Executive Summary / Key Takeaways

• Mister Car Wash (MCW) delivered a strong Q1 2025, exceeding expectations with 9% revenue growth and 14% Adjusted EBITDA growth, driven by robust UWC membership expansion and a rebound in retail traffic.
• The core investment thesis is underpinned by the resilience of its high-margin Unlimited Wash Club (UWC) subscription model, which provides predictable recurring revenue and is benefiting from the successful introduction and adoption of premium tiers like Titanium 360.
• Strategic focus on data-driven greenfield expansion (30-35 new stores targeted in 2025, back-half weighted) and increased, targeted marketing investments aim to drive future unit and membership growth despite a cautious view on the consumer backdrop.
• Operational excellence, including labor optimization, chemical cost savings, and a strong focus on customer experience and employee development, is contributing to margin expansion and competitive differentiation.
• The company's financial health is improving, marked by voluntary debt reduction in Q1 2025 and an expected improvement in the net leverage ratio to below 2.5x Adjusted EBITDA by year-end 2025, supported by a favorable debt reprice and active sale-leaseback program.

The Shine of Scale: Building a Resilient Car Wash Empire

Mister Car Wash, Inc. stands as the nation's largest car wash brand, a position forged over more than 25 years of operational refinement and strategic expansion. Primarily focused on the efficient Express Exterior model, complemented by interior cleaning services at select locations, MCW has grown from a regional player to a sprawling network of 518 locations across 21 states as of March 31, 2025. This journey, particularly the expansion from 136 stores and $250 million in revenue a decade ago to surpassing 500 stores and approaching $1 billion in revenue by the end of 2024, highlights a proven ability to scale and integrate operations.

At the heart of MCW's business model lies the Unlimited Wash Club (UWC), a monthly subscription program that has become a critical differentiator. This program offers customers convenience and value, while providing MCW with a significant stream of predictable, recurring revenue. UWC sales consistently represent the vast majority of total wash sales, standing at 73% in Q1 2025. The success of this model provides a degree of insulation against the volatility that can affect the traditional retail car wash business, particularly sensitive to weather and discretionary spending fluctuations.

MCW's strategic approach is built on four pillars designed to drive sustainable, long-term growth: expanding its footprint, increasing innovative solutions, driving traffic and growing membership, and building a best-in-class team. These pillars are not merely aspirational; they are actively shaping the company's operations and financial performance.

A key element of MCW's competitive edge is its commitment to innovation, particularly through its in-house R&D team. This focus has yielded proprietary solutions like Titanium 360, a premium wash offering that provides a mirror-like finish and comprehensive protection. The introduction of Titanium 360 has been remarkably successful, quickly gaining traction and reaching approximately 23% of the UWC membership mix by Q1 2025. This premium tier has had a tangible impact on the top and bottom line, contributing significantly to the increase in average express revenue per member, which rose by approximately 6% year-over-year in Q1 2025 to $28.78. The company aims for a cadence of new product introductions roughly every 18 to 24 months, signaling a continuous effort to enhance the customer experience and further distinguish its offering in the market. This technological differentiation is not just about product; it's about creating a superior value proposition that supports higher pricing and member retention.

The competitive landscape in the car wash industry is dynamic and has seen a significant influx of new entrants in recent years, peaking around 2023. While this competitive intrusion initially impacts performance, MCW has observed that its stores typically see a rebound and outperform the chain average within about two years, a testament to the strength of its offering and operational execution. Management notes that the rate of new competitor builds within a 3-mile radius has decelerated significantly, suggesting a potential rationalization of the industry over the next few years. MCW believes its scale, brand recognition, operational expertise, and differentiated UWC model position it well to capitalize on potential market share shifts and consolidation opportunities.

Comparing MCW to publicly traded competitors like Driven Brands (DRVN) and Valvoline (VVV) highlights distinct positioning. While DRVN and VVV offer diversified automotive services (including car washes), MCW's focus is primarily on the express car wash segment. MCW's UWC model provides a quantifiable advantage in recurring revenue and customer loyalty compared to the more transactional or bundled service models of some rivals. The company's operational efficiency, particularly in high-throughput express tunnels, is a key strength. However, MCW currently lacks the service diversification of some competitors, which could be a vulnerability if consumer preferences shift towards integrated automotive service providers. MCW strategically positions itself on value and customer experience, not solely on price, believing its superior service justifies its pricing structure, including the recent $3 increase to the base UWC program in most markets.

Financial Momentum and Operational Discipline

Mister Car Wash demonstrated robust financial performance in the first quarter of 2025, building on positive trends from the latter half of 2024. Net revenues climbed 9% year-over-year to $261.66 million, while Adjusted EBITDA saw an even stronger increase of 14% to $85.65 million. This resulted in an Adjusted EBITDA margin of 32.7%, a 130 basis point expansion compared to the prior year period. Net income for the quarter was $27.00 million, a significant improvement from $16.64 million in Q1 2024.

Operational efficiency played a key role in the margin expansion. The cost of labor and chemicals as a percentage of net revenues decreased by 160 basis points, benefiting from leverage on higher sales volume, labor optimization efforts, and lower chemical costs due to new formulations and strategic partnerships. Other store operating expenses increased as a percentage of revenue, primarily due to the addition of new locations, higher utilities, maintenance, and increased rent expense from new leases. General and administrative expenses decreased significantly as a percentage of revenue, benefiting from the absence of prior year debt refinancing costs, lower amortization from fully amortized intangible assets, and disciplined expense management, including a planned shift of marketing spend to Q2.

The revenue growth was fueled by several factors: continued growth in UWC members (up 5% year-over-year to over 2.2 million), a notable improvement in retail customer traffic (achieving back-to-back positive retail comps for the first time in three years, with January seeing a high teens increase), a favorable wash package mix driven by Titanium adoption, and the contribution from 36 net new locations added over the past year.

The company's liquidity position remains healthy. As of March 31, 2025, MCW held $39.13 million in cash and cash equivalents and had $299.79 million available under its revolving credit facility. The company proactively managed its debt, making $62.31 million in principal payments on its First Lien Term Loan during the quarter. This, combined with a favorable debt reprice in late 2024, is expected to drive an estimated 20% reduction in interest expense in 2025 compared to 2024. Management anticipates the net leverage ratio will improve to just under 2.5 times Adjusted EBITDA by the end of 2025.

The company continues to self-fund its growth, utilizing cash from operations and strategically employing sale-leaseback transactions, although none were completed in Q1 2025.

Outlook and Strategic Trajectory

Looking ahead, Mister Car Wash has raised the low end of its full-year 2025 guidance, reflecting the strong start to the year while maintaining a cautious stance on the broader macroeconomic environment. The company forecasts net revenues between $1.038 billion and $1.064 billion, with comparable store sales growth expected in the range of 1% to 3%. Adjusted EBITDA is projected to be between $334 million and $346 million, representing approximately 4% to 8% year-over-year growth and an Adjusted EBITDA margin of 32.2% to 32.5%. Adjusted earnings per diluted share are guided to $0.43 to $0.45, implying 15% to 22% growth (based on the new calculation methodology).

The outlook assumes that comparable store sales growth will be stronger in the first half of 2025, influenced by lapping the full rollout of Titanium and facing tougher comparisons in the back half. The timing of Easter is noted as a minor headwind to the Q2 comp. Management anticipates continued, albeit less severe, headwinds in the retail segment compared to 2024. The recent $3 price increase on the base UWC program is expected to support revenue per member in the latter half of the year.

Strategic initiatives continue to drive the forward view. The company plans to open 30 to 35 new greenfield locations in 2025, with approximately 70% expected in the second half. This disciplined expansion focuses on high-ROI sites in existing and adjacent markets. Capital expenditures are projected between $275 million and $305 million, reflecting this targeted growth plan. Marketing investments are expected to see a modest uptick, with efforts focused on driving retail traffic and membership growth through targeted campaigns.

Key risks to the outlook include the potential impact of an uncertain macroeconomic environment on consumer discretionary spending, particularly affecting retail traffic. While direct tariff exposure is limited, indirect impacts on consumer confidence remain a factor. Competitive intensity, though potentially rationalizing, still poses a challenge. However, the resilience of the UWC model and the company's operational capabilities are expected to provide a buffer against these pressures.

Conclusion

Mister Car Wash's first quarter 2025 results underscore the strength of its operational execution and the resilience of its subscription-based business model. The company is effectively leveraging its scale, innovative offerings like Titanium 360, and a disciplined approach to growth to drive both top-line expansion and margin improvement. Despite a cautious outlook on the consumer environment and ongoing competitive dynamics, MCW's strategic focus on targeted greenfield development, increasing membership penetration through enhanced marketing, and maintaining operational efficiency positions it favorably. The improving financial structure, marked by debt reduction and expected lower interest expense, further strengthens the investment case. As the industry potentially rationalizes, MCW's established brand, loyal UWC base, and commitment to customer experience provide a solid foundation for continued growth and market leadership. Investors should monitor the trajectory of retail traffic, the successful integration of new locations, and the impact of marketing initiatives on membership growth as key indicators of the company's ability to execute its strategy and deliver on its outlook.