Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Mister Car Wash Inc (MCW, Financial) reported a 6% increase in sales to $239 million and a 6% increase in adjusted EBITDA to $75 million in Q1.
- The company successfully opened 6 new greenfield stores, reaching a total of 482 locations, and added 35,000 UWC members, ending the quarter with over 2.1 million members.
- Mister Car Wash Inc (MCW) saw a strong performance in its subscription business, which accounted for about 74% of sales, demonstrating resilience despite a softer retail environment.
- The launch of the Titanium wash package has been well received, with penetration levels growing above 20%, indicating a successful rollout and positive customer response.
- The company has managed to maintain strong cash flow and adjusted EBITDA levels through tight management of expenses, particularly in SG&A.
Negative Points
- The retail side of the business experienced increased pressure, particularly in lower-income areas, which could affect overall revenue growth.
- Despite the increase in membership, the company noted a softer retail environment due to increased competition and cannibalization from new store openings.
- There was a slight uptick in churn following the price increase of the Platinum wash package to $32.99, although it was found to be highly accretive overall.
- Labor and chemical costs increased by 20 basis points to 28.9%, driven by an increase in the number of stores operated and higher average hourly wages.
- The company faces ongoing challenges with the competitive intensity across the car wash industry, which could impact market share and profitability.
Q & A Highlights
Q: Can you give us some more detail on trends through the quarter? Any quantification on how much the adverse weather shaved off the comp number? And then just second, any changes you've seen into April as more of the initial Titanium promos roll off and even with some of the noise from that lower-end customer?
A: John Lai, CEO, explained that while weather did impact the business, they do not blame it for not meeting targets. Jed Gold, CFO, added that comp store sales were consistent throughout Q1, with March being slightly higher. They observed momentum into April, driven largely by the Titanium package as promotions rolled off, leading to increased revenue per member.
Q: What's the timing on migrating to $32.99 as a premium? And would you consider $19.99 sacred?
A: John Lai, CEO, stated that they are now in all markets at the $32.99 price point for the Platinum package, and the promotions have all rolled off. He emphasized the importance of maintaining the $19.99 price point for now, considering it a value offering in their membership plan mix.
Q: With the high level of competition in the space and a soft retail environment, are you seeing any trends in member acquisition costs?
A: John Lai, CEO, mentioned that their member conversion costs are negligible as they focus on converting existing customers to members rather than spending significantly to attract new customers.
Q: Can you talk about the drivers of cost of labor and chemicals deleverage in more detail? Considering rising input costs, how are you thinking about this line item over the balance of the year?
A: Jed Gold, CFO, explained that about 90% of the cost of labor and chemicals line is labor expense, with a 3.5% wage inflation observed in Q1. He expects this to remain consistent throughout the year. Chemical costs per car were lower than historically, due to sourcing efficiencies and usage improvements.
Q: What do you see in M&A multiple-wise?
A: John Lai, CEO, noted that assets are trading in the 10 to 12-ish range, with some multiple compression observed over the last year.
Q: This is Vicky on for Robby Ohmes. So my first question is, you mentioned that premium penetration is now above 60%. Over the long term, just curious, what is your target split between all 3 types of memberships?
A: John Lai, CEO, expressed satisfaction with the current mix of about 40% in their base plan and 40% in Platinum, with 20% in Titanium. He highlighted the high margin of premium plans and the ongoing efforts to increase this segment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
