Mister Car Wash, Inc.

Good day and welcome to the Mr. Car Wash Q2 2021 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Megan Everett, Senior Director of Communications. Please go ahead.

Good afternoon, everyone, and thank you for joining us today for Mr. Carwash's second quarter fiscal 2021 earnings call. Speaking today are Chairperson and Chief Executive Officer John Lai and Chief Financial Officer Jed Gold. After John and Jed have made their former 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 expectations. 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 if circumstances change. Please review the cautionary statements and risk factors contained in the company's registration statement on Form S-1 filed with the Securities and Exchange Commission on July 27, 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 financial measures can be found in the company's earnings press release, which was filed with the SEC today and posted to the investor relations section of Mr. Karwash's website at ir.mrcarwash.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. It's great 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 we're still feeling the glow and positive emotions over the significance of going public. Morale within our organization and the esprit de corps from 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 as a passionate and mission-driven bunch, but coming out of it, there's 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 car wash company and scale this to even greater heights. We believe a strong culture drives strong performance. and 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 weave of talented, hardworking, and passionate leaders who love what they do and are having fun building a 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 and own a piece of the pie. I had no idea what level of participation we were going to get, but I'm thrilled to share that over 30% of our workforce participated. That's almost 2,000 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 this powerful force that gets stronger and stronger. Just the other day, I was getting my car washed, and one of our crew members, who looked like he was just out of high school, came up to me and said, Mr. Lai, thanks for setting up the ESPP program. Without the payroll deduction plan, I wouldn't have been able to participate. I hope, and it's my dream, that someday I get into the MIT program. This blew me away, and it 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 and then share some background on our growth drivers, our strategy, and how we're going to deliver long-term shareholder value. Then Jed Gold, our CFO, will discuss our financial results, including the impact COVID-19 had on our comparisons, as well as the divestiture of our Quick Loop facilities completed in December of 2020. Jed's also going to review our guidance for fiscal 2021. I'm pleased to share that our Q2 results materially exceeded expectations. For the quarter, we delivered total revenue of $197 million, an 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 kept off an incredibly strong first half with adjusted EBITDA of $135 million revenues were up 45 percent, same-store sales up 50 percent, and as of today, we added eight new stores through acquisitions and opened up eight new Greenfield locations so far in 2021. As Jed 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 car wash brand in the U.S. with 350 geographically diversified locations, 1.5 million unique unlimited wash club members, and we wash over 70 million cars annually. Our 39 consecutive quarters of positive same-store sales growth pre-COVID is an amazing number and was driven by our awesome field management team and their relentless focus on operational excellence. Our biggest competitive advantage is our people, who deliver 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 ENPS score of 55 puts us in the 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 limited Wash Club member base, maximizing throughput, and investing in our team. UWC has changed the game. Representing over 60% of our overall business, this predictable, recurring, subscription-based business model has transformed every aspect of our company as we've become very member-centric. As we increase 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 as 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 park 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. They're 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 as 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 our 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 Jed.

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. 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 business benefited from the strong macro backdrop and increased mobility trends. Revenue increased 93% to $197 million from $102 million last year, driven by the comparable store sales growth of 93% and unit growth of 7%. Our comparable store sales growth includes UWC membership growth of 39%, Since June 30, 2020, as UWC membership grew to over 1.5 million members from approximately 1.1 million members as of the end of Q2 last year, accounting for 62% of total wash sales during the period. In addition, we had a solid retail comparable store sales growth or non-UWC 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-loop facilities in December of 2020. We are also comparing to prior year period when we temporarily suspended our services, including UWC billings at more than 300 of our locations between March of 2020 and May of 2020 in response to the rapid onset of the pandemic. Compared to 2019, revenue growth was 25 percent and comparable store sales growth was 22 percent for Q2. 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 planned projections due to ramping memberships and, again, bringing new car wash users into the category as we expand our network of stores. We feel great about our store pipeline and our ability 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 non-cash stock and compensation expense related to the acceleration of the vesting of store-level team member performance options was $57 million, or 29% of revenue, a 500 basis point improvement versus Q2 last year. This improvement was primarily driven by sales leverage, which we define as spreading the fixed costs of the business over a greater number of sales, and the optimization of the WASH labor model. 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 improvement versus Q2 of 2019 was approximately 1,000 basis points largely driven by the same factors. percentage point leverage in our other store 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 non-cash 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 in the same period last year. The 93% revenue increase was the primary driver of this year-over-year expense leverage. The $2.5 million 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 pay down, 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 percent compared with 27 percent last year. Adjusted net income increased to $41 million from $800,000 last year. Diluted earnings per share was 14 cents in the second quarter of 2021 compared with break even 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 $700,000 of adjusted EBITDA due to the divestiture of our quick-loop facilities in December of 2020. Moving on to the balance sheet and cash flows. Cash and cash equivalents as of June 30th, 2021, was $155 million compared to $58 million as of June 30th, 2020, 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 used those proceeds to repay our long-term loans, and our total debt as of June 30th, 2021 was $615 million, resulting in net leverage ratio 2.1 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. 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 percent against 2020 revenues of $575 million, based on comparable store sales growth of 29 to 33 percent and 16 to 18 new greenfield locations. As a reminder, Our sales growth expectation also takes into account the $24 million negative impact from the loss of revenue associated with the divestiture of our quick-loop 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 to $252 million on the year. Adjusted diluted earnings per share are expected to increase to 39 cents to 44 cents, assuming diluted shares outstanding as of December 31st, 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 percent. Note that the tax rate being used to compute adjusted net income is approximately 26 percent. We expect total net capex of approximately $83 million for the year. Gross greenfield capex will total $85 million or $28 million net of planned sell these backs 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 green fields and acquisitions. In addition, we see continued productivity opportunities at our existing locations through growth and UWC 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.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're 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 Wolf Research. Please go ahead.

Hey, guys. Thanks for taking the question, and congrats on your first quarter as a public company here. 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 variant or some other factors at play? What are you seeing as you exit Q2 here?

Yeah, David, thanks for your question. And we aren't going to provide comps by month, but I will highlight that we did see a very strong spring in from both a revenue and EBITDA perspective, with 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 just any regional outliers, when you start peeling back the layers to this, 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 skew at the regional level, it's because there's a higher sales mix from our greenfield 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.

Thanks for that. It's very helpful. Just 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?

Yeah, David, terrific question. You know, when I look back over the last six months, what we've done to grow our UWC member base is nothing short of phenomenal. And With respect to not getting too excited, 300,000 new members through June, plus 24%. Quite frankly, I'm not sure that that's a sustainable rate of growth. If we stopped adding new members for 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 Jed just outlined, you know, we anticipate continued growth with our membership program, probably not at the same rate, but growth nonetheless as we continue to, you know, increase the value proposition of that program. So we're very bullish and optimistic about UWC as we continue to, you know, increase that member base and, again, provide more optionality for our members.

Thanks, guys. 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, there appears to be a bit of a deceleration in the two-year comp assumed. I mean, is that largely conservatism 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 comparison?

Yeah, thanks, Liz. It's like we said, we're not talking month to month, though 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 year due to the divestiture of the lieu 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 of a lap.

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 networking effect, can you just remind us what percent of your members use more than one location? And just maybe any change you've seen in the UWC member tendencies as people have been getting out, any change in frequency? And then, Jed, really nice, obviously, the UWC, 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.

Yeah, Simeon, let me take that first part, and then I'll hand 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, a 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 of stores and a 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 it's really supporting our thesis to increase penetration and provide, you know, wherever you are in the city, whichever city you're in, there's a convenient Mr. Car Wash location for you to get your car cleaned. And as we add stores, that value proposition just continues to strengthen and lifting all boats along with that. So it's a pretty cool phenomenon.

And then the second part of your question there, Simi, about the retail sales and just peeling back that a little bit, is that those retail sales are an important part to the business because it brings in customers who aren't 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% versus 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 Unlimited Wash Club membership growth, sales growth of 95%. We're very happy with the growth that retail sales in particular exceeded our expectations. Great.

Thanks a lot, guys. Best of luck for the year ahead, and congrats again.

Thanks.

Our next question comes from Michael Lasser with UBS. Please go ahead.

Good afternoon. Thanks a lot for taking my question. When you had set your guidance a couple months ago when we last spoke, the assumption was that people would be going back to work through the end of the year, probably more likely after Labor Day. and mobility was going to increase. Now it looks like most people are not going to be going back to the office until next year. So how have you factored that into your outlook for the second half?

Yeah, so when you look at the first half compared to the second half, right, we can't have said enough that the great Q2 and the record quarter, on the quarter it was 18% higher from an adjusted EBITDA perspective than any other quarter in the history of Mr. Carwash. And the guidance that we provided, the revised guidance we provided in early June, where we took adjusted EBITDA up to $246 million, it factored in some of the investments that we were going to be making in particular to help offset wage compression, public company costs, to help. So what we expect is baked into this annual outlook. that we provided here.

Yeah, Jed, I would just add, too, you know, when we look at Q2 and as thrilled as we are about Q2, it was a little bit of an anomaly. I mean, you know, there was so much pent-up demand, and with respect to the kind of unprecedented spike in car traffic, this check certainly had had positive impact for sure, but it created this perfect storm for, you know, being able to sign up even more members given our really strong value proposition. You know, as I look at the back half of this year, we're still going to be growing our business. But to say that we're going to grow it at that same rate, you know, is a pretty tall order. So we expect to grow at this predictable, steady pace, and we plan on doing it.

All right. Quick follow-up question. On the new watch model that you implemented about a year ago, can it drive a similar amount of leverage on the cost of labor line? We sort of think the sales are going to be similar. And what has been the customer response to this new model?

I'm sorry. Was the question regarding our interior clean services? Yeah.

Yes. Jed cited the new wash model as a critical factor in driving a lot of the cost of labor leverage in the second quarter. And presumably, it's less labor intensive. And so... I was wondering if that can drive a small amount of leverage moving forward on sales.

Got it. Got it. So, Michael, as far as the sales leverage and the optimization of the labor model, that was an initiative that we started implementing during the pandemic. It's been phased in over 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 Q3 and Q4 some investments around store-level labor to help offset some of the wage compression that we're experiencing and help recognize our A players at the front line.

Yeah, Jed, I would add, too, our productivity is at an all-time high on a per-employee basis. You know, we're a lot more efficient, I think, coming out of COVID. You know, there's some lessons learned. And so, you know, the headlines are cars per labor hour is up over 70%. That's phenomenal. Labor dollar per car is down 30%. And so when you have both of those trends going in the right direction, it clearly 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.

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 Bobby Greener on for Peter. Thanks for taking my questions. First, I wanted to ask about some of your Western U.S. markets and issues with water shortages going on right now. Where there's water restrictions, is that a 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 couldn't operate in a certain market?

Yeah. First of all, let me say that we take water conservation very seriously at Mr. Car Wash. You know, we've been out in front of this for years. And when you look at the average number of freshwater gallons that we use per car You know, we've made year-over-year improvements, and we recycle and repurpose roughly 15 gallons per car today. And so, you know, we see ourselves as really responsible stewards of the environment. For us, 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 know that in a drought situation, washing your car to commercial car wash is actually better for the environment than it is washing in your driveway. And if there were to be any temporary restrictions, it would be put on the home washer. The second part of your question, in my tenure, which has been up in 20 years, there's been one situation in Austin, Texas that had to do with a pump at Lake Travis that had 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 they didn't have an impact on our business at all.

I think that's great detail. One other, just on the margin flow through on sales upside, you discussed it before. I think based on the numbers you gave us a couple months ago, it looks like sales kind of came in, you know, $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 a similar kind of margin flow through in the event of sales upside?

Yeah, Peter. Just given the low variable cost nature of our business, these incremental sales, they do flow through at a healthy level. Always hesitant just a little bit to 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 likely be slightly less than the 70% as we invest in public 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 is a process that's been rolled out and continued 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.

All right. Thanks, John.

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 our questions. First, I wanted to ask a quick follow-up, actually, on the margin piece. When we look at the first half EBITDA margins, and they could call it mid to high 30s, the implied in the back half is more in the kind of lowish 30s range. And I was wondering if you could maybe dissect the – the components of, of the lower margin going forward between a little bit of a decel 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, uh, kind of size up if you can, or kind of, uh, give us a, uh, an overview of where those pieces are coming from. And then also how should we be thinking about that margin beyond 2021? Um, in a, you know, perhaps someone normalized backdrop.

So, Michael, that was a great summary of everything that we've done that has helped drive 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 a little bit.

Yeah, Jed, if I can also chime in here. So I think it's important to note, and this isn't a surprise to all you on the line, we are in growth mode as a company. And as a growth company, we're investing in a big-time way in our people, and so specifically building out our G&A, building out our development team so that we can not 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 1,000 stores, it takes an army, and we've got an incredibly talented team, and we're going to continue to add to it.

Great. Thank you. And a quick follow-up. Maybe this is more of a bigger picture question. I guess first can you talk a little bit about how the new green fields that you're opening, how they're continuing to ramp, and then kind of relatedly thinking about the whole industry longer term. I know you guys have said before you see that there's a lot of capacity available for continued growth and for you guys to grow into an industry that's 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 capacity longer term as you guys add more and more greenfield locations. Thank you.

Yeah, listen, there's a ton of white space. There's 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 emboldening us to, as I mentioned before, double down on this initiative. and continue to expand our footprint. So in the markets that we're in, we're continuing to grow as we also, you know, 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 conveyorized car washes there are to serve them, you know, I can easily see in my crystal ball the industry, the number of conveyors in the U.S., doubling in size. And right now, there's a race to control and have a lion's share of each market. And we're not the only ones that are on our bikes pedaling very quickly.

And then, Michael, the first part of your question around new build 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're outperforming the pro formas that were approved. prior to us building those locations. And if we extrapolate that performance out, they're actually exceeding the balance of the express exterior portfolio, driving that approximate three-year payback for those particular locations that have a sell lease back. We're very optimistic about the performance of our greenfields and plan to continue to make investments to drive growth here. Thank you, guys.

This concludes our question and answer session. I would like to turn the conference back over to John Lai for any closing remarks.

Yeah, well, thank you all for joining us on today's call, and we deeply appreciate your interest in Mr. Carwash. We look forward to updating you on our progress for the next call So thank you very much.

The conference is now concluded. Thank you for attending today's presentation.