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, 2022


☐	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 1, 2022, the registrant had 304,992,610 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 Cash Flows	5
	Condensed Consolidated Statements of Stockholders' Equity	6
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
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”). 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 or operate new locations in a timely and cost-effective manner, enter into new markets or leverage new technologies, our competitive advantage or 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 by third parties or employees 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.

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, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	74,885		$	19,738
Restricted cash		62			120
Accounts receivable, net		2,937			1,090
Other receivables		14,441			22,796
Inventory, net		8,888			6,334
Prepaid expenses and other current assets		11,247			8,766
Total current assets		112,460			58,844

Property and equipment, net		514,357			472,448
Operating lease right of use assets, net		763,427			718,533
Other intangible assets, net		125,781			129,820
Goodwill		1,107,072			1,060,221
Other assets		8,394			8,236
Total assets	$	2,631,491		$	2,448,102

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	27,589		$	27,346
Accrued payroll and related expenses		19,976			16,963
Other accrued expenses		25,460			20,201
Current maturities of operating lease liability		39,336			37,345
Current maturities of finance lease liability		648			559
Deferred revenue		28,814			27,815
Total current liabilities		141,823			130,229

Long-term portion of debt, net		895,428			896,336
Operating lease liability		750,929			717,552
Financing lease liability		14,955			15,359
Long-term deferred tax liability		45,741			22,603
Other long-term liabilities		7,043			8,871
Total liabilities		1,855,919			1,790,950

Stockholders’ equity:
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 304,624,334 and 300,120,451 shares outstanding as of September 30, 2022 and December 31, 2021, respectively		3,052			3,007
Additional paid-in capital		775,199			752,343
Accumulated other comprehensive income		600			225
Accumulated deficit		(3,279	)		(98,423	)
Total stockholders’ equity		775,572			657,152
Total liabilities and stockholders’ equity	$	2,631,491		$	2,448,102

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,
	2022			2021		2022			2021
Net revenues	$	217,576		$	194,310	$	662,154		$	566,898
Cost of labor and chemicals		68,228			63,438		203,117			203,051
Other store operating expenses		82,343			68,435		239,173			194,889
General and administrative		24,743			22,166		74,040			226,015
(Gain) loss on sale of assets		(649	)		748		(3,336	)		(5,559	)
Total costs and expenses		174,665			154,787		512,994			618,396
Operating income (loss)		42,911			39,523		149,160			(51,498	)

Other expense:
Interest expense, net		10,100			5,717		27,028			33,416
Loss on extinguishment of debt		-			-		-			3,183
Total other expense		10,100			5,717		27,028			36,599
Income (loss) before taxes		32,811			33,806		122,132			(88,097	)
Income tax provision (benefit)		8,814			6,440		26,988			(29,747	)
Net income (loss)	$	23,997		$	27,366	$	95,144		$	(58,350	)

Other comprehensive income (loss), net of tax:
(Loss) gain on interest rate swap		(1,795	)		54		375			401
Total comprehensive income (loss)	$	22,202		$	27,420	$	95,519		$	(57,949	)

Net income (loss) per share:
Basic	$	0.08		$	0.09	$	0.31		$	(0.21	)
Diluted	$	0.07		$	0.08	$	0.29		$	(0.21	)
Weighted-average common shares outstanding:
Basic		304,290,590			296,360,660		302,641,749			274,387,532
Diluted		326,881,152			327,320,169		327,773,344			274,387,532

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,
	2022			2021
Cash flows from operating activities:
Net income (loss)	$	95,144		$	(58,350	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization expense		45,274			36,530
Stock-based compensation expense		16,959			210,292
(Gain) loss on sale of assets		(3,336	)		(5,559	)
Loss on extinguishment of debt		-			3,183
Amortization of deferred debt issuance costs		1,270			898
Non-cash lease expense		29,602			26,535
Deferred income tax		21,526			(33,247	)
Changes in assets and liabilities:
Accounts receivable, net		(1,663	)		(549	)
Other receivables		8,355			(5,595	)
Inventory, net		(2,431	)		850
Prepaid expenses and other current assets		(2,458	)		(5,042	)
Accounts payable		6,424			4,025
Accrued expenses		4,295			6,874
Deferred revenue		660			1,531
Operating lease liability		(32,103	)		(26,468	)
Other noncurrent assets and liabilities		(2,065	)		(2,599	)
Net cash provided by operating activities	$	185,453		$	153,309

Cash flows from investing activities:
Purchases of property and equipment		(132,014	)		(86,330	)
Acquisition of car wash operations, net of cash		(65,533	)		(55,072	)
Proceeds from sale of property and equipment		63,763			50,944
Net cash used in investing activities	$	(133,784	)	$	(90,458	)

Cash flows from financing activities:
Proceeds from issuance of common stock pursuant to initial public offering		-			468,750
Proceeds from issuance of common stock under employee plans		5,941			121
Payments for repurchases of common stock		-			(308	)
Proceeds from secondary public offering for employee tax withholdings		-			20,859
Tax withholdings paid on behalf of employees for secondary public offering		-			(20,859	)
Payments on debt borrowings		(2,100	)		(456,972	)
Payments of debt extinguishment costs		-			(28	)
Payments of deferred debt issuance costs		-			(226	)
Principal payments on finance lease obligations		(421	)		(364	)
Payments of issuance costs pursuant to initial public offering		-			(29,194	)
Net cash provided by (used in) financing activities	$	3,420		$	(18,221	)

Net change in cash and cash equivalents and restricted cash during period		55,089			44,630
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	$	74,947		$	162,504

Supplemental disclosure of cash flow information:
Cash paid for interest	$	25,900		$	33,134
Cash paid for income taxes	$	2,416		$	8,029

Supplemental disclosure of non-cash investing and financing activities:
Property and equipment in accounts payable	$	10,965		$	14,817
Property and equipment accrued in other accrued expenses	$	3,886		$	-

See accompanying notes to unaudited condensed consolidated financial statements.

Mister Car Wash, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

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

(Unaudited)

Nine Months Ended September 30, 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
Stock-based compensation expense		-		-		5,979			-			-			5,979
Issuance of common stock under employee plans		251,003		2		2,415			-			-			2,417
Vesting of restricted stock units		457,372		5		(5	)		-			-			–
Exercise of stock options		1,601,615		16		1,680			-			-			1,696
Gain on interest rate swap		-		-		-			301			-			301
Net income		-		-		-			-			35,659			35,659
Balance as of June 30, 2022		303,917,168	$	3,045	$	769,242		$	2,395		$	(27,276	)	$	747,406
Stock-based compensation expense		-		-		5,461			-			-			5,461
Exercise of stock options		707,166		7		496			-			-			503
Loss on interest rate swap		-		-		-			(1,795	)		-