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Mister Car Wash, Inc. (MCW)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 2024 was broadly in line with internal expectations: net revenues rose 6% to $239.2M, adjusted EBITDA grew 6% to $75.2M, and comps were +0.9% (management rounded to ~+1%) while the company reiterated FY24 guidance with one change—raising the lower bound of comp guidance to +0.5% from -0.5% .
  • Premiumization is a key catalyst: Titanium member penetration exceeded 20% by quarter-end; promotions are rolling off and Platinum pricing moved to $32.99 in most markets, expected to lift revenue per member and drive mix toward higher-margin tiers .
  • Subscription resilience (UWC ~74% of sales, +35k net adds, ~2.1M members) offset retail softness, particularly among lower-income cohorts; management highlighted sequential comp improvement into April as Titanium promos expired .
  • Liquidity and maturities improved via refinancing: $925M first-lien term loan due 2031 (SOFR+300 bps) and $300M revolver due 2029 (SOFR+250 bps), with no expected increase in interest expense at current leverage .

What Went Well and What Went Wrong

What Went Well

  • Subscription momentum and premium mix: “Our subscription business remained incredibly resilient… Titanium penetration… above the 20% level at the end of the first quarter… promotions are now rolling off, we’re beginning to see a healthy lift to revenue per member” .
  • Unit growth execution: Record Q1 greenfield openings (6) and strong economics (year-2 cash-on-cash ~50%, paybacks <3 years) supporting ~40 openings in 2024 .
  • Cost discipline and EBITDA: SG&A leverage and efficiencies underpinned adjusted EBITDA of $75.2M; Q1 adjusted EBITDA margin was ~31.4% .

What Went Wrong

  • Retail softness, especially lower-income cohorts: Retail comps worsened from low double-digit negative in Q4 to low negative teens in Q1; 80 stores in lower-income demographic segments were among the weakest performers .
  • Store-level cost pressure: Rent expense rose with lease count growth (cash rent +12% to $26.5M), and frontline wage inflation (~3.5%) drove labor deleverage despite chemical sourcing efficiencies .
  • Weather headwinds in northern markets: A soft winter with limited snow reduced typical seasonal wash demand; management noted they “never blame…weather,” but acknowledged impact .

Financial Results

MetricQ3 2023Q4 2023Q1 2024
Revenue ($USD Millions)$234.1 $230.1 $239.2
Net Income ($USD Millions)$19.5 $12.4 $16.6
Diluted EPS ($)$0.06 $0.04 $0.05
Adjusted Net Income ($USD Millions)$25.5 $24.0 $26.6
Diluted Adjusted EPS ($)$0.08 $0.07 $0.08
Operating Income ($USD Millions)$43.1 $36.9 $42.5
Adjusted EBITDA ($USD Millions)$71.6 $69.5 $75.2
EBITDA Margin (%)30.6% (71.6/234.1) 30.2% (69.5/230.1) 31.4%

KPIs

KPIQ3 2023Q4 2023Q1 2024
Comparable-store sales (%)+1.7% +0.7% +0.9% (mgmt ~+1%)
UWC sales penetration (%)71.5% 73.8% 74%
Net UWC member additions (000s)+6 +6 +35
UWC members (Millions, period-end)~2.1 ~2.1 ~2.1
Ending store count462 476 482
Titanium penetration (members)n/an/a>20%
Premium penetration (Platinum+Titanium, members)n/an/a>60%

Notes:

  • Management commented adjusted EBITDA margin was ~31.4% in Q1; EBITDA margin for prior quarters is derived from disclosed adjusted EBITDA and revenue .
  • Comps reported at +0.9% in the press release; management rounded to ~+1% on the call .

Guidance Changes

MetricPeriodPrevious Guidance (2/21/2024)Current Guidance (5/1/2024)Change
Net revenuesFY 2024$988–$1,016M $988–$1,016M Maintained
Comparable-store sales growth (%)FY 2024-0.5% to +2.5% +0.5% to +2.5% Raised lower bound
Adjusted net income ($M)FY 2024$99–$111 $99–$111 Maintained
Adjusted EBITDA ($M)FY 2024$291.5–$308 $291.5–$308 Maintained
Diluted adjusted EPS ($)FY 2024$0.30–$0.34 $0.30–$0.34 Maintained
Interest expense, net ($M)FY 2024$81 $81 Maintained
Rent expense, net ($M)FY 2024~$111 ~$111 Maintained
Diluted weighted avg shares (M)FY 2024330 330 Maintained
New greenfield locationsFY 2024~40 ~40 Maintained
Capital expenditures ($M)FY 2024$364–$405 $364–$405 Maintained
Sale-leasebacks ($M)FY 2024$135–$150 $135–$150 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2023 and Q4 2023)Current Period (Q1 2024)Trend
Premiumization (Titanium/Platinum)Titanium rolling out; UWC penetration rising (Q3: 71.5%, Q4: 73.8%) Titanium >20% member mix; Platinum price to $32.99 in most markets; promos rolling off; expected revenue per member lift Improving
Subscription vs RetailUWC strength; comps modestly positive (Q3 +1.7%, Q4 +0.7%) UWC ~74% of sales; retail softness more pronounced; lower-income cohort under pressure Mixed (UWC strong; retail soft)
Store Growth & Economics35 greenfields in 2023; strong pipeline 6 greenfields opened; on track for ~40 in 2024; year-2 cash-on-cash ~50%, payback <3 years Stable/Positive
Cost Structure (Rent, Labor, Chemicals)Rent rising with leases; ongoing cost management Rent expense +12% to $26.5M; ~3.5% wage inflation; chemical cost per car improved Mixed (rent/labor up; chemicals efficient)
Macro & WeatherCompetition elevated; unit growth strong; modest comps Soft winter impacted northern stores; competitive unit growth cresting; retail demand pressured Softening retail; normalization of competitive build
Financing/LiquidityNo revolver draws; healthy liquidity Refinanced $925M term loan (2031, SOFR+300) and $300M revolver (2029, SOFR+250); extended maturities; no expected interest expense increase Improving liquidity profile

Management Commentary

  • “Our subscription business… remains incredibly resilient… Titanium… penetration… above the 20% level… promotions are now rolling off, we’re beginning to see a healthy lift to revenue per member” — John Lai, CEO .
  • “We tightly managed our expenses… allowed us to lever SG&A and drive strong cash flow and adjusted EBITDA… Adjusted EBITDA margin remained flat at 31.4%” — Jedidiah Gold, CFO .
  • “Greenfield development… continues to be the highest and best use of our capital… we continue to see solid year 2 cash on cash returns of about 50% and paybacks of under 3 years” — CFO .
  • “Under the newly refinanced credit agreement… term loan priced at SOFR + 300 bps… revolver at SOFR + 250 bps… we do not expect any increase in interest expense as a result” — CFO .
  • “Premium penetration is now north of 60%… raising Platinum pricing to $32.99… decreases the gap… incent customers to trade up to Titanium” — CEO .

Q&A Highlights

  • Weather and comps trajectory: Management saw the strongest month in March and sequential comp improvement into April as Titanium promotions rolled off .
  • Membership growth strategy: 2024 focus prioritizes upgrading existing members into premium tiers; net UWC member growth modeled at mid-single digits vs low-double-digit adds in 2023 .
  • Retail weakness magnitude: Retail comps declined to low negative teens in Q1 vs low double-digit negative in Q4; pressure concentrated in lower-income markets .
  • Pricing and elasticity: Platinum moved to $32.99 across markets; churn increase was modest and accretive when combined with Titanium rollout; base plan price held “sacred” for now .
  • Greenfield AUV ramp: Year 1 AUV $1.0–$1.3M, reaching $2.0–$2.3M by year 3; net investment ~$2.0M after sale-leaseback .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 2024 EPS/revenue/EBITDA was unavailable due to an S&P Global daily request limit at the time of retrieval; as a result, formal beat/miss versus consensus cannot be assessed in this report [SPGI access error].
  • Management characterized results as “in line with expectations” and reiterated FY24 guidance, with improved comp guidance lower bound (+0.5% vs prior -0.5%), suggesting estimate revisions may focus on mix/price (Titanium and Platinum) rather than top-line trajectory .

Key Takeaways for Investors

  • Premium mix is the central driver of 2024: Titanium penetration >20% and Platinum price standardization should lift revenue per member and margins; watch for sustained promo roll-off benefits through Q2 .
  • Subscription base remains a stabilizer amid retail volatility; comps should benefit from mix and greenfield maturation, while retail softness is the key swing factor quarter-to-quarter .
  • Cost structure bears watching: Rent growth (lease count expansion) and wage inflation are offsets to margin expansion; chemical efficiencies help but may not fully offset rent/labor .
  • Balance sheet/liquidity improved: Refinancing extends maturities and supports unit growth; at current leverage, interest expense should not rise, reducing refinancing overhang .
  • Guidance credibility: Reiterated FY24 ranges with tighter comp outlook (lower bound raised) indicate confidence in premiumization and store execution; monitor Q2 sequential comp .
  • Tactical setup: Near-term catalysts include sequential comps improvement post-promo roll-off, continued Titanium mix gains, and greenfield openings ramp; risks center on retail demand and competitive intensity .
  • Medium-term thesis: Durable subscription model, premiumization, and attractive unit economics underwrite growth and cash generation; sustained mix shift and disciplined cost control are key to re-rating potential .

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