Mister Car Wash (MCW) 10 Nov 222022 Q3 Earnings call transcript

Good afternoon, and welcome to Mister Car Wash's conference call to discuss financial results for the third quarter of fiscal 2022. [Operator Instructions] Please note that this call is being recorded, and the reproduction of this call in whole or in part is not permitted without written authorization from the company.

Speaking from management on today's call are John Lai, Chairperson 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.

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. statements of the except any company update revise as required may obligation be or law, change. by does such statements today as and be to These circumstances if not have review SEC. XX-Q such to quarter time forward-looking company's from other its be as disclaimer in factors contained Please the the filings second and updated may time statements with the

be A non-GAAP will to call refer of to today can measures. today, financial at financial website and GAAP management earlier also Car in Mister earnings reconciliation the the company's the During non-GAAP between issued section the press found measures certain ir.mistercarwash.com. Wash's Investor release Relations posted and

over will Lai. Mr. John ahead, I call Please turn now to sir. the go

on Hurricane Florida the safe nicely. Good afternoon, everyone. I'm I'd Ian. and like up to that teams update our effects and our everyone of begin to quick happy report with held is stores in a

into sure came amazing particularly one. Our access faced Team showed hatches making you and medical you proud and went leadership Florida, you tough how big mode, and was a when stores resources. I'm batten of team everyone food, really down shelter how our the together and to are had securing

XX% Overall results. cycles to to be expectations. backdrop, sales was our $XXX over increased different comp $XX store economic Moving perform adjusted proven to many million, increased our million, X% third to X.X%. business nicely a strong tougher on to resilient. quarter in with continues despite EBITDA line performance and And macro and increased Revenue has and

of store washes and count new locations. total which our new QX X locations XXX greenfield car opened X to We through the end brought acquired

and added member new consistent to report program trends. happy growth I'm members UWC and rates net historical with remained that XX,XXX retention Our

helps that an some a car them people and Motorists discretionary month, it to that but in be changed expressed has starting around resilient, not great themselves, pullback the potential To for only consumer a reflection take offers is And very it say automobile value. a at per understatement. great have it's concerns clean membership feel spend. on a would good. care with in challenging vehicles those pride consumers way UWC proven their $XX.XX be their

nearly are Today, grateful revenue recurring a to XX% our a subscription, and business being predictable with of massive built deeply such that base we have member beautifully provides stream.

to continued a our areas inflationary of on see many and things. past tighter to productivity, quarters, across cost we projects. side the cost on improvements Similar business, in the our longer-term focus of few continue we pressures with offset expenses which Moving partially to reprioritizing

get we're in we're things short-term As environment and little a as business cognizant it the realities seasoned takes are management what a the right team, long for now of term, market. shifting this also the doing while current building prudently harder of a

maximizing took we've We is very modest to interested is ticket more increase in And in a been belief, August, philosophical always AUVs. maximizing price remind with now reflected little as retail a back everyone, volume which which our average, in versus resistance.

recent make side. long feeling to given pressures the us And feel overdue, and each a afraid not move been also the we the time. was right move market we're But this when on we've par cost in it's to got

making labor All talent challenging. more best stubbornly of is unemployment our and low, tight, speed, stores car still still are competition but market a at the is executing for putting the out wonderfully good and even

labor Express which average starting year-over-year. is in cars wage as knit and one where a one resulted reductions in and for team for attract had revenue per dollar in up in all staffing to we labor XXX, increases and car. all nonmanagerial cross-trained, has our rates improvements to everyone of the our being incrementally These X% crews continue wages to percentage with of we've are and hourly best, improvements To offset the reductions are model, hour, retain tightly call labor increase culture per by

Speaking our and certified our Mr. considerable an through trainer our like trainer program of our continued network. manager pipeline. We've management teams, regional highlight OLP of trainers and have, and of in growth training training the network I'd accelerate coverage our help spent close now additional addition energy leadership to the Learn to team, to

started long out member We the within, and hourly of team ops senior over promoting of from have on as front history a line. XX% our an team

were by scale. makes others at they're Car what you good hasn't they are, ask answer operators, to If happened accident. This they particularly probably Mister Wash who

operational deeply we're a have of. something of We culture proud excellence and it's

in in and the turning one environment. plugged a company capital a can infrastructure system, smartest of out high-potential next-gen and human now things leaders into developed new built We've is a the throughput ground our leaders are the do. running national Investing that and or high laser-focused be hit future markets can the stores

Jed, to results. over a turn our Before these to thank delivered like it that I'd teams take I moment to

experience I XX industry, We and customer are to move best from of stretches team everyone the us and proud and States coast and the who's north coast footprint with that be to delivering a south It's act to from to couldn't Texas. one, matter out, Minnesota in as the we geographically largest may carwash visit. California years United be a contributed but our We which no taken from you operator build success. the spread in to Pennsylvania consistent mystery

you. turn now over I'll Jed, it to

Thank and good afternoon, everyone. you, John,

previous offset inflationary mid-August. took as trends expectations. Overall, well retail as we we had with results retail quarter, continue in with increase pressures to price were the Similar good and consistent, price, our to remained partially we a and third our relatively the demand productivity improvements that quarter, line in in

and stores Our exceeding are greenfield well to expectations. continue very our perform

to These nicely average We are four-wall to in continue ramp the unit of year XX% year million area stores and X. in EBITDA the volumes of $X.X experiencing first beyond margins range XX%.

operations with express to XX% our margins of our to $X.X significant capability mature solid XX%. expansion emboldened volumes us world-class investing average EBITDA opportunity these four-wall our footprint, have coupled capabilities. The store expand comparison, our greenfield For behind returns average to million are unit continue and with

In invest expansion, in addition to manage strategic while near-term and see of structure. steps initiatives to build our number cost a to expenses new taking opportunity also we

late During we September disruption as to our and early October, Ian. result Florida Hurricane experienced in business of a a

average We have subscription-based helps events revenue Benefit XX majority an insulate locations is X.X stores such the X us being impact days. weather-related the as the the temporarily reoccurring for in financial of from Florida all but of and closed to of revenue hurricane.

we construction Florida has through. that hurricane said some are Having working delays that, in the in resulted

months steady store and subscription $XXX of quarter, the represented growth during with number the of our of XX%. and XXX,XXX remains XX% the quarter X million. comparable X.X% store net was the side added UWC in members increased outpacing third by and the line basis, first members third sales sales revenue net During increased September in the net the all in with total The business sales in UWC during quarter. of a X wash members XX% On In UWC we the increased positive year-over-year Comparable growth our XX,XXX expectations, year. EWC July months August. quarter, of to and growth

base a any did the trading not premium way. we in the down quarter, our see last we from see from change and did to club to package package historical not rates, members Similar meaningful meaningful churn

on July experienced the commentary second quarter of Similar with During my on our the retail comparable were to levels. quarter, better we August. our line and September business and retail than third sales stabilization sales, volumes some quarter also with in in side retail expectations store

expenses. expectations by pressure. to also to but were These line with inflationary in Turning our be continue impacted

revenue, stock-based percentage increased Excluding Other XX.X% XX XXX store to increased operating points XX as and chemicals basis G&A to compensation points XX.X%. decreased points and basis and basis of expense to a labor X.X%. expenses

from in from benefit primarily growth-related to expenses increase rates labor the is some of company and G&A primarily a service continue maintenance public chemicals operating costs from costs. and increased store And utility investments. efficiencies. Other higher combination increased and Labor

coming it growth the impacting as As vertically the capability previously continue areas sense. expense EBITDA internal makes build increases initiatives we to are and integrate in from we discussed, where out most have adjusted biggest

managing to our labor, investments long-term hiring, belts at growth more aligning systems tightening and to strategic around can more started becoming and our cost we behind have are near-term where structure priorities. take objectives a with we balanced efficient approach However, our our even

debt During and as third rates additional interest Streak quarter, $XX.X our added last from unhedged higher acquisition. the $X.X million the expense million to debt increased our year of portion on Clean of part the to interest due

interest debt. our in As hedge now basis favorable points are rate LIBOR XXX a paying we and mid-October, expired on outstanding our plus reminder,

of compared rate GAAP the $X.X employee in increase exercise year treatment in XXXX. compared ago tax awards and the exercise tax the the third related our due with the benefit reported GAAP the for rate to Our period. primarily the quarter for the options quarter quarter of quarter third The negligible with exercise year. million third XX.X% in was XX% last stock effective third was to was stock of favorable tax The to

Adjusted $XX in per diluted $X.XX, net compensation income expenses, which million share, and and adjusted and net add income the noncore respectively, were quarter. operating certain back stock-based

X.X% Third year. $XX.X third quarter adjusted from EBITDA up the million, was last quarter

debt million. quarter and some and to cash $XXX on million cash $XX sheet At equivalents highlights. flow cash end, Moving approximately and long-term balance were outstanding was

by months operating capital first was the of For year, activities $XXX $XXX expenditures provided million net were gross cash million. X and the

make Lastly, guidance. let few around me a comments

with third acceleration are in the September and simply comfortable remain the trends outlook year months the our ranges. October, the and and quarter the of for we previously provided Given of modest across in-line trends tightening

full X%; million of of of adjusted guidance $XXX growth for to million adjusted and net million comparable calls to $XXX to Our $XXX income of million; year to net sales $XXX updated revenues XXXX million. EBITDA $XXX $XXX million store now X%

the in market, As for of curve a we target. makes we a LIBOR a forecast reminder, use this forward moving and bit expense, when interest the

million the million in we expense the quarter. XX $XX the over past assumption shifts interest With forward our is mentioned now $XX curve of days, last the that instead XXXX

as to increases continues interest to expense the meaningful rates. headwind Interest be model Fed a the

expense continue short strategies to reduce interest do in the look term. forward, not going but material We any benefits to expect at

XXXX that of construction our minimum a With new in of early earlier there and Florida the this year, for Hurricane and greenfield get openings guidance supply the greenfield pushed few Ian state XX chain delays locations causing in a are some into now is year. the of some could delays

stores not land open full end do quarter impact right year. the on or in at have a to of material revenue the expenses year, slated the to With the of we expect modest to the number of the fourth timing

it will earlier, remain stated sale comes we opportunistic when to As leasebacks.

to total million $XXX to in Our of previously $XX versus $XX XXXX proceeds between model now forecasted. million $XXX million the assumes million

the terms do not terms favorable, deals should are more While unless doing could be we with we do more end our up consistent plan to currently closings. recent

to Our have a year $XXX with conservatism outlook to $XXX to versus for projects original of with built is new million. function next This million full we the along that is year's CapEx range work previous XXXX largely of service offering. the guide, $XXX capital $XXX a around into expenditure now some combine million million chosen the

it of the the efficient work the rollout, year. these of instead certain more is simply defer magnitude to to Given related and next complete year new projects this service

turn wash. session. I are us operator car business our hard-working members appreciation fulfill associates my Operator? thanks With over all Q&A of the closing, that, like helping In would our who every and begin day and mission to to add America's I'll to to and the the being premier it executing team

[Operator is of Bank of question America. Instructions] Suzuki Our Elizabeth from first .

more of beginning of since multiples the I'm terms in in you you're attractive curious whether added market seeing the X gotten So and they've stores year? quarter. this the mean, I acquisition currently what just the

if Just more chunky reasonable available at becoming curious is more a price. anything

is Liz, question. Yes. this Great John.

in recede here multiples times. recent seen have we So a bit

kick and a a think equity a which we their into platform I is in third rationality and and couple acquisition borrowing economics One, combination are the deal. on of lean to Obviously, private firms. have see of then to going factors. space, first we'll in entry Typically, costs little that's on of after impact going the their bit up, acquisitions of an on fourth that. a gain second

actually were a because as seen deals broken have the in frothy. recent things view too But of period, which actually we here number most we getting healthy yes, little a

very shared to our down, still going entire have to past, and want we as And remain be. disciplined, back in M&A we've throughout really multiples come in a them very not the approach this at So through you strategic lens. to where look very process, with things selective we're

just get asset It's to of fits been the the portfolio. and this and sheer We about that in overall how big a standpoint. scale have number never within thing our quality up from more

is quick one in how much you just then market? Ian washed? sales just general, And the when whether think impacted cars And and that, there wait to stores that because just get get just total sales to it of Hurricane in do Great. or lost those one like -- on number week have correct quarter in the you weather assume events given that their people are another the

No, I it's sales think, just about one during event things a a with subscription is of great that this. impacted model Liz, are such this element, retail weather really as the the that

us of or the about of days these were the downturns $X.X the these that come patterns downturns through. to But model from then that again, we helps is impact beauty insulate weather once where and So in regional X.X estimate economic be closed. we over million revenue the short-term lost this some

The next Siegel BMO question of from is Simeon Markets. Capital

help there's than let any you UWC other income in for to or as regional know you might any be retail trends, QX And year? Florida, you next what speak seeing? -- us discrepancy members new Can expecting maybe or if any you're can then you're whether into on

and Jed, our Yes, see I'll you here. registration historical typically, our growth chime quarter-over-quarter, off look and QX sign-ups. at the kick it QX When of we we bulk rate when is in can

said, a that to So next expectations we program. as really in towards in we grow That have for half gearing strong expect been we're up this each quarters first as of QX. we've we the have QX year. in we modest having did of And

us again, feeling us standpoint, a in lead membership healthier, our standpoint, retail behind grow program. a for QX. more continue optimistic to stabilizing and as retail From to able we will retail is characterize be -- We're gets [indiscernible] the that that pipeline that worst to to from

volumes thing right, John's trend on staying over look slight month weather knowing that sequential customers with quarter, you some of of Yes. add uncertainty there's optimism, of bit those us soft at the -- quarter does backdrop. macro And Simeon, the during you lot one see to the I the there quarter, beta it more there's as the to QX, number and we're during volatility that ground relatively seeing at but be during -- gives quarter retail would a the you us, just look to the month then QX, here, improvement in for little with to it higher a as and tend the and be through, more tend retail a volatility tends come QX. point,

question next of UBS. Lasser Michael is from The

their the reasons the was us well? begun you promotional contributed others prices, you much it you how one marketplace needed in Can provided overall cushion increase growth have a more promotional? the a increase And be seen to already same-store bit in to? intensity quarter? promotional look Have to like-for-like to more you when you give I the as be And of the sense for to why price believe sales raise

is I'll increase let John. to we're I'll from talk to as of generally don't and was turn very me par for kick kick with over price Michael, in, to the to specifically publicly us markets off, move we all the But the got strategy about noted, kind Jed off contribution most little obvious talk reasons. it about then saying a recent resistance. this it by we pricing of like met almost our it that price in meant and But standpoint. what just it

packages, big any standpoint, And picture for a from which see that power, think any sharing you So make believe we trading have the good always pricing we still we is be just anyway. is were, didn't if down don't call some right And we we Jed moves. now but as a time us that won't on this to guys to do lower-priced sign. material reported, any with probably we

The what second was your question, part the... of

intensity promotional On

Promotional intensity. Yes, yes.

early the now needle. whether assessing point campaigns. effect collecting through we're campaigns channels, they're not or in some testing to of digitally of at say now we and moving through omnichannel And data the desired a the And and various are having promotional promotional not effectiveness we're approach, the and stages right those direct. a So both multiple right

I promotionally that it's been think guess, player I averse as note we've definitely important to We're a company. industry. definitely We're in as not into the price discounting. positioned not the

sometimes to need we with result, signal be a healthy when aggressive so a promotions, they as getting could more that always be. And are as others things not that as see

us. That that's for the said, table there's nothing off

is mouth, to up profitable what customers, and try more budget and of them have until them family been been our their acquire that shouldn't virtually packages, telling growing strategies into has beautifully we and our through new doesn't new experiment friends old up word that but recently, that We suggest school people program. advertising get nil trade to

And are we're very through with And as again, be going introductory strategies different offers. those seeing around we to membership initial accelerating clever some experimenting well.

So subsequent Hopefully, mode. test report to Michael. calls you with in very for the is jury we'll out, more have in guys. now, we're our much But still

quarter basis where the a that up just proposition And price Net-net, increase by would comp because question to then, price see part and a helps value have as of different XXX believe UWC, bit helps UWC. little and increase actually you third you But the it's performed we of the price a expected, bit increase, volume. an that points. August trade as impact little benefiting retail the into delta it your in that that between retail the about and bit a when we than Michael, the you'll what see of pricing, take about reminder, take little typical to first pricing, retailer

looks shake other It your year $XX million ask Okay. interest $XX next question. I depending will up go if by about where rates could Jed, on expense like out. million, interest one

that do now? correct? willingness A, your the stands, interest or rates, right where does And that timing any have position to your given B, debt over So deals is bolt-on influence in additional rise the

for I'll plus we forward the take that is take year, So right? and paying the expense way -- depending we're we next part, interest LIBOR So curve forecast the our first XXX. on then where the

hedge, right So expense. correct interest incremental rate to when interest where expense with run the quarter, on million look about the -- $XX your at math about our is per without $XX we now quarterly million it's

the to piece around it to previously, does. the use growth impacting your And priority and the expansion. and that's capital we've the it. than we second is fund mean at of model about the flow talked as question then a from cost model best want potential of to generated cash free the free acquisitions, -- the the there's debt where believe that's, highest I flow allocate and greenfield cash more adequate and And the to we --

really and opportunities different look But we'll going see tough work really to as M&A acquisition. or to whether a answer the available, depends one It's a be going the it not. the at the cost It's to pay we basis. case-by-case come at economics on is we'll them, and on borrowing what would say make going and time definitively, multiple that the ultimately that we're to be

question next Piper Peter is Keith Sandler. The from of

you it's now. any there's this lower September. that's theories something on I would but that have It in kick October? driving maybe here over improvement been of just And maybe wash. some the thoughts in recent a shorter-term what's with kick summer, really question the have wash to didn't Is wanted gas helped with car continued to retail Do around that off in then improvement? retail more seem prices kicking car with

prices optimistic we prices improve. we to July, see retail the the month's point, last that Yes. will but relationship obviously, in demand. was Well, your and speak can't August gas had there But dropped performance, specifically We that frame. time we out play retail -- hypothesized that as are between gas to didn't

But to right? would then our money so more the have So stuff. pockets, ability do would you much that more people's hypothesis, in they think for with

or metric number good remained I and between mean that will is think consistent, direct yes, we So still car. a And that which A point how cars miles up still either of is getting the and get. is to fluctuate driven, and think, has beauty getting from is clean sign is down, fairly our their prices a important other, the get they'll I that driven B gas cleaned. business even dirty that there miles to link vehicle though love still are people dirty are people need And point and a

still pressures. one may lot thing from of insulate is, is add be really right, differentiate And macroeconomic other following. this in where other a from would retailers environment. helps there's and helps subscription broader still But uncertainty there a the is, UWC of really companies mean, that there I out I there lot these And that the you us element macro us

And Helpful. Okay. to then a longer-term question. maybe to pivot

Just on growth opportunity. the unit greenfield

just said greenfield, but have X,XXX out acquisition to hearing of lot a hearing to a as I the pivoted time. stores multiples, XXX because acquisition, that greenfield lot partial you'd growth to think as new industry-wide. operators this of greenfield year I'm from XXX there units many you over you've thought get

does the . pace get a outlook the is agree years? change number trying that stores to would or with? to coming you of So that X,XXX And the that over

met. market total we [indiscernible] and be this needs the car we you that pretty that feels guesstimate believe of out Yes. underserved just strong the now. and right U.S. is the It's us think still there that good a car at data, to No, get of all zoom U.S., right. accurate what is number really But demand for to be and in I washes when industry look number is park number that hard that size but estimate to

very of Phoenix, There with think saturated space we white competitive. certain there. a and lot lot for highly So growth like markets runway out a that of have Lubbock, that become are like there's Texas

we But country when backyard really double either footprint, into believe look own our our intense. that are to brand we we geographic that while geographic so can move in of our And the new at areas. have markets for gotten or new continuing look really, footprint to there pockets adjacencies

So we're bullish on upside And not opportunity. our still unit our has growth changed vision whatsoever. very level very,

from question next The Instructions] Gutman Stanley. of [Operator Simeon is Morgan

Michael Simeon. remarks the is on on bit efficiencies in made about a prepared of cost it comments and This Kessler wanted -- sounds the term. of you near I shift in some for with start labor total to like the little savings the a

And ask if so a bit little further you're anything just there's to that, on I responding wanted to backdrop? what different the you or doing, guys how are new or demand

Yes.

about less more it's backdrop, of think on. we're how what about demand we're it's I and the just kind focused reassessing

initiatives, pandemic, out of coming that rate. So added But and of somewhat, bunch the what lot we're on and has we important folks reevaluating economy are focus identifying reprioritizing most to the at very shifted took accelerated need we on. this a a since of a initiatives

super to particularly novo to priorities, tougher. will be development pipeline opportunities perspective, that buckling But innovating are get we as R&D us, always important becoming development greenfield an any get organization, there de the those for and and even growing in as fast down of leadership us. are efficient, always more organizations So are that leaner from have terms in

bit level, service. impacting without quality staffing an at for customer particular opportunity model experience, area, as speed the where staffing we've store and/or one in an And previously, that elevated up was model, a there have, customer us and/or shared to tighten inside that we

those hours longer-term per total store. that at had able But then projects So burner. labor put and used our improve also payoffs on perhaps some the longer-term choose to to back we're look

And temporarily while hold on were few to that just a focus that reimage items we we give has odometer. store looking a I Maybe on we its you that some years examples, the to off on mentioned. if

for It's investment we or. be reduction that and cost in think an simultaneously. not mode mode So either us, can we

And continue term the thing. to so to going to long continue we're to for grow this invest

management But got be at bunch a of this a we're strong this prudent, cookies room cycles. we're here managed margins through cycle that to to smart. us have going so managing time, And fact of are same bunch different gives tough economic and we that to going be us, even another for team, the And get And just through. we're that it our is tighter. already, the

on was follow-up And hurricane, just update Great. maybe I don't rebannering. but at Clean an integration one integration, great. how the of there it process, the all would the going, Streak, delayed know on that's be the if because

This starting of heart, we And but initiatives elegant average improving was those acquisition we're good number really for an to the what X, transitioning the we do we've way. we plant, with on them than going all better. little reported track. Listen, processes businesses And make buy a shared one the and and of that, -- implement well physical definitely Yes. post is to do in the to the and a faint programs in take past, going us longer this as we from integration. day is bit not the integration,

that the time. that right part, then up, but is hardest important culture sure getting and getting the And most synced and and part they're arguably engaged the happy team takes highly all the making

kind a rolling a taking basis. of So on we this regional are

transition. a are way of the the over X/X little through We

of hope the to short we anticipated, bit or of anything. cut I which are we're by, We corners a end going in we us be again, project what year, that midst pushing finished, that, a not just But taken change X/X and the of is little longer it's think, back had second completely to bit. next QX than the little of

of Chris from Stifel. is question next The O'Cull

Patrick range, pretty it is implies wide. which your Chris. guidance for comps Jed, is XQ on seems in up X% This like the to flat

And within in that all? range? if key that you're assume running And or of you first is, right, of that is safe that factors it is low the would end the to what land high So then range to are the lead it that currently?

Yes.

order right, is would In comp in Patrick, of midpoint of math X% guide, QX to the get QX. to the your So to X%. flat it imply a

beta on lot we look particularly you As macro and performance months, at we a December, there higher in the November did X.X%. the plus look But -- uncertainty in still those historically, backdrop. at of a you as quarter, is

to still model range believe wider prudent -- So the that there. you're the we weight seeing outcomes it's of

I Okay. currently you us signed That's And many you've many you year have do Got got leases helpful. mean how next it. how And a for sites of then give sense well? as then guys construction can under now?

Give I as here look. me a second

And revised Patrick, the XX we construction I'll actually and jump in as projects But how guidance, this to of I disclose the prepared a as we trending minimum we're many [indiscernible] have see Yes, had today. remarks typically don't mean, we year. said he in under and so

we've look of as -- can long-term historic as guardrails to adding pace you're years high algorithm use future and single-digit newbuilds You the that that quarters. growth ahead got growth thinking to of the them. We've also been rate and at unit the

to are their on, Am to under we construction of under one take under people I of a piece, researched. being fat were I how liberties pipeline. is that lot pipeline, precise contract. that use Can being say, define But allowed listen, in saying contract, signed negotiated word? pipeline? currently definition you a there's have Jed, that being very But the The many

greenfield really, year, cadence if our detail hope and allowed open to this say, to next up week. pace to So this back to really store provide we we're more about development we by to. we're initiative, a can circle needless get But on and time where we're optimistic

Justin from is Baird. question next of Kleber The

on comments a to on wanted first sale your I leasebacks. just Jed, follow-up ask

You mentioned cap backup terms, favorable the less in rates. given

impact get next step we depreciation bonus in you growth think think that, guess, harder year or store starting do to CapEx on down, forward? and the to does about your I And execute? thoughts way, going any these transactions As

Yes.

rates, the not seen, actually we've cap on Just the less so at It's closed least recent have closing, favorable deals clarification. rates cap that -- we on. in one

look mean, going disciplined opportunistic we those As be recent listen, XX-year in ahead, cap leases. relatively consistent that -- to with we're those very leases rates to keep these and But our closings. are making structured be are we sure I

continue cash long lot just term. that's expected -- sense. and whole that try looking it a some we're It's for generate today so operations believe We at something from capital, make doesn't into generated a to the our this we over growth signing of and fund We're pull can what with along the can back. using the going both a relationships not market we're have of in as well. going deals active these combination to have the get great national we But partners see very with that and XXXX long-standing we're REIT market to to to with, that we

it. Got

asked. Obviously, at peers That's noticed that Okay. helpful. the your you question in new then build membership with to And I least Michael a just use discount offering follow-up many Florida. one were approach. a of promotional

John, that a of I one when confirm, I of you new just So was you're implement that to sign-ups you tactics look what maybe And that was initial were to then testing? these compared want that -- feedback guess, referencing build. like just kind any on legacy

diligence, I your you're of the you and No, tires. on office the and on-the-ground exactly and right, actually compliment field Yes. out due getting kicking going

testing we're of extra on the strategies from we're analyst that again, could get But that iterations. that we different and to promotions that where that move our sense. was an We sure elect to standpoint, right of do standpoint testing the then And deploy the actually be to or rate you discounting just discounts want now. saw control a a ratings what make discount A/B not at exactly -- there you So it lots credit needle and evaluating perspective. we're one and the that just from makes -- the no,

way. as it was in objective? a And drive Is of result, them profitable packages more customer into or membership? So pause on a your to we scar -- have life acquisition early people it lot I along tactics. whole say, you cycle, inefficient trade to learned but or riddled what our is a with call we convert when lot and And industry up this tissue, promotional the

Wash when apply you You down need ask, Unlimited need store the unnecessarily visited folks because to in be diluting Club that to to very sign trading or necessarily -- of that existing lot got Florida, not our for you did people it. of a discount up just there's customer a you did whole program. mindful actually revenue you don't I

Actually [indiscernible]. in can't credit I came release, a press across so just take for

actually that? desktop How know the the out away. I then. you got Nice diligence You thought star is office. gold of taken what, gets

for color. it. Well, Appreciate guys. right, the thanks All all

The next from MKM question David of is Partners. Bellinger

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quarters on one, potentially And retail that single-wash recent very mean growth lower that? the given conversion. any for that there So the is and the could dependent way member into expecting the in see business first as What is And past we member you get stabilization generator for growth next over year? on we retail more the size notion customers XXXX? into to the does impact? some a retail of volumes, pocket kind as lead few Are air

here. John David,

done customers program. has need think which the list. priority our to good bottom is job energy to many so So our of up such converting driving more I top spend To we of your a now on bubbled point, retail, line we've into membership

retail So then growth. described a really we're vague and the to recent somewhat that in in being traffic have campaigns membership we're to we select intended ultimately lead markets drive intentionally, boost

we a I don't The the air quarter-over-quarter. of clever term growth trajectory yes, And that that steady that which term air to move in needle. early see hope that's the strategy pocket, our a we're on But pocket and growth. I still part. of terms mentioned we going in continue continue healthy to to as experience assessing hope is upward stages truly member earlier, we promotional your

David, And point. one other just

my the XX%. You first prepared heard of during XXX,XXX in X members we year, remarks added the up that quarters

retention good historic here able those has we've focus rates retain job being of despite done that members. on what the member But a those history and where to is this making seen the macro team range. we and sure keep as within headwinds So recently, the

what means And optimistic to so we're as forward. going that

What's a follow-up fifth we fully quarters? in EBITDA maybe starting of a the updated few in to are over higher a pressures a or pressures next margin year-on-year understanding to Got But it. in level linger seems these volumes very row to some these for will evidence to that the should decline that just your quarter that expect margin then continue to be plays into EBITDA that. of bit? QX? begin you, lapping guidance abate Are off you And cost any seeing be think and contraction similar Jed. implied margins I for

Yes.

that said, some business. that expect that that than that's the those pressure, So inflationary saving and of we're other pressures, August in we've we're that. helping the see cost continuing the help to as obviously initiatives through offset well. taking experience we to various We have price soon don't as to anytime some subside We're offset increase to continuing of the

longer about business margins zooming little in you've the think that we term and still is to we out fundamentals us the And just As a it heard before about achievable. believe talk are the strong. that bit, of that XX% XX%

a profile, to just It -- boost public, the if back this naturally and four-wall Yes. this to what expense? so line and Dave, we we priority growth. pull was level in Jed, generating would and health on EBITDA to add, margins store for growth. in certainly throttle top the but just never us. accelerate we're so going is We've prior infrastructure And by I strong of on margin chose invested what amazingly could our have tremendous. the focusing we margin grew And built at expansion

be you. remain of kind growth, to with want line top quite honest in We to

to growth, more important So retail and for sales member it's think drive us, drive traffic. we to unit

the least the to to, then if we've right the mature some But focus anything, and stabilize shifted bit deliver when at but be perhaps for slow down, in We a now. little mentioned, a to it's our get hopefully of not maximize today. never been side margins we as have, our will and expansion, priority then them. kind priority cost margin it's curve start can us improve point smarter top on There our to certainly margins

question-and-answer to remarks. Lai John the to for over back conference like session. This I closing our would turn concludes

want just the We us to Thank quarter forward I call today. fourth concludes. Yes. the on circling back woods, the thank with you results much. sharing and knock for all look once and very joining on guys with everyone you to solid the a quarter

The concluded. for conference presentation. today's Thank attending now has you

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