10-Q

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40542

Mister Car Wash, Inc.

(Exact name of registrant as specified in its charter)


Delaware	47-1393909
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
222 E. 5th Street Tucson, Arizona	85705
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (520) 615-4000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.01 per share

MCW

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐

As of November 12, 2021, the registrant had 297,341,227 shares of common stock, $0.01 par value per share, outstanding.

Table of Contents


		Page
	FORWARD-LOOKING STATEMENTS	2

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	4
	Condensed Consolidated Statements of Stockholders' Equity (Deficit)	5
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	36

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	38

Signatures		39

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). You can generally identify forward-looking statements by our use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “seek,” “vision,” or “should,” or the negative thereof or other variations thereon or comparable terminology. Forward-looking statements include those we make regarding the following matters:


	•		developments involving our competitors and our industry;


	•		our ability to attract new customers, retain existing customers and maintain or grow the number of our Unlimited Wash Club ("UWC") members;


	•		potential future impacts of the COVID-19 pandemic, including from variants thereof;


	•		expectations regarding our industry;


	•		our ability to maintain comparable store sales growth;


	•		our ability to continue to identify and open greenfield locations;


	•		our estimates of greenfield location expansions and our whitespace opportunity;


	•		our ability to continue to identify suitable acquisition targets and consummate such acquisitions on attractive terms;


	•		our ability to attract and retain a qualified management team and other team members while controlling our labor costs;


	•		the impact of our debt and lease obligations on our ability to raise additional capital to fund our operations and maintain flexibility in operating our business;


	•		our reliance on and relationships with third-party suppliers;


	•		our ability to maintain security and prevent unauthorized access to electronic and other confidential information;


	•		our ability to respond to risks associated with existing and future payment options;


	•		our ability to maintain and enhance a strong brand image;


	•		our ability to maintain adequate insurance coverage;


	•		our status as a “controlled company” and Leonard Green & Partners, L.P.’s ("LGP") control of us as a public company;


	•		the impact of evolving governmental laws and regulations and the outcomes of legal proceedings; and


	•		the effects of potential changes to U.S. regulations and policies on our business.

The preceding list is not intended to be an exhaustive list of all of our forward-looking statements. We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors, including those discussed in this Quarterly Report on Form 10-Q in Part I., Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Part II, Item IA. “Risk Factors” of our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021 (the “Second Quarter 10-Q”) may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Furthermore, the potential impact of the pandemic related to COVID-19 and variants thereof on our business operations and financial results and on the world economy as a whole may heighten the risks and uncertainties that affect our forward-looking statements described above. Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included elsewhere in this Quarterly Report on Form 10-Q are not guarantees of future performance and our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate, may differ materially from the forward-looking statements included elsewhere in this Quarterly Report on Form 10-Q. In addition, even if our results of operations, financial condition and liquidity, and events in the industry in which we operate, are consistent with the forward-looking statements included elsewhere in this Quarterly Report on Form 10-Q, they may not be predictive of results or developments in future periods.

Any forward-looking statement that we make in this Quarterly Report on Form 10-Q speaks only as of the date of such statement. Except as required by law, we do not undertake any obligation to update or revise, or to publicly announce any update or revision to, any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Quarterly Report on Form 10-Q.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Mister Car Wash, Inc.

Condensed Consolidated Balance Sheets

(Amounts in thousands, except share and per share data)

(Unaudited)


	As of
	September 30, 2021			December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	162,232		$	114,647
Restricted cash		272			3,227
Accounts receivable, net		8,986			4,613
Inventory		5,633			6,415
Prepaid expenses and other current assets		12,879			6,068
Total current assets		190,002			134,970

Property and equipment, net		300,676			263,034
Operating lease right of use assets, net		699,274			681,538
Other intangible assets, net		124,522			127,019
Goodwill		759,770			737,415
Other assets		5,328			4,477
Total assets	$	2,079,572		$	1,948,453

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	26,716		$	24,374
Accrued payroll and related expenses		19,943			11,424
Other accrued expenses		18,799			20,264
Current maturities of debt		8,400			8,400
Current maturities of operating lease liability		36,218			33,485
Current maturities of finance lease liability		542			495
Deferred revenue		26,195			24,505
Total current liabilities		136,813			122,947

Long-term portion of debt, net		601,723			1,054,820
Operating lease liability		700,548			685,479
Financing lease liability		15,507			15,917
Long-term deferred tax liability		12,571			46,082
Other long-term liabilities		4,222			6,558
Total liabilities		1,471,384			1,931,803

Commitments and contingencies (Note 15)

Stockholders’ equity:
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 296,794,199 and 261,907,622 shares outstanding as of September 30, 2021 and December 31, 2020, respectively		2,975			2,622
Additional paid-in capital		740,657			91,523
Accumulated other comprehensive loss		(716	)		(1,117	)
Accumulated deficit		(134,728	)		(76,378	)
Total stockholders’ equity		608,188			16,650
Total liabilities and stockholders’ equity	$	2,079,572		$	1,948,453

See accompanying notes to unaudited condensed consolidated financial statements.

Mister Car Wash, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(Amounts in thousands, except share and per share data)

(Unaudited)


	Three Months Ended September 30,					Nine Months Ended September 30,
	2021		2020			2021			2020
Revenues, net	$	194,310	$	155,796		$	566,898		$	412,904
Cost of labor and chemicals		63,438		50,245			203,051			141,874
Other store operating expenses		68,435		56,127			194,889			164,352
General and administrative		22,166		10,476			226,015			37,069
Loss (gain) on sale of assets		748		(4,283	)		(5,559	)		(3,773	)
Total costs and expenses		154,787		112,565			618,396			339,522
Operating income (loss)		39,523		43,231			(51,498	)		73,382

Other expense:
Interest expense, net		5,717		15,917			33,416			49,341
Loss on extinguishment of debt		-		-			3,183			1,918
Total other expense		5,717		15,917			36,599			51,259
Income (loss) before taxes		33,806		27,314			(88,097	)		22,123
Income tax provision (benefit)		6,440		7,445			(29,747	)		2,148
Net income (loss)	$	27,366	$	19,869		$	(58,350	)	$	19,975

Other comprehensive income (loss), net of tax:
Gain (loss) on interest rate swap		54		(288	)		401			(1,189	)
Total comprehensive income (loss)	$	27,420	$	19,581		$	(57,949	)	$	18,786

Net income (loss) per share:
Basic	$	0.09	$	0.08		$	(0.21	)	$	0.08
Diluted	$	0.08	$	0.07		$	(0.21	)	$	0.07
Weighted-average common shares outstanding:
Basic		296,360,660		261,863,586			274,387,532			261,784,795
Diluted		327,320,169		274,111,695			274,387,532			273,994,569

See accompanying notes to unaudited condensed consolidated financial statements.

Mister Car Wash, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(Amounts in thousands, except share and per share data)

(Unaudited)


	Common Stock					Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Stockholders’ Equity (Deficit)
	Shares			Amount
Balance as of December 31, 2020		261,907,622		$	2,622	$	91,523		$	(1,117	)	$	(76,378	)	$	16,650
Stock-based compensation expense		-			-		310			-			-			310
Exercise of stock options		688,430			7		260			-			-			267
Shares repurchased		(180,681	)		-		(534	)		-			-			(534	)
Gain on interest rate swap		-			-		-			319			-			319
Net income		-			-		-			-			24,584			24,584
Balance as of March 31, 2021		262,415,371		$	2,629	$	91,559		$	(798	)	$	(51,794	)	$	41,596
Issuance of common stock pursuant to initial public offering, net of issuance costs of $29,194		31,250,000			313		439,243			-			-			439,556
Stock-based compensation expense		-			-		203,231			-			-			203,231
Vesting of restricted stock units		7,680			-		-			-			-			-
Exercise of stock options		2,516,784			25		1,597			-			-			1,622
Shares repurchased		(127,357	)		-		(1,716	)		-			-			(1,716	)
Gain on interest rate swap		-			-		-			28			-			28
Net loss		-			-		-			-			(110,300	)		(110,300	)
Balance as of June 30, 2021		296,062,478		$	2,967	$	733,914		$	(770	)	$	(162,094	)	$	574,017
Stock-based compensation expense		-			-		6,751			-			-			6,751
Exercise of stock options		757,887			8		502			-			-			510
Shares repurchased		(26,166	)		-		(510	)		-			-			(510	)
Gain on interest rate swap		-			-		-			54			-			54
Net income		-			-		-			-			27,366			27,366
Balance as of September 30, 2021		296,794,199		$	2,975	$	740,657		$	(716	)	$	(134,728	)	$	608,188

See accompanying notes to unaudited condensed consolidated financial statements.

Mister Car Wash, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(Amounts in thousands, except share and per share data)

(Unaudited)


	Common Stock					Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Stockholders’ Equity (Deficit)
	Shares			Amount
Balance as of December 31, 2019		261,749,196		$	2,620	$	90,358		$	-		$	(156,580	)	$	(63,602	)
Adoption of new accounting standards, net of tax		-			-		-			-			19,798			19,798
Stock-based compensation expense		-			-		387			-			-			387
Shares repurchased		(4,624	)		-		(324	)		-			-			(324	)
Net income		-			-		-			-			8,860			8,860
Balance as of March 31, 2020		261,744,572		$	2,620	$	90,421		$	-		$	(127,922	)	$	(34,881	)
Stock-based compensation expense		-			-		398			-			-			398
Shares repurchased		(2,400	)		-		(5	)		-			-			(5	)
Loss on interest rate swap		-			-		-			(901	)		-			(901	)
Net loss		-			-		-			-			(8,754	)		(8,754	)
Balance as of June 30, 2020		261,742,172		$	2,620	$	90,814		$	(901	)	$	(136,676	)	$	(44,143	)
Stock-based compensation expense		-			-		402			-			-			402
Exercise of stock options		162,378			1		19			-			-			20
Shares repurchased		(14,400	)		-		(33	)		-			-			(33	)
Loss on interest rate swap		-			-		-			(288	)		-			(288	)
Net income		-			-		-			-			19,869			19,869
Balance as of September 30, 2020		261,890,150		$	2,621	$	91,202		$	(1,189	)	$	(116,807	)	$	(24,173	)

See accompanying notes to unaudited condensed consolidated financial statements.

Mister Car Wash, Inc.

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)


	Nine Months Ended September 30,
	2021