Mister Car Wash Inc
NYSE:MCW
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Mister Car Wash Inc
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Good afternoon and welcome to Mister Car Wash' conference call to discuss financial results for the fourth quarter of fiscal 2021. [Operator Instructions] Please note that 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 Everett, Senior Director of Communications. Please go ahead, ma'am.
Thank you. Good afternoon, everyone, and thank you for joining us today for Mister Car Wash' Fourth Quarter Fiscal Year 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 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 expectations. These statements speak as of today and as -- and except as may be required by law, the company does not have any obligation to update or revise such statements if circumstances change. 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' website at ir.mistercarwash.com. With that, I'll turn the call over to John. John?
Thanks, Megan. Good afternoon, everyone, and thanks for joining us on our fourth quarter and year-end earnings call. We had another great quarter and an extraordinary year that we're excited to share with you. But before I dive in, I'd like to zoom out and talk about the growing nature of our market, some of the trends we're seeing across the industry and how we execute and deliver best-in-class unit-level results. Big picture, the U.S. car park is huge and growing with approximately 285 million vehicles on the road today. When we look at the size of the market, the pond is not only very large, but it's expanding as more consumers come into the category driven by the ease, convenience and tremendous value of the drive-through express car wash model. More importantly, we're seeing consumption rising as more people sign up to become members of our subscription-based Unlimited Wash Club program, which has made it easy and affordable to keep their car clean all the time while protecting their investment. Even in the face of inflation and rising gas prices, we believe that the joy customers receive from keeping their car clean, coupled with the relative affordability of our service, has created a strong tailwind for expansion. As the largest car wash operator in the United States with less than 5% market share, we believe we're in a great position to expand our footprint by increasing penetration in existing markets while continuing to look for new markets to move into. In short, when we look at the size of our industry, we see demand outpacing supply, which has created a huge growth opportunity for us. Biggest differentiators are people and the amazing team we've developed that delivers an elevated level of hospitality across the entire company. As service providers, we take great pride in our service delivery model, which has become arguably our biggest competitive advantage. We talk a lot about technology and systems and the procedures we use to consistently wash lots of cars, but it's our people-first culture that we've developed at scale that's a real key to our success. Watching our teams process 200 cars per hour in a smooth and seamless way is like watching a well-choreographed dance with everyone moving in synchronicity. The perpetual motion of our crews working in unison with a skip in their step and a shared purpose is what makes our day very special. And this results in incredibly strong AUVs and customer satisfaction. During 2021, I'm delighted to share that our full year revenue increased 31.9% to over $750 million and EBITDA of over $254 million. From a unit-level standpoint, we grew our footprint by 55 stores, acquiring 38 locations and opening up 17 greenfields. This set a record for the single-biggest year in unit growth in the history of our company. On the M&A front, late in the fourth quarter of last year, we closed 2 strategic acquisitions, Clean Streak and the Downtowner, that significantly bolstered our position in Florida. We now have 65 locations in Florida and plan on opening at least 10 more before the end of the year. Greenfields are one of the most important pieces of our growth strategy, and we're thrilled with how well they're performing. We've leveraged all the knowledge we picked up over the years and have developed a car wash model that's all about throughput and volume. We're investing heavily in our new store development and construction teams and see significant opportunity to accelerate our greenfield openings in 2022 and beyond. For the full year, we washed over 75 million vehicles and ended the year with nearly 1.7 million Unlimited Wash Club members. We continue to see healthy membership growth as more and more customers see the value in keeping their car clean all the time, which has fundamentally changed the way people care for their vehicles. We achieve exceptional results by hiring great people, paying them well, and most importantly, treating them well. We invest heavily in training and as a company on the rise, we're in constant leadership development mode as we build out our bench of future managers. In our last earnings call, we talked about our recent launch of our certified trainer program and our operations leadership program. To date, more than 200 team members have completed the training, and this is providing a clear stepping stone for those looking to take on more responsibility within our company. At a time when companies are struggling to staff their operations, we feel very fortunate that we've had no interruptions to our business, and our stores are continuing to become even more productive as we set volume records in almost every region. In the second half of last year, we moved to get out in front of the labor challenges that everyone is experiencing right now by increasing hourly wages to retain and attract talented team members. Our path of being a people-centric company began many years ago, and the ongoing investments we've made in wages, benefits, training and career path progression has put us in a great position during this tough labor environment. On the executive leadership front, I'd like to recognize the retirement of Dave Hale, our VP of Development, who decided after 20 years at Mister and over 40 years in the industry, it was time to ride off into the sunset and spend some quality time with his family. From everyone on Mister Car Wash, we want to say thank you to Dave and wish him happiness. Over the last 2 years, Dave has been grooming his successor, Ryan Darby, to take over, and I'm happy to report that Ryan and his team are doing a phenomenal job building beautiful stores and increasing our capacity to open up even more. I'm also thrilled to announce the promotion of Mayra Chimienti as our new Chief Operating Officer. Myra is a 14-year veteran of Mister Car Wash and has served as VP of Ops Services prior to being promoted to a new role. The fact that she's a female and a Latina in a predominantly male-dominated industry is also pretty cool. Before I turn it over to Jed, I'd like to thank our entire team, who's done an amazing job scaling our company and elevating our culture, especially our field and HQ teams, who have been working so hard to deliver on our mission to deliver the best car wash experience. We couldn't do it without our people and are grateful to have the best team in the industry. I'd like to now turn it over to Jed to review our fourth quarter and 2021 financial results.
Thank you, John, and good afternoon, everyone. 2021 was a record year on many levels, and as John indicated, we're pleased so far with our strong start to 2022. Before going through our results and 2022 guidance, I want to make 3 comments to help you better understand some of the broader trends in our business. First is around demand. Underlying demand was strong during the fourth quarter. We did see some variability in the middle of the quarter related to weather, specifically impacting our retail sales. But that worked itself out in December, and the trends have remained strong. The second is around input inflation and pricing. As we discussed on our last earnings call, we proactively adjusted hourly labor rates in August of 2021, and that resulted in some modest labor inflation in the fourth quarter. To offset this, we took a modest price increase in our retail wash offerings across the majority of our locations in November. We are happy to report that since December, the increase in pricing has basically offset the increase in labor inflation. But the fourth quarter did experience a little bit of margin compression based on the timing of these 2 events. More importantly, these investments have helped keep our employee turnover relatively flat since the middle of last year. And we're also seeing improvements in labor productivity measures, such as cars washed labor hour and store labor dollars per car washed, that are allowing us to maintain very strong margins while continuing to invest in our people and future growth. The third is around acquisitions. We closed 2 acquisitions late in the fourth quarter. These acquisitions have helped boost our market share and solidify our positioning in Florida, a state that is experiencing strong population growth and demographic trends. Upon the completion of the sale-leaseback process of the acquired locations, the acquisition multiple is expected to be in the low teens. As we have mentioned before, it can take us 6 months to a year to fully integrate acquired locations. And during this time period, the acquired locations experience some margin compression as we apply our labor model and processes. Now let me review our fourth quarter results. My comments will include some of 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 financial metrics. In the fourth quarter, revenue increased 18.2% to $191.5 million driven by comparable store sales growth of 14.6% and unit growth of 15.8%. Please note that last year's fourth quarter included $4.9 million of revenue from the quick lube oil change business that was subsequently divested in December of last year. Excluding this from the comparison, revenue increased 21.8% in the quarter. Our subscription Unlimited Wash Club program remains a key driver of growth. UWC memberships increased 34% to 1.656 million from 1.233 million as of December 31, 2020, and accounted for approximately 67% of total wash sales in the quarter. With respect to unit growth, we added 36 net new locations in the fourth quarter, an increase in units of 15.8% year-over-year. Of the 36 new locations, 31 of these were acquired locations that were added in the quarter, and 6 of these were new greenfield build locations. We also closed 1 location in the quarter, giving us a total of 396 locations at year-end. Turning to the expense side of the P&L for the quarter. The cost of labor and chemicals increased to 19.2% from the fourth quarter of 2020 to $62.1 million or 32.4% of revenue. The increase was primarily driven by the increased labor and benefits. Cost of labor included $2.3 million of expense related to stock-based compensation. Our chemical costs were well managed in the quarter and were down slightly on a per-car basis. Other store operating expenses were $70.12 million in this year's fourth quarter or 37.2% of revenue compared with $60.1 million or 37.1% of revenue last year. The modest increase was primarily driven by the increase in wash locations and volume. General and administrative expenses in this year's fourth quarter were $28.8 million or 15% of revenue compared with $14.3 million or 8.8% of revenue last year. Of the nearly $14.5 million increase, $4.4 million was from the debt issuance costs incurred in connection with our financing to acquire Clean Streak, $4 million was from stock comp expense, $2 million was from public, company and professional fees, and $2.6 million was from an increased investment in G&A labor. As we have discussed on earlier calls, our development team is an area we continue to invest and build as we continue to scale our greenfield capabilities and bring more development projects in-house. Interest expense decreased to $6 million from $14.7 million last year due to the majority of the proceeds from the IPO to pay down debt. As a reminder, late in the quarter, we raised an additional $290 million in incremental first lien term loan to help fund our acquisition of Clean Streak. Our GAAP reported effective tax rate for the 2021 fourth quarter was 11.4% compared with 26.6% for the fourth quarter of 2020. The decrease was primarily due to the exercise of employee stock options and a favorable tax treatment. Our GAAP tax rate, excluding the benefit of stock options exercises, was 26.3% in the fourth quarter of 2021. Adjusted net income, which adds back stock-based compensation and certain noncore operating expenses, increased 105% to $33.6 million in the fourth quarter, and adjusted net income per diluted share was $0.10 versus $0.06 in the prior year period. The lower taxes that resulted from the exercise of stock options benefited adjusted net income per diluted share by $0.02 in the fourth quarter. We realize the tax benefits from the exercise of stock options are difficult to predict and model. So starting in the first quarter of this year, we plan to begin excluding the tax benefits from the way we calculate adjusted net income and adjusted net income per share in our reported financial table. Lastly, adjusted EBITDA increased 15.9% to $57.3 million in the fourth quarter of 2021 versus $49.5 million in the fourth quarter of 2020. For the full year, we are very happy with what the team accomplished. On top of becoming a publicly traded company, the team delivered impressive results. We added 54 net stores, grew our store count by 16% and ended the year with 396 car washes. Car wash revenue increased nearly 38% to $758.3 million. Comparable store sales increased nearly 32%. UWC memberships accounted for 64% of total wash sales in fiscal 2021 compared with 62% in fiscal 2020. And we ended the year with nearly 1.7 million members in the UWC program. Adjusted net income was $136.6 million or $0.44 per diluted share, and adjusted EBITDA increased to $254.3 million. Moving on to some balance sheet and cash flow highlights. At year-end, cash and cash equivalents was $20 million, and long-term debt was $896 million. Net cash provided by operating activities for the year was $173 million. Gross capital expenditures were $126 million. And we generated $96 million in proceeds from sale leasebacks. Lastly, let me make a few comments around our initial outlook for 2022 as well as some commentary on first quarter trends for the full year 2022. Revenue in the range -- we expect revenue in the range of $875 million to $895 million, an increase of 15% to 18%. This assumes the opening of approximately 30 greenfield locations opened primarily in the second half of the year. Comparable store sales increase of between 5% to 7%. On a GAAP basis, net income is expected to be in the range of $139 million to $149 million. Adjusting for stock-based compensation, acquisition expenses, noncash rent and other nonrecurring, nonoperating or onetime expenses, adjusted net income is expected to be $144 million to $153 million or $0.44 to $0.47 per diluted share. And adjusted EBITDA is projected to be $284 million to $297 million. Gross capital expenditures are expected to be in the range of $285 million to $315 million. And we are projecting gross proceeds from sale leasebacks to be between $140 million and $150 million. While we do not anticipate providing quarterly commentary on a regular basis, we wanted to provide some color on trends in the first quarter and how we're thinking about the progression of the year. As indicated earlier, trends in the first quarter have been very strong, specifically January and February. We talked about how weather can have some impact on the business, particularly retail sales, and the weather in the first quarter has been favorable. As a result, we've seen a nice acceleration in the business over the past few months and anticipate first quarter comparable store sales growth to be in the area of 10%. As a reminder, this is on top of almost 19% comp growth that we reported in the first quarter last year. With this being the case, we see first quarter revenue being in the area of $215 million and first quarter adjusted EBITDA being in the area of $73 million. As a reminder, the second quarter represents our toughest comparison for the year driven by the strong prior year demand and our initial outlook for full year 2022 revenue currently assumes a mid- to high single-digit comparable store sales increase in the first half of the year and a low to mid-single-digit comparable store sales in the second half of the year. In closing, I would like to add my thanks and appreciation to all of our team members who work day in and day out to execute our business and serve our customers. Fiscal 2021 was a historic and record-breaking year for the company. We feel very good about our positioning in the fundamentals of the business going into 2022. 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. On behalf of the team, we look forward to our continued success and delivering consistent earnings growth for our shareholders. With that, I'll turn it over to the operator to begin the Q&A session. Operator?
[Operator Instructions] Our first question is from Simeon Siegel with BMO Capital Markets.
Nice end of the year. Congrats. So Jed, I think you just -- really great to hear about the positive quarter-to-date commentary. So this question might answer itself. But just curious how you're thinking about -- and I guess maybe stress testing internally, any potential usage impacts, whether it's a retail or UWC churn? Just anything from inflation go-forward, general macro sentiment factors, just kind of thinking about how your customer might be impacted and how they react? And then I was hoping, I think you said you raised the expected greenfield estimate for the year. So I was hoping you would dig into that a little bit more. You've now handily beaten the M&A target if you're raising greenfields. Like it just seems like the heightened unit expansion is really in full gear. So maybe just kind of talk to that, talk to the acceleration.
Yes. Simeon, this is John. And before I turn it over to Jed, I just want to give some broad color on how we see the health of the business. I don't know if there's a technical definition for crushing it. But in trying to remain keeping both feet on the ground, and we live by the mantra of stay humble and stay hungry. But to have a Q4 where comps were plus 14.6%, the numbers speak for themselves. And as Jed alluded to, Q1, how we feel pretty confident that we're going to be able to grow comps plus 10% in this quarter. Our business is super healthy right now. As I mentioned in my opening comments, the demand for our service has been amazing. So we feel very fortunate to be in this category. And with respect to concerns around inflation and what's going to happen to consumer spending, we're not seeing it. So for all -- with all the knock on woods, right, because no one knows what the future holds, we're in a great spot right now. And we've got cars lined up to the street, and we're processing them as quickly as we can. I'll turn it over to Jed to give more precise answers.
Yes. So Simeon, on the first part of the question and just some of the broader macro trends, right, as we were putting together the guidance, first of all, I think it's worth highlighting that the fundamentals and outlook for the business, as John said, have never been stronger. We're really encouraged with how the business is performing and the trends that we're seeing, but it's in the backdrop of a lot of uncertainty with rising interest rates, gas prices. Gas prices are up nearly 30% on a national average year-to-date. And then we've got the backdrop of the geopolitical risk. Even though we operate 100% in the U.S., the indirect impact and potential trickle down, that may come. So as we put together the guidance, we believe that what we've built adequately reflects the trends that we're seeing, but then also factors in the broader macro event -- the broader macro environment that we're operating in. Greenfield side of your question, so we're saying approximately 30 greenfields during the year. We've made some -- as you know, we've made some investments in that team. We're ramping up development. And when we look at the white space and potential opportunity for future expansion, nothing has changed. There's a lot of white space and runway for growth.
The next question is from Simeon Gutman with Morgan Stanley.
This is Jackie Sussman on for Simeon. Congratulations on a good quarter. Kind of piggybacking off of what you were saying about the strong quarter to date trends. The market is starting to think about a more traditional recession potentially occurring, and your business did have a bit of a decline in the last recession. But as you mentioned, it's a different business now, with a higher recurring revenue mix. So I guess, more specifically, how resilient is the subscription base during a recession? And you're expecting stronger comps going forward throughout the year?
Yes. Terrific question. When we look at '08, '09 and the impact that we received, our portfolio was a lot different back then. We had a majority of our stores were full-service Interior Clean locations. Today, that ratio has been flipped upside down, where the bulk of our portfolio is Express Exterior, which by virtue of that value proposition, has a very affordable price point of anywhere from $7, $8 or $9 to get in. So it's easily accessible for all motorists. And that affordability, we think, is perfectly positioned and it could be an even tighter environment going forward.
Great. And just a quick follow-up, if I can. You guys had a great year in '21. You said you were going to reinvest back into the business. Is there any kind of volatility in your thinking given the inflation and kind of macro backdrop in terms of how you're choosing to invest?
No. For us, it's full steam ahead. We are so emboldened with some of the success that we've been enjoying, particularly with our greenfields, that we're, as we mentioned in previous calls, not just doubling down but tripling down on building out our capabilities there. And really, the focus is on the human capital side, making sure that we've got the right team in place. So we're growing like weeds right now and having a lot of fun doing what we're doing. But we don't anticipate pulling back on the throttle at all.
Next question is from Michael Lasser with UBS.
John, is there a national price per gallon of gas that if they got to that level, you think it would start to have an impact on the business? Would it be $5, closer to $6? What would that be -- what would that level will be?
Yes. That's a tricky question to answer. I wish I had a really good crystal ball into future gas prices. I do know that from an inflation-adjusted standpoint, we've had a couple of the years in the history of our company, I'm going to go back to 2012, where, again, on an inflation-adjusted basis, the price per gallon was a little north of $4. We didn't see any impact to our business then and we're, quite frankly, not seeing it now. But I want to do all the knock on woods. Because to your question, if it were to get to $5 or higher, I don't want to come across with -- in any hubristic way where we think that there is not going to have any impact on consumer spend. And I think if anything, it's going to affect folks that are living paycheck to paycheck, and it disproportionately impacts their overall budget in a more meaningful way. But for us, we haven't seen any threat thus far.
My follow-up question is 2 parts. One is, how much is the price increase contributing to your same-store sales growth in 2022? And as part of that, you did have a tough compare like, Jed, you pointed out in the second quarter, particularly on the retail side of the business. So to the extent that retail starts to soften in the second quarter, is it going to make it more difficult to recruit additional Wash Club members because that is a key source of new membership?
Yes. So Mike, I'll take the first part of your question around the price and what we expect that. So as we've said, we took a price increase of November of last year. And as we look forward and the impact on 2022, we expect that to be just under a 2% benefit on the year coming from that pricing, which will largely offset the cost pressures and the labor inflation in some of the investments that we've made and we are making to support the future growth of the business.
Yes, Michael, I would add too that, for us, the lifeblood of growing our member base is attracting more retail customers into our stores and then working towards educating them to make an informed decision and converting them into membership. So for us, retail traffic is important. We've got this unique phenomenon where because we're doing so well, and we're washing so many cars [Indiscernible] member base. As we've shared previously, we've done a lot to decompress our locations and speed things up and reduce bottlenecks to, quite frankly, cut down the lines and make sure that you can get in and out in 5 minutes. There are certain hours in certain stores where we're bumping up against maximum capacity, which I guess is a good problem to have. But it also then highlights the opportunity that we have to continue to grow our share, increase our penetration and add more stores where when we have people lined up to the street, it's a beautiful thing. And for us then we're saying, hey, there's more cars that we're "leaving on the street." Let's add some locations around some of those high-performing stores to decompress them a bit and overall lift our share in that market.
The next question is from Chris O'Cull with Stifel.
John, given you have made significant investments in the development team and you continue to make those investments, I was hoping you could describe what kind of capacity for greenfield development you're targeting longer term.
Yes. We continue to reset our set high watermark. And if I -- just to put things in perspective, last year, we opened up 17 stores, this year we expect to open up 30 stores. And if we continue on that path -- and by the way, that's 100% -- almost 100% improvement. We want to get to about a store a week, which we think is kind of a good sweet spot for us. And one of the most important things I want to highlight is opening the store, as much work as that is, the other piece of the equation, which is the most important piece, is we have to have the team in place to be able to operate them and deliver that exceptional customer experience, which speaks to our MIT investments, management training program investments and building out our bench. So we've got this concurrent path of building out our capability of building new stores, coupled with increasing our leadership pipeline and making sure that we've got amazingly trained leaders that can go in and crush it. So we're on that parallel path. And as I mentioned to the previous question, we're not pulling back on the throttle.
That's helpful. And then your long-term algorithm calls, I think, for 50 washes to be acquired over 5 years. I mean the Clean Streak acquisition, I think there's 23 units that were opened, 10 under construction. And then you had the other one, I think, had 5-or-so locations. So should we interpret that to mean that the 50 wash outlook would be conservative? Or should we expect acquisitions to be very limited going forward?
I think acquisitions, by definition, can be very lumpy and highly unpredictable. For us, when we're looking at building out our market -- for the markets we're in, there's a number of bolt-on opportunities where we lean in to increase our market share in the regions that we're already in, but then also lean in on some opportunities like the Clean Streak deal that you referenced that strategically bolster our position, and in that particular case, almost doubled our footprint in the Orlando and Tampa markets. So as we look at this ever-changing landscape that is consolidating and is being rolled up, we anticipate perhaps coming down the turnpike some larger-scale combination opportunities, but those are very difficult to rate.
Chris, the one thing I'd add. And when we've pulled that together, the long-term growth algorithm, right, the 50 over 5 years, what we didn't want to do is put ourselves in a position where we are chasing a number just for the sake of chasing a number. There's a lot of capital coming into this space. Multiples are being driven up. And so playing this to where we weren't forced to play -- pay any egregious multiples to try and hit a number that we would put out there just didn't make sense for us. And then also, right, M&A is a key driver, but then we also are building out. As you highlighted in your earlier question, the investments we're making in greenfield, which brings an element of predictability and even just that much more consistency to our unit expansion.
Yes. That's very helpful. And I may have missed this, I apologize if I did. But Jed, did you say how much the Clean Streak acquisition is embedded in your guidance? How much you're anticipating maybe it contributes to EBITDA or revenue?
So as we look at Q4 2021, the acquisition was late in Q1. So very little impact on 2021 results. And then we aren't disclosing the exact expectation around Clean Streak. But keep in mind, Chris, as we make these acquisitions, oftentimes, it will take half a step back and then we'll get 2 steps ahead. We've done over 100 acquisitions. We have a strong track record of this and really looking at these investments over a 3-year investment horizon.
Next question is from Peter Keith with Piper Sandler.
Congrats on a great year. I wanted to piggyback off of Clean Streak. So you guys have now owned it for a couple of months. It's a fairly sizable acquisition compared to what you guys have done in the past? How would you frame it up versus your normal acquisition accretion benefit? You've historically raised a four-wall EBITDA by about 55% in 3 years. Do you see a similar opportunity here or maybe a little bit more, a little bit less?
Yes, we definitely see a ton of growth potential inside the business and we're very optimistic about, as Jed referenced, where we're going to be in year 3. And just to underscore what Jed mentioned, it takes us at least 6 months to get all the pieces in place and oftentimes a year to get the team trained up and operating in the Mister way. So for us, we do take a somewhat conservative outlook in year 1 because it's not about year 1 EBITDA growth, in our opinion, it's about what we get in year 3. So making those necessary investments, making the necessary changes. And it's one of the things that we do really well. So we're integrating and standardizing and assimilating but creating this consistent experience across all of our stores. So if you're going to any store -- any of the 75 in Florida, you receive the same Mister Car Wash experience. We're not there yet. We have probably another 90 days to 180 days before we get there. But that's the heavy lifting for us, and we will get there. And when we do, again, we think all boats rise with the tide because we're connecting everything from a standard point-of-sale system to singular procedures. And getting the culture right, again, is probably the most important and the most difficult, but it's something that we really stick to it and get to ultimately. Because for the team members that we adopt into our family, in almost every single case, it's a lifting experience for them personally and professionally.
Peter, just a little bit more color on that. So the -- right, as we look at our vision of building a national brand, right, this takes us -- it's a big step in that direction, particularly in bolstering our position there in Florida. The -- one thing we'll share is that the EBITDA on a per-unit basis for this particular acquisition is higher than what we've seen in previous acquisitions. Having said that, we still see, as John had highlighted, a lot of upside, particularly in memberships. When you look at the subscription members per location, it's materially lower than the 4,300 that we had per store. Also, there's opportunities for throughput and then also some potential cost synergies as well, which, as you guys know, we don't build those into the model, but as we convert them over to our chemical programs and some of our processes. But all this, it's going to take time. The integration does not happen overnight. The one other point I think worth mentioning is that 100% of the real estate was owned on Clean Streak, and we're in the process of looking at sale-leaseback opportunities on the portfolio.
Yes. Jed, I would just add, too, that it's not uncommon for us to acquire businesses that are running leaner labor staffing models than we are. And we're happy to, again, increase that staffing approach because we're able to generate more cars through the turnstile. And we're already starting to see that. So to your comment on increasing throughput and growing the top line, for us, having more people on the clock, as counterintuitive as it may sound because it's like, "Well, aren't you increasing labor?" Yes, we're increasing labor, but we're washing more cars. And so overall, we're going to generate more revenue, which will ultimately trickle to the bottom line. And that's a front-end load investment, which we're happy to make.
Okay. Great. That sounds exciting. Maybe just one last clarification question on Clean Streak. So I think you had -- what was it? I think there was additional 10 stores that weren't open yet that are in process of opening. So when you're guiding for 30-unit openings in 2022, are those your own greenfield? Or do you have the 10 Clean Streaks in there as well?
The clean streaks are factored into that, approximately 30.
Yes. So you've got basically 10 of your sort of owned greenfield plus the -- or 20 of your own greenfield plus 10 of these planned Clean Streak acquisitions?
Yes, roughly. That's how it works, yes.
[Operator Instructions] The next question is from Ryan Sundby with William Blair.
You ended the year with -- or nearly 1.7 million UWC members. Just from a housekeeping standpoint, does that include members that were active at the acquired locations? And if it does, how quickly should we think about driving penetration higher at this location? Because it sounds like it was lower than the corporate average.
Yes. So the nearly 1.7 million members, it includes all of the members, including the members that we acquired through the acquisitions, yes. But when you look at the membership on a per-unit basis for those acquired stores, materially lower than the member per location in our core base business, providing us some opportunity for future we see membership growth. But once again, that's going to take time. We've got to put in place our processes, our team, our training, our development. It's not going to happen overnight.
Yes. I would expect, Jed, that probably the second half of this year, we'll start seeing an uptick in member of growth. There might be some modest growth right now. But there's other things that we're prioritizing before we start [Indiscernible] customers on the value of the membership. We want to make sure the quality is there, speed's there, customer service is where it needs to be. Those are our fundamental building blocks before we turn them on to the Unlimited Wash Club program. So there's a little bit of a chicken and egg. But the second half, I think we're very optimistic about the growth potential.
Got it. Makes a lot of sense. And then historically, I think you've talked about roughly 75% of the UWC sign-ups occurred during the first half of the year. 2021 looks a little bit different with bigger gains in Q2 and Q4. Can you just help us think about how we should think about the sequencing of member ahead next year? And I guess there's a different setup here in '21. Did that impact anything like retention rates or frequency compared to the years passed?
Yes. Ryan, so seasonality, it's -- in this business, it's a little bit tricky, particularly as we make these acquisitions, because seasonality shifts just a little bit based on where -- for example, we now have a larger presence in Florida, which will have a little bit more seasonality. The seasonality patterns are different there versus the -- a Michigan or Iowa market. So that seasonality shifts just a little bit. Historically, we have seen that 75% in the first half of the year, but it's a difficult thing to -- it really is a difficult thing to predict. And when you look at any given year, there are some years where it's relatively flat and then a year like last year where, I believe it was about 90% was in the first half of the year.
Jed, I would add the beauty of our geographic footprint and how diverse our portfolio is. Right now, we're coming into pollen season, which is like gold when it hits the vehicle. Because everyone, particularly in the southern climates, they want to get that pollen off their vehicle. In the summertime in California during the harvest season of almonds, we absolutely crush it. In the winter in Minnesota, we're rocking and rolling. So there's these different demand curves based on each of the regions. And Florida has their love bunks, right? I mean I can go down to each specific market demand comes at different. And that's beautiful because what that has done is smoothed out our growth curve. And I think some of the percentages is we try to triangulate around where do we see the bulk of our growth. I see it smoothing, not clumpy in any 1 quarter because back historically, it was Q1 and then moving into Q2. But now it's more persistent year-round.
Okay. That's helpful. And if I could just squeeze one more. I think at least one of the Clean Streak locations had oil change. Is that something you'd continue to do? Or is that a business or a site that you'd want to access?
Yes. No, we subscribe to the theory of doing fewer things well, and we're very focused and committed to washing cars and delivering a great experience. So we -- as we divested our lube business last year, if we're acquiring a business that has a lube shop, we either look to partner with another major oil change provider and divest that piece of the business or we will repurpose the -- that area to be able to either get more free vaccine or get more stacking lanes in to wash more cars. But to answer to your question is, no, we don't anticipate any of these ancillary profit centers. We have our hands full with just washing cars. And for the life of me, I -- because back in the day, we had a whole bunch of profit centers, and it's hard to be good at all of those things.
The next question is from Greg Badishkanian with Wolfe Research.
This is Jake Moser on for Greg. So I was just wondering, it looks like your guidance embeds a little bit of margin compression. So I was wondering, how much of that is driven by the recently acquired Florida stores. And then secondly, it sounds like pricing is pretty much offsetting labor and chemicals. So sort of aside from the acquisition impact, what else -- is it mostly just the investments in building out the development team? Or what else might be contributing to the margin compression?
Yes. So a couple of things on the margin. Like we've been saying, the fundamentals and outlook for the business on our margin hasn't changed. Our targeted adjusted EBITDA margin for the business is in the low to mid-30% range, like we've been saying. Last year, we experienced incredible margin rates, particularly in the first half of the year. They were exceptionally high, at or above our target range. For the most part, we're offsetting the labor inflation or just inflation in general with the modest price increase we took in November and through various productivity improvements. When you look at Clean Streak in particular, it's actually margin-neutral to the balance of the business. And what you're seeing on the overall margin compression side, the investment that we're making in the MIT and operation leadership program as we make investments in our team members to help support the future new unit expansion. And then also last year, we only had about -- it was half a year of public company costs, which we expect to be about $10 million on the year. This year, we'll have a full year of those costs.
Jed, I would add, too, that as a high-growth company, we have not prioritized margin expansion. And our margins we think are really healthy and strong, and they've grown year-over-year. But to your comment, we are in investment mode and we are in build mode. We could easily, if we ever chose to, dial back on certain investments and increase margins very, very quickly or take pricing if we wanted to, to get our margin profile even higher. But if we're in growth mode, why do we want to do that prematurely? So as a result, we're remaining very conservative. And again, the goal here is to build a national car wash brand, and we're on that path.
That makes sense. I appreciate the color there. And then it sounded like you were seeing some encouraging trends in terms of improving employee turnover. Were those improvements across both manager-level positions and sort of rank-and-file employees? And then did Omicron have any impact on that sort of at the start of 2022?
Yes, for sure. I think January from an Omicron standpoint, we were to the test with a bunch of call-outs and a bunch of people that had gotten sick. We were able to work through that, and again, without any interruptions. But in this current environment of flat turnover, we would consider a win. And again, we -- over the last 3 years, we've reduced our turnover considerably given the things that I mentioned in my opening comments to make this an amazing place to work. So going forward, we're really focusing on now this employee value proposition and how we can make this an even more attractive career opportunity. And we're -- one of the things that's been probably the most rewarding part about this entire journey is that we've been lifting lives and improving -- fundamentally improving people's lives, thousands of people's lives, as a result because we're -- sharing. We're a company that believes in kind of an egalitarian mindset. But the fact that every one of our site managers is an owner in the company because we have provided and we're providing them with an equity position, that is really powerful. And it puts us in a great spot vis-à-vis our competition, who has chosen not to share in the profits with their team leaders.
This concludes our question-and-answer session. I would like to turn the conference back over to John Lai for any closing remarks.
Well, thank you, operator. Listen, on behalf of the entire team here at Mister Car Wash, we appreciate your interest in our journey. We think we're in the early stages of our life cycle, quite frankly. And even though we've been at this for over 25 years, it feels like the second or third inning. And our opportunity to scale this company to 1,000 stores and even higher, Jed, who came from Yum! Brands, pats me on the head, sometimes in a very condescending way and says, "John, 1,000 stores. That's cute. Let's get to 15,000." which might be a little bit big, but 1,000 is in our sight line, and we're thrilled to be on this path. So thank you, everyone, for your support and interest. We're going to get back to washing cars.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.