Mister Car Wash, Inc. Q4 FY2023 earnings call

• Delivered solid results in 2023 despite challenges like increased competition, high inflation, etc. - Completed Titanium rollout ahead of schedule with 100% of stores now offering Titanium. - Focus shifting to trading up existing UWC members to Titanium vs. converting new retail customers. - Opened 14 new greenfield stores in Q4 and ended the year with 476 locations. - UWC penetration for Titanium exceeded expectations at over 15%. - Focus on optimizing expenses and leveraging scale for efficiency.

In the fourth quarter, total net revenue increased 7.4% to $230 million. Adjusted EBITDA increased 5% to $69.5 million. Comp store sales increased 0.7%. UWC sales represented nearly 74% of total wash sales, and the number of UWC members increased 10.3% year-over-year. Greenfield sales remained strong with 14 new greenfield locations opened in the fourth quarter.

• Expect to open approximately 40 new greenfield locations in 2024, back half weighted. - Continue promoting Titanium across markets to drive trial and adoption, with re-launch of introductory pricing in certain markets. - Target UWC growth focused on conversion and revenue per member rather than net member growth. - Anticipate G&A growth to slow due to productivity initiatives. - Cautious outlook due to ongoing macro environment challenges and lack of industry consolidation.

• Macro forces such as increased competition, high inflation, high interest rates, and tight labor market pose challenges. - Retail volume remains a headwind due to difficult economic conditions for consumers and competitive activity. - Impact of promotional pricing on short-term revenue lift from Titanium.

Q: Please go ahead on Titanium 360 rollout penetration and promo impact?

A: John Lai stated they're ahead of penetration expectations at 15%, with promo offers rolling off to drive revenue tailwind. Jedidiah Gold added Titanium impact in Q4 was muted by promotions.

Q: Thoughts on M&A environment and leverage for transformative opportunity?

A: Jedidiah Gold mentioned evaluating M&A strategically, considering strong balance sheet and access to capital, but needing a good asset with favorable return profile.

Q: Shift to focus on existing member upward migration and impact on membership growth?

A: John Lai said membership growth will moderate as focus is on upgrading existing members, leading to slower net member growth but continued growth.

Q: Industry outlook and margin expansion expectations?

A: John Lai stated focus on revenue growth first, with margin expansion expected incrementally, possibly in back half of 2024.