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Conveyorized car wash service company Mister Car Wash (NYSE:MCW) reported results in line with analysts' expectations in Q2 CY2024, with revenue up 7.7% year on year to $255 million. The company's outlook for the full year was also close to analysts' estimates with revenue guided to $1.00 billion at the midpoint. It made a non-GAAP profit of $0.11 per share, improving from its profit of $0.09 per share in the same quarter last year.
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Mister Car Wash (MCW) Q2 CY2024 Highlights:
- Revenue: $255 million vs analyst estimates of $255.4 million (small miss)
- EPS (non-GAAP): $0.11 vs analyst estimates of $0.09 (22.6% beat)
- The company reconfirmed its revenue guidance for the full year of $1.00 billion at the midpoint
- EPS (non-GAAP) Guidance for the full year is $0.32 at the midpoint, missing analysts' estimates by 1.4%
- Gross Margin (GAAP): 32.5%, down from 32.9% in the same quarter last year
- Free Cash Flow was -$44.21 million compared to -$23.85 million in the previous quarter
- Same-Store Sales rose 2.4% year on year (0.3% in the same quarter last year)
- Market Capitalization: $2.45 billion
Formerly known as Hotshine Holdings, Mister Car Wash (NYSE:MCW) offers car washes across the United States through its conveyorized service.
Specialized Consumer ServicesSome consumer discretionary companies don’t fall neatly into a category because their products or services are unique. Although their offerings may be niche, these companies have often found more efficient or technology-enabled ways of doing or selling something that has existed for a while. Technology can be a double-edged sword, though, as it may lower the barriers to entry for new competitors and allow them to do serve customers better.
Sales GrowthA company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one tends to grow for years. Regrettably, Mister Car Wash's sales grew at a weak 9.9% compounded annual growth rate over the last five years. This shows it failed to expand in any major way and is a rough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or emerging trend. Mister Car Wash's recent history shows its demand slowed as its annualized revenue growth of 7.4% over the last two years is below its five-year trend.
Mister Car Wash also reports same-store sales, which show how much revenue its established locations generate. Over the last two years, Mister Car Wash's same-store sales averaged 1.4% year-on-year growth. Because this number is lower than its revenue growth, we can see the opening of new locations is boosting the company's top-line performance.
This quarter, Mister Car Wash grew its revenue by 7.7% year on year, and its $255 million of revenue was in line with Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 9.1% over the next 12 months, an acceleration from this quarter.
Cash Is KingIf you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.
Over the last two years, Mister Car Wash's demanding reinvestments to stay relevant have drained its resources. Its free cash flow margin was among the worst in the consumer discretionary sector, averaging negative 11.4%. This is a stark contrast from its operating margin, and the investments (working capital, capital expenditures) are the primary culprit.
Mister Car Wash burned through $44.21 million of cash in Q2, equivalent to a negative 17.3% margin. The company's cash burn increased meaningfully year on year while its cash conversion fell 14.9 percentage points. This relationship shows Mister Car Wash's management team spent more cash this quarter but was less efficient at generating sales with that cash.
Key Takeaways from Mister Car Wash's Q2 Results We were impressed by how significantly Mister Car Wash blew past analysts' EPS expectations this quarter. On the other hand, its full-year earnings forecast was underwhelming. The outlook could drag down shares. The stock remained flat at $7.60 immediately after reporting.
