IPO Watch – Mister Car Wash (MCW)
Mister Car Wash (MCW), which debuted last week, is the largest car wash operator in North America, operating over 340 locations nationwide.
According to the company’s S-1 filing, every year, cars in North America are washed two billion times and continue to benefit from positive secular trends. First, the car wash industry is benefiting from a continued shift in demand away from DIY services towards the time-efficient convenience of do-it-for-me (DIFM) car washes, as consumers place more importance on speed, quality and convenience. Second, the number of registered vehicles in the United States continues to grow and has increased from approximately 250 million vehicles in 2010 to approximately 273 million as of 2020.
The car wash industry is highly fragmented with the vast majority of the market comprised of independent operators that operate one or two locations. As the largest player in the industry, Mister Car Wash is able to make investments in training, technology and innovation that independent operators typically lack the resources to undertake. However, their 340+ locations represented less than 5% of the market by location count, and the top ten operators combined comprised less than 10% market share, underscoring the opportunity for them to continue to expand their footprint in a highly attractive and growing category.
As mentioned at the top, MCW is the largest national car wash brand based on number of locations, having grown from 65 locations in 2010 to 344 locations as of March 31st. Their car wash locations consist of two formats: Express Exterior Locations (263 locations as of March 31st) and Interior Cleaning Locations (81 locations as of March 31st). All locations offer express exterior wash packages and have exterior-only lanes. Every wash includes their proprietary T3 Cleaning Conditioner (gently removes dirt and grime, cleans and refreshes the exterior of the vehicle), Wheel Cleaner (high pH, soft-metal safe, foaming chemistry applied to wheel and tire through targeted applicators, removes dirt and grime to prepare for subsequent applications) and Dynamic Dry (pH charged rinse, optimized blower configuration and soft cloth technology at certain locations to deliver a spot-free and drier car).
The company has grown rapidly in the past through multiple successful acquisitions and have recently begun pursuing greenfield development as a new lever for growth. In 2018, they launched their greenfield development strategy to expand the number of Express Exterior Locations, opening the first greenfield location in Urbandale, Iowa. They have a total of 22 greenfield locations across 11 markets.
Welcome To The UWC
Mister Car Wash offers a monthly subscription program, called the UWC or Unlimited Wash Club. As of March 31st, they had nearly 1.4M Members and in Q1, UWC Sales represented 62% of Total Sales. Members are billed automatically each month. Over 95% of UWC Members hold a membership for exterior cleaning services, of which a majority are in their Platinum Exterior Plan, priced at $29.99 per month.
A bit more info regarding their wash packages:
Express Exterior Wash Packages – The company offers four express exterior wash packages. Additional options within the wash packages include waxes and protectants that are applied during the wash process in the tunnel. These services include their proprietary chemistry and application systems: HotShine Carnauba Wax (waterfall wax application for enhanced shine), Repel Shield (silicone based to provide water repellency), Platinum Seal (extends life of shine and protection), Wheel Polish (protects wheels against pitting from road grime and provides shine), Underbody Wash (cleans beneath the vehicle) and Tire Shine (cleans and shines tires).
Interior Clearing Wash Packages – At select locations, the company offers interior cleaning services in addition to express exterior washes. Interior cleaning services are added to an express exterior wash and include interior vacuuming, window cleaning, dusting of dashboard and hard surfaces and a hand towel dry of the exterior by their team members.
Of course, if one does not want to sign up for a membership, individual services are available. Below, you will find some of the pricing courtesy of topcarwashcost.com.
Since 2010, the company has increased net revenue from $124M to $575M in 2020 and to $595M as of the last twelve months ended March 31st, a CAGR of 17% from 2010 to LTM March 31, 2021.
They also note that from 2017 through 2019, all regions and vintage cohorts delivered positive comparable store sales growth. Prior to 2020, they achieved 39 consecutive quarters of positive comparable store sales growth, averaging 9% annually from 2010 to 2019. In 2020, as one can imagine, financial results were impacted by the COVID-19 pandemic. Yet, the company rebounded and in the first quarter of 2021, they delivered comparable store sales growth of 18.6%.