for strong operators like Mister to capture incremental market share and drive growth. Ultimately, we’re setting the stage for meaningful, sustainable performance by investing strategically driving innovation and sharpening our competitive edge, all while delivering on our mission to produce a clean, dry shiny car with unparalleled customer service.

With the largest subscription base in the industry, strong unit economics and a long history of innovation, we’re exceptionally well positioned to accelerate growth and elevate our brand for the long term. Now let’s discuss the progress we’ve made on our strategic imperatives during the third quarter. Let me start with expanding our footprint. During the quarter, we opened five new greenfield locations, bringing our total store count to 527 stores across 21 states. And just a few days ago, we celebrated the grand reopening of one of our flagship stores in TUCSON at the corner of Speedway Boulevard in Country Club, which we fundamentally transformed to deliver an even better customer experience. With one quarter left in 2025, we remain on track to open approximately 30 new stores this year.

In addition to the five stores we recently acquired. What’s most exciting is that we’re only about halfway to our long-term goal of more than 1,000 Mister locations across the U.S., underscoring the growth opportunity in front of us. Moving on to increasing our innovative solutions. At Mister, innovation is more than just ideas. It’s a launch pad for growth and delivering differentiated solutions that further separate Mister from other operators in the marketplace. From improving the quality of the water we use to fine-tuning our chemistry and tunnel equipment to introducing proprietary extra services like Titanium 360, innovation is at the heart of who we are at Mister. We continue to put our capital to work where we’ll have the biggest impact on sales, our stores and improving the customer experience, and we remain committed to investing in technology and R&D to further differentiate and extend our lead.

Our innovation pipeline is strong. And although it’s too early to discuss details, we aim to bring our newest major innovation to market in 2026. Next, driving traffic and growing membership. We were encouraged by the results of our marketing tests in Q2. And in Q4, we’re stepping up our marketing investment and expanding our testing program in a select number of markets. Our goal is clear. Build a strong foundation where marketing becomes a scalable growth engine for Mister in 2026 and beyond. This phase is all about focus and precision. Zeroing in on what matters most to understand which channels and tactics drive efficient incremental sales growth. Once we’ve established that baseline, we’ll look to broaden our efforts exploring new channels and creative promotional offers that generate a meaningful return on our advertising investments.

With a long runway of opportunity ahead, we’re excited about what this program can unlock for Mister’s long-term growth, particularly within our retail business. Finally, building a best-in-class team. We have the best team in the industry, and it shows. From our frontline team members in the stores all the way up to our senior leadership, our people and culture are woven into every layer of the business, driving performance, innovation and customer experience. Our team has been the high octane fuel behind our success as we continue to scale, we remain fully committed to investing in their growth and development and long-term potential. Before I wrap up my prepared remarks, I want to thank our amazing people across the entire company for their ongoing contributions and commitment to our customers, which allows us to deliver solid results.

In summary, this is an exciting time for Mister, and we’re energized by where our business stands today and where we’re going tomorrow. Industry headwinds are clearing. We’re actively managing variability in our retail performance and we’re capitalizing on M&A opportunities to fuel additional growth. By strengthening our core, driving innovation and expanding both organically and inorganically, we’re not only meeting strong customer demand, we’re reshaping our category for the future. We’ve laid a strong foundation for sustainable growth and are well positioned to lead both our business and the broader industry into its next chapter. I’ll now turn the call over to Jed to provide more commentary on our financial results.

Jedidiah Gold: Thanks, John, and good afternoon, everyone. Overall, we are pleased with our third quarter results and the performance of the business. We exceeded the high end of our expectations with comp store sales growth of 3.1% and adjusted EBITDA of $87 million. Additionally, we delivered adjusted EPS of $0.11, a 38% increase year-over-year. The team remains focused on the task at hand and aligned on delivering results. From a channel mix perspective, UWC was the primary growth driver, representing over 75% of total sales. This large and predictable base of subscription revenue continues to be the cornerstone of our resilient business model and a key contributor to our strong free cash flow. As noted in our earnings press release, we started reporting free cash flow in discretionary terms to highlight the strength of our cash generation and provide greater transparency into the nondiscretionary CapEx needs of the business.

I’ll expand on this shortly. We also successfully completed the rollout of our base membership price increases which contributed to the uplift in Express revenue per member during the quarter. As previously shared, this rollout was phased across markets and positions us well to drive continued revenue per member growth into next year. Importantly, churn has remained in line with expectations with a modest initial increase, followed by a reversion to the mean within 4 to 6 weeks. Across the industry landscape, we see encouraging signs of normalization. First, the pace of new competitor store openings within a 3-mile radius of existing Mister Car Wash’s has moderated compared to recent years with an estimated 40% fewer newbuilds year-to-date versus last year, contributing to a healthier, more balanced environment.

Second, as we’ve noted in prior calls, Mister locations that experienced competitive pressure continue to show year-over-year growth within 18 to 24 months of the competitor opening, ultimately outperforming the chain-wide average. During the third quarter, for example, the 49 sites facing competition less than a year old comped down low single digits, while sites with competition older than two years or no competition comped up mid- to high single digits on average. This underpins what we’ve long believed. While customers may explore alternatives, they consistently return to Mister for the superior customer experience we deliver. These two trends give us confidence in the quality of our model and optimism about our ability to accelerate growth moving forward.

Now let me provide some more details on the third 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 our 8-K filings and earnings press release. Net revenues increased 6% driven by a combination of 3.1% comparable store sales growth and the contribution of incremental revenue from the 26 net new stores opened over the last 12 months. UWC comps increased high single digits, while retail comps performed in line with our expectations for a low double-digit decrease. We achieved a 6% increase in UWC membership over the prior year, while maintaining retention rates consistent with our long-term averages.

Overall, we remain pleased with the performance and productivity of our store fleet and believe that the combination of decreasing competition and more data-driven site selection methodology, will drive higher returns on our invested capital moving forward. Sales growth was the strongest in July. Cycling a relatively easier lap but nonetheless positive through each month of the quarter. UWC sales represented 77% of total wash sales, and we ended the quarter with more than 2.2 million UWC members. At the end of the quarter, the membership split among base, Platinum and Titanium was approximately 41%, 34% and 25%, respectively. I’d like to point out that our subscription members remain resilient, and we’re not seeing trade down to lower-priced packages.

Finally, we continue to see strength in Express revenue per member, which increased approximately 4% year-over-year to $29.56. This was driven by our base membership price increases and additional mix shift into Titanium given the strong consumer response to our targeted trial promotion over the summer. Total operating expenses were $177 million in the quarter. As a percentage of revenue, total operating expenses improved 130 basis points to 67.1%, primarily due to sales leverage and disciplined cost management as the team continues to find ways to optimize costs and maximize operational leverage. Within total operating expenses, labor and chemicals improved 40 basis points to 28%, as leverage on our stronger sales, along with some savings in chemical costs more than offset higher labor expenses.

Other store operating expenses increased modestly by 10 basis points to 32.7%, driven by higher cash rent tied to our strategic new store investments and elevated utility costs particularly electricity where rates have been trending upward. G&A expense improved by 100 basis points to 6.4% as a result of better expense management. Looking ahead, we plan to invest approximately $2 million in Q4 to support the next wave of marketing tests. Building on the encouraging results from Q2, we’re optimistic about how this next phase will resonate with consumers and excited to fine-tune our approach to marketing and advertising going into 2026. EBITDA increased 10% to $87 million, and EBITDA margin increased to 130 basis points to 32.9%. Of note, this is on top of a 100 basis point increase last year and represents the highest Q3 EBITDA margin that we have ever reported.

Third quarter interest expense improved by 32% to $14 million, primarily due to lower average interest rates year-over-year and lower borrowings compared to last year as we’ve reduced our total outstanding debt by more than $100 million over the last 12 months. Finally, third quarter net income and net income per diluted share were $37 million and $0.11, respectively. Moving on to some balance sheet and cash flow highlights. At the end of the quarter, cash and cash equivalents were $36 million and outstanding long-term debt was $827 million, a $22 million sequential improvement as we voluntarily paid down debt during the quarter. Importantly, our leverage ratio stands at 2.4x adjusted EBITDA well within our stated target of 2x to 3x, and our liquidity position remains strong positioning us well to continue investing in future growth opportunities while reducing debt when feasible.

In addition, we were active in the sale-leaseback market. During the third quarter, we completed one sale-leaseback transaction involving one carwash location for an aggregate consideration of $5 million. In addition, our pipeline for Q4 is strong, with seven carwashes currently under LOI or contract. The passage of The One Big Beautiful Bill Act and the restoration of 100% bonus depreciation incentive have sparked a notable increase in demand, which along with the high quality of our assets is allowing us to negotiate deals on very favorable terms, and we are seeing a material improvement in cap rates as a result. Further easing of interest rates will likely provide an additional tailwind to cap rate trends. In addition, the majority of our capital expenditures qualify for 100% bonus depreciation under the bill.

Coupled with our existing net operating losses, we expect these deductions to fully offset taxable income and reduce our federal cash tax liability to near 0 for the next several years. Now I’d like to take a moment to highlight our free cash flow. While we continue to believe that our greenfield development program remains the most effective use of capital, growth CapEx represents nearly 90% of our total capital expenditures. As such, we believe it’s important to emphasize the strength of our underlying cash generation. Excluding growth-related investments, we generated free cash flow of $202 million for the nine months ended September 30, compared to $174 million in the same period last year. This represents 26% of sales and highlights the cash flow performance of our core operations and our ability to generate meaningful cash flow while investing to maintain our existing fleet of core stores.

It also underscores the financial flexibility we have to pursue strategic opportunities beyond our greenfield development program. Finally, regarding the Lubbock acquisition, announced shortly after we closed the third quarter. The addition of these five stores strengthens our market position and enhances the value proposition for our subscription members. From a financial and membership standpoint, we expect the impact to be immaterial. We do expect the five stores to be incremental to our previously communicated guidance of approximately 30. Now I’ll provide an update on our full year outlook. We are reiterating our previously provided guidance ranges for the fiscal year ending December 31, 2025. To assist with your modeling, I’ll add some additional context and color.

First, on comparable store sales, given our stronger-than-anticipated Q3 results, we now expect to finish the year at the high end or slightly above our guidance range of 1.5% to 2.5%. This reflects quarter-to-date trends through October, which as we noted on our last call, represented the toughest year-over-year comparison of any month in Q4. Second, on revenue, we expect full year revenue to land near the high end of our guidance range of $1.046 billion to $1.054 billion. This outlook incorporates approximately 17 new store openings in Q4, up from 14 in Q4 of 2024, and the timing of revenue contribution from those stores. We are also factoring in a modest sales uplift from our ongoing marketing tests. Finally, on adjusted EBITDA, we expect to be at the high end of our guidance range of $338 million to $342 million.

As increased spend on our Q4 marketing test is largely offset by a corresponding sales lift. For even more details, the full list of our outlook ranges for 2025 can be found in the table in today’s earnings press release. In summary, we remain committed to investing in our growth initiatives while continuing to deliver strong profitability and cash flow. Looking ahead, we are encouraged by the strength of our markets, the resilience of our business model and the consistent execution by our teams. We are well positioned to capitalize on the favorable tailwinds emerging in the carwash industry, achieve our financial objectives and create lasting value for our shareholders. Operator, that concludes our prepared remarks, and we will now open the call for questions.

Operator: [Operator Instructions] The first question comes from the line of David Bellinger with Mizuho.

Q&A Session

David Bellinger: Maybe first one just a couple of parts. So could you just help us understand where the sales upside were that materialized within Q3? And then on the October comment, I know there was a more difficult comparison, but just anything you’ve noticed from your core customers, a lot of noise out there with the government shutdown, some of these SNAP benefits potentially going away for a period. So anything that you’ve noticed on the start to Q4, just that’s been a little different than your expectations?

Jedidiah Gold: Yes, David. It’s Jed. Thanks for the question. So first of all, on your — the first part of your question about just what materialized and helped drive the strength in Q3. Overall, when we look at the trends by month, it was — all months were positive, as we talked about on our last call. It was a little bit softer lap in July. So July was the stronger of the three months, but each month was positive. We’re really happy with the revenue per member growth that we saw during the quarter, which was fueled by Titanium mix, just a little bit stronger than what we had expected at just over 25% during the quarter. As we look at October, October, as we’ve talked about, it is going to be the most difficult lap of the year. We’re lapping a positive low double-digit comp. We knew this was going to be a challenge. It’s in line with what we’ve expected, and it’s been factored into our — the full year guidance that we provided.

David Bellinger: Very good. And then second question, I appreciate all the cash flow commentary. It seems like a lot of things move in your favor with the accelerated depreciation and some of the leaseback demand picking up. So my question is, what’s the pecking order of your cash flow usage from here? Is it leverage pay down? Is it new units? Could you even buy back some stock directly from your private equity sponsor, if possible? Just help us think about the pecking order of your cash flow usage?

Jedidiah Gold: Yes. Really happy with the free cash flow that’s being generated from the business. It does present, as you highlighted, a lot of optionality for us to drive shareholder value. As we look at the uses of cash, greenfield is certainly the highest and best use of capital. So we’re not looking to pull off the gas in any way on continuing to build new units infill within our existing markets, expand our footprint. And then some of the other alternatives that you laid down, it gives us some alternatives right for potential share buyback, debt paydown, but also, we continue to look at different M&A opportunities. So really hard to say because it’s not a static analysis. It’s something that we’re going to continually look at and optimize that cash deployment.

Operator: The next question comes from Justin Kleber with Baird.

Justin Kleber: First one, just on, I guess, a couple of questions on pricing. I wanted to understand how the base price increase wraps into ’26? And then secondly, how do you guys think about the ability to optimize pricing at a local level? I know some of your markets have a slightly different pricing architecture, but I think most are fairly consistent. So just wondering if there’s an opportunity to create price zones based on local market dynamics.

John Lai: Yes. I’ll start. Good question. So listen, the way we approach pricing is on a market-specific basis. We would always love to get to a national pricing structure, but we think that, that’s not the right approach. So today, we’re continuously evaluating our strategy, and we look at it through the lens of the value that we’re providing to our customers. We keep a finger on the pulse of competitive activity. I think the fact that we’re delivering a premium experience justifies us perhaps moving up the ladder on pricing when we see that opportunity present itself. But we’ve been very cautious with respect to our approach. Typically, we’re not going to telegraph any future price moves on a call like this, so we like to keep that close to the vest.

Jedidiah Gold: And then I think the first part of your question, Justin, about how that base price increase will flow into 2026. So the rollout is just — as we had talked about in our prepared remarks, it’s been in line with our expectations, where we’ll take the base price increase for a short period, we’ll see for 4 to 6 weeks, we’ll see a period of elevated churn, but then churn comes back within its historic average. But it was, as you know, a phased rollout of that base price increase and some of the — our larger markets, that base price increase didn’t get rolled out until late Q3, early Q4. So most of the benefit from those markets will be realized in 2026. Roughly, as we think about the total base price increase and how much is going to impact 2025 versus 2026, it’s roughly 1/4 to 1/3 will — of that total base price increase will roll into 2026.

Justin Kleber: All right. And then, Jed, just based on your comments around full year comp, it seems like you’re not planning for a negative comp in the fourth quarter. Just wanted to confirm that.

Jedidiah Gold: That is — Justin, that is correct. We are not planning on a full — on a negative comp, at least on the full quarter, but keep in mind, October, as we’ve highlighted, a little more difficult lap. But November, December, it softens up a little bit. So we expect to be positive on the quarter.

Operator: The next question comes from the line of Peter Keith with Piper Sandler.

Alexia Morgan: This is Alexia Morgan on for Peter. We were wondering if you could provide some more color on membership trends. We calculate members per store in Q3 declining from Q2. And it looks like the total member count was either flat sequentially or possibly saw some slight decline, if my math is correct. Any insight you could provide into that trend would be helpful. And do you expect this trend to continue over the coming quarters?

John Lai: Yes. Thanks for the question. This is John. So you’re absolutely right. Sequentially, our membership base has been relatively flat. And that also is kind of in line with what we expected when we look at retail volume. And so for us, retail volume is the top of the funnel as we get more retail traffic in the door. We’ve proven that we can convert them at north of a 10% capture rate into membership. So really, for us, it’s solving for this retail traffic and getting more retail customers in the door to increase our member base. I will say that when we look at utilization of our current member base, it’s remained steady, and so the level of engagement has not waned. And we’re also looking to deepen the relationship that we have with our members to improve that engagement level, primarily focused on how we onboard that new member which is a really critical time to establish a different habit of behavior.

And we think that, that first 90 days is absolutely critical. Some additional color on UWC though and things that I think are important from a KPI perspective, our churn has remained steady at roughly 5%. So no uptick in churn, which is always a good thing. And when we look at the shape of that retention curve as our member base matures and they stay in the program longer, that churn rate decreases for those folks are staying longer. So for us, it’s all about getting them in, getting them used to washing their car ideally once a week. And once we establish that behavior, they tend to stay in the program. So today, we’re super happy. I think contextually, when you look at our member base, we’re definitely in the upper quartile on an industry-wide basis with approximately 5,000 members per store for our mature stores.

But we have a number of stores that have 7,000 members, a bunch of stores, that have 10,000 members. So it just emboldens us that we have organic growth inside of our existing customer base. And if I were just to zoom out for a second. When we think about the TAM for subscription, we think that the market is under subscribed and that there is a whole lot more potential for our industry to grow their membership base, and we look at other sectors like the gym space that has north of a 25% of the U.S. population belongs to some gym membership. And we think that, that customer parallels a carwash customer very closely. So to that end, that is what our potential is. So if we can double the TAM potential of our membership universe, that would be a really awesome tailwind for our business.

Alexia Morgan: Okay. That’s really helpful. And then my second question is on your marketing test. Is there any update or quantification on the comp lift in the markets experiencing those market tests? And then just anecdotally, any new marketing forms that are resonating with these tests?

John Lai: Yes. So as we noted in the last call, in Q2, we had a mid-single-digit uptick in comp store sales for the six pilot markets that on average that we tested in. And then we took the learnings from that and leverage those learns to deploy in our Q4 test, which is currently underway. So we don’t have anything to share with you in terms of how that is currently trending because it’s relatively new. But for us, it was breaking down channel offer the different types of image and building upon the good and then also discarding the stuff that wasn’t moving the needle.

Jedidiah Gold: And then as we think about Q4, Alexia, it’s — we did factor in a very small sales lift, but it’s a limited test, we’re still calling it a test. And it’s going to take a little bit of time to get some traction, just limiting the amount of sales benefit that we expect to see during the fourth quarter.

Operator: The next question comes from Michael Lasser with UBS.

Michael Lasser: So the competitive intensity within the industry is moderating, yet retail remains down low double digits. So is there a case where economic sensitivity is rising? Or alternatively as you raise the base price membership, the appeal of becoming an a la carte member looks a little bit more attractive. Maybe you could just give us a sense of what you think those dynamics start playing out?

John Lai: Yes. Michael, good question. So listen, while we believe or we’re seeing that the amount of new entrants into the space is abating and receding from the high of 2023, which is a good trend for us. Those businesses are out there, the ones that have been built. And so we have 80% of our portfolio as a competitor within a 1-mile — or excuse me, a 3-mile radius. And so as we look at the types of promotional offers that they’re deploying. Most of them are in the introductory subscription trial offers. We haven’t seen a whole lot of discounting on retail. I will say that I think to your question around the price sensitivity for our retail base price. It’s a $10 carwash. And so that’s within reach, I think, of most Americans. That said, we are sensitive to the bottom quartile of the income bracket, and those folks certainly are under a little bit more pressure, which we think is having an impact on frequency.

Jedidiah Gold: Yes, Michael, just putting a little bit finer point on that is when we look at — and it’s been pretty consistent over the last few quarters, when we look at those stores that are in the lower income demographic, they are underperforming the balance of the portfolio, speaking to that lower-end consumer being under just a little bit more pressure, and their wallet not going quite as far in their spend.

Michael Lasser: Okay. Very helpful. And then has there been a change philosophically within the Mister Organization where the company would be willing to accept fewer members per location with the offset being you can harvest more revenue per member? And how does that — if that’s the philosophy now, how does that look heading into 2026? Because the pipeline is going to have — probably been under some pressure, the pipeline for new members given the low double-digit retail decrease in 3Q. And if you’re pointing to a flat overall comp in 4Q, that’s probably going to suggest that retail remains under pressure in 4Q.

John Lai: Yes. Michael, so philosophically, I think there’s never been a primary thrust on maximizing profitability per customer. To your point, we were more about driving membership early on in our life cycle. But where we sit today, we’re definitely looking more at how we can increase the value of that member. So when we look at revenue per member, which is a really important KPI for us, that’s shown a really healthy uptick over the last 5 years, primarily driven by Titanium. So we were really pleased with how we were able to take an existing, very large installed base and increase the value of that base. And one could argue, without taking a price increase, it was introducing a new top tier. So that was terrific. But as we also noted, though, after roughly 18 years of holding the line on base membership, with rising input costs, we were kind of kicking and screaming to the table going, “Hey, we needed to take our membership price up,” which we did, the base, and that flowed through rather nicely.

So I think to your question, today, we want our cake and eat it too. We want to grow our member base, but we also want to increase the value of that member, and we’re trying to do both of those simultaneously.

Operator: The next question comes from the line of John Heinbockel with Guggenheim.

Jacob Nivasch: This is Jake Nivasch on for John. A quick question. Just wanted to go back to the marketing test. The expanded marketing test look from — from what 4 markets to double that? And I guess, what lift are you getting on brand awareness? And just trying to get a better sense of what the right level of spend you guys think might be, I guess, near term or just going forward here?

John Lai: Yes. Thanks for the question. So we’re just in the throes of the Q4 test right now. So too early for us to share anything of substance, although we are excited about the potential. So we just point back to the results that we had in Q2, which were promising, and emboldens us to want to turn up the knob more. As we’ve noted on previous calls, our ad spend as a percentage of revenue is minuscule, and we would love to be able to turn up the knob, but we want to be able to justify the investment and not just throw money at it. So we’re holding ourselves internally to a high bar from a ROAS perspective and making sure that every incremental dollar that we spend is going to generate ideally a 3x return in revenue.

Jedidiah Gold: And Jake, just a little bit more to build on that, right? So you talked about brand awareness and looking — using that as a measure for success. While we are looking at that, I think the focus really is around how do we drive incremental sales and incremental return on invested ad spend. So truly looking at this, we want to make sure that we know what works, what doesn’t work, looking at messaging, looking at channels, looking at the amount of spend, the combination of different channels. There’s a lot that goes into this, and we want to make sure we’re really getting smarter about it and building this disciplined marketing muscle that will continue to drive the top line going forward. So really optimistic about what we saw in Q2. It’s what’s emboldened us as we look to this test to continue to refine our learnings in Q4.

Operator: The next question comes from the line of Simeon Gutman with Morgan Stanley.

Simeon Gutman: I wanted to ask, can you remind us on Titanium, how long — I guess, when was the first — several markets rolled out? Are we in like a year 2 in some places or just 1.5 years? And then can you talk about what’s happened to membership in some of those longest markets? What you’re seeing in terms of Titanium membership growing on growth? And then what’s happening in other tiers in some of those longer markets?

John Lai: Yes. Simeon, thanks for the question. So it’s launched in 2023 and there’s a rolling rollout, [ let’s say ]. So we don’t do it all in one day. We roll it out by region and make sure that we’re reducing it. So we’ve had this benefit of month-over-month sequential growth that has been helpful. The membership, I think, recovering in the 25% range. And again, that has exceeded our expectations. When we look at the blend of the premium mix, which is our Platinum and Titanium, that’s roughly 60% of our overall member base. And again, we’re very pleased with that number. Would we like to see it grow? For sure. And so internally, we’re working on some techniques to continue to elevate the premiumization of our membership universe.

But the way we go about it, has been very kind of what we call slow burn. In that, we don’t want to become overly promotional and trying to get people into those tiers. But the fact that they have adopted it, and they’re sticking in the program, is really a testament to the value that they’re driving from the service that we’re providing.

Jedidiah Gold: Yes. And Simeon, when we look at it by market, there are some markets that are 35% plus mix, which is what gives us hope that there’s still some continued opportunity to drive Titanium mix and this membership premiumization. But it’s not going to be at the same accelerated rate that we’ve seen over the last 1.5 years. It’s going to take some concerted focus from the — particularly our frontline team members in really helping elevate in their communications with members for us to start to realize that higher member or higher Titanium mix across even more of our markets.

Simeon Gutman: And then a follow-up. I want to talk — ask about the greenfield markets. Can you talk about anything that surprised you? Can you talk about market development? Are you approaching it the same way in terms of number of stores? Anything either on membership or the retail customer in greenfield?

John Lai: Yes. Listen, the greenfield program, there’s been a lot of learnings for us. I think let me start by saying that the bulk of the greenfields that we’ve opened are hitting it out of the park. We’re absolutely crushing it. But that said, there’s been another bucket of stores that have come under some competitive intrusion, and those stores are ramping at a different trajectory as a result. There’s another kind of bucket as we break them into different categories of stores that we’re calling the early stores, that were intentionally early, where we went in to establish our position in the trade area that hasn’t been fully built out, but we expect that it will, and getting that beachhead will hopefully prevent others from coming in.

So again, we’re optimistic about the long-term potential of those locations. But then there’s also a smaller segment of stores where we just made some site selection errors, and we learned a lot from those mistakes, and we baked that into a lot of new protocols. One of those is we’re becoming a lot more data-driven and rigorous in our site selection process. And I will say our real estate team going forward is really, really focused on quality and making sure that we have a super high degree of confidence in the success of the future pipeline.

Operator: The next question comes from the line of Phillip Blee with William Blair.

Phillip Blee: Quick one on unit growth. You previously brought down your expectations for this year by a bit to 30 greenfields. Should we expect this to be your new run rate going into 2026? And does changes in the M&A environment impact your greenfield plans at all?

Jedidiah Gold: Yes, Phillip. So as we think about 2025, the guidance of approximately 30, as we shared in our prepared remarks, important to note that, that’s just greenfields. That does not factor in any M&A. So the Lubbock acquisition would be incremental to that. And then as we think about 2026, we expect the greenfield development to be in line with what we see in 2025.

Phillip Blee: Okay. Okay. Very helpful. And then previously, I believe you had mentioned that Lubbock was a market that was largely built out. So did something change in that assessment? And then how are you viewing the incremental opportunity to grow that total market? And then are there other cities that you maybe thought were a bit saturated from a store perspective, but maybe then reassessing the potential for further density?

John Lai: Yes. This is John. So great question. So listen, we had an established presence in Lubbock, albeit a small one with 4 stores. And we have the opportunity to double our footprint with a 5-store acquisition to get to 9 locations. It put us clearly in the #1 seat for that market. But to your point, it is a competitive market. There’s a lot of good operators in that market that we have the highest regard for. But at the end of the day, it’s not a market that we would add a greenfield to, given, to your point, the market is mature and kind of that capacity. But this really, again, speaks to the strength that we have from a growth perspective as a company and that we’re agnostic in unit growth. We can buy businesses, or we can build businesses, build stores and the fact that we have a two-pronged approach to strengthen our position.

And so again, our primary objective is to densify and fortify each of the markets that we’re in, elevate our market share. And if there’s a good opportunity to do that through M&A, we will pull the trigger. And that’s exactly what we did in Lubbock. We’re very optimistic about that.

Operator: The next question comes from the line of Mark Jordan with Goldman Sachs.

Mark Jordan: With the recent acquisition, should we expect M&A to accelerate going forward? Or is this acquisition just more opportunistic in nature?

John Lai: Yes. It’s hard for us to predict M&A. It’s, as you know, lumpy. Oftentimes, it’s predicated on when those opportunities come to market, and so we can’t project that. But we have — we remain open for and evaluating opportunities as they come across the table. And we’re out there pounding the pavement right now looking for the onesie-twosies, that we’re calling bolt-ons, that can strengthen our position in each market. So we’re very bullish, big picture, on what we think will be a really nice setup for perhaps larger scale combination opportunities in the future, but trying to predict that is difficult. So I will say that over the next 2 to 5 years, I expect the industry to skinny down a little bit in terms of the number of folks that — particularly the platforms that are in the space, the PE-backed platforms specifically that we’ll look to monetize and exit.

And it’s our prediction that most of them will probably exit at a lower multiple than what they paid to get in.

Mark Jordan: That’s perfect. And then that kind of dovetails into my next question is, like, what are — asking multiples in the M&A market, how does that compare now to maybe what you were seeing a year or 2 ago?

John Lai: It’s dropped precipitously.

Operator: The next question comes from Bobby Griffin with Raymond James.

Robert Griffin: Congrats on a good quarter. I guess, John, for me, I just wanted to circle back to — I think it was in your prepared remarks. You mentioned something about speaks to further opportunities to drive revenue growth when you’re talking about price, which is a little bit different. Is that more one-off? Or is that honestly putting in that like price now is part of the consistent wheel as we think about multiyear comp drivers for this business?

John Lai: Yes. So I think a couple of things. The cadence of our price increases have been — we characterize them as episodic and definitely lagging inflation, but no more frequent than once a year and ideally once every 2 years, I think if you start moving pricing more frequently than that. It could rattle the customer. And we certainly don’t want to do that, and we want to be careful about how we approach it. That said, as we look inside of our business down to the regional level, down to the store level, there are a number of opportunities today for us to optimize pricing. And so we kind of not hold that in reserve, but as we selectively look at where those opportunities are, we will pull the trigger on them at the appropriate time. But again, we’re not going to telegraph those moves on this call.

Robert Griffin: Yes, completely understandable. That’s very helpful, though, in the way to think about it. And I would agree with you on the opportunity as well. And I guess the second one I wanted to ask is just maybe to cut the store comp a little differently. But if you look at your mature markets that aren’t experiencing competitor growth, but also aren’t experiencing densification from you guys themselves, what does that mature market profile comp look like versus the company average?

Jedidiah Gold: Yes. So Bobby, as we think about that ramp curve, you really see the majority of the comp store sales growth coming from those stores that are open within the first 5 years, which isn’t unique to other retailers. You have a little bit of an accelerated comp or a little bit of an outsized comp. And then as you move into the mature stores, they tend to lag those stores that are in the first 5 years. I do think we’re in a little bit of a unique position given that we have 63 interior clean locations, and all 63 of those interior clean locations sit in the most mature vintages. And as we look at those interior clean locations, during the quarter, they comped at a plus — or excuse me, at a negative 1.6%, serving as a headwind to the overall comp, thus a headwind to the overall mature store base.

Robert Griffin: Okay. That’s helpful. I appreciate the details, and good luck here on the fourth and some of the marketing tests.

Operator: The next question comes from Robby Ohmes with Bank of America.

Yanjun Liu: This is Vicky on for Robby Ohmes. In the markets where you have tested marketing spend, have you seen any competitive responses?

John Lai: We have nothing out of the ordinary.

Yanjun Liu: Got it. And Titanium penetration is now 25%. For the markets that have above-average Titanium penetration, you mentioned some locations have around 35%. What’s the primary driver of the outperformance?

Jedidiah Gold: Yes. So just one clarification. Some markets are at 35%. We have some stores, some locations that are even more than that. So that’s just markets. And so as we look at those markets and what’s driving the outperformance, it’s always going to be a number of factors, economic — good economic tailwind, but good — this is where great operations leadership really shines and being able to align the team on the task at hand and being able to help drive that Titanium mix even higher. And so different — some of our different operators in different markets are better at that than others, but the leadership at that market level does have a play a role.

Operator: The next question comes from Christian Carlino with JPMorgan.

Christian Carlino: How are you thinking about the retail comps in the fourth quarter? It seems like you can hit the high end even if retail gets a bit worse. So is that just conservatism given the consumer is about to absorb tariffs in other areas of their wallet? I know you have the tough comp in October, but just any help on the puts and takes into the fourth quarter?

Jedidiah Gold: Yes. So as we think about the Q4 comp, we’ll have obviously the continued tailwind of the base membership price increase, helping drive revenue per member, going to continue to stay focused on Titanium penetration and look for opportunities to drive that a little bit further. The high end of the guide, it does — so when we look at the UWC revenue per member, looking at positive low single digit to mid-single digit. But that retail comp sales, it would be negative. It implies a negative high teens. So it implies getting worse from what we saw in Q3. And Q3 was slightly better than what we saw in Q2. So forecasting retail, it continues to be the more difficult line to forecast. And so I wanted to make sure we gave ourselves just a little bit of room, especially given how well October — how strong October was last year.

Christian Carlino: Got it. That’s helpful. Could you talk about how comps trended by region? Any big outperformers or underperformers? I know there was some hurricane noise last year with some lost days and then a lot of pent-up demand releasing afterwards. Any comments there? And do you think weather was a tailwind in the third quarter after being neutral in the second quarter?

Jedidiah Gold: Yes. Weather was certainly a tailwind as we look at Q1. Really, really good weather patterns in Q1 of this year. And then as we talked about Q2, it was just moderated, and was more in line with what we historically see, hence, the moderation in the comp. Q3, really nothing significant in the aggregate. There’s — right? Given how many markets we operate in, there’s always going to be benefit in some markets, but there’s going to be a tailwind in others. I mean one of the biggest factors that impacts comp when you look at it on the regional level, it’s just the number of stores that are moving from their freshmen year into their sophomore year and just the existing base of stores that we may already have in the region.

If we are running a marketing test, that also will drive a little bit of outperformance in the particular regions, whether strength of the operating team — there’s a lot of different variables that will come into play when we start looking at regional trends. We could have a whole half-day session in going through all the different regions and the variables that are impacting them.

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

John Lai: Well, thanks, everyone, for joining us for the Q3 call. We had a great quarter, as we noted. We’re super optimistic about how the year is shaping up. We have a lot of momentum in the business right now. More importantly, we’re very excited about the long-term opportunity to double our footprint. And I think as the noise from some of the underperforming carwash chains dies down, emerging from that will be a handful of very well-run, well-capitalized, growth-oriented carwash platforms that will ultimately prevail, and we expect to be one of them. So thank you, guys. Look forward to talking to you on the next call.

Operator: Thank you. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect. Thank you.