Q1 2022 Mister Car Wash Inc Earnings Call
Good afternoon, and welcome to Mister car Wash as conference call to discuss financial results for the first quarter fiscal.
2022 at this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.
Please note this call is being recorded and a reproduction of this call in whole or in part is not permitted without written authorization from the company.
I would now like to turn the call over to Megan Senior Director of Communications. Please go ahead ma'am.
Thank you.
Good afternoon, everyone and thank you for joining us today and for Mister car Wash is Q1 2022 earnings call speaking today are chairperson and Chief Executive Officer, John Lie and Chief Financial Officer, Jud God After John and Judd have made their formal remarks, we will open the call to questions.
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's current expectation.
These statements speak as of today and except as may be required by law. The company does not have any obligation to update or revise such statements as circumstances change.
Please review the cautionary statements and risk factors contained in the company's most recent filings with the SEC as such factors may be updated from time to time.
During the call today management will also refer to certain non-GAAP financial measures a reconciliation between the GAAP and non-GAAP financial measures can be found in the company's earnings press release issued earlier today and posted to the Investor Relations section of Mister car wash as web site at IR Dot Mister car wash dot com.
With that I'll turn the call over to John .
Thanks, Meghan and good afternoon, everyone and thanks for joining us on our first quarter earnings call. We had another great quarter and are pleased with the strong start that we've had in 2022.
With our high volume Express exterior locations Unlimited Wash club program, an expanding network of stores, we're making car, Washington, more convenient than ever as more and more customers discover how quick and easy it is to keep the car cleaning. There also discovering the great value of our unlimited Walsh club program and the amazing customer service that our team members provide.
We see that the combination of convenience value and service is driving strong demand in fundamentally changing the way people care for the vehicles.
This has translated into strong and consistent demand and results.
In the first quarter total revenue increased 25% from the first quarter of 2000 $21 million to $219 million.
Comp sales at locations opened more than a year increased 11%.
Adjusted EBITDA increased 22% to $75 million.
And we added 125000, new <unk> members and ended the quarter with nearly one 8 million members.
We're off to a great start with the three new Greenfield locations that we opened in Q1 in Houston, Orlando and Abilene.
And our greenfield locations or some of the most productive and profitable in our portfolio.
As a result, we're continuing to invest in our real estate development teams to expand our capabilities to open new locations.
As we think about M&A.
We will continue to look for assets that complement our footprint and allow us strategic entry into a market.
We recently announced the acquisition of four stores and Victor Valley, California, and are excited about the opportunity to grow in that region.
We have a long track record of buying good businesses, and making them better over time.
By integrating them into one brand versus trying to manage over 100 bespoke brands.
Speaking of integration, we often say that anyone can buy the business. The hard part is the post acquisition integration process.
And on that note, we're pleased with the progress we're making on the clean streak in downtown or businesses, which are both performing above our early expectations.
Shifting to our team members and the best in class customer service model. We're pleased that through what continues to be a tight labor market. Our stores remain fully staffed and we are building out our bench of future leaders.
Path to being a people centric company began many years ago and the ongoing investments we've made in wages benefits training and career path progression.
Led to the most highly engaged and motivated team in the industry.
At a time when many businesses are struggling to staff through operations, we feel very fortunate that we have had no interruptions to our business and our stores have become even more productive as we set volume records in almost every region.
Before I turn it over to Jerry I'd like to recognize and thank our amazing team, who are growing and scaling the business.
Despite all the systems machinery and equipment as the people who service our customers and deliver upon our mission each and every day to build a Mister car wash brand and propel us forward.
We are so very grateful for their passionate and hard working team members that make up the Mister car wash team. Thank you for everything you do.
Jed I'll now turn it over to you to review our first quarter financial results.
Thank you John and good afternoon, everyone. Overall, we're very pleased with our first quarter results the underlying trends in the business and the great start to 2022.
Before we get into the details there are a couple of highlights I want to emphasize.
First demand was strong across the business across all regions throughout the quarter.
And retail sales benefited from favorable weather.
Our newer stores as well as our more mature locations all continued to perform very well and generated strong comp growth.
Second during the omicron surge in January of this year, we experienced higher levels of absenteeism related to people being out sick and taking health related precautions. This led to lower than expected staffing and labor expenses in the quarter that were temporary in nature as we have discussed our biggest differentiator starts with our people.
Our service delivery model and labor and customer service are key to delivering the customer experience our customers have come to expect.
Sure.
Third similar to the last few quarters, we experienced some year over year input inflation, primarily related to labor rates chemical pricing and utility rates, but we manage this well and the increased costs were offset by improvements in our productivity.
The modest retail price increase we took late last year and the higher absenteeism I just mentioned.
Lastly, while the business is performing at a very high level and we are not seeing any fundamental change in the overall demand picture, we simply wanted to remind everyone about the 93% comparable store sales that we are facing in the current second quarter due to the government stimulus a strong macroeconomic backdrop.
And the reemergence of the consumer population that was previously sheltered during Q2 of last year.
Now, let me walk through the highlights for the first quarter of 2022.
Net revenue increased 25% to $219 4 million driven by comparable store sales growth of 11% and unit growth of 16% compared to Q1 of last year.
New Greenfield units and recent acquisitions, many of which are not in the comparable store base, yet performed very well in the quarter and contributed to the strong revenue growth.
Our strong comparable store sales growth is being fueled primarily by growth in subscriptions and our <unk>.
UC program.
We added 125000 net new uwp members in the first quarter, bringing total Columbus club membership to nearly one 8 million members as of March 31 2022.
On a year over year basis, Uwp membership increased 28% and we are seeing strong increases across all regions in cohorts of stores, we're particularly pleased with the strong uwp's membership growth at our newer greenfield locations, which continue to perform above expectations.
Turning now to expenses for the first quarter.
Against the backdrop of revenue increasing 25% during the quarter the cost of labor and chemicals increased 26, 6% from the first quarter of 2021 to $65 5 million and included $1 9 million of stock based compensation expense.
As a percentage of revenue the cost of labor and chemicals increased 40 basis points to 29, 9%. The increase is primarily related to stock based compensation expense and slight inflationary pressure and wash chemicals and supplies.
Partially offsetting offsetting this was a temporary decline in labor expenses that resulted from the higher absenteeism highlighted earlier.
Also in line with our 25% revenue growth other store operating expenses increased 27, 4% from the first quarter of 2021 to $77 $8 million driven primarily by the increase in wash locations.
As a percentage of revenue other store operating expenses increased 70 basis points to 35, 5%.
The increase was primarily driven by the inflationary pressure related to operating costs, such as utilities and maintenance services.
General and administrative expenses were $23 $7 million in the first quarter versus $15 million last year.
Of the nearly $9 million increased just over $3 million was from stock compensation expense.
About $3 million was from an increased investment in G&A head count labor and about $2 million of other expenses, primarily related to public company costs, including.
D&O insurance and professional services.
As we've discussed on earlier calls our biggest area of incremental G&A investment has been in public company costs and our investment in the Greenfield development team.
As we continue to scale, the internal capabilities and bring more development projects in house.
Yes.
Interest expense decreased to $8 2 million from $14 million last year due to using most of the proceeds from the IPO to pay down debt and being partially hedged against rising interest rates at favorable interest rates.
Our GAAP reported effective tax rate for the first quarter was 18, 9% compared with 25, 4% for the first quarter of 2021.
The decrease was primarily due to the exercise of employee stock options and the favorable tax treatment for <unk>.
Benefit to our GAAP tax rate related to the exercise of stock awards was $3 $7 million during the first quarter of 2022.
Adjusted net income, which adds back stock based compensation of certain non core operating expenses increased 43, 1% to $37 $8 million and adjusted net income per diluted share was <unk> 11.
First quarter, adjusted EBITDA was $74 8 million.
Up 21, 8% from the first quarter last year.
The $74 8 million of adjusted quarterly EBITDA was the highest in the history of Mister car wash.
Testament to all the hard work of the team and an achievement we are proud of.
Moving on to some balance sheet and cash flow highlights at quarter end cash and cash equivalents were approximately $70 million and outstanding long term debt was $895 million.
For the first three months of the year net cash provided by operating activities was $81 5 million and gross capital expenditures were $30 million.
Similar to M&A, we plan to be opportunistic and disciplined with the timing of our sale leasebacks and aimed to maximize the proceeds and economics of these transactions.
Lastly, let me make a few comments around guidance.
Our outlook for the full year 2022 is unchanged at this point, while our first quarter results were slightly ahead of our expectations. The second quarter represents our most challenging comparison and we are projecting second quarter 2022 comps in the flat to 2% range.
Given some of the uncertainties in the macro environment, we simply think it is prudent to maintain our full year outlook until we get a little further along in the year.
That outlook calls for revenue in the range of $875 million to $895 million.
An increase of 15% to 18% the.
The opening of approximately 30 Greenfield locations with the majority of these in the second half of the year.
Comparable store store sales increase of between 5% to 7%.
GAAP net income of $139 million to $149 million.
Adjusted net income of $144 million to $153 million or <unk> 44 to <unk> 47 per diluted share.
And adjusted EBITDA of $284 million to $297 million.
Gross capital expenditures and sale leasebacks are still projected to be in the range of $285 to $315 million and $140 million to $150 million for the full year, respectively, and there could be some variability in the timing of the sale leasebacks.
In closing I would also like to add my thanks, and appreciation to all our hardworking timber team members, who are executing the business every day and helping us fulfill our mission of being America's Premier Carwash brand.
We are as confident as ever in our ability to deliver against our long term growth algorithm driven by our best in class operations and further new unit expansion.
As always we greatly appreciate their dedication and hard work of our team members as well as the support of our other stakeholders with that I'll turn it over to the operator to begin the Q&A session operator.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
Youre using a speakerphone please pick up your handset before pressing the keys.
Your question. Please press Star then two.
Your first question comes from from.
Simeon.
<unk> from Morgan Stanley . Please go ahead.
Great Hey, guys. This is Michael Kessler on for Simeon. Thank you for taking my questions.
First I know this has been a common question last several months, but thinking about how your business performs in a consumer slowdown outright recession.
I mean like just any any framework how to think about it given your current scale geographic diversity, what would be your assumption I guess on memberships churn rates frequency of shops and trapped Oreo.
Trips to the locations things of that nature I'd be curious to know your updated thoughts there.
I'll kick it off and Jay you can certainly chime in and I think that was like 10 questions embedded into one so I'll try to cover all of those under that umbrella, but starting with consumer demand and I think we feel very fortunate that we're in this space.
We have a service that is universe has universal appeal across all demographics, everyone loves a carwash cars will always get dirty and the lowest need to be cleaned.
And given the relative affordability.
Service, where you can get your car cleaned.
Five minutes for typically around $10 in some cases less than $10.
It's very accessible and affordable to all.
So we have not seen any impact to our business and.
As Jed said some of his opening comments shattering records left and right.
Feel really really confident and good about where we sit today.
If there is a pending recession, we can look to OE dollars nine and kind of how well we performed during that timeframe and if memory serves me correct is going back a few years ago.
Had.
Approximately a 5% shrank in comp sales during that timeframe.
Which compared to other sectors.
Consider a win.
And the fact that if technically we're viewed as a consumer discretionary.
Non staple and in an environment, where people are starting to perhaps cut back on non essential non staple items.
As Carr, Washington going to be impacted.
What we have seen is that given the overall cost of transportation and what it takes for people to get from point a to point b the cost of actually maintaining your asset and keeping it clean.
Is pennies on that overall budget.
It's something that people.
Wanted you to feel good, particularly in tougher times. So it was a little bit of affordable luxury play here as well.
So in good times, we do really well in tougher times, we also do well.
And so for all the knock on woods, we're feeling really confident about the future yes.
Yeah, and Michael the one thing I would add to that right.
Supplement right John what he had said we're very fortunate to be in an industry where demand for our services remains strong when you go back to that time period in the previous recession of one nine where we saw that 5% comp decline.
The subscription part of the business only represented 14% of sales.
It is a much smaller portion than what we have today, where we're sitting at about 65% of sales today.
Can I characterize that member basis, sticky and very loyal.
And given how well our membership has performed.
It's really acted as kind of the catalyst and the smoothing effect to our business.
We feel very fortunate that many years ago.
Climbed on top of this subscription bandwagon and said Hey, we can change the way people care for their vehicle. We can take something that was a once in a while treat and convert.
Consumer behavior into two car, Washington, as part of their regular routine and we're doing that times $1 8 million members and that's pretty cool.
Yes.
Great Alright, thanks for all that color.
If I could ask a follow up and this is on the drought water shortage situation up and down the West Coast. I know you guys have said when these types of situations have occurred in the past.
We've never really seen a material impact to your business or any consumer response or from your side, but I'm curious given the headlines and what we're what we're hearing.
In your store exposure on the West coast.
Any impact or.
How do you think about how consumers might respond or how your business would respond given the situation.
Situation out there.
Let me start by saying that we take water conservation very seriously, we recycle and repurpose over 30% of the water that we use to cleaner car.
And we're continuing to focus on ways that we can reduce our utilization of freshwater.
And making investments along those lines.
The other thing Thats important to note given our geographic footprint and really this beautiful diversity from coast to coast were not heavily weighted in any one region and if there were to be any impact I don't think it would have a material effect with respect to what's going on right now in California, specifically and then there is also I think some concerns about Utah.
And then here in Arizona is something Thats always in the news.
Most municipalities almost all municipalities no debt and a draw.
Out environment, Washington card, a professional carwash is better for the environment that it is Washington, your driveway and we share that with you all in the past.
Any restrictions on water and your lawn <unk>, Washington in your driveway not using a commercial carwash so the only.
Effect that we've seen thus far we have two stores in a pocket of California called Antelope Valley that have not had any impact whatsoever on our ability to.
Operate.
The only restriction was to not water our lawns.
But that was a market wide mandated by the city.
And quite frankly, I think it's a good mandate.
Great very clear, thanks, guys, great quarter and good luck the rest of the year.
The next question comes from Michael Lasser of UBS. Please go ahead.
Good evening. Thanks, a lot for taking my question have you seen any changes in either.
New customer the cost of new customer acquisition or retention rates in the last few weeks and you are guiding to a flat to comp this quarter that business is currently running yet.
Great.
Acceleration.
Given that you are in the heart of the stimulus lab right now in order to achieve that level for the quarter.
So Michael let me, let me kick it off and Jed you can certainly chime in here as well but.
The enough Michael this might sound strange, but our CAC is virtually zero.
We have been right or wrong focused on taking existing retail customers and educating and informing them of the value and the benefits of a membership plan. So we have done very little advertising or promotional activity and very little discounting and promotions to attract people into the program.
Our approach, which is I think unique to just our philosophy is to educate inform and take a what we call a soft sell approach in that letter.
Our customers make their own decision when they are ready versus being aggressive in offering certain promotional.
Have them try it and then see a higher attrition rate.
So as a result again with all the knock on Woods, we've had an amazing loyal member base.
There will be a day, though when we probably need to turn on the advertising spigot and do some more.
Working right now behind the scenes on continuing to build out our digital ecosystem and do more to improve member engagement, which is a huge priority for us.
But we're a few months away from having anything material to share.
And Michael the thing I'd add there right. So the fundamentals of the business strong remain unchanged and first in the first quarter we saw.
Strong performance on both the retail and <unk> subscription sides of the business.
Thus far in the second quarter, we're seeing relative outperformance of the EWC subscription side compared to the retail side.
Given the macro economic environment, and the kind of the 93% comp that was mentioned earlier that we're facing in the second quarter we knew.
The second quarter was going to be a challenging quarter from a comp perspective.
However, our new stores and our recent acquisitions, which are not included in the comp store number are continue to perform very well.
In addition, the EWC subscription side of the business remains strong and we're not seeing any degradation there.
So if retail.
Not as strong as it is.
<unk>.
Some reflection.
The current macro.
Or just attributed to you.
The tough comparison is there a way you can give us a sense for how <unk>.
Three year stack had been running in the lab.
Given this very heightened focus on what's going on in the overall macro environment.
Yes so.
That retail side, Michael it's going to perform.
Similar to what you would see in a typical retail business that customers a lot more sensitive.
The beauty is we've talked about with the subscription as it is more consistent it's more predictable.
And so what we've seen here recently.
Really.
It feels like it's a combination of both where that macro piece is having a little bit of a headwind to the retail side of the business, but we're seeing a really strong lap in that that really strong lap was even more pronounced last year on the retail side with some of the macro tailwind that.
Yes, Michael this is John but to be Crystal clear I think to <unk> point, we have relatively outperformed on EWC.
But.
To be honest with you we have underperformed on relatively underperformed on retail.
But we're not alone I just came from the National trade show in Nashville, and talking to other operators Theyre also seeing some softness in the retail business as well.
So it's a really good question is one that one that we're studying right now.
Understood. Thank you so much and good luck.
The next question comes from Simeon Siegel of BMO capital markets. Please go ahead.
Thanks, Hey, everyone hope, you're all doing well.
Sorry, if I missed it did you give any geographic discrepancy that you guys are seeing and then Jim can you just on the store Opex. How do you think about that going forward. Thank you.
No I think nothing thats unusual Simeon in terms of performance.
It's not uncommon for one pocket of the country to have some weather and then another not so everything in our view smooths out over time.
But we're not seeing any on the downside in any region that is underperforming consistently over time.
If anything it's just for a couple of week period is that the bounce back once the weather.
It comes back.
Yes, I would echo the same sentiment that when you look at the performance across all regions. When you look at the performance across even our most mature locations. When you look at it across all income demographics for the quarter. We were we were we saw a strong performance.
<unk>.
Great. Thanks, guys and then since it comes up any within EWC strength was great and are you seeing any change.
And that you are seeing any delta and the growth that's worth calling out.
No Simeon if in fact, we actually we saw a slight improvement on the churn relative to where we've been so.
Perfect. Thanks, a lot guys best of luck for the rest of year.
Thanks.
Next question comes from Elizabeth Suzuki of Bank of America. Please go ahead.
Okay.
How are you thinking about your capital structure and interest rate risk.
Right.
What are your internal assumptions right.
In your guidance.
Yes.
It's a good question as you look at the.
The full year.
Sure.
About 60% hedged today at very favorable rates the hedge will roll off in October of this year. We're currently evaluating different strategies to help.
Helped mitigate that exposure.
Potentially cap that exposure.
But at this point, we're still looking at that in the interest rate so interest rate interest expense during the quarter it.
It was about $8 million on a full year, we're expecting it to be around about $32 million.
So interest expense, it's really difficult to project in this environment as you know and we.
We'll likely be moving higher later in the year and could present, some short term pressure to the model.
Yes.
And then just one quick one on what you see.
Being in the labor market.
The ability to recruit and train.
New members.
Ian Lee.
Got it.
<unk> constraints, there on being able to hire and train.
Liz This is John so listen I think we feel very fortunate that we've been focused on building what we consider to be the best team in the industry and it started many many years ago.
As we've shared in previous calls our labor our average hourly rates are up roughly 8% this year versus same timeframe a year ago.
But that's against the backdrop of.
Improved productivity across our entire chain, where labor as a percentage of revenue is down cars per labor hours up.
Labor dollars per car is down and so while we're paying people more we're washing more cars far more productive and as a result of more profitable.
No.
When you are able to.
Lift the lives of people.
And allow them to make a little bit more and simultaneously improve profitability. There's not a lot of companies that can do those two things simultaneously and we're doing that.
With respect to just inflationary.
Yeah, Hi costs, there was an article in the journal yesterday I think on.
I think it is currently 8% to 10% kind of range.
So in a lot of ways its debt raise comes in and it goes right back out rinse and food costs and et cetera.
And so we're continuously looking for ways, where we can actually help our people make even more.
While we while we.
Driving bottom line results.
Great. Thanks, so much.
The next question comes from Kate Mcshane of Goldman Sachs. Please go ahead.
Hi, good afternoon, Thanks for taking my question.
If there were to be a startling.
Of the top line or if you were to see an environment where comps were.
Negative just weaker can you remind us how you would manage costs.
In a tougher macro environment tougher top line environment, and how we should think about margins.
Yes. So Keith this is John we are we were <unk>.
Setting our sights on the long term and looking to build and get to 1000 stores when we get to a 1000 stores we're going to.
Knock on wood, we're down and.
To grow so to that end, we're making material investments in infrastructure, we're making material investments in human capital to be able to support accelerated growth.
Not too.
<unk> focused on near term pressures because if we were to pull back on the throttle it would have than it.
It would have impact two to three years down the road.
So for US if this is a long term play and we are a high growth company.
We are attempting to build.
What we envision to be a national brand.
Pulling back on the trial, just as not makes sense for us so for US it's full steam ahead.
That said I think we're very responsible and we've shown that we've been able to manage through different price pressures and cost pressures over the years.
And we will continue to do so.
But for us ratcheting down any costs at this point just doesn't make sense yes.
One thing I would add there right so to John's point, we're looking at this over the long run very much growth focused growth oriented and.
We do look though at the pricing and in general we're priced competitively and each of our markets. We do continue to balance member and volume growth with margins and pricing, but we do believe if we needed. It we have additional pricing additional pricing power that we can take if needed, but that's not how we're managing this business.
It's really the top line and how do we capitalize on the opportunity that's here in front of us with a in a.
A fragmented.
Okay.
Thank you.
The next question comes from Chris <unk> of Stifel. Please go ahead.
Thanks, Good afternoon guys.
I appreciate the difficult comparisons in the second quarter, but when you look at the comp relative to 19 or even a three year geometric stack. It looks like it would appear the flat to 2% comp guide would imply slower performance in what you just reported in the first quarter relative to 19 is that true.
Yes, so Chris if you look at the.
Three year stack since we're going to introduce a new trial.
Electively unused term.
Would be about a 9% comp which is in line with what we've hysteric historically delivered when you look at what the business has done over the last 10 years.
The the first half, especially of Q1 performed really really well on both retail and the EWC side, particularly that retail ticket or retail sales benefited from as I said in my remarks that we had some some some great weather trends that help support us.
Jed I would add given the I'll call. It the insanity of Q2 of 'twenty one in terms of justice.
Amazingly great growth.
Judy and projecting and providing guidance for that lap that we're going into.
And I think a lot of companies are also with US. This is one of the more difficult.
Quarters for almost every business to guide too.
So in a lot of ways, you could accuse us of being conservative but.
If we're guiding to.
At least hitting what we did last year.
I think that would be a win and a lot of cases.
Yes fair enough.
And I'm glad to hear the churn rates have been have been steady and maybe an improving but if you start to see the churn rate increase, especially among a certain consumer segment.
Would the company attempt to reduce the churn with maybe special promotional offers such as I don't know next month at a discount or free to a targeted group of consumers could do you have that capability to do something like that.
Yes, we haven't done a lot of that we think pressing the.
Call it.
Price lever.
The discount lever the promotional tactic lever is a slippery slope and there's a strong argument that the way in which you have to.
Track to customer is the way in which you need to retain a customer and so when folks are.
In my opinion given away the farm at $9 99 for some introductory first month offer.
Sure.
<unk> seen super high attrition rates in the.
Next month.
In our view that's not the way to go about it but we have done when you look at the this value proposition and the value stack and how people.
Prioritize what's important to them they may come in through the Hey, I'm going to save in the third or fourth visit door, but over time, they become obsessed with keeping the car cleaning all the time they love. The fact that they can quote unquote skip the line and get out get through the store, even quicker with our fast fast pass member lanes and so for all those convenience elements that.
We've introduced.
Back to changing their behavior.
We think that just continuing to improve continue to deliver excuse me exceptional customer experience is ultimately the best way, but up until now we've kind of stayed away from.
Getting too aggressive on trying to retain people through price.
That's fair and then one last one and this might be a bit anecdotal, but we visited some of the washes in the surrounding markets here in Nashville, and we noticed the ability to hit the attendance had been added to the kiosk payment flow is this like is this widespread new feature and if so can you provide a bit color around why you chose to do it now.
Isn't that cool by the way hopefully you tips.
Of course.
I'm not going to ask you how much I won't put you on the spot, but I will say that our average customer or excuse me, let me be very precise.
The average tip income on a per hour basis per employee is around $2 per hour.
Which is huge so listen we were tipping society at tipping culture, and it's something that we just didn't introduce we introduced at little over six months ago I think.
And we're enjoying that $2 across the entire country.
Let me highlight that that's just for our retail business, which is.
And then the 20% of our overall volume range.
<unk>.
Limited Wash club member to date doesn't have that option provided tip, even though there's a strong argument that they are our most loyal biggest fans biggest ambassadors and if we had the opportunity to give them the chance to tip.
It'd be really interesting to see what that would do but.
But let me zoom out for a second and take your question kind of down a different path. When we look at average hourly wages in our goal of trying to get.
Our average to $15 per hour, we're there right and when we add in tip income.
Pushing $17 per.
Per hour and this is non managerial average hourly wages that is awesome and if I can highlight we're not managing to a part time full time mix theres. Many businesses out there that we'll talk a big game when it comes to a starting $15 hourly wage, but then limit your number of hours to 20.
Per week, so that you don't qualify for benefits, we think benefits are important and we think everyone should get them.
If they want them.
So I can drone on and on about some of the things we've done with wages and benefits standpoint.
The tip income piece was something that we felt made a ton of sense.
Thanks, guys.
The next question comes.
Comes from Ryan Sundby, William Blair. Please go ahead.
Hey, guys. Good evening. Thanks for the question I appreciate all the color so far.
And so we look at the sequential decline in cost of labor and chemicals as a percentage of sales can you maybe just help us quantify how much the decline related impact on labor supply maybe help expenses.
And then could you see a corresponding impact on demand anywhere across the portfolio.
So specific to Q1 I think Joe you have some thoughts on yes, so the impact that the absenteeism that we had highlighted in the prepared remarks, it's about 30% to 35 basis points on the quarter.
When you look at it as a percentage of sales.
Okay.
I could just again underscore the fact that we have what we believe to be an elevated staffing models. So we're opening and closing with at least two people theres. Some businesses out there that will do with one we think that's highly unsafe and we wouldn't want our kids to do that so we're not going to ask our team members to do that.
But on average we have at least three people on the clock throughout the day and in our higher volume stores, it's not uncommon for us to have four or five.
Other businesses are managing to a much tighter labor model.
Again, theres no criticism or approaches to provide an elevated experience and make sure that we have this will be called express <unk> hundred 60, where all of our team members are cross trained.
And we're not dependent upon any one person because they're all cross train everyone can plug into any position if its a tunnel operator service adviser.
Picking up trash dealing with a customer issue everyone has been cross trained to do all those things.
And Thats why we are delivering these amazing <unk> and processing. So many cars because we don't have the lines that you would see during peak periods and other businesses.
Alright, thats great to hear any thoughts I mean, do you think Amazon impacted demand at all.
Yes.
I'm using the word knock on wood to many times here, but.
As a society, we're all hoping that this variance is behind us.
We have taken the safety and the safety and welfare of our team members and our customers seriously throughout this last two years and have put in place some very stringent guidelines to make sure that all of our team members are safe.
And again, we have not had <unk>.
Haven't had any in recent times and interruptions to our business and we're fully staffed.
Got it Okay, and then I guess, just three of the 30 or so locations opened so far can you just talk a little bit more about the sequencing of the greenfield openings. This year I know you talked about it being back half weighted but just wanted to see if it would be any change in the pace so far.
So the original plan was that Ryan was the 30, approximately 30 and it was more back half loaded in the original model that we put together.
Great. Thanks, guys.
As a reminder, if you have a question. Please press star one. The next question comes from Peter Keith of Piper Sandler. Please go ahead.
Hey, Thanks. Good afternoon team was curious on the acquisitions you had commented that clean streak in downtown are going better than you expected I guess could you.
Unpack that a little bit is it just simply that you are rebranding and more quickly.
Macro trends are good now how are they trending better than you thought.
Well first and part of our investment thesis is our.
Call. It a love Fest for Florida, which is the beautiful trends that we're seeing.
Macro trends and the growth dynamic that is the state of Florida, but there is other states and also show similar dynamics.
So we're very bullish on Florida and win.
Looked at both clean streak in the downtown and we had the opportunity to double our footprint and improve our penetration and provide more.
Washes for members it made absolute sense specific.
To your question around the improvements.
We're in the early innings of the post acquisition integration process. This particular.
Given the fact that it was really.
Specific to clean streak find three different flags with.
With three different systems in three different operating procedures is going to take a little bit more work for us to get there.
Our typical timeline for.
What we call go live in putting in our programs and our products and our menus.
About at the six month, Mark and then we start to see.
An uptick kind of month over month after that.
But the hardest part has always taken the team members to a better place and improving the culture.
This business came to the table with a very hungry team members.
Really excited about being part of this team.
But we're now going through all the nitty gritty and the.
Hard work that is post acquisition and.
It's going to take us a while so short answer to your question. The improvements are just more naturally driven I would like to contribute to some of the things that we've done, but we're still knee deep into it I mean, our teams are going through and.
Putting in place new equipment, and we're going through store by store the transition to our integrated and linked point of sales system.
And then continuing to work on building out the team and the bench and that's going to take us at least six months, if not a year to get there.
Okay. That's helpful.
And then maybe circling back John from some of the earlier comments just around some of the it sounds like some April softness with retail and interesting youre coming off the heels of a conference where you're talking to a lot of peers.
What some of the speculation or people signing the higher gas prices.
Some pockets of the country have had a lot of precipitation in April and maybe Thats impacted sales just curious on what some of the speculation is on the on that retail weakness.
Yes, there wasn't I mean.
Everyone's interpretation has their own opinion quite frankly, I think if anything there was more euphoria and <unk> on the floor.
With respect to how well our industry is doing right now and.
No.
Not in a position to speak on behalf of the entire industry.
Just to give you a kind of a temperature of the water.
Everyone's, making a lot of money right now and everyone is doing really well and when youre in that kind of environment.
People are less concerned about a temporary.
Perhaps slowdown in retail.
Because it.
At times.
But to be honest with you when everyone's celebrating that's when I get nervous.
Maybe we should put the Martini down and grab a cup of coffee because.
Staying humble and staying hungry is our mantra.
And so we're not celebrating.
This group is.
Out there.
Pedaling as quickly as we can to continue to improve.
But right now there is just a lot of speculation around the Y on retail, but I don't think anyone has a clear answer as to what.
The single drivers.
Okay I appreciate the feedback and good luck.
Thanks Peter.
The next question comes from Jacob Moser of Wolfe Research. Please go ahead.
Hey, guys.
Last time, we talked to you noted consistently strong performance when comparing lower income trade areas versus higher income trade areas.
So I was wondering would you say that's still the case today or have you seen any divergence between those two market cohort.
Yes.
The phrase that you hear us use as everybody loves the Carwash and we're seeing strong performance across all income demographics, even our.
The locations and the most affluent.
Income demographics, they are performing well as well as those in the lower income demographics.
Okay. Thank you.
This concludes our question and answer session I would like to turn the conference back over to John Lee for closing remarks.
Listen I just want to thank our entire team and thank everyone on the call for your interest in Mister car wash, we have a super bright future in front of us and we're very optimistic about.
Our growth opportunity and our ability to continue to scale. This company to even greater heights. So thank you very much and have a great day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.