Mister Car Wash Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Summary of Significant Accounting Policies (Policies)

Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2023

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

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 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 $47 and $76 as of March 31, 2023 and December 31, 2022, respectively. The activity in the allowance for doubtful accounts was immaterial for the three months ended March 31, 2023 and 2022.

Other Receivables

Other receivables consisted of the following for the periods presented:


	As of
	March 31, 2023		December 31, 2022
Payroll tax withholding and exercise proceeds receivable	$	85	$	273
Construction receivable		6,462		6,199
Income tax receivable		3,353		4,387
Insurance receivable		1,759		2,627
Other		2,457		1,696
Total other receivables	$	14,116	$	15,182

Inventory, Net

Inventory consisted of the following for the periods presented:


	As of
	March 31, 2023			December 31, 2022
Chemical washing solutions	$	8,391		$	9,357
Reserve for obsolescence		(163	)		(183	)
Total inventory, net	$	8,228		$	9,174

The activity in the reserve for obsolescence was immaterial for the three months ended March 31, 2023 and 2022.

Revenue Recognition

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


	Three Months Ended March 31,
	2023		2022
Recognized over time	$	156,891	$	140,874
Recognized at a point in time		68,970		78,008
Other revenue		99		537
Net revenues	$	225,960	$	219,419

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,
	2023		2022
Numerator:
Net income	$	21,136	$	35,488

Denominator:
Weighted-average common shares outstanding - basic		307,291,909		300,931,453
Effect of potentially dilutive securities:
Stock options		19,798,577		27,010,017
Restricted stock units		498,213		1,230,967
Employee stock purchase plan		19,567		-
Weighted-average common shares outstanding - diluted		327,608,266		329,172,437

Net income per share - basic	$	0.07	$	0.12
Net income per share - diluted	$	0.06	$	0.11

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,
	2023		2022
Stock options		2,677,756		2,041,141
Restricted stock units		356,400		-
Employee stock purchase plan		3,619		-

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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. We adopted the new standard on January 1, 2023 and was

applied prospectively. We reviewed our business processes and controls to support the recognition and disclosure as required under the new standard. The adoption of this new standard did not have a material impact on our unaudited condensed consolidated financial statements.

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. This update requires 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 contracts. This update was effective for us as of January 1, 2023, and the adoption of this new standard did not have a material impact on our condensed consolidated financial statements and related disclosures.

- Definition

Disclosure of inventory accounting policy for inventory classes, including, but not limited to, basis for determining inventory amounts, methods by which amounts are added and removed from inventory classes, loss recognition on impairment of inventories, and situations in which inventories are stated above cost.

+ References + Details