Filed pursuant to Rule 424(b)(3)

Registration Statement No. 333-258186

Prospectus Supplement No. 7

(To Prospectus dated July 29, 2021)

 

img130463346_0.jpg 

This prospectus supplement updates, amends and supplements the prospectus dated July 29, 2021 (the “Prospectus”), which forms a part of our Registration Statement on Form S-1 (Registration No. 333-258186). Capitalized terms used in this prospectus supplement and not otherwise defined herein have the meanings specified in the Prospectus.

 

This prospectus supplement is being filed to update, amend and supplement the information included in the Prospectus with the information contained in our Quarterly Report on Form 10-Q filed with the SEC on May 13, 2022, which is set forth below.

 

This prospectus supplement is not complete without the Prospectus. This prospectus supplement should be read in conjunction with the Prospectus, which is to be delivered with this prospectus supplement, and is qualified by reference thereto, except to the extent that the information in this prospectus supplement updates or supersedes the information contained in the Prospectus. Please keep this prospectus supplement with your Prospectus for future reference.

 

Mister Car Wash, Inc.’s common stock is quoted on the New York Stock Exchange under the symbol “MCW.” On May 12, 2022, the closing price of our common stock was $12.12.

 

INVESTING IN OUR SECURITIES INVOLVES CERTAIN RISKS. SEE “RISK FACTORS” BEGINNING ON PAGE 15 OF THE PROSPECTUS.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if the Prospectus or this prospectus supplement is truthful or complete. Any representation to the contrary is a criminal offense.

 

The date of this prospectus supplement is May 13, 2022.

 


 

 

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 March 31, 2022

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 April 30, 2022, the registrant had 302,272,484 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

4

 

Condensed Consolidated Statements of Cash Flows

5

 

Condensed Consolidated Statements of Stockholders' Equity

6

 

Notes to Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

Item 4.

Controls and Procedures

30

 

 

 

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

32

Item 1A.

Risk Factors

32

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

32

Item 3.

Defaults Upon Senior Securities

32

Item 4.

Mine Safety Disclosures

32

Item 5.

Other Information

32

Item 6.

Exhibits

33

 

 

Signatures

34

 

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”). All statements other than statements of present and historical facts contained in this Quarterly Report on Form 10-Q, including without limitation, statements regarding our future results of operations and financial position, business strategy and approach may be forward-looking. 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 are based on our management’s beliefs and assumptions and on information currently available to us. Such beliefs and assumptions may or may not prove to be correct. Additionally, such forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to, those identified in Part I. Item 1A. “Risk Factors” and in Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the 2021 10-K) and in Part I. Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q. These risks and uncertainties include, but are not limited to:

We may be unable to attract new customers, retain existing customers and maintain or grow the number of Unlimited Wash Club (“UWC”) members, which could adversely affect our business, financial condition and results of operations and rate of growth.
If we fail to acquire, open and operate new locations in a timely and cost-effective manner and enter into new markets our financial performance could be materially and adversely affected.
We may not be able to successfully implement our growth strategies on a timely basis or at all.
We are subject to a number of risks and regulations related to credit card and debit card payments we accept.
An overall decline in the health of the economy and other factors impacting consumer spending, such as natural disasters and fluctuations in inflation may affect consumer purchases, reduce demand for our services and materially and adversely affect our business, results of operations and financial condition.
Growing inflation, supply chain disruption and other increased operating costs could materially and adversely affect our results of operations.
Our locations may experience difficulty hiring and retaining qualified personnel, resulting in higher labor costs.
We lease or sublease the land and buildings where a number of our locations are situated, which could expose us to possible liabilities and losses.
Our indebtedness could adversely affect our financial health and competitive position.
Our business is subject to various laws and regulations and changes in such laws and regulations, or failure to comply with existing or future laws and regulations, may result in litigation, investigation or claims that could adversely affect our business.
Our locations are subject to certain environmental laws and regulations.
We are subject to data security and privacy risks that could negatively impact our results of operations or reputation.
We may be unable to adequately protect, and we may incur significant costs in enforcing or defending, our intellectual property and other proprietary rights.
Stockholders’ ability to influence corporate matters may be limited because a small number of stockholders beneficially own a substantial amount of our common stock and continue to have substantial control over us.
Our stock price may be volatile or may decline regardless of our operating performance, resulting in substantial losses for investors purchasing shares of our common stock.

Given these and other risks and uncertainties applicable to us, 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.

As used in this Quarterly Report on Form 10-Q, unless otherwise stated or the context requires otherwise, references to “Mister Car Wash,” “Mister,” the “Company,” “we,” “us,” and “our,” refer to Mister Car Wash, Inc. and its subsidiaries on a consolidated basis.

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

 

 

March 31, 2022

 

 

December 31, 2021

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

70,261

 

 

$

19,738

 

Restricted cash

 

174

 

 

 

120

 

Accounts receivable, net

 

1,128

 

 

 

1,090

 

Other receivables

 

12,733

 

 

 

22,796

 

Inventory, net

 

7,000

 

 

 

6,334

 

Prepaid expenses and other current assets

 

9,858

 

 

 

8,766

 

Total current assets

 

101,154

 

 

 

58,844

 

 

 

 

 

 

 

Property and equipment, net

 

487,897

 

 

 

472,448

 

Operating lease right of use assets, net

 

716,745

 

 

 

718,533

 

Other intangible assets, net

 

128,052

 

 

 

129,820

 

Goodwill

 

1,060,766

 

 

 

1,060,221

 

Other assets

 

8,265

 

 

 

8,236

 

Total assets

$

2,502,879

 

 

$

2,448,102

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

33,869

 

 

$

27,346

 

Accrued payroll and related expenses

 

20,484

 

 

 

16,963

 

Other accrued expenses

 

20,405

 

 

 

20,201

 

Current maturities of operating lease liability

 

37,889

 

 

 

37,345

 

Current maturities of finance lease liability

 

577

 

 

 

559

 

Deferred revenue

 

28,463

 

 

 

27,815

 

Total current liabilities

 

141,687

 

 

 

130,229

 

 

 

 

 

 

 

Long-term portion of debt, net

 

894,629

 

 

 

896,336

 

Operating lease liability

 

714,098

 

 

 

717,552

 

Financing lease liability

 

15,206

 

 

 

15,359

 

Long-term deferred tax liability

 

28,246

 

 

 

22,603

 

Other long-term liabilities

 

7,659

 

 

 

8,871

 

Total liabilities

 

1,801,525

 

 

 

1,790,950

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock, $0.01 par value, 1,000,000,000 shares authorized, 301,607,178 and 300,120,451 shares outstanding as of March 31, 2022 and December 31, 2021, respectively

 

3,022

 

 

 

3,007

 

Additional paid-in capital

 

759,173

 

 

 

752,343

 

Accumulated other comprehensive income

 

2,094

 

 

 

225

 

Accumulated deficit

 

(62,935

)

 

 

(98,423

)

Total stockholders’ equity

 

701,354

 

 

 

657,152

 

Total liabilities and stockholders’ equity

$

2,502,879

 

 

$

2,448,102

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

3


 

Mister Car Wash, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income

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

(Unaudited)

 

 

Three Months Ended March 31,

 

 

2022

 

 

2021

 

Net revenues

$

219,419

 

 

$

175,508

 

Cost of labor and chemicals

 

65,538

 

 

 

51,749

 

Other store operating expenses

 

77,801

 

 

 

61,083

 

General and administrative

 

23,687

 

 

 

14,961

 

Loss on sale of assets

 

459

 

 

 

790

 

Total costs and expenses

 

167,485

 

 

 

128,583

 

Operating income

 

51,934

 

 

 

46,925

 

 

 

 

 

 

 

Other expense:

 

 

 

 

 

Interest expense, net

 

8,166

 

 

 

13,959

 

Total other expense

 

8,166

 

 

 

13,959

 

Income before taxes

 

43,768

 

 

 

32,966

 

Income tax provision

 

8,280

 

 

 

8,382

 

Net income

$

35,488

 

 

$

24,584

 

 

 

 

 

 

 

Other comprehensive income, net of tax:

 

 

 

 

 

Gain on interest rate swap

 

1,869

 

 

 

319

 

Total comprehensive income

$

37,357

 

 

$

24,903

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

Basic

$

0.12

 

 

$

0.09

 

Diluted

$

0.11

 

 

$

0.09

 

Weighted-average common shares outstanding:

 

 

 

 

 

Basic

 

300,931,453

 

 

 

262,151,037

 

Diluted

 

329,172,437

 

 

 

278,354,463

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

4


 

Mister Car Wash, Inc.

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)

 

 

Three Months Ended March 31,

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

Net income

$

35,488

 

 

$

24,584

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization expense

 

14,945

 

 

 

11,650

 

Stock-based compensation expense

 

5,519

 

 

 

310

 

Loss on sale of assets

 

459

 

 

 

790

 

Amortization of deferred debt issuance costs

 

419

 

 

 

356

 

Non-cash lease expense

 

9,606

 

 

 

8,613

 

Deferred income tax

 

5,018

 

 

 

7,099

 

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable, net

 

146

 

 

 

(318

)

Other receivables

 

10,108

 

 

 

(262

)

Inventory, net

 

(665

)

 

 

289

 

Prepaid expenses and other current assets

 

901

 

 

 

(242

)

Accounts payable

 

5,679

 

 

 

3,144

 

Accrued expenses

 

3,635

 

 

 

2,799

 

Deferred revenue

 

648

 

 

 

1,254

 

Operating lease liability

 

(9,094

)

 

 

(8,245

)

Other noncurrent assets and liabilities

 

(1,268

)

 

 

(232

)

Net cash provided by operating activities

$

81,544

 

 

$

51,589

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(30,015

)

 

 

(32,301

)

Proceeds from sale of property and equipment

 

1

 

 

 

3,591

 

Net cash used in investing activities

$

(30,014

)

 

$

(28,710

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from exercise of stock options

 

1,281

 

 

 

121

 

Payments for repurchases of common stock

 

-

 

 

 

(199

)

Payments on debt borrowings

 

(2,100

)

 

 

(2,100

)

Principal payments on finance lease obligations

 

(134

)

 

 

(119

)

Payments of issuance costs pursuant to initial public offering

 

-

 

 

 

(35

)

Net cash used in financing activities

$

(953

)

 

$

(2,332

)

 

 

 

 

 

 

Net change in cash and cash equivalents and restricted cash during period

 

50,577

 

 

 

20,547

 

Cash and cash equivalents and restricted cash at beginning of period

 

19,858

 

 

 

117,874

 

Cash and cash equivalents and restricted cash at end of period

$

70,435

 

 

$

138,421

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

Cash paid for interest

$

7,821

 

 

$

14,149

 

Cash paid for income taxes

$

-

 

 

$

109

 

 

 

 

 

 

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

Property and equipment in accounts payable

$

18,123

 

 

$

6,363

 

Stock option exercise proceeds in other receivables

$

45

 

 

$

-

 

Repurchase of common stock in other accrued expenses

$

-

 

 

$

15

 

Deferred offering costs in accounts payable and other accrued expenses

$

-

 

 

$

1,030

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

5


 

Mister Car Wash, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

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

(Unaudited)

 

Three Months Ended March 31, 2022

 

Common Stock

 

 

Additional Paid-in Capital

 

 

Accumulated Other Comprehensive Income

 

 

Accumulated Deficit

 

 

Stockholders’ Equity

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2021

 

300,120,451

 

 

$

3,007

 

 

$

752,343

 

 

$

225

 

 

$

(98,423

)

 

$

657,152

 

Stock-based compensation expense

 

-

 

 

 

-

 

 

 

5,519

 

 

 

-

 

 

 

-

 

 

 

5,519

 

Exercise of stock options

 

1,486,727

 

 

 

15

 

 

 

1,311

 

 

 

-

 

 

 

-

 

 

 

1,326

 

Gain on interest rate swap

 

-

 

 

 

-

 

 

 

-

 

 

 

1,869

 

 

 

-

 

 

 

1,869

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

35,488

 

 

 

35,488

 

Balance as of March 31, 2022

 

301,607,178

 

 

$

3,022

 

 

$

759,173

 

 

$

2,094

 

 

$

(62,935

)

 

$

701,354

 

 

 

 

 

Three Months Ended March 31, 2021

 

Common Stock

 

 

Additional Paid-in Capital

 

 

Accumulated Other Comprehensive Loss

 

 

Accumulated Deficit

 

 

Stockholders’ Equity

 

 

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

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

6


 

Mister Car Wash, Inc.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

(Unaudited)

 

1. Nature of Business

Mister Car Wash, Inc., together with its subsidiaries (collectively, the Company), is a Delaware corporation based in Tucson, Arizona and provider of conveyorized car wash services. The Company operates two location formats: Express Exterior Locations, which offer express exterior cleaning services, and Interior Cleaning Locations, which offer both express exterior cleaning services and interior cleaning services. As of March 31, 2022, the Company operated 399 car washes in 21 states.

Forward Stock Split

In June 2021, the Company's board of directors (the “Board”) and the stockholders of the Company approved a 96-for-1 forward stock split of the Company’s outstanding common stock, which was effective on June 16, 2021. All common stock and per share information has been retroactively adjusted to give effect to this forward stock split for all periods presented. Shares of common stock underlying outstanding stock options and other equity instruments were proportionately increased and the respective per share value and exercise prices, if applicable, were proportionately decreased in accordance with the terms of the agreements governing such securities. There were no changes to the par value per share of the Company’s common stock as a result of the forward stock split. Additionally, the Board and the stockholders of the Company approved an increase in the authorized shares of common stock to 1,000,000,000 shares.

Initial Public Offering

In June 2021, the Company completed its initial public offering (“IPO”) of 43,125,000 shares of common stock at a public offering price of $15.00 per share. The Company sold 31,250,000 shares of common stock and the selling stockholders identified in the Company’s final prospectus that forms a part of the Company’s Registration Statement on Form S-1 (File No. 333-256697), filed with the SEC pursuant to Rule 424(b)(4) on June 28, 2021 (the “Prospectus”), sold an aggregate amount of 11,875,000 shares of common stock, which selling stockholder amount included the underwriters' option to purchase up to an additional 5,625,000 shares of common stock. The Company received gross proceeds of approximately $468,750 before deducting underwriting discounts, commissions and offering related issuance costs; the Company did not receive any proceeds from the sale of shares by the selling stockholders. The unaudited condensed consolidated financial statements as of March 31, 2022, including share and per share amounts, include the effects of the IPO.

Secondary Public Offering

In August 2021, the Company completed a secondary public offering of 12,000,000 shares of common stock sold by the selling stockholders identified in the Company’s final prospectus that forms a part of the Company’s Registration Statement on Form S-1 (File No. 333-258186), filed with the SEC pursuant to Rule 424(b)(5) on August 24, 2021. The Company did not receive any proceeds from the sale of shares by the selling stockholders, and the Company incurred $498 of expenses in connection with the secondary public offering, which were recorded in general and administrative expenses in the unaudited condensed consolidated statements of operations and comprehensive income.

2. Summary of Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements as of March 31, 2022 and for the three months ended March 31, 2022 and 2021 have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2021 included in the 2021 10-K.

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements. In the opinion of management, the included disclosures are adequate, and the accompanying unaudited condensed consolidated financial statements contain all adjustments which are necessary for a fair presentation of the Company’s consolidated financial position as of March 31, 2022, consolidated results of operations and comprehensive income for the three months ended March 31, 2022 and 2021, and consolidated cash flows for the three months ended March 31, 2022 and 2021. Such adjustments are of a normal and recurring nature. The consolidated results of operations for the three months ended March 31, 2022 are not necessarily indicative of the consolidated results of operations that may be expected for the year ending December 31, 2022.

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company. All material intercompany balances and transactions have been eliminated in consolidation.

7


 

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenue and expenses during the periods reported. Some of the significant estimates that the Company has made pertain to the determination of deferred tax assets and liabilities; estimates utilized to determine the fair value of assets acquired and liabilities assumed in business combinations and the related goodwill and intangibles; and certain assumptions used related to the evaluation of goodwill, intangibles, and property and equipment asset impairment. Actual results could differ from those estimates.

Accounts Receivable, Net

Accounts receivable are presented net of an allowance for doubtful accounts of $78 and $70 as of March 31, 2022 and December 31, 2021, respectively. The activity in the allowance for doubtful accounts was immaterial for the three months ended March 31, 2022 and 2021.

Other Receivables

Other receivables consisted of the following for the periods presented:

 

As of

 

 

March 31, 2022

 

 

December 31, 2021

 

Payroll tax withholding and exercise proceeds receivable

$

 

 

$

8,477

 

Construction receivable

 

5,911

 

 

 

5,574

 

Income tax receivable

 

2,343

 

 

 

4,935

 

Insurance receivable

 

2,646

 

 

 

2,594

 

Other

 

1,833

 

 

 

1,216

 

Total other receivables

$

12,733

 

 

$

22,796

 

Inventory, Net

Inventory consisted of the following for the periods presented:

 

As of

 

 

March 31, 2022

 

 

December 31, 2021

 

Chemical washing solutions

$

7,055

 

 

$

6,406

 

Other

 

81

 

 

 

52

 

Total inventory, gross

 

7,136

 

 

 

6,458

 

Reserve for obsolescence

 

(136

)

 

 

(124

)

Total inventory, net

$

7,000

 

 

$

6,334

 

The activity in the reserve for obsolescence was immaterial for the three months ended March 31, 2022 and 2021.

Revenue Recognition

The following table summarizes the composition of the Company’s revenue, net for the periods presented:

 

 

Three Months Ended March 31,

 

 

2022

 

 

2021

 

Recognized over time

$

140,874

 

 

$

108,270

 

Recognized at a point in time

 

78,008

 

 

 

66,322

 

Other revenue

 

537

 

 

 

916

 

Net revenues

$

219,419

 

 

$

175,508

 

 

8


 

 

Net Income Per Share

Basic net income per share is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted net income per share is computed by dividing net income by the weighted-average shares outstanding for the period and includes the dilutive impact of potential new shares issuable upon vesting and exercise of stock options, vesting of restricted stock units, and stock purchase rights granted under an employee stock purchase plan. Potentially dilutive securities are excluded from the computation of diluted net income per share if their effect is antidilutive. Reconciliations of the numerators and denominators of the basic and diluted net income per share calculations for the periods presented are as follows:

 

 

Three Months Ended March 31,

 

 

2022

 

 

2021

 

Numerator:

 

 

 

 

 

Net income

$

35,488

 

 

$

24,584

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

Weighted-average common shares outstanding - basic

 

300,931,453

 

 

 

262,151,037

 

Effect of potentially dilutive securities:

 

 

 

 

 

Stock options

 

27,010,017

 

 

 

16,203,426

 

Restricted stock units

 

1,230,967

 

 

 

-

 

Weighted-average common shares outstanding - diluted

 

329,172,437

 

 

 

278,354,463

 

 

 

 

 

 

 

Net income per share - basic

$

0.12

 

 

$

0.09

 

Net income per share - diluted

$

0.11

 

 

$

0.09

 

 

The following potentially dilutive shares were excluded from the computation of diluted net income per share for the periods presented because including them would have been antidilutive:

 

 

Three Months Ended March 31,

 

 

2022

 

 

2021

 

Stock options

 

2,041,141

 

 

 

458,152

 

 

Deferred Offering Costs

The Company capitalizes certain legal, accounting, and other third-party fees that are directly related to the Company’s equity financings, including the IPO, until such financings are consummated. After consummation of an equity financing, these costs are then recorded as a reduction of the proceeds received as a result of the financing. Should a planned equity financing be abandoned, terminated, or significantly delayed, the deferred offering costs would be immediately written off to operating expenses. Upon the closing of the IPO in June 2021, all deferred offering costs in the accompanying unaudited condensed consolidated balance sheets were reclassified from prepaid expenses and other current assets and recorded against the IPO proceeds as a reduction to additional paid-in capital. As of March 31, 2022 and December 31, 2021, there were no deferred offering costs capitalized.

Prior Period Reclassification

Certain prior period amounts related to other receivables within accounts receivable, net and prepaid expenses and other current assets in the accompanying unaudited condensed consolidated financial statements have been reclassified to conform to the current period presentation. There was no change to prior period current or total assets.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU No. 2016-13”), which replaces the existing incurred loss impairment model with an expected credit loss model and requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected. The guidance will be effective for the Company beginning January 1, 2023, and interim periods therein. Early adoption is permitted. The Company is currently evaluating the effect that ASU No. 2016-13 will have on its consolidated financial statements and related disclosures.

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805) – Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU No. 2021-08”). The guidance improves the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and certain inconsistencies in application. Under current U.S. GAAP, an acquirer generally recognizes contract assets acquired and liabilities assumed in a business combination at fair value on the acquisition date. The amendments in this update require that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC Topic 606 as if it had originated the

9


 

contracts. The amendments in this update will be effective for the Company beginning January 1, 2023, and interim periods thereafter. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the effect that ASU No. 2021-08 will have on its consolidated financial statements and related disclosures.

3. Property and Equipment, Net

Property and equipment, net consisted of the following for the periods presented:

 

 

As of

 

 

March 31, 2022

 

 

December 31, 2021

 

Land

$

87,072

 

 

$

81,911

 

Buildings and improvements

 

177,301

 

 

 

171,540

 

Finance leases

 

16,497

 

 

 

16,497

 

Leasehold improvements

 

96,704

 

 

 

92,821

 

Vehicles and equipment

 

191,464

 

 

 

188,053

 

Furniture, fixtures and equipment

 

76,848

 

 

 

73,213

 

Construction in progress

 

31,407

 

 

 

24,724

 

Property and equipment, gross

 

677,293

 

 

 

648,759

 

Less: accumulated depreciation

 

(187,860

)

 

 

(175,017

)

Less: accumulated depreciation - finance leases

 

(1,536

)

 

 

(1,294

)

Property and equipment, net

$

487,897

 

 

$

472,448

 

For the three months ended March 31, 2022 and 2021, depreciation expense was $12,934 and $9,971, respectively.

For the three months ended March 31, 2022 and 2021, amortization expense on finance leases was $242 and $242, respectively.

4. Other Intangible Assets, Net

Other intangibles assets, net consisted of the following as of the periods presented:

 

 

March 31, 2022

 

 

December 31, 2021

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

Trade names and Trademarks

$

107,200

 

 

$

100

 

 

$

107,200

 

 

$

-

 

CPC Unity System

 

42,900

 

 

 

32,663

 

 

 

42,900

 

 

 

31,591

 

Customer relationships

 

11,800

 

 

 

7,726

 

 

 

11,800

 

 

 

7,584

 

Covenants not to compete

 

11,075

 

 

 

4,434

 

 

 

11,075

 

 

 

3,980

 

 

$

172,975

 

 

$

44,923

 

 

$

172,975

 

 

$

43,155

 

For the three months ended March 31, 2022 and 2021, amortization expense associated with the Company’s finite-lived intangible assets was $1,769 and $1,437, respectively.

As of March 31, 2022, estimated future amortization expense was as follows:

 

Fiscal Year Ending:

 

 

 

 

2022 (remaining nine months)

 

 

$

5,728

 

2023

 

 

 

6,664

 

2024

 

 

 

4,793

 

2025

 

 

 

1,317

 

2026

 

 

 

1,250

 

Thereafter

 

 

 

1,200

 

Total estimated future amortization expense

 

 

$

20,952

 

 

10


 

5. Goodwill

Goodwill consisted of the following for the periods presented:

 

 

As of

 

 

March 31, 2022

 

 

December 31, 2021

 

Balance at beginning of period

$

1,060,221

 

 

$

737,415

 

   Current period acquisitions

 

-

 

 

 

323,477

 

   Other provisional adjustments

 

545

 

 

 

(671

)

Balance at end of period

$

1,060,766

 

 

$

1,060,221

 

 

Goodwill is generally deductible for tax purposes, except for the portion related to purchase accounting step-up goodwill.

6. Other Accrued Expenses

Other accrued expenses consisted of the following for the periods presented:

 

 

As of

 

 

 

March 31, 2022

 

 

December 31, 2021

 

Utilities

 

$

4,601

 

 

$

4,274

 

Accrued other tax expense

 

 

6,593

 

 

 

8,088

 

Insurance expense

 

 

3,304

 

 

 

3,200

 

Other

 

 

5,907

 

 

 

4,639

 

Total other accrued expenses

 

$

20,405

 

 

$

20,201

 

 

7. Income Taxes

The effective income tax rates on continuing operations for the three months ended March 31, 2022 and 2021 were 18.9% and 25.4%, respectively. In general, the effective tax rates differed from the U.S. federal statutory income tax rate primarily due to state income taxes, non-deductible expenses such as those related to certain executive compensation, and other discrete tax benefits recorded during the period.

The year-to-date provision for income taxes for the three months ended March 31, 2022 included taxes on earnings at an anticipated annual effective tax rate of 27.0% and a net, favorable tax impact of $3,537 related primarily to discrete tax benefits originating from stock options exercised during the three months ended March 31, 2022.

The year-to-date provision for income taxes for the three months ended March 31, 2021 included taxes on earnings at an anticipated annual effective tax rate of 25.4%. Other discrete tax benefits were recorded during the period but did not result in a change in the effective tax rate recorded during the period.

For the three months ended March 31, 2022 and 2021, the Company did not record any unrecognized tax benefits or interest and penalties related to any uncertain tax positions.

8. Debt

The Company’s long-term debt consisted of the following as of the periods presented:

 

 

As of

 

 

March 31, 2022

 

 

December 31, 2021

 

Credit agreement

 

 

 

 

 

First lien term loan

$

901,201

 

 

$

903,301

 

Less: unamortized discount and debt issuance costs

 

(6,572

)

 

 

(6,965

)

First lien term loan, net

 

894,629

 

 

 

896,336

 

 

 

 

 

 

 

Total long-term portion of debt, net

$

894,629

 

 

$

896,336

 

 

11


 

As of March 31, 2022, annual maturities of debt were as follows:

 

Fiscal Year Ending:

 

 

 

 

2022 (remaining nine months)

 

 

$

-

 

2023

 

 

 

-

 

2024

 

 

 

-

 

2025

 

 

 

-

 

2026

 

 

 

901,201

 

Thereafter

 

 

 

-

 

Total maturities of debt

 

 

$

901,201

 

 

As of March 31, 2022 and December 31, 2021, unamortized debt issuance costs, including those associated with the Company's Revolving Commitment (as defined below), were $7,008 and $7,427, respectively, and accumulated amortization of debt issuance costs was $3,167 and $2,748, respectively.

For the three months ended March 31, 2022 and 2021, the amortization of deferred debt issuance costs in interest expense, net in the unaudited condensed consolidated statements of operations and comprehensive income was approximately $419 and $356, respectively.

Credit Agreement

On August 21, 2014, the Company entered into a Credit Agreement (“Credit Agreement”) which was originally comprised of a term loan (“First Lien Term Loan”) and a revolving commitment (“Revolving Commitment”). The Credit Agreement was collateralized by substantially all personal property (including cash, inventory, property and equipment, and intangible assets), real property, and equity interests owned by the Company.

Under the Credit Agreement and with respect to the First Lien Term Loan, the Company had the option of selecting either (i) a Base Rate interest rate plus fixed margin of 2.25% or (ii) a Eurodollar (LIBOR) interest rate for one, two, three or six months plus a fixed margin of 3.25%.

Under the Credit Agreement and with respect to the Revolving Commitment, the Company had the option of selecting either (i) a Base Rate interest rate plus a variable margin of 2.50% to 3.00%, based on the Company’s First Lien Net Debt Leverage Ratio, or (ii) a Eurodollar (LIBOR) interest rate for one, two, three or six months plus a variable margin of 3.50% to 4.00%, based on the Company’s First Lien Net Leverage Ratio.

First Lien Term Loan

In February 2020, the Company entered into Amendment No. 1 to Amended and Restated First Lien Credit Agreement (“Amendment No. 1”) which amended the Amended and Restated First Lien Credit Agreement entered into in May 2019 (the “A&R First Lien Credit Agreement”). Amendment No. 1 changed the interest rate spreads associated with the A&R First Lien Credit Agreement where (i) the variable margin associated with the Base Rate interest rate plus a variable margin based on the Company’s First Lien Net Leverage Ratio changed from 2.25% to 2.50% to 2.00% to 2.25% and (ii) the variable margin associated with the Eurodollar Rate interest rate for one, two, three or six months plus a variable margin based on the Company’s First Lien Net Leverage Ratio changed from 3.25% to 3.50% to 3.00% to 3.25%.

In June 2021, the Company made a voluntary prepayment of $190,400 of outstanding principal under the First Lien Term Loan funded by the net proceeds from the IPO. In connection with the voluntary prepayment, the Company expensed $1,037 of previously unamortized debt issuance costs as a loss on extinguishment of debt in the unaudited condensed consolidated statements of operations and comprehensive income. The early prepayment resulted in the elimination of required quarterly amortization principal payments through 2026.

In December 2021, in connection with the Clean Streak Ventures acquisition, the Company entered into Amendment No. 3 to Amended and Restated First Lien Credit Agreement (“Amendment No. 3”) which amended and restated the A&R First Lien Credit Agreement. Under the terms of Amendment No. 3, the previous First Lien Term Loan was increased by $290,000 to $903,301 with the balance due on May 14, 2026. The incremental increase in aggregate principal of $290,000 resulted in $285,962 of proceeds net of discount and deferred debt issuance costs.

As of March 31, 2022 and December 31, 2021, the amount outstanding under the First Lien Term Loan was $901,201 and $903,301, respectively. As of March 31, 2022 and December 31, 2021, the interest rate on the First Lien Term Loan was 3.46% and 3.10%, respectively.

The A&R First Lien Credit Agreement, as amended (the “Amended A&R First Lien Credit Agreement”), requires the Company to maintain compliance with a First Lien Net Leverage Ratio. As of March 31, 2022, the Company was in compliance with the First Lien Net Leverage Ratio financial covenant of the Amended A&R First Lien Credit Agreement.

12


 

Revolving Credit Agreement

In June 2021, the Company entered into Amendment No. 2 to the Amended and Restated First Lien Credit Agreement (Amendment No. 2”) that (i) increased the maximum available borrowing capacity under the Revolving Commitment from $75,000 to $150,000 and (ii) extended the maturity date of the Revolving Commitment to the earliest to occur of (a) June 4, 2026, (b) the date that is six months prior to the maturity date of the First Lien Term Loan (provided that clause (b) shall not apply if the maturity date for the First Lien Term Loan is extended to a date that is at least six months after June 4, 2026, the First Lien Term Loan is refinanced having a maturity date at least six months after June 4, 2026, or the First Lien Term Loan is paid in full), (c) the date that commitments under the Revolving Commitment are permanently reduced to zero, and (d) the date of the termination of the commitments under the Revolving Commitment. The increase to the maximum available borrowing capacity was effected on the close of the IPO in June 2021. In connection with Amendment No. 2, the Company expensed $87 of previously unamortized debt issuance costs as a loss on extinguishment of debt in the unaudited condensed consolidated statements of operations and comprehensive income.

As of March 31, 2022 and December 31, 2021, there were no amounts outstanding under the Revolving Commitment.

The maximum available borrowing capacity under the Revolving Commitment is reduced by outstanding letters of credit under the Revolving Commitment. As of March 31, 2022 and December 31, 2021, the available borrowing capacity under the Revolving Commitment was $149,442 and $149,503, respectively.

In addition, an unused commitment fee based on the Company’s First Lien Net Leverage Ratio is payable on the average of the unused borrowing capacity under the Revolving Commitment. As of March 31, 2022 and December 31, 2021, the unused commitment fee was 0.25%.

Standby Letters of Credit

As of March 31, 2022, the Company has a letter of credit sublimit of $10,000 under the Revolving Commitment, provided that the total utilization of revolving commitments under the Revolving Commitment does not exceed $150,000. Any letter of credit issued under the Credit Agreement has an expiration date which is the earlier of (i) no later than 12 months from the date of issuance or (ii) five business days prior to the maturity date of the Revolving Commitment, as amended under Amendment No. 2. Letters of credit under the Revolving Commitment reduce the maximum available borrowing capacity under the Revolving Commitment. As of March 31, 2022 and December 31, 2021, the amounts associated with outstanding letters of credit were $558 and $497, respectively, and unused letters of credit under the Revolving Commitment were $9,442 and $9,503, respectively.

Second Lien Credit Agreement

In June 2021, the Company made a voluntary prepayment of all outstanding borrowings under the second lien term loan (the “Second Lien Term Loan”) pursuant to the Second Lien Credit Agreement entered into May 2019, as amended by the First Amendment to Second Lien Credit Agreement in March 2020 (the “Amended Second Lien Credit Agreement”) funded by the net proceeds from the IPO, which included outstanding principal of $242,673 and accrued interest expense of $6,050. In connection with this voluntary prepayment, the Company expensed $2,059 of previously unamortized debt issuance costs as a loss on extinguishment of debt in the unaudited condensed consolidated statements of operations and comprehensive income.

 

9. Fair Value Measurements

The following table presents financial liabilities which are measured at fair value on a recurring basis as of March 31, 2022:

 

 

Fair Value Measurements

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

Interest rate swap

$

2,818

 

 

$

-

 

 

$

2,818

 

 

$

-

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

Contingent Consideration

$

5,750