Mister Car Wash, Inc.

Good afternoon and welcome to Mr. Carwash's conference call to discuss financial results for the second quarter fiscal 2022. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. Please note this call is being recorded, and a reproduction of this call, in whole or in part, is not permitted without written authorization from the company. I would now like to turn the conference over to Ms. Megan Everett, Senior Director of Communications. Please go ahead, ma'am.

Thank you. Good afternoon, everyone, and thank you for joining us today for Mr. Carwash's Q2 2022 earnings call. Speaking today are Chairperson and Chief Executive Officer John Lai and Chief Financial Officer Jed Gold. After John and Jed have made their formal remarks, we will open the call to questions. Before we begin, I do need to remind everyone that comments made today 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. These statements speak as of today and as may be required by law, the company does not have any obligation to update or revise such statements if circumstances change. During this call today, management will also refer to certain non-GAAP financial measures. A reconciliation between the GAAP and non-GAAP financial measures can be found in the company's earnings press release issued earlier today and posted to the investor relations section of Mr. Carwash's website at ir.mrcarwash.com. With that, I will turn the call over to John. John.

Thanks, Megan, and good afternoon, everyone, and welcome to our Q2 earnings call. Coming into the quarter, I think there was some concerns around inflation and whether or not people might start pulling back and getting their car washed, particularly with gas prices soaring above $5 a gallon. and of course, the huge comp we were going up against. What we experienced was that demand remained solid. However, there was a little bit of softness on the retail side of our business, but that was offset by the strength of our Unlimited Watch Club program, which is 65% of our revenues, where our members remained amazingly loyal. Since our beginning over 25 years ago, we've been through various economic cycles, and what we've seen throughout is that in good times and in tough times, the American consumer deeply values keeping their car clean. And at $10 a wash or $20 for a club membership, it's affordable, convenient, and brings people joy. And to that end, we feel very fortunate to be in a space that is so resilient. For Q2, I'm happy to report that revenues increased by 14% to $225 million. Comp store sales increased 2.4%. And we opened four new Greenfield locations and acquired six new stores. We added 59,000 net new members to our Unlimited Watch Club program, and year over year, we're up 20%. The real headline for UWC is that we didn't see any impact to churn, which speaks to the loyalty we've engendered. However, on the retail side of our business, we did see some softness that was in line with expectations. And like almost everyone right now, we're experiencing some inflationary pressures in labor, chemistry, and utilities. I'll let Jed go into more details in a second on the cost side of the business. So big picture with sales remaining relatively steady and with some cost pressure, we are experiencing some near-term headwinds to margins. But, and this is important, we're not slowing down on making long-term investments in people, programs, and in our stores because our focus has never been about maximizing margins in the near term. We're more interested in scaling our company with a long-term view given the incredible growth opportunity in front of us. Bottom line, adjusted EBITDA came in at $74.5 million. just slightly below our internal expectations. To remind everyone on the line today, our five strategic focus initiatives are, number one, to expand our footprint, two, to build out our teams, three, to digitally innovate and enhance our member experience, four, to develop the next generation of WASH products, and five, make a sustainable impact in the communities we serve. So let me provide you a brief update on some of these initiatives. While we've been highly acquisitive over the years, our business has shifted to become less of a consolidation play and more of an organic growth story. The eight stores we've opened so far this year are off to a great start, and our Greenfield program has materially exceeded our expectations. We're planning on adding another 20-plus stores in the back half of this year and are even more excited about 2023. We currently have over 100 Greenfield projects in our pipeline that we expect to open in the next few years. We think the addressable market is still underserved in many markets, and the opportunity to densify in each market is huge. On the product and services side, we're planning on expanding our service offerings in early 2023 with the goal of rolling out the biggest extra service offering in the history of our company. When we pioneered HotShine almost two decades ago, it completely changed the customer experience, and with this new offering, we'll continue our long history of innovation. With respect to retail pricing, we plan on leveraging our pricing power by taking some modest retail price increases in Q3. And I'd like to remind everybody that our approach to pricing has been rather conservative, and we've always believed that rather than just taking price and justifying it by citing rising costs, we believe it's better to earn the right to a price increase by delivering exceptional value. On the sustainability front, early 2021, we began piloting a water reduction and efficiency program in 15 stores in Salt Lake City. In our pilot, we were able to reduce freshwater usage by 30% by reengineering certain parts of our wash process. The plan is to leverage these results and expand the water reduction program into new regions going forward. Last but not least, I was in our Florida market recently checking in on our teams on the ground. As you know, we've doubled our footprint in Florida in the last six months, and the teams were knee-deep in the post-acquisition integration process. Without going into too many gory details, let's just say that integration is not for the faint of heart, and to do it right requires time, money, and a whole lot of effort. I was thrilled to see the progress the team has made, and I'm hoping I get asked questions during our Q&A on how we've transformed the culture and lifted the lives of our new team members. On another note, Florida, like many parts of the country, is experiencing some intense heat right now. Consistent with our people-first ethos, our general managers are focusing on safety and wellness, making sure everyone's properly hydrated, handing out electrolyte packets, and giving people necessary cooling breaks. We hope that everyone on the line appreciates how difficult it is to work out the elements and the steps we're taking to make sure everyone's safe. Jed, I'm now going to turn it over to you.