Conveyorized car wash service company Mister Car Wash (NYSE:MCW) fell short of analysts' expectations in Q1 CY2024, with revenue up 5.9% year on year to $239.2 million. On the other hand, the company's outlook for the full year was close to analysts' estimates with revenue guided to $1.00 billion at the midpoint. It made a non-GAAP profit of $0.08 per share, down from its profit of $0.08 per share in the same quarter last year.

Is now the time to buy Mister Car Wash? Find out in our full research report.

Mister Car Wash (MCW) Q1 CY2024 Highlights:

• Revenue: $239.2 million vs analyst estimates of $242.7 million (1.5% miss)

• Adjusted EBITDA: $75.2 million vs analyst estimates of $74.3 million (1.2% beat)

• EPS (non-GAAP): $0.08 vs analyst expectations of $0.08 (in line)

• The company reconfirmed its revenue guidance for the full year of $1.00 billion at the midpoint (in line with expectations)

• The company reconfirmed its EPS (non-GAAP) guidance for the full year of $0.32 at the midpoint (in line with expectations)

• Gross Margin (GAAP): 29.6%, down from 33.8% in the same quarter last year

• Free Cash Flow was -$23.85 million compared to -$70.27 million in the previous quarter

• Same-Store Sales were up 0.9% year on year (slight miss vs. expectations of up 1.0% year on year)

• Market Capitalization: $2.13 billion

“Our overall results in the first quarter were in line with expectations, and we are executing against our strategic initiatives to drive profitable growth. In the first quarter, our subscription business remained incredibly resilient, growth in our new Titanium membership package was very strong, and we opened a record number of new greenfields for any first quarter in our history,” said John Lai, Chairman and CEO of Mister Car Wash.

Formerly known as Hotshine Holdings, Mister Car Wash (NYSE:MCW) offers car washes across the United States through its conveyorized service.

Specialized Consumer Services

Some 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 Growth

Reviewing a company's long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one sustains growth for years. Mister Car Wash's annualized revenue growth rate of 10.4% over the last four years was weak for a consumer discretionary business.

Within consumer discretionary, a long-term historical view may miss a company riding a successful new product or emerging trend. That's why we also follow short-term performance. Mister Car Wash's recent history shows the business has slowed as its annualized revenue growth of 8.3% over the last two years is below its four-year trend.

We can dig even further into the company's revenue dynamics by analyzing its 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's revenue grew 5.9% year on year to $239.2 million, missing Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 8.8% over the next 12 months, an acceleration from this quarter.

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Cash Is King

If 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 with consumers have drained company resources. Its free cash flow margin has been among the worst in the consumer discretionary sector, averaging negative 8.8%.

Mister Car Wash burned through $23.85 million of cash in Q1, equivalent to a negative 10% margin, reducing its cash burn by 373% year on year.

Key Takeaways from Mister Car Wash's Q1 Results

This quarter pretty much met expectations across the board. Same store sales was slightly below, leading to a small revenue miss, but adjusted EBITDA was slightly ahead. The company maintained its revenue and EPS outlook for the full year, both of which are in line with current expectations. The stock is flat after reporting and currently trades at $6.69 per share.

Mister Car Wash may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.