10-Q

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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 July 31, 2024, the registrant had 321,828,892 shares of common stock, $0.01 par value per share, outstanding.

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 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 are 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,” “should,” or "vision," or the negative thereof 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 in this Quarterly Report on Form 10-Q 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, 2023 (the “2023 Form 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:

Given these and other risks and uncertainties applicable to us, you are cautioned not to place undue reliance on such forward-looking statements. 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 indicative 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. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements as of June 30, 2024 and for the three and six months ended June 30, 2024 and 2023 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 condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto for the year ended December 31, 2023 included in the 2023 Form 10-K.

The 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 condensed consolidated financial statements contain all adjustments which are necessary for a fair presentation of our consolidated financial position as of June 30, 2024, consolidated results of operations for the three and six months ended June 30, 2024 and 2023, and consolidated cash flows for the six months ended June 30, 2024 and 2023. Such adjustments are of a normal and recurring nature. The consolidated results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the consolidated results of operations that may be expected for any other future interim or annual period.

Principles of Consolidation

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

Reclassification

Within the condensed consolidated financial statements certain immaterial amounts have been reclassified to conform with current period presentation. We reclassified Restricted cash of $145 and $72 from an individual line item on the condensed consolidated balance sheets at June 30, 2024 and December 31, 2023, respectively, to Prepaid expenses and other current assets to conform with the current period presentation.

Use of Estimates

The preparation of the 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 we have 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 $39 and $68 as of June 30, 2024 and December 31, 2023, respectively. The activity in the allowance for doubtful accounts was immaterial for the three and six months ended June 30, 2024 and 2023.

Other Receivables

Other receivables consisted of the following for the periods presented:


	As of
	June 30, 2024		December 31, 2023
Construction receivable	$	7,097	$	6,480
Income tax receivable		1,500		3,051
Insurance receivable		4,118		3,686
Employee retention credit receivable		5,189		-
Other		1,539		1,497
Total other receivables		19,443		14,714

Inventory, Net

Inventory consisted of the following for the periods presented:


	As of
	June 30, 2024			December 31, 2023
Chemical washing solutions	$	5,979		$	9,135
Reserve for obsolescence		(120	)		(183	)
Total inventory, net	$	5,859		$	8,952

The activity in the reserve for obsolescence was immaterial for the three and six months ended June 30, 2024 and 2023.

Revenue Recognition

The following table summarizes the composition of our net revenues for the periods presented:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Recognized over time	$	184,082	$	164,733	$	360,341	$	321,624
Recognized at a point in time		70,861		72,029		133,707		140,999
Other revenue		100		132		178		231
Net revenues	$	255,043	$	236,894	$	494,226	$	462,854

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 June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Numerator:
Net income	$	22,091	$	27,132	$	38,728	$	48,268

Denominator:
Weighted-average common shares outstanding - basic		319,415,156		309,314,858		317,626,972		308,308,972
Effect of potentially dilutive securities:
Stock options		7,509,205		18,363,467		10,097,192		19,081,022
Restricted stock units		1,399,443		603,008		1,428,419		550,611
Employee stock purchase plan		1,331		2,020		16,057		10,794
Weighted-average common shares outstanding - diluted		328,325,135		328,283,353		329,168,640		327,951,399

Net income per share - basic	$	0.07	$	0.09	$	0.12	$	0.16
Net income per share - diluted	$	0.07	$	0.08	$	0.12	$	0.15

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 June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Stock options		4,153,264		3,555,410		3,909,744		3,116,583
Restricted stock units		1,336,924		235,216		668,462		295,808
Employee stock purchase plan		95,582		88,163		49,358		45,891

Employee Retention Credit

In response to the COVID-19 pandemic, the Employee Retention Credit (“ERC”), was established under the Coronavirus Aid, Relief, and Economic Security Act. The ERC is a refundable tax credit against certain employment taxes equal to 50% of the qualified wages an eligible employer paid to employees from March 13, 2020 to December 31, 2020. Companies who meet the eligibility requirements can claim the ERC on an original or adjusted employment tax return for a period within those dates.

In March 2024, we determined that we qualify for $5,189 in relief for the period from March 13, 2020 to December 31, 2020. Upon receipt of the credit, we will owe $526 in tax advisory costs associated with the assessment of the tax credit. This amount was expensed within General and administrative expenses in the amount of $0 and $526 during the three and six months ended June 30, 2024. As there is no authoritative guidance under U.S. GAAP for government assistance to for-profit business entities, the Company accounts for the ERC by analogy to International Accounting Standards 20, or IAS 20, Accounting for Government Grants and Disclosure of Government Assistance. In accordance with IAS 20, management determined it has reasonable assurance of receipt of the identified ERC amount and recorded the credit in the amount of $0 and $5,189 in Other income on our condensed consolidated statements of operations during the three and six months ended June 30, 2024, respectively. A corresponding accrual of the tax credit receivable was recorded under Other receivables on our condensed consolidated balance sheet as of June 30, 2024.

Recent Accounting Pronouncements

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which focuses on the rate reconciliation and income taxes paid. ASU No. 2023-09 requires a public business entity (PBE) to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. For PBEs, the new standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. An entity may apply the amendments in this ASU prospectively by providing the revised disclosures for the period ending December 31, 2025 and continuing to provide the pre-ASU disclosures for the prior periods, or may apply the amendments retrospectively by providing the revised disclosures for all periods presented. The adoption of this ASU is not expected to have a material impact on our consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires enhanced disclosures regarding significant segment expenses and other segment items for public entities on both an annual and interim basis. Specifically, the update requires that entities provide, during interim periods, all disclosures related to a reportable segment's profit or loss and assets that were previously required only on an annual basis. Additionally, this guidance necessitates the disclosure of the title and position of the Chief Operating Decision Maker ("CODM"). The new guidance does not modify how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments. This update is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years starting after December 15, 2024. This ASU must be applied retrospectively to all prior periods presented. Early adoption is permitted. We are currently evaluating the impact this ASU may have on our consolidated financial statements.

4. Other Intangible Assets, Net

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


	June 30, 2024				December 31, 2023
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Trade names and Trademarks	$	107,000	$	-	$	107,000		-
CPC Unity System		42,900		42,185		42,900		40,040
Customer relationships		9,700		6,640		9,700		6,430
Covenants not to compete		13,230		9,620		13,230		8,693
Other intangible assets, net	$	172,830	$	58,445	$	172,830	$	55,163

For the three months ended June 30, 2024 and 2023, amortization expense associated with our finite-lived intangible assets was $1,638 and $1,706, respectively. For the six months ended June 30, 2024 and 2023, amortization expense associated with our finite-lived intangible assets was $3,282 and $3,383, respectively.

As of June 30, 2024, estimated future amortization expense was as follows:


Fiscal Year Ending:
2024 (remaining six months)	$	1,733
2025		1,827
2026		1,585
2027		741
2028		462
Thereafter		1,037
Total estimated future amortization expense	$	7,385


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)


		Page
	FORWARD-LOOKING STATEMENTS	2

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	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	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	32

Signatures		33


	As of
(Amounts in thousands, except share and per share data)	June 30, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	3,609	$	19,047
Accounts receivable, net		8,525		6,304
Other receivables		19,443		14,714
Inventory, net		5,859		8,952
Prepaid expenses and other current assets		13,220		11,877
Total current assets		50,656		60,894

Property and equipment, net		816,429		725,121
Operating lease right of use assets, net		844,564		833,547
Other intangible assets, net		114,385		117,667
Goodwill		1,134,734		1,134,734
Other assets		12,378		9,573
Total assets	$	2,973,146	$	2,881,536

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	40,103	$	33,641
Accrued payroll and related expenses		21,105		19,771
Other accrued expenses		27,858		38,738
Current maturities of long-term debt		9,250		–
Current maturities of operating lease liability		46,091		43,979
Current maturities of finance lease liability		787		746
Deferred revenue		34,756		32,686
Total current liabilities		179,950		169,561

Long-term portion of debt, net		919,224		897,424
Operating lease liability		814,905		809,409
Financing lease liability		13,630		14,033
Deferred tax liability		91,560		71,657
Other long-term liabilities		4,477		4,417
Total liabilities		2,023,746		1,966,501

Stockholders’ equity:
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 321,395,188 and 315,192,401 shares outstanding as of June 30, 2024 and December 31, 2023, respectively		3,220		3,157
Additional paid-in capital		812,845		817,271
Retained earnings		133,335		94,607
Total stockholders’ equity		949,400		915,035
Total liabilities and stockholders’ equity	$	2,973,146	$	2,881,536


	Three Months Ended June 30,					Six Months Ended June 30,
	2024		2023			2024			2023
Net revenues	$	255,043	$	236,894		$	494,226		$	462,854
Cost of labor and chemicals		72,691		70,824			144,349			137,616
Other store operating expenses		99,543		90,337			196,346			179,803
General and administrative		24,912		27,829			54,622			52,012
(Gain) loss on sale of assets, net		2,897		(4,728	)		1,364			(4,791	)
Total costs and expenses		200,043		184,262			396,681			364,640
Operating income		55,000		52,632			97,545			98,214

Other (income) expense:
Interest expense, net		20,254		18,295			40,278			36,043
Loss on extinguishment of debt		-		-			1,882			-
Other income		-		-			(5,189	)		-
Total other expense, net		20,254		18,295			36,971			36,043
Income before taxes		34,746		34,337			60,574			62,171
Income tax provision		12,655		7,205			21,846			13,903
Net income	$	22,091	$	27,132		$	38,728		$	48,268

Net income per share:
Basic	$	0.07	$	0.09		$	0.12		$	0.16
Diluted	$	0.07	$	0.08		$	0.12		$	0.15
Weighted-average common shares outstanding:
Basic		319,415,156		309,314,858			317,626,972			308,308,972
Diluted		328,325,135		328,283,353			329,168,640			327,951,399


	Six Months Ended June 30,
	2024			2023
Cash flows from operating activities:
Net income	$	38,728		$	48,268
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		39,856			33,819
Stock-based compensation expense		12,152			11,354
(Gain) loss on sale of assets, net		1,364			(4,791	)
Loss on extinguishment of debt		1,882			-
Amortization of debt issuance costs		713			842
Non-cash lease expense		24,037			21,838
Deferred income tax		19,903			11,058
Changes in assets and liabilities:
Accounts receivable, net		(2,222	)		1,145
Other receivables		(5,846	)		(2,219	)
Inventory, net		3,093			905
Prepaid expenses and other current assets		(1,267	)		133
Accounts payable		3,251			5,593
Accrued expenses		3,022			6,525
Deferred revenue		2,070			2,966
Operating lease liability		(21,025	)		(19,591	)
Other noncurrent assets and liabilities		(829	)		(723	)
Net cash provided by operating activities		118,882			117,122

Cash flows from investing activities:
Purchases of property and equipment		(163,096	)		(127,868	)
Acquisition of car wash operations, net of cash acquired		-			(4,985	)
Proceeds from sale of property and equipment		18,454			82,622
Net cash used in investing activities		(144,642	)		(50,231	)

Cash flows from financing activities:
Proceeds from issuance of common stock under employee plans		2,773			4,444
Payments of tax withholding on option exercises		(19,290	)		-
Proceeds from debt borrowings		925,000			-
Proceeds from revolving line of credit		92,000			-
Payments on debt borrowings		(901,201	)		-
Payments on revolving line of credit		(84,000	)		-
Payments of deferred financing costs		(4,525	)		-
Principal payments on finance lease obligations		(362	)		(324	)
Net cash provided by financing activities		10,395			4,120

Net change in cash and cash equivalents and restricted cash during period		(15,365	)		71,011
Cash and cash equivalents and restricted cash at beginning of period		19,119			65,222
Cash and cash equivalents and restricted cash at end of period	$	3,754		$	136,233

Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets
Cash and cash equivalents		3,609			136,095
Restricted cash, included in prepaid expenses and other current assets		145			138
Total cash, cash equivalents, and restricted cash	$	3,754		$	136,233

Supplemental disclosure of cash flow information:
Cash paid for interest	$	39,646		$	30,281
Cash paid for income taxes	$	2,181		$	1,500

Supplemental disclosure of non-cash investing and financing activities:
Property and equipment in accounts payable	$	21,119		$	14,686
Property and equipment in other accrued expenses	$	-		$	29,718
Proceeds from sale of property and equipment in other receivables	$	-		$	4,149
Payment of debt financing costs in other accrued expenses	$	735		$	-
Stock option exercise proceeds in other receivables	$	-		$	172


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


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


	Common Stock						Additional Paid-in Capital			Retained Earnings		Stockholders’ Equity
	Shares			Amount
Balance as of December 31, 2023		315,192,401		$	3,157		$	817,271		$	94,607	$	915,035
Stock-based compensation expense		—			—			6,246			—		6,246
Vesting of restricted stock units		139,409			1			(1	)		—		—
Exercise of stock options		4,116,291			42			704			—		746
Tax withholding on option exercises		(1,613,019	)		(16	)		(9,924	)		—		(9,940	)
Net income		—			—			—			16,637		16,637
Balance as of March 31, 2024		317,835,082		$	3,184		$	814,296		$	111,244	$	928,724
Stock-based compensation expense		—			—			5,906			—		5,906
Issuance of common stock under employee plans		232,136			2			1,411			—		1,413
Vesting of restricted stock units		1,114,106			11			(11	)		—		—
Exercise of stock options		3,599,539			36			625			—		661
Tax withholding on option exercises		(1,385,675	)		(13	)		(9,382	)		—		(9,395	)
Net income		—			—			—			22,091		22,091
Balance as of June 30, 2024		321,395,188		$	3,220		$	812,845		$	133,335	$	949,400


	As of
	June 30, 2024			December 31, 2023
Land	$	129,770		$	121,960
Buildings and improvements		312,646			263,468
Finance leases		16,604			16,604
Leasehold improvements		141,812			135,861
Vehicles and equipment		313,283			285,127
Furniture, fixtures and equipment		102,491			100,457
Construction in progress		100,534			75,639
Property and equipment, gross		1,117,140			999,116
Less: accumulated depreciation		(296,920	)		(270,706	)
Less: accumulated amortization - finance leases		(3,791	)		(3,289	)
Property and equipment, net	$	816,429		$	725,121