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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

OR

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.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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

 

i


 

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.

 

2


 

 

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.

3


 

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.

 

4


 

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.

 

5


 

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.

 

6


 

Mister Car Wash, Inc.

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)

 

 

Nine Months Ended September 30,

 

 

2021