Mister Car Wash's Q3 2025: Contradictions Emerge on Marketing Strategy, Retail Sales, and Pricing Impact

Date of Call: October 29, 2025

Financials Results

• Revenue: $263M, up 6% YOY
• EPS: $0.11 per diluted share, up 38% YOY
• Operating Margin: Adjusted EBITDA margin 32.9%, up 130 basis points YOY

Guidance:

• Reiterated full-year 2025 guidance; comparable-store sales expected at the high end or slightly above the 1.5%–2.5% range.
• Full-year revenue expected near the high end of $1.046B–$1.054B.
• Adjusted EBITDA expected at the high end of $338M–$342M.
• Approximately 17 new store openings in Q4 (part of ~30 greenfields for 2025); recent 5-store Lubbock acquisition incremental to that target.
• ~$2M incremental marketing investment in Q4 for expanded tests.

Business Commentary:

* Revenue and EBITDA Growth: - Mister Car Wash reported a 6% increase in revenue to $263 million and a 10% rise in adjusted EBITDA to $87 million for Q3 2025. - The growth was driven by strong performance in UWC subscriptions, with a 3.1% increase in comparable store sales.

• Subscription Base Expansion:
• The company ended Q3 with approximately 2.2 million UWC members, marking a 6% increase year-over-year, with Titanium 360 tier reaching 25% penetration.

• The expansion was fueled by the rollout of base membership price increases and targeted promotional trials, demonstrating a strong price-to-value relationship.

• Growth through Strategic Acquisitions:

• Mister Car Wash completed the acquisition of five new stores in Lubbock, Texas, more than doubling its market share in the area.

• This strategic acquisition was part of a broader plan to drive growth through strategic M&A, capitalizing on industry consolidation and capacity exiting due to competitive pressures.

• Marketing and Advertising Efforts:

• The company is expanding its marketing investment and testing program in select markets to build a scalable growth engine for 2026 and beyond.
• The focus is on precision and optimizing return on advertising investments, with plans to broaden efforts after establishing efficient growth channels.

Sentiment Analysis:

Overall Tone: Positive

• Management: "very pleased" with Q3; revenue up 6% to $263M; adjusted EBITDA +10% to $87M; adjusted EPS $0.11 (+38% YOY). Reiterated guidance at the high end and cited momentum in membership, UWC mix and M&A optionality, calling the company "exceptionally well positioned" to accelerate growth.

Q&A:

• Question from David Bellinger (Mizuho Securities USA LLC): Could you help us understand where the sales upside materialized within Q3? And on the start to Q4 any differences versus expectations? Also, what's the pecking order for cash flow uses going forward (debt paydown, new units, buybacks, M&A)?
  Response: Q3 strength was across all months with July strongest; revenue-per-member growth driven by higher Titanium mix (>25%); October is the toughest lap but already factored into guidance. Cash deployment priority is greenfield development as highest-and-best use, with optionality for M&A, debt paydown or buybacks to be optimized over time.

• Question from Justin Kleber (Robert W. Baird & Co. Incorporated): How will the base price increase flow into 2026, and can pricing be optimized locally (price zones)? Also, are you planning for a negative comp in Q4?
  Response: Pricing is market-specific and phased; management is cautious on cadence and will optimize regionally; CFO said roughly 1/4–1/3 of the base price increase will roll into 2026. They do not expect a negative comp for the full Q4 (October tough but Nov/Dec should offset).

• Question from Alexia Morgan (Piper Sandler & Co.): Membership appears flat sequentially—any color on members per store and outlook? And any quantification from marketing tests (comp lift, channels resonating)?
  Response: Membership was relatively flat sequentially due to lower retail top-of-funnel; churn steady at ~5% and utilization stable. Q2 pilots produced a mid-single-digit comp lift in six test markets; Q4 test is underway but expected to deliver only a limited sales lift in the quarter.

• Question from Michael Lasser (UBS Investment Bank): With moderating competitive intensity but retail down low double digits, is economic sensitivity rising or are price increases driving retail a la carte choices? Also, are you willing to accept fewer members per location in exchange for higher revenue per member?
  Response: Lower-income demographic stores underperform as frequency softens but the $10 retail price remains broadly affordable; company focuses on increasing revenue per member (Titanium/top-tier) while still pursuing membership growth—aiming to grow both rather than trade one for the other.

• Question from Jacob Nivasch (Guggenheim Securities, LLC): How much did you expand the marketing test, what's the brand lift, and what target level of spend/ROAS are you targeting going forward?
  Response: Q4 test is in progress following promising Q2 pilots; ad spend is currently small as a percent of revenue and management expects to scale only with disciplined ROAS (targeting ~3x revenue per incremental dollar) and confirmed channel/offer effectiveness.

• Question from Simeon Gutman (Morgan Stanley): When was Titanium rolled out and how are longer-tenured Titanium markets performing? Also, any surprises from greenfield markets and are you changing market development approach?
  Response: Titanium launched in 2023 with rolling rollout; penetration ~25% company-wide and some markets >35%; further mix gains will be slower and require frontline focus. Most greenfields perform very well, some are impacted by competitor intrusion or earlier site-selection errors—company is tightening data-driven site-selection protocols.

• Question from Phillip Blee (William Blair & Company L.L.C.): Is ~30 greenfields per year the new run rate into 2026, and does M&A activity change greenfield plans? On Lubbock, was the market saturated or did something change?
  Response: Greenfield development is expected to be in line with ~30 stores into 2026; that target excludes M&A (Lubbock five-store deal is incremental). Lubbock was a mature, built-out market—acquisition was opportunistic to densify and secure #1 share rather than adding a greenfield.

• Question from Mark Jordan (Goldman Sachs Group, Inc.): Should M&A accelerate or was the recent acquisition opportunistic? How do current asking multiples compare to a year or two ago?
  Response: M&A is lumpy and opportunistic; management is actively evaluating bolt-on opportunities but cannot predict timing. They observe that deal multiples have declined "precipitously" versus prior years.

• Question from Robert Griffin (Raymond James & Associates, Inc.): Is price now a consistent lever for multi-year comps or episodic? And how do mature-market comps (no competition/densification) compare to company average?
  Response: Price increases are episodic (ideally every 1–2 years) and selectively optimized by region; most comp growth comes from stores in their first five years while mature stores lag—interior-clean mature locations comped about -1.6% this quarter, creating a headwind to the mature-store cohort.

• Question from Yanjun Liu (BofA Securities): In markets with marketing tests, any competitive responses? For markets with above-average Titanium penetration (~35%), what drives outperformance?
  Response: No unusual competitive responses observed to marketing tests. Higher Titanium penetration is driven by strong local operations leadership, favorable local economics, and effective execution by market teams.

• Question from Christian Carlino (JPMorgan Chase & Co): How should we think about retail comps in Q4 and puts/takes into the quarter? Also, any notable regional comp or weather effects in Q3?
  Response: Q4 UWC revenue-per-member expected low-single to mid-single-digit growth while retail comps could be negative high teens (i.e., worse than Q3); management purposely left conservatism for October's tough lap. Weather was a tailwind in Q1, neutral in Q3 overall, and regional trends vary materially by vintage, marketing tests and local factors.

Contradiction Point 1

Marketing Strategy and Effectiveness

It involves changes in marketing strategy and the effectiveness of marketing tests, which are crucial for growth and investor confidence.

What is the expected marketing spend, and are there competitive responses to your marketing tests? - Jacob Nivasch (Guggenheim Securities, LLC)

2025Q3: Marketing spend is limited in Q4 for disciplined testing. No unusual competitive responses to marketing tests. Focus on optimizing ROAS and driving sales growth. - John Lai(CEO)

Regarding marketing strategies, do you believe promotional efforts or brand awareness initiatives yield greater effectiveness? Additionally, with room to increase marketing spend, how do you balance this against the current macroeconomic environment—should you pause spending or proceed? - Unidentified Analyst (Guggenheim)

2025Q2: John, good to hear from you. So to answer your first part of your question, I think our approach has been initially focusing on awareness to generate trial and then ultimately have to adopt our service as part of the regular purchasing pattern, transitioning them ultimately into membership, which is our primary goal. But when we look at the blend from a campaign standpoint, and I want to emphasize the word blend, it really was a mix of awareness, also highlighting some of our virtues without getting overly promotional. That said, we did tinker with some percentage off and dollar off offers, and we had some interesting results across all of those different campaigns. - John Lai(CEO)

Contradiction Point 2

Retail Sales and Economic Impact

It involves the impact of economic factors on retail sales and the company's ability to adapt to economic conditions.

What impact are economic factors having on retail sales, and is there a shift toward à la carte memberships due to pricing changes? - Michael Lasser (UBS Investment Bank)

2025Q3: Retail sales are impacted by lower-income consumers facing economic pressure. We see potential for increased value among existing members. There's no shift to a la carte despite price increases due to subscription benefits. - John Lai(CEO)

Regarding 2025 guidance, what factors are driving the negative low double-digit retail comp decline in the back half? Are specific factors like income cohorts or weather year-over-year comparisons contributing to this? - Simeon Gutman (Morgan Stanley)

2025Q2: A little bit of softness when we look at the -- those consumers at the lower in the lower quadrant -- lower income demographic. - Jedidiah Marc Gold(CFO)

Contradiction Point 3

Price Increase and Churn Impact

It involves differing perspectives on the impact of a price increase on customer churn, which could affect revenue and customer retention strategies.

How are economic factors affecting retail sales, and is there a shift toward à la carte memberships due to pricing changes? - Michael Lasser (UBS Investment Bank)

2025Q3: There's no shift to a la carte despite price increases due to subscription benefits. - John Lai(CEO)

How has customer churn responded to the price increase compared to test markets? - Justin Kleber (Baird)

2025Q1: Churn has been consistent with the test, showing a slight uptick in churn post-price increase, settling back in the following month. We don't expect downturns to persist. - Jed Gold(CFO)

Contradiction Point 4

Economic Impact on Retail Sales

It highlights differing expectations and observations regarding the impact of economic conditions on retail sales, which could influence business strategy and financial forecasting.

How are economic factors and pricing changes affecting retail sales and membership models? - Michael Lasser (UBS Investment Bank)

2025Q3: Retail sales are impacted by lower-income consumers facing economic pressure. - John Lai(CEO)

Can you elaborate on the comp guidance and whether consumer weakness is driving the low-end guidance? Are you factoring in a recession? - Simeon Gutman (Morgan Stanley)

2025Q1: Our expectation is for low single digits comp store member growth, consistent with previous guidance. - Jed Gold(CFO)

Contradiction Point 5

Pricing Strategy and Marketing Investments

It involves the company's approach to pricing strategy and marketing investments, which are crucial for revenue growth and competitive positioning.

How is the 2026 pricing strategy being considered, and do local market dynamics influence pricing decisions? - Justin Kleber (Robert W. Baird & Co. Incorporated)

2025Q3: Pricing is market-specific, focusing on value and competitive activity. Base price increase rollout was phased, with 1/4 to 1/3 of the increase impacting 2026. Not telegraphing future price moves. - John Lai(CEO)

What percentage of the car wash base is being increased for pricing? What is the optimal marketing spend level? - John Heinbockel (Guggenheim Securities)

2024Q4: Eddie Plank: We are assessing the competitive landscape to consider price increases, particularly as we're underpriced in some markets. Testing has shown positive results with price increases and minimal churn. - John Lai(CEO)