Q2 2021 Mister Car Wash Inc Earnings Call
Good day and welcome to the Mister car Wash Q2, 2021 earnings call.
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I would now like to turn the conference over to Megan Britt Senior Director of Communications. Please go ahead.
Good afternoon, everyone and thank you for joining us today for Mister car wash is a second quarter fiscal 'twenty 'twenty. One earnings call speaking today are chairperson and Chief Executive Officer, John Light and Chief financial financial officers that God. After John Instead has made their formal remarks, we will open.
Nicole the question.
Before we begin I do need to remind everyone that comments made today 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 materially from managements current expectations.
These statements speak as of today and except as maybe required by law. The company does not have any obligations to update or revise such statements as circumstances change.
Please review the cautionary statements and risk factors contained in the company's registration statement on form S. One filed with the Securities and Exchange Commission on July 27th the 2021.
As such factors may be updated from time to time in its other filings with the SEC, including its quarterly report on Form 10-Q for the quarterly period ended June 30th 2021.
During the call today management will also refer to certain non-GAAP financial measures a reconciliation between the GAAP and non-GAAP find out some financial measures can be found in the company's earnings press release, which was filed with the FCC yesterday and posted to the Investor Relations section of Mister car Wash this website.
At IR, Scott Mister car wash dot com.
With that I'll turn the call over to John John.
Good afternoon, everyone and thanks for joining us on our first earnings call as <unk>.
Good to talk to all of you again as a new public company.
It's been a little over six weeks since we rang the bell and were still feeling the glow and positive emotions over the significance of going public.
Morale within our organization and the speed of course, a coast to coast has never been stronger.
It was an extremely validating feeling and a testament to our amazing team and all the hard work that led up to this historic event.
We came into the IPO was a passionate mission driven bunch, but coming out of it there is a new sense of purpose as we set out to do what no. One else has done before which is to build a true national Carlisle company.
Scale is to even greater heights.
We believe our strong culture drive strong performance.
We're executing at a high level right now and clicking on all cylinders.
It's taken us over 25 years to build our team.
And today, we have an incredibly strong we have a talented hardworking and passionate leaders who love what they do and are having fun building very special company.
Before I dive into the numbers I'd like to share a quick story.
During the IPO, we launched an employee stock purchase plan to give our team members an opportunity to buy stock in on a piece of the pie.
No idea what level of participation, we were going to get but I am thrilled to share that over 30% of our workforce participated.
It's almost 2000 people, who voluntarily invested back into the company they work for.
Given the size of our organization when you have that many people that deeply believe in the company it becomes as powerful force to get stronger and stronger.
Just the other day I was getting my car was one of our crew members who looked like he was just at a high school came up to me and said Mr. Lai. Thanks for setting up the ESP program.
Without the payroll deduction plan I wouldn't have been able to participate.
Hope, it's my Dream is someday I get into the program.
Just blew me away.
Highlighted the fact that at the end of the day as service providers, it's all about our people.
And when they feel good about the company that they work for they perform well.
For our call today I'd like to begin by briefly recapping, our second quarter results.
<unk> share some background on our growth drivers our strategy and how we're going to deliver long term shareholder value.
Then Jed Golar CFO will discuss our financial results, including the impact COVID-19 had on our comparisons as well as the divestiture of our quickly facilities completed in December of 2020.
<unk> also can review our guidance for fiscal 2021.
I am pleased to share that our Q2 results.
Curiously exceeded expectations.
For the quarter, we delivered total revenue of $197 million.
Increase of plus 93% over Q2 of 2020, and adjusted EBITDA of $73 million, which were all time records for quarterly sales and adjusted EBITDA.
This performance capped off an incredibly strong first half with adjusted EBITDA of $135 million revenues were up 45% same store sales up 50% and as of today, we added eight new stores through acquisitions and opened up eight new greenfield locations. So far in 2021.
As Jen will discuss as we look ahead, we're well positioned to deliver on our unit level growth outlook for the remainder of the year.
For those of you that are newer to our company, let me provide some background on our history.
Since our founding 25 years ago, we've grown to become the largest national Carwash brand in the U S. With 350 geographically diversify locations 1.5 million unique unlimited watch club members and we wash over 70 million cars annually.
Our 39 consecutive quarters of positive same store sales growth pre COVID-19 is an amazing number and was driven by our OSM field management team and their relentless focus on operational excellence.
Our biggest competitive advantage is our people who delivered an elevated level of customer service day in and day out.
Over 90% of our managers have been promoted from within and we support all of our team members with competitive wages excellent benefits best in class training and career path progression.
Employee engagement has never been stronger our NPS score of 55 puts us in a best in class category alongside some of the most legendary brands and consumer retail.
As we think about our future our focus will be on continuously adding value to the customer experience, while continuing to build and acquire new stores to strengthen our portfolio.
Comp store growth will be driven by increasing our alumina wash club member base maximizing throughput and investing in our team.
DWP has changed the game representing.
Representing over 60% of our overall business is predictable recurring subscription based business model has transformed every aspect of our company as we become very member centric.
As we increased store density, we expect our membership numbers to grow as the associated network of more stores equals greater optionality for our members, which increases the value proposition is our market share grows.
We're calling this the network effect and it's having a positive symbiotic relationship with our Greenfield program.
Our unit growth will be driven by Greenfield development to infill existing markets complemented by highly selective strategic acquisition opportunities in new markets and existing markets.
Looking ahead, we see a lot of opportunity for continued growth. The U S car wash industry is large highly fragmented and very resilient.
Demand for our services has never been stronger as the U S car parks continues to expand and more new users come into the category as motorists continue to shift away from doing it yourself to having someone do it for them in the end.
Cars will always get dirty or always going to need to be cleaned. When you have that kind of persistent demand for your service that's a good thing.
From a big picture standpoint, while we're the largest car wash operator in North America with less than 5% market share, we actually see ourselves quite small with a huge runway for continued growth in front of us.
With all the fundamental building blocks in place and the best team in the industry.
We're in an excellent position to achieve our 2021 outlook as well as a longer term target to grow our top line in the high single digit range and grow adjusted EBITDA in the low double digit range.
Now I'd like to turn it over to Jeff.
Thank you John and good afternoon, everyone. As John said, we are very pleased with our performance for the first half of this year, including our second quarter results, which exceeded our expectations, marking a record quarter from both a revenue and adjusted EBITDA perspective, driven by the exceptional.
Performance this spring.
We believe that our performance to date positions us well to deliver against our outlook for the year.
Before I review our guidance for fiscal 2021, let me provide some additional detail about our second quarter and year to date results Mike.
My results will focus on our adjusted non-GAAP results.
Please refer to today's press release, if you would like more details on our financial performance and our methodology in calculating non-GAAP metrics.
In the second quarter, our best business benefited from the strong macro backdrop and increased mobility trends revenue increased 93% to $197 million.
$102 million last year, driven by the comparable store sales growth of 93% and unit growth of 7%.
Our comparable store sales growth includes UW see membership growth of 39%.
Since June 32020, as UW see membership grew to over one 5 million members from approximately one 1 million members as of the end of Q2 last year.
For 62% of total watch sales during the period.
In addition, we had a solid retail comparable store sales growth or non EWC membership sales growth of 90% during the quarter.
Important to note our revenue growth for Q2 fiscal 2021 was impacted by a $5.1 million decrease in oil change revenue as a result of the divestiture of our quick lube facilities in December of 2020.
We are also comparing to prior year period, when we temporarily suspended our services, including UW see billings at more than 300 of our locations between March of 2020.
In May of 2020 in response to the rapid onset of the pandemic.
Compared to 2019 revenue growth was 25% and comparable store sales growth was 22% for Q2.
Yeah.
With respect to unit growth, we added five stores through acquisitions and two new build locations in Q2 of this year.
Greenfield unit expansion is a key driver for our growth strategy and we continue to be very pleased with the performance of our new locations.
We now have 13 greenfield locations that have passed their one year, mark with productivity and profitability that is nicely exceeding their plan projections due to ramping memberships and again, bringing new carwash users into the category as we expand our network of stores.
We feel great about our store pipeline and our ability to.
To deliver against our long term new store model parameters as we continue to grow our footprint.
Now switching gears to provide perspective on the balance of the P&L.
This year's Q2 cost of labor and chemicals.
Excluding the $31 million impact of noncash stock compensation expense related to the acceleration of the vesting of store level team member performance options was $57 million.
We're 29% of revenue.
500 basis point improvement versus Q2 last year. This.
This improvement was primarily driven by sales leverage, which we define as spreading the fixed cost of the business over a greater number of cells.
And the optimization of the wash labor model the.
The redesign of the wash labor model was initially implemented in 2020 in response to the COVID-19 pandemic and is based on location level demand metrics, such as wash volumes wait times and peak hour needs. The.
The improvement versus 2019 Q2 of 2019 was approximately 1000 basis points largely driven by the same factors.
Teen percentage point leverage in our other store operating areas operating expenses was related to more normalized levels of revenue in Q2, this year versus a pandemic impacted Q2.
2020.
Compared to Q2.2019 other store operating expenses improved 100 basis points as a percent of revenue driven by leverage on the sales increase.
General and administrative expenses in Q2, this year, excluding the $171 million impact of noncash compensation expense due to the acceleration of vesting of performance options.
Were $18 million or 9% of revenue compared with $14 million or 13% of revenue.
And in the same period last year.
The 93% revenue increase was primarily the primarily primary driver of this year over year expense leverage.
The two and a half million dollar a year over year decrease in interest expense was due to slightly lower rates and debt levels.
Given the timing of our IPO.
At the end of Q2 and the subsequent debt Paydown, we would expect interest expense to be approximately $6 million per quarter in Q3 and Q4.
Our effective tax rate during Q2, 2021 was 28, 8% compared with 27% last year.
Adjusted net income increased to $41 million.
From $800000.
Last year.
Diluted earnings per share was <unk> 14 in the second quarter of 2021 compared with breakeven in the prior year period.
And finally as a testament to the execution.
By our best in class operations team.
Strong flow through on the 93% sales increase drove a 160% increase in adjusted EBITDA to a record $73.1 million for Q2. This year. This is despite a decrease of $700000 of adjusted EBITDA due to the due to the divestiture of our quick lube facilities.
In December of 2020.
Moving on to the balance sheet and cash flows.
Cash and cash equivalents as of June 32021.
<unk> was $155 million compared to $58 million as of June 32020, and $115 million as of December 31st 2020.
As you know we completed our IPO in June of 2021, which generated proceeds of approximately $433 million.
After offering related costs.
We use those proceeds to repay our long term loans and.
And our total debt as of June 32021 was $615 million, resulting in net leverage ratio.
Two one times.
Also in conjunction with the IPO, we closed on an amendment to our revolving commitment and upsized capacity from $75 million to $150 million, creating additional liquidity.
For future growth.
Capital expenditures increased approximately $17 million to $44 million in the first half of fiscal 2021 net of sale leaseback proceeds capex decreased $1.5 million to $22 million mainly.
Maintenance Capex was $9 million in the first half of fiscal 2021, compared with $1.6 million in the first half of fiscal 2020.
Let me now turn to our guidance, which you saw outlined in our earnings press release.
For the full year fiscal 2021, we expect revenue growth of approximately 30% against 2020 revenues of $575 million.
Based on comparable store sales growth of 29% to 33% and 16 to 18, new Greenfield locations.
As a reminder, our so our sales growth expectation also takes into account the $24 million negative impact from that.
The loss of revenue associated with the divestiture of our quick lube facilities as well as the conversion of interior clean to express stores.
With the inherent leverage of our operating model adjusted EBITDA is expected to increase between 53% to 56% to $247 million.
So $252 million on the year.
Adjusted diluted earnings per share are expected to increase to 39 to 44.
Assuming diluted shares outstanding as of December 31, 2021 of approximately 330 million shares.
This outlook also assumes full year interest expense of approximately $39 million and an effective tax rate of 35%.
Note that the tax rate being used to compute adjusted net income is approximately 26%.
We expect total net capex of approximately $83 million for the year gross Greenfield capex totaled $85 million or $28 million net of planned sale leasebacks and tenant improvement allowances.
In addition, we expect $18 million for maintenance with the remainder being spent on other growth initiatives and integrating acquired stores.
I'll take a moment now to discuss our long term growth targets.
As John outlined we see significant white space that we intend to capitalize on with our unit growth strategy that blends greenfields and acquisitions and.
In addition, we see continued productivity opportunities at our existing locations through growth in EWC membership.
And continued lane and site optimization.
We therefore are targeting top line percentage growth in the high single digits based on high single digit percentage unit growth.
And comparable store sales growth in the mid single digits.
With continued expense leverage we believe we can continue to grow adjusted EBITDA in the low double digit percentages, we are comfortable with our current leverage that sits within our target range of two to three times and we intend to remain disciplined with allocating capital.
Prioritizing investment in the business.
In conclusion, we've had a very strong first half of fiscal 2021.
And our late June IPO marked a key milestone for our company.
The entire Mr. Team is excited about the many opportunities that lie ahead as we enter this new phase as a public company and we believe we are well positioned to deliver on our long term growth targets.
And with that I'll turn it over to the operator to begin the Q&A session Sarah.
Sure.
Thank you we will now begin the question and answer session.
Ask a question you May press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from David Bellinger with Wolfe Research. Please go ahead.
Hey, guys. Thanks for taking my question and congrats on your first quarter as a public company here and nice results.
So if we could just start on the makeup of sales growth.
In Q2 can you walk us through the monthly trends for the quarter any changes across geographies to call out and as you assess the exit rate or even early parts of Q3 is there anything you can correlate with some of the more recent headlines around the delta Varian or some other factors that play just what are you seeing.
Q2 here.
Yes, David Thanks for your question.
We aren't going to provide comps by month, but I will highlight that we did see a very strong spring from both a revenue and EBITDA perspective with the March through May at record highs.
Certainly we benefited from the increased mobility trends and the pent up consumer demand.
And then the second part of your question there about the.
Just any regional outliers.
When you start peeling back the layers to this this is this is a business that performs well it comps well across all regions across all cohorts across all income demographics, usually when we see a SKU at the regional level. It's because there is a higher sales mix.
From our.
Greenfields and acquired stores that are still ramping and they're moving out of that freshman year into the sophomore year and get picked up in our same store sales.
Yes. Thanks.
Thanks for that it's very helpful and just as my follow up here on the member growth again, very strong this quarter up almost 40% year over year. So how should we think about the trajectory of member growth. Both over the next few quarters with this new digital push and also potentially as these elevated growth rates potentially normalize over time.
Todd.
Yes, David terrific question.
When I look back over the last six months, what we've done to grow our <unk> member base is nothing short of a phenomenon.
Yes.
With respect to not getting too excited 300000, new members through June plus 24%.
Quite frankly, I'm not I'm not sure that that's a sustainable rate of growth. If we stopped adding new members to the rest of the year and finished the year plus 20% that'd be awesome.
Historically, when we see member growth the bulk of it does come in the first two quarters.
But given the consistency of our business that judge is to outline we anticipate continued growth with our membership program probably not at the same rate.
But growth Nonetheless, as we continue to increase the value proposition of that program. So we're very bullish and optimistic about.
<unk> as we continue to.
We increased that member base.
And again provide more optionality for our members.
Thanks, guys I appreciate the detail.
Our next question comes from Elizabeth Suzuki with Bank of America. Please go ahead.
Great. Thank you so regarding the full year same store sales outlook I mean air appears to be a bit of a deceleration in the two year comp assumed I mean is that largely conservative about the pace of reopening or were there. Other factors that may have elevated growth in the second half of 2019 that creates a bit of a difficult two year compare.
Chris.
Yes, Thanks, Liz it's a it's like we said, we're not talking of month to month.
We did see this outperformance.
Early with the start of the quarter at record highs given the strong macro environment.
As you think about the second half keep in mind that we do have the headwind of the revenue lost.
$24 million on the on the year due to the divestiture of the lube business through December of 2021.
Also.
Keep in mind that as you look at the comp on a go forward basis. It was August of last year that we brought our interior clean services back online.
Making it just a little bit more difficult overlap.
Great. Thank you.
Our next question comes from Simon Siegel with BMO capital markets. Please go ahead.
Thanks, Hey, guys. Congrats on the first public call exciting stuff.
So John to your point regarding the network. In fact can you just remind us what percent of your members use more than one location and just maybe any change you've seen in EU WC member tendencies as people have been getting out any any change in frequency and then Jed I really nice obviously pwc, but also the retail growth that you mentioned can you.
Dig into that a little bit maybe speak to the wash volumes versus price or anything else baked into the retail growth. Thanks.
Yes, Simeon let me take that first part and then.
And the second part over to Jed. So when we look at the network effect and the impact of having more stores in market more optionality.
On average today.
Little over 30% of our members use more than one location to get their car clean in markets, where we have increased density increased penetration in stores and higher market share as a result, so markets like des Moines, Iowa, El Paso, Texas, Bakersfield, California, we actually see a 10 percentage point improvement in the number of stores.
So it's a little north of 40%.
Cross utilization, which we think is a terrific number so.
Really supporting our thesis to increase penetration and provide.
Wherever you are in the city whichever city year, and Theres, a convenient Mister car wash location for you to get your car clean.
And as we add stores that value proposition just continues to strengthen.
And lifting all boats.
With that so it's a pretty cool phenomenon.
The second part of your question there assuming about the retail sales and just peeling back that a little bit as you.
Those retail sales are an important part to the business because it brings in customers who are subscription members, yet and allows us an opportunity to trade them into the unlimited wash club.
We were up our retail sales were up 90%.
Last year, if we look at it on a two year stack they were up plus 2%.
But the retail sales growth of 90% compared to the.
On the Red Wash club membership growth sales growth of 95% were <unk>.
Very happy with the growth that that retail sales in particular.
Seeded our expectations.
Great. Thanks, a lot guys best of luck for the year ahead and congrats again.
Thanks.
Your next question comes from Michael Lasser with UBS. Please go ahead.
Yes.
Taking my question.
Your your guidance a couple of months ago.
So the.
The assumption was that people will be going back to work.
Through the end of the year, probably more likely after labor day.
<unk>.
Now it looks like most people are not can we go back to the office until next year.
Have you factored that into your outlook for the second half.
Yes, so when you look at the first half compared to the second half.
We can't emphasize enough that the great Q2, and a record quarter. It was the quarter was 18% higher from an adjusted EBITDA perspective than any other quarter in the history of Mister Carwash.
And the guidance that we provided.
The revised guidance, we provided in early June where we took adjusted EBITDA to $246 million.
Sure.
It factored in some of the investments that we're going to be making in particular to help offset wage compression public company costs.
Sure.
To help.
So what we expect is baked into this annual outlook that we have that we provided here, yes, Judah I would just add too when we look at Q2 and as thrilled as we are about Q2.
It was a little bit of an anomaly I mean, there was so much pent up demand and with respect to the kind of unprecedented spike in car traffic.
<unk> certainly had had.
Positive impact for sure, but it created this perfect storm for.
Being able to sign up even more members given our really strong value prop.
As I look at the back half of this year, we're still going to be growing our business, but to say theyre going to grow at that same rate. It was a pretty tall order. So.
We expect to grow at this predictable steady pace and we plan on doing it.
Got it.
Quick follow up question.
On the new one.
<unk> implemented about a year ago.
Similar amount of leverage on the cost of labor line forward, assuming the sales are going to be similar.
And what's been the customer response to this new model.
I'm sorry was the question regarding our interior clean services.
Broke up yet.
Yes.
You cited the new watch model.
A critical factor in driving a lot of the cost of labor leverage in the second quarter.
And presumably.
What is less labor intensive.
And so I was wondering if that can drive a small amount of leverage moving forward.
The amount of sales.
Got it got it.
Michael on the <unk>.
As far as are the sales leverage and the optimization of the labor model that was an initiative that we started implementing during the during the pandemic it's been phased in.
A couple of months, we expect to continue to receive benefit from that from a labor hours worked perspective through Q1 of 2021.
We do have built into Q2, Q3 and Q4 of investments.
Around.
Store level labor to help offset some of the wage compression that we're experiencing and help recognize or <unk>.
A players at the at the frontline.
Jed I would add to our productivity is at an all time high on a per employee basis. We're a lot more efficient I think coming out of Covid. There's some lessons learned and so the headlines are cars per labor hour is up over 70%.
That's phenomenal.
Labor dollars per car is down 30% and so.
So when you have both of those trends going in the right direction.
<unk> says that we as a management team have been able to manage through any labor increases through increased productivity for us that's the name of the game.
Thank you very much.
Okay.
Again, if you'd like to ask a question. Please press Star then one our next question comes from Peter Keith with Piper Sandler. Please go ahead.
Hey, good afternoon, guys, it's not greener on for Peter Thanks for taking my questions.
First I just wanted to ask that.
Some of your Western U S markets and initiatives with water shortages going on right now.
Where there is water restrictions.
Good or bad dynamic for your business.
And John during your tenure with the company has there ever been.
Restrictions put in place where you can operate in a certain market.
Yes.
First of all let me say that we take water conservation very seriously at Mister car wash.
Been out in front of this for years.
When you look at the average number of freshwater gallons that we use per car.
We've made year over year improvements and we recycle and repurpose.
<unk> 15 gallons per car today, and so we see ourselves as really responsible stewards of the environment for us. It's it's a really key part of what we stand for.
With respect to the Western States, we have not seen any stoppages of businesses most municipalities no debt.
Drought situation.
Washington, Your car to commercial car wash is actually better for for the environment and as Washington, Your driveway and if there is if there were to be any temporary restriction restrictions, we put on the home washer SEC.
The second part of your question in my tenure, which is coming up on 20 years.
There's been one situation in Austin, Texas that had to do with a pump at Lake Travis.
Nothing to do with the drought and with that pump going out we were asked to reduce our freshwater consumption, which we were able to do and continue to wash cars consistently and so it didn't have an impact on our business at all.
Alright, Thanks, Greg.
Great detail.
One other.
Uh huh.
Yes.
The margin flow through.
On sales upside.
Discussed it before.
And based on models based on the numbers you gave us a couple of months ago.
Sales came in.
$4 million upside EBITDA was around $3 million.
70, 75%.
EBITDA flow through.
Relative to your guidance for the full year should we continue to expect similar.
Kind of margin flow through on it.
In any event the sales up that.
Yes, Peter so.
Just given the low variable cost nature of our business. These incremental flow sales they do flow through it at a healthy level.
I'm always hesitant just a little bit of talk sales flow through because they do flow through a little bit different than a traditional retail model due to the subscription element to the business.
But going forward it will it will likely be slightly less than the 70% as we invest in.
Company costs the store level Labor and then also some of the development resources and supporting team to help.
Build out.
The development team.
Our wash labor model as a process thats been rolled out and continue to be refined and like I said, we'll continue to see benefit from that through Q1 of 2022, although it will be to a lesser extent in the quarters to come.
Alright, thanks, guys.
Okay.
Our next question comes from Simeon Gutman with Morgan Stanley. Please go ahead.
Hey, guys. This is Michael Kessler on for Simeon. Thank you for taking my questions.
First I wanted to ask a quick follow up actually on the margin piece. When we look at the first half EBITDA margins in the call. It mid to high Thirty's implied in the back half is more on the kind of low ish 30, <unk> range and I was wondering if you could maybe dissect the.
The components of the lower margin going forward between a little bit of detail on this on the top line reinvestment and staffing up at the store location level and reinvestment back in the organization. If you can maybe add.
You guys size up if you can kind of give us.
An overview of where those pieces are coming from and then also how should we be thinking about that margin beyond 2021.
In perhaps a more normalized backdrop.
So Michael that was a great summary of everything that we've done has helped drive the the margins there so.
I think one other thing that I would highlight is we did have during Q2.
Some of the.
Store level labor investment that we were going to make and some of those were delayed just a little bit.
Into Q3 and Q4.
So that helped from a margin perspective on Q2, just just a little bit.
Yes, Jed if I can also chime in here so.
I think it's important to note.
This isn't a surprise to all of you on the line.
We're in growth mode, as a company and as a growth company. We're in we're investing in a big time way.
In our people.
So specifically building out our G&A building out our development teams. So that we cannot just double down, but triple down on our capability and our capacity to put up more stores quite frankly, so we're investing in our team again, if our vision someday is to get to a 1000 stores. It takes an army and <unk>.
Got an incredibly talented team and we're going to continue to add to it.
Great. Thank you.
Follow up maybe this is more of a bigger picture question.
I guess first can you talk a little bit about how the new greenfield that youre opening how they're continuing to ramp and then kind of relatedly thinking about the whole industry longer term.
I know you guys had said before you see that Theres a lot of capacity available for continued growth and for you guys to grow into an industry that is also growing I was wondering if you could just maybe expand on that and give us a sense of how you think about capacity and your ability to grow into it and also for the whole industry to support a capacity longer term as you can.
More and more greenfield locations. Thank you.
Yes, listen there's a ton of white space. There is a lot of pockets in the U S and within the markets that we're actually in that are underserved right now and again. This is embolden us to as I mentioned before double down on this initiative.
And continue to expand our footprint.
So in the market sovereign.
We're continuing to grow as we also ambitiously look to move into new attractive markets.
But when I zoom out and look at just this massive 275 million cars in the U S.
And how many conveyorize car washes novartis serve them.
Can easily see my Crystal ball the industry the number of competitors in the U S doubling in size.
And right now there is a race quadrant two to control and have a lion's share of each market.
We're not the only ones that are on our bikes pedaling very quickly.
And then Michael the first part of your question around Newbuild performance, just a little bit more color there as I said in the prepared remarks, and when you look at the 13 that have crossed the one year Mark.
They are outperforming the pro forma that were approved prior tests building those locations and if we extrapolate that performance out.
They are actually exceeding the balance of the express exterior portfolio.
Driving that approximate three year paybacks for those particular locations that have a sale leaseback.
We're very optimistic about the performance of our of our Greenfields and plan to continue to make investments to drive growth here.
Yeah.
Okay. Thank you guys.
Yes.
This concludes our question and answer session.
Like to turn the conference back over to John Murray for any closing remarks.
Yeah, well. Thank you all for joining us on today's call and we deeply appreciate your interest in Mister Carwash, we look forward to updating you on our next on our progress for the next call.
So thank you very much.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.