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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, 2024

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 October 30, 2024, the registrant had 322,249,966 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)

 

Consolidated Balance Sheets

3

Consolidated Statements of Operations

4

 

Consolidated Statements of Cash Flows

5

Consolidated Statements of Stockholders' Equity

6

Notes to Consolidated Financial Statements

7

Item 2.

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

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

29

Item 4.

Controls and Procedures

29

 

 

 

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings

30

Item 1A.

Risk Factors

30

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

30

Item 3.

Defaults Upon Senior Securities

30

Item 4.

Mine Safety Disclosures

30

Item 5.

Other Information

30

Item 6.

Exhibits

31

 

 

Signatures

32

 

1


 

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 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,” or “should,” 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:

An overall decline in the health of the economy and other factors impacting consumer spending, such as natural disasters, the occurrence of a recession, inflation and worsening in economic conditions may affect consumer purchases and reduce demand for our services.
Our ability to attract new customers, retain existing customers and maintain or grow the number of Unlimited Wash Club ® (“UWC”) Members.
If we are unable to compete successfully against other companies and operators in our industry, including our ability to acquire, open and operate new locations in a timely and cost-effective manner, we may lose customers and market share and our revenues may decline.
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.
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 key or sufficient qualified personnel or increases in 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, including environmental, and changes in such laws and regulations, or failure to comply with existing or future laws and regulations, could adversely affect our business.
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.
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. 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


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

 

Mister Car Wash, Inc.

Consolidated Balance Sheets

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

(Unaudited)

 

 

As of

 

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

September 30, 2024

 

 

December 31, 2023

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

16,478

 

 

$

19,047

 

Accounts receivable, net

 

2,835

 

 

 

6,304

 

Other receivables

 

15,422

 

 

 

14,714

 

Inventory, net

 

5,491

 

 

 

8,952

 

Prepaid expenses and other current assets

 

12,559

 

 

 

11,877

 

Total current assets

 

52,785

 

 

 

60,894

 

 

 

 

 

 

 

Property and equipment, net

 

870,903

 

 

 

725,121

 

Operating lease right of use assets, net

 

857,861

 

 

 

833,547

 

Other intangible assets, net

 

113,139

 

 

 

117,667

 

Goodwill

 

1,134,734

 

 

 

1,134,734

 

Other assets

 

16,450

 

 

 

9,573

 

Total assets

$

3,045,872

 

 

$

2,881,536

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

44,715

 

 

$

33,641

 

Accrued payroll and related expenses

 

30,265

 

 

 

19,771

 

Other accrued expenses

 

26,793

 

 

 

38,738

 

Current maturities of long-term debt

 

9,250

 

 

 

 

Current maturities of operating lease liability

 

47,195

 

 

 

43,979

 

Current maturities of finance lease liability

 

811

 

 

 

746

 

Deferred revenue

 

34,639

 

 

 

32,686

 

Total current liabilities

 

193,668

 

 

 

169,561

 

 

 

 

 

 

 

Long-term portion of debt, net

 

931,046

 

 

 

897,424

 

Operating lease liability

 

826,213

 

 

 

809,409

 

Financing lease liability

 

13,473

 

 

 

14,033

 

Deferred tax liability

 

97,499

 

 

 

71,657

 

Other long-term liabilities

 

4,570

 

 

 

4,417

 

Total liabilities

 

2,066,469

 

 

 

1,966,501

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock, $0.01 par value, 1,000,000,000 shares authorized, 322,239,140 and 315,192,401 shares outstanding as of September 30, 2024 and December 31, 2023, respectively

 

3,228

 

 

 

3,157

 

Additional paid-in capital

 

820,498

 

 

 

817,271

 

Retained earnings

 

155,677

 

 

 

94,607

 

Total stockholders’ equity

 

979,403

 

 

 

915,035

 

Total liabilities and stockholders’ equity

$

3,045,872

 

 

$

2,881,536

 

See accompanying notes to consolidated financial statements.

3


 

Mister Car Wash, Inc.

Consolidated Statements of Operations

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

(Unaudited)

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net revenues

$

249,329

 

 

$

234,076

 

 

$

743,555

 

 

$

696,930

 

Cost of labor and chemicals

 

73,617

 

 

 

72,760

 

 

 

217,966

 

 

 

210,376

 

Other store operating expenses

 

102,607

 

 

 

90,514

 

 

 

298,953

 

 

 

270,317

 

General and administrative

 

25,436

 

 

 

26,426

 

 

 

80,058

 

 

 

78,438

 

(Gain) loss on sale of assets, net

 

(1,916

)

 

 

1,321

 

 

 

(552

)

 

 

(3,470

)

Total costs and expenses

 

199,744

 

 

 

191,021

 

 

 

596,425

 

 

 

555,661

 

   Operating income

 

49,585

 

 

 

43,055

 

 

 

147,130

 

 

 

141,269

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (income) expense:

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

20,653

 

 

 

19,100

 

 

 

60,931

 

 

 

55,143

 

Loss on extinguishment of debt

 

-

 

 

 

-

 

 

 

1,882

 

 

 

-

 

Other income

 

-

 

 

 

-

 

 

 

(5,189

)

 

 

-

 

Total other expense, net

 

20,653

 

 

 

19,100

 

 

 

57,624

 

 

 

55,143

 

Income before taxes

 

28,932

 

 

 

23,955

 

 

 

89,506

 

 

 

86,126

 

Income tax provision

 

6,590

 

 

 

4,470

 

 

 

28,436

 

 

 

18,373

 

Net income

$

22,342

 

 

$

19,485

 

 

$

61,070

 

 

$

67,753

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

     Basic

$

0.07

 

 

$

0.06

 

 

$

0.19

 

 

$

0.22

 

     Diluted

$

0.07

 

 

$

0.06

 

 

$

0.19

 

 

$

0.21

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

     Basic

 

321,917,525

 

 

 

312,883,586

 

 

 

319,067,596

 

 

 

309,850,600

 

     Diluted

 

329,299,326

 

 

 

328,844,569

 

 

 

329,222,641

 

 

 

328,265,878

 

See accompanying notes to consolidated financial statements.

 

4


 

Mister Car Wash, Inc.

Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)

 

Nine Months Ended September 30,

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

Net income

$

61,070

 

 

$

67,753

 

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

 

 

 

 

 

Depreciation and amortization expense

 

61,038

 

 

 

51,418

 

Stock-based compensation expense

 

18,843

 

 

 

17,643

 

Gain on sale of assets, net

 

(552

)

 

 

(3,470

)

Loss on extinguishment of debt

 

1,882

 

 

 

-

 

Amortization of debt issuance costs

 

961

 

 

 

1,270

 

Non-cash lease expense

 

36,557

 

 

 

33,337

 

Deferred income tax

 

25,842

 

 

 

14,748

 

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable, net

 

3,469

 

 

 

(1,874

)

Other receivables

 

(7,012

)

 

 

212

 

Inventory, net

 

3,461

 

 

 

88

 

Prepaid expenses and other current assets

 

(605

)

 

 

(408

)

Accounts payable

 

11,629

 

 

 

3,777

 

Accrued expenses

 

11,850

 

 

 

8,170

 

Deferred revenue

 

1,954

 

 

 

3,288

 

Operating lease liability

 

(31,811

)

 

 

(29,689

)

Other noncurrent assets and liabilities

 

264

 

 

 

(777

)

Net cash provided by operating activities

 

198,840

 

 

 

165,486

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(259,896

)

 

 

(218,692

)

Acquisition of car wash operations, net of cash acquired

 

-

 

 

 

(51,890

)

Proceeds from sale of property and equipment

 

36,431

 

 

 

96,930

 

Net cash used in investing activities

 

(223,465

)

 

 

(173,652

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from issuance of common stock under employee plans

 

3,742

 

 

 

6,176

 

Payments of tax withholding on option exercises

 

(19,290

)

 

 

-

 

Proceeds from debt borrowings

 

925,000

 

 

 

-

 

Proceeds from revolving line of credit

 

186,000

 

 

 

-

 

Payments on debt borrowings

 

(903,513

)

 

 

-

 

Payments on revolving line of credit

 

(164,000

)

 

 

-

 

Payments of deferred financing costs

 

(5,257

)

 

 

-

 

Principal payments on finance lease obligations

 

(552

)

 

 

(492

)

Other financing activities

 

-

 

 

 

(500

)

Net cash provided by financing activities

 

22,130

 

 

 

5,184

 

 

 

 

 

 

 

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

 

(2,495

)

 

 

(2,982

)

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

$

16,624

 

 

$

62,240

 

 

 

 

 

 

 

Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets

 

Cash and cash equivalents

 

16,478

 

 

 

62,133

 

Restricted cash, included in prepaid expenses and other current assets

 

146

 

 

 

107

 

Total cash, cash equivalents, and restricted cash

$

16,624

 

 

$

62,240

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

Cash paid for interest

$

60,436

 

 

$

56,164

 

Cash paid for income taxes

$

2,267

 

 

$

2,409

 

 

 

 

 

 

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

Property and equipment in accounts payable

$

17,352

 

 

$

15,167

 

Property and equipment in other accrued expenses

$

-

 

 

$

16,439

 

Stock option exercise proceeds in other receivables

$

1

 

 

$

17

 

See accompanying notes to consolidated financial statements.

5


 

Mister Car Wash, Inc.

Consolidated Statements of Stockholders’ Equity

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

(Unaudited)

 

Nine Months Ended September 30, 2024

 

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

 

Stock-based compensation expense

 

-

 

 

 

-

 

 

 

6,691

 

 

 

-

 

 

 

6,691

 

Exercise of stock options

 

843,952

 

 

 

8

 

 

 

962

 

 

 

-

 

 

 

970

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

22,342

 

 

 

22,342

 

Balance as of September 30, 2024

 

322,239,140

 

 

$

3,228

 

 

$

820,498

 

 

$

155,677

 

 

$

979,403

 

 

 

 

 

Nine Months Ended September 30, 2023

 

Common Stock

 

 

Additional Paid-in Capital

 

 

Retained Earnings

 

 

Stockholders’ Equity

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2022

 

306,626,530

 

 

$

3,072

 

 

$

783,579

 

 

$

14,477

 

 

$

801,128

 

Stock-based compensation expense

 

-

 

 

 

-

 

 

 

5,361

 

 

 

-

 

 

 

5,361

 

Vesting of restricted stock units

 

4,296

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Exercise of stock options

 

1,471,021

 

 

 

15

 

 

 

1,101

 

 

 

-

 

 

 

1,116

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

21,136

 

 

 

21,136

 

Balance as of March 31, 2023

 

308,101,847

 

 

$

3,087

 

 

$

790,041

 

 

$

35,613

 

 

$

828,741

 

Stock-based compensation expense

 

-

 

 

 

-

 

 

 

5,993

 

 

 

-

 

 

 

5,993

 

Issuance of common stock under employee plans

 

207,042

 

 

 

2

 

 

 

1,591

 

 

 

-

 

 

 

1,593

 

Vesting of restricted stock units

 

634,069

 

 

 

6

 

 

 

(6

)

 

 

-

 

 

 

-

 

Exercise of stock options

 

2,815,372

 

 

 

28

 

 

 

1,879

 

 

 

-

 

 

 

1,907

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

27,132

 

 

 

27,132

 

Balance as of June 30, 2023

 

311,758,330

 

 

$

3,123

 

 

$

799,498

 

 

$

62,745

 

 

$

865,366

 

Stock-based compensation expense

 

-

 

 

 

-

 

 

 

6,289

 

 

 

-

 

 

 

6,289

 

Exercise of stock options

 

2,212,411

 

 

 

22

 

 

 

1,555

 

 

 

-

 

 

 

1,577

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

19,485

 

 

 

19,485

 

Balance as of September 30, 2023

 

313,970,741

 

 

$

3,145

 

 

$

807,342

 

 

$

82,230

 

 

$

892,717

 

See accompanying notes to consolidated financial statements.

 

6


 

Mister Car Wash, Inc.

Notes to Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

(Unaudited)

 

1. Nature of Business

Mister Car Wash, Inc., a Delaware corporation, together with its subsidiaries (collectively, “we,” “us,” “our” or the Company), is based in Tucson, Arizona and is a provider of conveyorized car wash services. We primarily operate Express Exterior Locations, which offer express exterior cleaning services along with free vacuum services, and interior cleaning services at select locations. As of September 30, 2024, we operated 501 car washes in 21 states.

 

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements as of September 30, 2024 and for the three and nine months ended September 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 omitted pursuant to such rules and regulations. These 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 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 consolidated financial statements contain all adjustments which are necessary for a fair presentation of our consolidated financial position as of September 30, 2024, consolidated results of operations for the three and nine months ended September 30, 2024 and 2023, and consolidated cash flows for the nine months ended September 30, 2024 and 2023. Such adjustments are of a normal and recurring nature. The consolidated results of operations for the three and nine months ended September 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 consolidated financial statements include the accounts of the Company. All material intercompany balances and transactions have been eliminated in consolidation.

Reclassification

Within the consolidated financial statements certain immaterial amounts have been reclassified to conform with current period presentation. We reclassified Restricted cash of $146 and $72 from an individual line item on the consolidated balance sheets at September 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 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 $95 and $68 as of September 30, 2024 and December 31, 2023, respectively. The activity in the allowance for doubtful accounts was immaterial for the three and nine months ended September 30, 2024 and 2023.

7


 

Other Receivables

Other receivables consisted of the following for the periods presented:

 

As of

 

September 30, 2024

 

 

December 31, 2023

 

Construction receivable

$

7,660

 

 

$

6,480

 

Income tax receivable

 

1,046

 

 

 

3,051

 

Insurance receivable

 

3,634

 

 

 

3,686

 

Other

 

3,082

 

 

 

1,497

 

    Total other receivables

$

15,422

 

 

$

14,714

 

Inventory, Net

Inventory consisted of the following for the periods presented:

 

As of

 

 

September 30, 2024

 

 

December 31, 2023

 

Chemical washing solutions

$

5,607

 

 

$

9,135

 

Reserve for obsolescence

 

(116

)

 

 

(183

)

    Total inventory, net

$

5,491

 

 

$

8,952

 

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

Revenue Recognition

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

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Recognized over time

$

184,725

 

 

$

167,670

 

 

$

545,066

 

 

$

489,294

 

Recognized at a point in time

 

64,441

 

 

 

66,320

 

 

 

198,148

 

 

 

207,319

 

Other revenue

 

163

 

 

 

86

 

 

 

341

 

 

 

317

 

    Net revenues

$

249,329

 

 

$

234,076

 

 

$

743,555

 

 

$

696,930

 

Earnings Per Share

Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted earnings 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 earnings per share if their effect is antidilutive. Reconciliations of the numerators and denominators of the basic and diluted earnings per share calculations for the periods presented are as follows:

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

Net income

$

22,342

 

 

$

19,485

 

 

$

61,070

 

 

$

67,753

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

   Weighted-average common shares outstanding - basic

 

321,917,525

 

 

 

312,883,586

 

 

 

319,067,596

 

 

 

309,850,600

 

   Effect of potentially dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

       Stock options

 

5,562,479

 

 

 

15,573,984

 

 

 

8,585,621

 

 

 

17,912,009

 

       Restricted stock units

 

1,763,531

 

 

 

289,840

 

 

 

1,540,123

 

 

 

463,687

 

       Employee stock purchase plan

 

55,791

 

 

 

97,159

 

 

 

29,301

 

 

 

39,582

 

   Weighted-average common shares outstanding - diluted

 

329,299,326

 

 

 

328,844,569

 

 

 

329,222,641

 

 

 

328,265,878

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share - basic

$

0.07

 

 

$

0.06

 

 

$

0.19

 

 

$

0.22

 

Earnings per share - diluted

$

0.07

 

 

$

0.06

 

 

$

0.19

 

 

$

0.21

 

 

8


 

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

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Stock options

 

5,209,783

 

 

 

3,798,034

 

 

 

4,343,090

 

 

 

3,343,733

 

Restricted stock units

 

-

 

 

 

8,049

 

 

 

445,641

 

 

 

199,888

 

Employee stock purchase plan

 

-

 

 

 

-

 

 

 

32,905

 

 

 

30,594

 

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 nine months ended September 30, 2024, respectively. 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 consolidated statements of operations during the three and nine months ended September 30, 2024, respectively. A corresponding accrual of the tax credit receivable was recorded under Other assets on our consolidated balance sheet as of September 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. The adoption of this ASU is not expected to have a material impact on our consolidated financial statements.

9


 

3. Property and Equipment, Net

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

 

As of

 

 

September 30, 2024

 

 

December 31, 2023

 

Land

$

140,461

 

 

$

121,960

 

Buildings and improvements

 

341,545

 

 

 

263,468

 

Finance leases

 

16,661

 

 

 

16,604

 

Leasehold improvements

 

147,506

 

 

 

135,861

 

Vehicles and equipment

 

324,735

 

 

 

285,127

 

Furniture, fixtures and equipment

 

102,595

 

 

 

100,457

 

Construction in progress

 

110,411

 

 

 

75,639

 

Property and equipment, gross

 

1,183,914

 

 

 

999,116

 

Less: accumulated depreciation

 

(308,966

)

 

 

(270,706

)

Less: accumulated amortization - finance leases

 

(4,045

)

 

 

(3,289

)

Property and equipment, net

$

870,903

 

 

$

725,121

 

For the three months ended September 30, 2024 and 2023, depreciation expense was $19,682 and $15,633, respectively. For the nine months ended September 30, 2024 and 2023, depreciation expense was $55,754 and $45,567, respectively.

For the three months ended September 30, 2024 and 2023, amortization expense on finance leases was $254 and $251, respectively. For the nine months ended September 30, 2024 and 2023, amortization expense on finance leases was $756 and $753, respectively.

4. Other Intangible Assets, Net

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

 

 

September 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

 

 

 

42,900

 

 

 

42,900

 

 

 

40,040

 

Customer relationships

 

9,700

 

 

 

6,745

 

 

 

9,700

 

 

 

6,430

 

Covenants not to compete

 

13,230

 

 

 

10,046

 

 

 

13,230

 

 

 

8,693

 

Other intangible assets, net

$

172,830

 

 

$

59,691

 

 

$

172,830

 

 

$

55,163

 

For the three months ended September 30, 2024 and 2023, amortization expense associated with our finite-lived intangible assets was $1,246 and $1,715, respectively. For the nine months ended September 30, 2024 and 2023, amortization expense associated with our finite-lived intangible assets was $4,528 and $5,098, respectively.

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

 

Fiscal Year Ending:

 

 

 

 

2024 (remaining three months)

 

 

$

475

 

2025

 

 

 

1,827

 

2026

 

 

 

1,585

 

2027

 

 

 

741

 

2028

 

 

 

501

 

Thereafter

 

 

 

1,010

 

Total estimated future amortization expense

 

 

$

6,139

 

 

5. Goodwill

Goodwill consisted of the following for the periods presented:

 

 

As of

 

 

September 30, 2024

 

 

December 31, 2023

 

Balance at beginning of period

$

1,134,734

 

 

$

1,109,815

 

   Current period acquisitions

 

-