Good afternoon, and welcome to the Mister Car Wash Fourth Quarter 2024 Conference Call. At this time, all participants will be in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that today's call is being recorded and a reproduction of this call in whole or in part is not permitted without written authorization from the company. I would now like to turn the call over to Mr. Eddie Plank, Vice President of Investor Relations. Please go ahead, sir. Perhaps you're muted, Mr. Plank. It seems that we are experiencing some technical difficulties. Please hold while we reconnect. Pardon me, this is the conference operator. We have reconnected our speakers. The floor is yours.

Good afternoon, everyone, and thank you for joining us to discuss our fourth quarter and full year 2024 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 will 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. 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 statement disclaimer contained in the company's SEC filings, including its most recent reports, as such factors may be updated from time to time.

Thanks, Eddie. Good afternoon, everyone, and thanks for joining our Q4 2024 earnings call. We ended the year with quarterly results that exceeded our expectations, led by strong comp store sales growth of 6%. Q4 marked the seventh consecutive quarter of comp growth for Mister, including the first positive retail comp since Q1 of 2022. Looking at the full year, fueled by the introduction of our premium titanium service, we delivered record revenues and EBITDA with sales up 7% and adjusted EBITDA growing by 12%. We also continue to make great strides with our greenfield program, opening 40 new locations in 2024, including one relocation and surpassing the 500-store milestone. While we're encouraged by our performance, we are hesitant to extrapolate current trends through the upcoming year. Consumer behavior remains difficult to predict, and our non-subscription business is more sensitive to weather. So we're retaining a cautiously optimistic view for retail trends in the month ahead, which Jed will discuss in more detail when he outlines our guidance for the year later in the call. As we turn our focus to 2025, I'd like to briefly comment on the competitive environment. Although the landscape remains crowded, we expect the influx of new entrants into the market to continue to decelerate from the highs we saw in 2023. Over the next few years, we expect the industry to rationalize, and we are confident Mister will be well positioned to capitalize as market share and consolidation opportunities present themselves. Disciplined growth, solid execution, and operational excellence to deliver an exceptional customer experience is what motivates us and drives our success, not growth at all costs. Now, I'd like to spend a little time on our four strategic pillars and the progress we're making to drive productive and profitable growth over the long-term. Starting with number one, expand our footprint. We will continue to drive unit growth in 2025 through our greenfield program. This year, we plan to add 30 to 35 new stores in key metro areas as we continue to densify and strengthen our position. The greenfield program has proven successful for us. Since inception, we have constructed 140 car wash locations accounting for more than 27% of our platform. As the program evolves, we are continuing to refine our proprietary site selection model and are becoming more surgical with our analysis of both core and new markets, which we expect will improve our success rate. With respect to M&A transactions, we remain opportunistic, and we'll continually evaluate opportunities that make strategic sense. Moving to number two, increase our innovative solutions. Our culture of innovation across products, service, and operations also sets Mister apart. When we innovate, we win; our Titanium launch is a great example of this. At 23% of UWC membership penetration overall, Titanium outperformed our expectations in 2024. Our overarching goal is to continuously improve the customer experience. That requires agility and a commitment to innovate across all segments of the company, whether reducing friction at the point of sale, developing creative new marketing campaigns or pushing forward with industry-leading technology and R&D. The end game is the same: to consistently wow and delight our customers while increasing our competitive advantage. Moving to number three, drive traffic and grow membership. As I mentioned, we're increasing our investments in marketing to enhance our brand messaging to engage with customers in new ways. To that end, in Q4, we tested new media channels to expand our reach and launch digital promotions in select markets to drive retail traffic, and we're generally pleased with customer response. Moving forward, we remain customer obsessed, evaluating and improving each customer interaction, and we're turning our attention to driving stronger brand awareness and membership growth. This includes developing more robust segmented and targeted marketing aimed at increasing awareness and driving traffic. Finally, number four, build a best-in-class team. This has been an ongoing effort, evidenced by the material investments in our leadership team over the past couple of years. The most recent being our first-ever Chief Technology Officer, Carlos Chavez, who joined us at the beginning of the year. With this strong retail and digital background and wealth of experience in technology leadership roles, Carlos will develop our vision for how technology can serve as a competitive differentiator. I look forward to his partnership as we take the business and industry beyond where it is today. Looking to 2025 and beyond, I remain optimistic about our growth prospects. Our industry has seen a lot of change over the past few years, but over time, we believe the best operators will win. As a leading car wash company in the nation, we'll continue to play offense by expanding our footprint, connecting with consumers, driving membership, and ultimately, shareholder value. When I reflect on where our company was 10 years ago with 136 stores and $250 million in revenue to where we stand today at over 500 stores and nearly $1 billion in revenue, I couldn't be more energized about our future. None of this would have been possible without our incredibly talented team; our people, our culture, and our ability to continuously improve is what makes Mister special. I'd like to thank all of our great team members for your tremendous effort. I'll now turn the call over to Jed, to provide more commentary around our financial results.

Thank you, John, and good afternoon, everyone. In summary, Mister had another record-breaking year; marked by 7% revenue growth, 12% adjusted EBITDA growth, and 16% growth in adjusted earnings per share. We ended the year on a high note, with a really strong fourth quarter, fueled by the successful rollout of our new Titanium offering earlier during the year. Overall, we are pleased with our Q4 performance. From a top line perspective, sales were at the high end of our guidance range and comp trends were the strongest we've seen in over two years, led by high single-digit growth at UWC and a slightly positive retail comp. From a bottom-line perspective, the team maintained strong cost discipline, resulting in adjusted EBITDA and adjusted net income that was better than our guidance range. Fourth quarter sales demonstrated the power of our predominantly subscription model. Sales benefited from a particularly strong October that included a significant uptick in retail volume, as our teams capitalized on more favorable weather conditions. The favorable weather trends and retail improvement translated to more at bats and slightly more opportunities to trade customers into membership. In addition, our subscription business remained resilient, providing us with a significant and stable recurring revenue base. Member utilization held constant in Q4, which is a key indicator of member satisfaction. We didn't see any material changes in our core churn levels from previous quarters. Our Titanium membership also continued to perform well, accounting for 23% of our membership mix and helping to drive a 10% increase in Express revenue per member during the quarter. Titanium far exceeded our expectations this year, and we are pleased with how the team has executed the launch. Finally, we opened 13 new net Express exterior car washes in the quarter, totaling a record 38 net greenfield openings for the full year. This equated to 39 new stores, one relocation opening, and two closures. Now I'll provide some more detail on fourth quarter results. For simplicity, I'll be referring to adjusted numbers only, which exclude items such as stock-based compensation and loss from the disposition of assets. The full reconciliation of adjusted figures can be found in our 8-K 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 our new store openings. UWC sales represented 75% of total wash sales, and we ended the quarter with more than 2.1 million UWC members. On a year-over-year basis, the number of UWC members increased by 46,000 members or roughly 2%. At the end of the quarter, the membership split among base, platinum, and titanium was approximately 41%, 36%, and 23%, respectively. The average Express revenue per member in Q4 increased 10% to $28.65 versus $26.14 in the fourth quarter last year. Total operating costs and expenses were $173 million in the quarter. As a percentage of net revenue, total operating expenses decreased 100 basis points to 68.8%. Labor and chemicals decreased 110 basis points to 27.8%, driven primarily by work the team completed earlier in the year to optimize our labor model at our interior clean locations and leveraging our scale and purchasing and shipping of chemicals. This was partially offset by increased labor rates. As we now begin to anniversary those savings in chemical costs and interior clean labor, we don't expect to realize incremental gains in 2025. Other store operating expenses increased 50 basis points to 33.1%, primarily driven by higher rent expense related to our new store growth and sale leasebacks as well as higher utilities, equipment, and facilities and maintenance costs. G&A expense decreased 40 basis points to 7.9%, driven primarily by better expense management, partially offset by an increase in marketing expenses. EBITDA increased 13% to $78 million and EBITDA margin increased 100 basis points to 31.2%. Looking at the full year, EBITDA was $321 million, representing a 12% year-over-year increase. To echo John's sentiment of how far we've come over the last decade, our 2024 EBITDA reflects a 10-year compounded annual growth rate of 22%. Fourth quarter interest expense decreased by 7% to $19 million, primarily due to lower average interest rates year-over-year, despite modestly higher borrowings compared to last year. Finally, fourth quarter net income and net income per diluted share were $31 million and $0.09, respectively. Moving on to some balance sheet and cash flow highlights at the end of the quarter. Cash and cash equivalents were $67 million, largely driven by proceeds from our sale leasebacks. Outstanding long-term debt was $920 million, a $22 million sequential decrease as we paid down our revolver balance during the quarter. This reduction in net long-term debt, coupled with our strong full year performance and increased cash balance resulted in a 0.3 reduction in our net leverage ratio to 2.7 times. Our balance sheet remains healthy and flexible, and we continue to self-fund our growth and expansion via sale-leaseback. In the fourth quarter, we were very active in the sale-leaseback market, completing 21 sale-leaseback transactions involving 21 car wash locations for an aggregate consideration of $98 million. Now I'll provide some color around our initial 2025 outlook. With respect to sales, we are encouraged by the momentum we've seen build over the last two quarters. However, with many factors such as inflation still impacting discretionary spending and the outsized benefit of weather on recent results, it's too early to say whether consumer patterns will improve. As such, we are anticipating continued headwinds in retail, though to a lesser extent than in 2024. As we think about the progression of the year and total comparable store sales, we expect the front half to be slightly stronger than the back half. This is largely due to the full price rollout of Titanium in late Q2 and then more challenging comparisons in the back half. With respect to store growth, we expect to open approximately 30 to 35 new greenfields this year. The majority of these will be in existing markets where we have opportunities to densify, fortify, and grow our market share. As John mentioned, we are becoming more data-driven on site selection and are more rigorously evaluating and scoring sites in our pipeline to drive the highest returns on our capital. The timing of these openings will be back-half weighted with an estimated 30% in the first half and approximately 70% in the second half. In addition to greenfield expansion, we continue to look at other ways to drive the business. To that end, we are taking a base membership price increase in select markets where we believe we've earned it through our distinct value proposition and superior customer experience. We will never compete solely on price. But as we evaluate additional markets, we see the opportunity to optimize the base UWC pricing more broadly over the course of the year. Looking at adjusted EBITDA, high end of our range assumes a roughly 30 basis point uptick in margin compared to last year. I'd like to note that this is despite the incremental rent expense resulting from the record number of sale leasebacks we executed in 2024. When looking at profitability on an EBITDAR basis, which excludes rent and the impact of sale leasebacks, we anticipate even greater year-over-year margin expansion of 80 basis points at the high end. On the cost side, we expect to continue to leverage our G&A and slightly decrease G&A expense as a percentage of sales. We should be in a position to leverage certain expenses this year due to various productivity initiatives and an even greater focus on doing more with less. These efficiencies will be slightly offset by a modest uptick in our marketing investments. We expect to remain active in the sale-leaseback market during 2025. Sale leasebacks remain the most attractive source of capital for Mister. We are targeting proceeds of $40 million to $50 million during the year, with a focus on leveraging the influx of buyer demand to further improve deal economics. In November, we took the opportunity to reprice our term loan and revolving credit facility. We were able to reduce the spread on our term loan to SOFR plus 250 basis points. The reprice and recent paydown of our revolver, coupled with a slightly more favorable rate outlook, will help drive an estimated 20% reduction in interest expense compared to 2024. The full list of our initial outlook ranges for 2025 can be found in the table in today's earnings release. But to recap the key items, we expect net revenue of $1.38 billion to $1.64 billion, comparable store sales growth of 1% to 3%, adjusted EBITDA of $334 million to $346 million, representing approximately 4% to 8% growth year-over-year, and representing a margin of 32.2% to 32.5%. We expect adjusted net income per diluted share of $0.43 to $0.45 per share, representing growth of 15% to 22%. Finally, we plan for capital expenditures of $275 million to $305 million during the year. In closing, I would also like to thank the entire Mister team for their hard work and dedication. In a multi-unit business, how the entire team takes ownership of their piece of Mister is what enables us to deliver great results. While 2024 was not without challenges, our team faced them head-on, executed strongly, and delivered where it counted most. Moving forward, we are well-positioned, and I look forward to continuing to unlock our potential. That concludes our prepared remarks, and we will now open the call for your questions.

We will now begin the question-and-answer session. The first question will come from John Heinbockel with Guggenheim Securities. Please go ahead.

I wanted to begin by discussing pricing and marketing. What percentage of the car wash base are you increasing the base pricing? Is $22.99 the correct figure to consider? Additionally, John, from a marketing perspective, what is the appropriate spending level for the long term? How soon do you aim to reach that target? Is it a multi-year journey or do you expect to achieve it this year?

Hey John, thanks for the question. So, with respect to our base pricing, which, as we've shared previously, we've held the line since inception, which is over 15 years ago. But we assess the competitive landscape and compare where we sit in relation to the median market price for base and find that we are actually underpriced in many areas. So, we anticipate over the course of 2025, taking price in those markets where we see those opportunities. We haven't put together the specific schedule yet, but it is in play right now. And what we can tell you is that in markets where we did test to see what the impact would be with respect to elasticity and attrition and churn, we were very encouraged by the results. That has given us confidence that we can pass this through relatively easily and see a nice flow-through as a result. To your question on marketing, so we have not been a very advertising, marketing-driven company, as you know. We expect to triple our investments in 2025 versus where we were a year ago based on some encouraging results we're seeing in Q4 and from some of the tests we've done. As we continue to see good results, we will adjust our spending upward appropriately.

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

Yes, it's a bit tricky, John. You combined an M&A question with your inquiry about our greenfield growth strategy. We don’t have a specific preference regarding new unit growth. We expect several good opportunities to arise in the coming years, and we want to be prepared to take advantage of them when they do. However, we will remain disciplined in our approach, focusing on quality assets with clear upside potential, and, most importantly, those that are reasonably priced. When opportunities arise, we will do our utmost to engage and act swiftly. It's important to note that merging businesses is straightforward; the real challenge lies in what happens afterward. We have a proven track record in post-acquisition integration, acquiring solid businesses and enhancing them. Our goal has never been to grow at any cost; we are committed to building a brand that is loved—a legendary and enduring brand. Therefore, the businesses we consider must meet all our criteria. We certainly won't settle for the lowest quality options. Regarding the greenfield pace, that’s a judgment call. Currently, we believe that 30 to 35 openings is a prudent target based on our internal capacity to avoid overextending ourselves. We're comfortable with that number at this time.

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

Yes, David, it's Jed here. Good to talk to you. Listen, as we look at Q4, we had a really strong October, which was the strongest month of the quarter. We saw really strong growth, both UWC and retail. Retail was up in the positive teens during October. Total comp in October was low-double-digit growth, and there's a correlation between the positive weather trends and the results that we saw. November was the most challenging month of the quarter with softer retail volume, comps were up in the low-single-digit range. December bounced back with slightly positive retail trends, and total comp in December was in the mid-single-digit range, rounding us out to the plus 6% for the quarter. January has been similar to October, even a bit stronger, driven by positive weather. When we look at precipitation levels in the markets we operate, where it's rainy during the week and sunny on the weekend, we believe this is a testament to our operations being well-positioned when the weather cooperates. No one is better positioned to process and wash vehicles than Mister.

Great. Thanks for all that detail. Good to hear the Q1 start. And then my follow-up on the Titanium mix, I think it was 23% this quarter; that's a slight step back versus Q3, which was at 24%. So you're starting to see that penetration rate begin to top out in any way? And what are your assumptions within the 2025 guide for Titanium?

Yeah, listen, as we said in our prepared remarks, we are really happy with how Titanium performed. It's exceeded our expectations, focusing then on helping drive trial and adoption. We utilized some promotions to help drive it to that 25% penetration level that we saw in Q3, and we believe some of those members who signed up at the promotional price have churned out and opted out of the promotion once the promotional period ended. We see this as an opportunity; we did not build in a lot of upside into the model in continuing to drive those penetration levels. So in the long term, we see some opportunities to drive this, although it will clearly be at a much slower rate than what we've seen at launch to date.

Yeah, Jed, I just want to add, as we look at it, 60% of our membership is premium in both Platinum and Titanium, and that is a beautiful percentage.

Hey, guys. Good quarter. My first question is back to this comp and the difference between the quarter and then the guidance. Would you say that December is representative, or would you say that the bounce back was helped by weather? I'm trying to reconcile the midpoint, which implies that the discretionary customer, the retail customer, is less bad. So I assume it's flat or negative. So yeah, if you can put all of that together, would December be the proper run rate that's unencumbered by weather?

We have included in our guidance that retail remains the most challenging area to predict. We expect a mid-single-digit decline in 2025, which indicates a slight improvement from the results of the full year 2024 but a decrease compared to Q4 of 2024. This change is attributed to weather conditions that boosted our retail traffic in October and January. Therefore, we believe we have reflected the long-term trend of a mid-single-digit negative decline in retail for the full year. Historically, we have experienced a slight challenge in retail as we transition retail customers to subscriptions, which has typically been around that mid-single-digit level. We are returning to more typical levels observed in the averages over the past three to ten years.

Yes, Simeon, I would just add that retail is improving, but we're also wanting to keep both feet on the ground. We’re not here to claim the retail customer is back, but we are seeing some encouraging signs. We hope what we have experienced in the last couple of years will improve, though we don't want to overstate that.

Yes. A follow-up, and I'm going to make it two parts because of that response, John. The retail customer coming back, do you think it's inflation or is it capacity, meaning competition, that was the biggest holdback? And then there's a competitor privately that declared bankruptcy. I'm curious about location overlap, asset quality, and are there other assets for sale up there? I heard how you're approaching asset, either acquisition or growth. The dominos seem to be starting to fall, and I think that's what your model was prepped to benefit from. Are any of these initial ones expected to help the business next year? Is that in your guidance range? I don't know what happens with these assets, but should there be a benefit to that as well?

Yes. So to answer the second part of your question first, there's not a lot of overlap with the company you're referring to on our existing portfolio. So we don't expect there to be a positive impact on our business as a result. That said, as the industry rationalizes and certain operators are in distress right now, where we do have overlap, that may help us in theory, but I think it will take time for that to flush out. As a result, we don't expect to see any immediate boosts in the near term. Long-term, we believe there will be opportunities. Regarding the first part of your question, it's really both factors at play: retail consumer pressure due to inflation and competitive intrusion. If I were to weigh one against the other, I would say it's slightly more towards the competition, but inflation is also a consideration.

Simeon, I think to build on that, what we've observed is that stores with competitors within a three-mile radius show a performance impact that lasts about 18 months to two years before those customers start to come back. In Q4, it was even more pronounced where stores with competition older than two years outperformed the overall Q4 results.

When I speak to GMs affected during that first 18-month period, they report customers say they missed the appreciation above and beyond the service that our frontline team members deliver. At the end of the day, there's an emotional connection we’ve established with our customers, that’s our secret sauce.

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

Yes. Again, when we look at some of the multiples starting to contract as we assess where we see upside potential, if we had to take on some additional leverage, we could do so with a clear plan to deleverage over time as we improve our bottom line. It starts with top-line growth, followed by bottom-line growth, and we’re willing to lean in a bit on leverage when it makes sense.

It's important, Justin, to see not only how high we're willing to go on leverage but how high we’re willing to accept in leverage for the asset we're acquiring. Our confidence in being able to bring that leverage back down within the ranges we established is essential.

Additionally, we assess at least adjusted leverage factors. We closely examine the rents that have been associated with these stores. Some have saddled themselves with high rents via sale leaseback financing, making it harder to find comfort in the business if there’s a high rent burden. It's very crucial when evaluating opportunities.

Looking at membership growth this year, we expect slightly positive growth in the high end of our guidance, or plus 3%. The growth will be primarily driven by our greenfield openings.

Good evening. Thank you for taking my question. John, are you noticing any changes in consumer attitudes towards signing up for a wash subscription compared to a couple of years ago when this innovation was more novel? I'm asking this because, while retail trends have improved, it seems the business is becoming more affected by weather, and member growth per location has been under pressure, likely due to some of the newer locations you’ve opened. It appears that member growth is slowing down, and Jed mentioned that you only expect modest growth in total members or same-store members at the high end. Therefore, it seems you anticipate some decline in members at the low end of the comp range. Thank you.

At the very core, we believe that the subscription TAM is undersubscribed. When we zoom out and look at the US car park, we estimate that the number of folks that have a subscription plan today signifies a growth potential. Regarding whether we have seen customers significantly less willing to sign up, the short answer is no. Our capture rates have remained consistent, which tells us many are new to the express exterior category and unaware of our wash-as-often-as-you-like membership plan. When we introduce that concept, they sign up in historical numbers. We're going to continue down this path without being certain of the subscription potential's ceiling, but we have a healthy store portfolio with many members per location. Once you convert a customer to membership, keeping their car clean becomes routine and reverting back becomes a challenge.

To add, our capture rates have been fairly consistently at around 9% to 10% over recent quarters. As for the slight membership growth mentioned, that's on a comp store basis, and for total member growth, we expect mid-single-digit growth as new greenfield openings drive that.

Thank you for that. My follow-up question is regarding your one to three comp expectations for the year with stronger trends in the first half and soft returns in the back half. The comment that you started off January with double-digit retail comp would imply at the low end of that range you expect comps to be negative in the second half of 2025. Is that the case?

Michael, no, we're assuming positive comps in each quarter throughout the year, just slightly stronger in the first half than in the second half. What we've seen in February is that retail volumes and comp store sales growth has moderated to align more closely with our expectations. Our plan and forecast are close to in line with what we have built into the guidance.

Okay. Thank you very much and good luck.

Thank you.

Thanks. First, I had a follow-up question, Jed, regarding the recent comp trend. How should we think about the impact of weather and its impact on the subsequent period? For instance, I think you said October was strong because of the weather, but November saw a sharp pullback; should we expect that dynamic in the future?

Chris, it's a good question. I don't think we've done enough analysis around that to definitively say on a call like this. It could just be conjecture. An economically, that's what we saw in Q4, and it continues to be what we’re observing in Q1, but I'd prefer to do further analysis before making any statements definitively.

To offer some perspective, I used to begin every day checking the weather report. At this point, our subscription model has made us less weather-dependent. The significant recurring base of our business makes us stable for the long run. When you have 75% of the business derived from consistent subscription revenues, the focus shifts mainly to the remaining 25%, which truly pertains to your question.

That's helpful. And then I know you have several marketing tests and programs underway. But John, what do you believe will be the key drivers for retail sales growth this year?

Yes. We have a significant aversion to discounting and are keenly aware of the need to not dilute the value of our premium brand. We’re focused on brand building more than discounting, emphasizing our unique experience and value. Conversely, we will continue to test different channels and offers. Nothing that has materially shifted the needle yet, but we will persist with this initiative.

Thanks for the question. Your 2025 earnings outlook has been higher than expected under this kind of comp sales scenario. Can you talk about your confidence there generally around expense control against some pressures from labor costs that you've discussed? Also, how should we think about potential incremental margin fall-through on sales upside here?

As we evaluate expenses with regards to our predicted EBITDA, our confidence stems from our best estimates at this point. In 2024, we benefited from two significant tailwinds due to chemical optimization starting in January 2025 and labor optimization from early Q2. Therefore, some tailwind will be evident in Q1 from labor optimization, and we won’t disclose any other optimization programs right now. The team acts as owners and will seek efficiency initiatives yielding a few hundred thousand dollars in savings across various aspects. Our EBITDA margin will remain fairly consistent throughout the year, driven by Titanium and that anticipated price increase contributing to ongoing modest margin expansions.

I must clarify that margin expansion isn't our highest priority. We recognize its importance, but our ongoing investments in our business, particularly on the human capital side, remain key to our long-term success. We don't want to reduce our focus on growth and improvement in the future.

Great, excellent color. I just wanted to inquire about competitive space. You spoke a bit about your expectations for this to be rationalizing over the next few years. Can you elaborate on the state of this rationalization in 2025? Are you already seeing some share gains materialize from early rationalization in your outlook?

Short answer is no, although we are on the threshold of breakthroughs starting to happen. The news indicates distressed assets are starting to appear. There’s a mix of both high-quality assets commending premiums and some marginal assets under duress. So we analyze both the competitive intelligence and the strengths and opportunities provided by our model with a focus on strengthening our position in existing markets. If we have a stronghold, and there's an opportunity to increase market share via acquisition, that’s the route we will likely take. Alternatively, if a new geography presents itself as viable, we'll also assess that. However, we do not incorporate potential M&A opportunities into our guidance, as their timing can be complex and highly speculative.

To reiterate, we do not account for M&A in our guidance or outlook. The context and timing of this rationalization can be challenging to ascertain, making it speculative.

Hey. Good afternoon. Nice quarter, guys. John, could you frame up what you believe the number of new openings in the industry were in 2024? And do you have an estimate for where that could land for 2025?

You may have better intel than I do given how active you've been in the space, and I'm speaking with a smile because I know you've talked to many folks. But to provide a number, I’d estimate 2024 saw about 550 new units, with a margin of error in that estimate.

We feel steady about the trends in the sale leaseback market. We completed 21 transactions in Q4. Amid rumors related to competitors facing distress, we’ve already finalized many deals, with high-quality assets being sold at favorable cap rates. There is a market interested in them. Our strategy this year focuses more on how we drive cap rates even lower given the surge in buyer demand for misters.

As I discuss with REITs, they equally weigh the financial health of a tenant as much as the business's economic factors when analyzing potential deals. They look for high-quality operators with solid financials. In this case, we have a consistent record with timely rent payments, making it easier for us to engage with them.

Hi, good afternoon. Just one question for me. The base price increases, could this signal a more normalized cadence of price increases? We see one before another 15?

Yes, so our cadence is once every 15 years. I don't know if your spreadsheet goes out that far. That was my attempt at some humor about spreadsheets because they can be serious. But in all seriousness, Costco is one of our North Stars with its practice of once every five years. We aim to be just as deliberate, balancing our price-to-value relationship while carefully evaluating market conditions. We believe we need to earn price increases through consistent value to the customer and ensuring we provide exceptional service.

Hey, guys. Thanks for taking my question. I apologize if I missed this, but I saw that you guys included in the guidance CapEx of $275 million to $305 million. I think it's been around $330 million for the past couple of years. Can you remind me what's changed this year compared to the last couple of years?

It's fairly straightforward. We're expecting fewer new greenfield openings this year and a slight increase in ground leases for some of our new openings versus previous years. Consequently, this means there are fewer land purchases, so it adjusts our total CapEx. Overall, core store CapEx has remained consistent over the last several years at about $100,000 per store.

Hi, good afternoon. Thanks for taking our question. You previously mentioned opening more than 40 locations this year, and I'm curious about what caused any stores to not fit your updated criteria. Given the long timeline to open a store, is this about delaying construction for next year? And, in wrapping that up, what does this updated approach to greenfield openings mean for long-term unit growth expectations beyond 2025?

As we reassess our pipeline against this more competitive backdrop, we needed to be even more selective regarding the potential impact of competitors. We've learned a lot over the years. If a store is in a first market, it generally has an advantage. If we determine there is a new competitor establishing within a two- to three-mile radius post securing a deal and entering the engineering and architecture phase, we must reevaluate the store's potential. Ensuring discipline in our expectations will continue to guide us through this process. The focus is not on hitting a set number but on intentional growth. We have narrowed our strategy down, and the 30 to 35 stores we’ve earmarked are prudent to our internal capabilities at this time.

We have opened 140 new locations and learned valuable lessons from that experience which we are applying to our future processes. As John mentioned earlier, we had to remove a couple of projects from our plans as we evaluated and scored them before making significant development investments. Some projects have been delayed due to extended permitting and approval processes, and these will now open in 2026 instead of 2025. Because of the lengthy timelines needed to open new stores, we were unable to add new projects to our pipeline this year, which means we have fewer openings planned. However, our fundamental belief in our ability to grow remains the same. We are confident in our strategy for new locations and have several sites prepared for development.

Got it. That's helpful. Regarding the bankruptcy and the slowing openings for the industry, what does this mean at a high level? Is this recent competitor unique, or are there other major platforms in a similar state? Does this sharp decrease in openings for the industry affect your own growth with respect to your equipment suppliers' financial position? Thank you.

We can't speak to their position, but several operators are beginning to look to monetize their businesses now, taking the form of recent news stories concerning distressed assets. In our predictions, there will be two to five dominant players per region over time. There is never one operator commanding 100% market share. Thus maintaining three significant operators in each region is more feasible, and several companies out there will grow, prosper, and expand over the next few years. We’re positioned to capitalize on potential opportunities as they arise.

Concerning the equipment and supply chain positioning, we haven't seen substantial challenges; thus we don't foresee impacts affecting our growth considerations.

When we recognize competitive data, we assess strengths and opportunities really through a strategic lens. It is relevant to strengthen existing market positions as well as pursuing adjoining geography aimed at reinforcing our continual expansion ambitions.

To recap, we expect net revenue of $1.38 billion to $1.64 billion; comparable store sales growth of 1% to 3%; adjusted EBITDA of $334 million to $346 million, which represents a margin between 32.2% to 32.5%. Adjusted net income per diluted share is expected at $0.43 to $0.45, reflecting growth between 15% to 22%. Our planned capital expenditures are anticipated at $275 million to $305 million throughout the year.

Thanks for joining the call. Whenever I visit any market, I start with the smallest store in our portfolio and work my way up. Some of my team prefer to visit larger locations, but for me, it serves as a true test of our performance. This morning, I went to a store with over 40 years of history in Tucson called Broadway and Euclid. I was pleased to see the wave and the smile. I was whisked through the tunnel, and the car came out virtually spotless within 105 minutes, leaving me satisfied. This experience represents who Mister Car Wash truly is. Across our now over 500 stores, we're dependent on the performance of every store, and all are vital to our overall success. We have built a robust culture with strong infrastructure, and we’re executing day in and day out. I'm proud of our team and enthusiastic about our future as we look to 2025. Thank you, and I'm eager to share our results in the next earnings call.

Thanks, everyone.

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