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

Quarterly report pursuant to Section 13 or 15(d)

Leases

Leases

3 Months Ended

Mar. 31, 2024

Leases [Abstract]

Leases

10. Leases

Balance sheet information related to leases consisted of the following for the periods presented:


		As of
	Classification	March 31, 2024		December 31, 2023
Assets
Operating	Operating right of use assets, net	$	836,528	$	833,547
Finance	Property and equipment, net		13,064		13,315
Total lease assets		$	849,592	$	846,862

Liabilities
Current
Operating	Current maturities of operating lease liability	$	44,850	$	43,979
Finance	Current maturities of finance lease liability		766		746
Long-term
Operating	Operating lease liability		810,783		809,409
Finance	Financing lease liability		13,833		14,033
Total lease liabilities		$	870,232	$	868,167

Components of total lease cost, net, consisted of the following for the periods presented:


	Three Months Ended March 31,
	2024		2023

Operating lease expense(a)	$	27,212	$	24,011
Finance lease expense
Amortization of lease assets		251		251
Interest on lease liabilities		264		276
Short-term lease expense		51		14
Variable lease expense(b)		7,264		6,703
Total	$	35,042	$	31,255

Operating lease expense includes an immaterial amount of sublease income and is included in other store operating expenses and general and administrative expenses in the accompanying condensed consolidated statements of operations.

Variable lease costs consist of property taxes, property insurance, and common area or other maintenance costs for our leases of land and buildings and is included in other store operating expenses in the accompanying condensed consolidated statements of operations.

The following includes supplemental information for the periods presented:


	Three Months Ended March 31,
	2024			2023
Operating cash flows from operating leases	$	26,517		$	23,766
Operating cash flows from finance leases	$	264		$	276
Financing cash flows from finance leases	$	180		$	161

Operating lease ROU assets obtained in exchange for lease liabilities	$	14,710		$	10,527

Weighted-average remaining operating lease term		13.76			13.95
Weighted-average remaining finance lease term		15.38			16.17

Weighted-average operating lease discount rate		8.11	%		7.43	%
Weighted-average finance lease discount rate		7.33	%		7.33	%

As of March 31, 2024, lease obligation maturities were as follows:


Fiscal Year Ending:	Operating Leases			Finance Leases
2024 (remaining nine months)	$	80,624		$	1,336
2025		108,557			1,786
2026		107,598			1,792
2027		103,836			1,819
2028		97,880			1,846
Thereafter		963,795			18,425
Total future minimum obligations	$	1,462,290		$	27,004
Less: Present value discount		(606,657	)		(12,405	)
Present value of net future minimum lease obligations	$	855,633		$	14,599
Less: current portion		(44,850	)		(766	)
Long-term obligations	$	810,783		$	13,833

Forward-Starting Leases

As of March 31, 2024, we entered into 13 leases that had not yet commenced related to build-to-suit arrangements for car wash locations. These leases will commence in years 2024 through 2026 with initial lease terms of 15 to 20 years.

As of December 31, 2023, we entered into 14 leases that had not yet commenced related to build-to-suit arrangements for car wash locations. These leases will commence in years 2024 through 2026 with initial lease terms of 15 to 20 years.

Sale-Leaseback Transactions

During the three months ended March 31, 2024, we completed one sale-leaseback transaction related to one car wash location with aggregate consideration of $4,900, resulting in a net gain of $1,697, which is included in Gain on sale of assets in the accompanying condensed consolidated statements of operations. Contemporaneously with the closing of the sale, we entered into a lease agreement for the property for an initial 20-year term. For the sale-leaseback transaction consummated in the three months ended March 31, 2024, the cumulative initial annual rent for the property was approximately $306, subject to annual escalations. This lease is accounted for as an operating lease.

During the three months ended March 31, 2023, we completed two sale-leaseback transactions related to car wash locations with aggregate consideration of $9,213, resulting in a net gain of $370, which are included in Gain on sale of assets in the accompanying condensed consolidated statements of operations. Contemporaneously with the closing of the

sales, we entered into lease agreements for the properties for initial 20-year terms. For the sale-leaseback transactions consummated in the three months ended March 31, 2023, the cumulative initial annual rent for the properties was approximately $559, subject to annual escalations. These leases are accounted for as operating leases.