Mister Car Wash Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Leases

Leases

12 Months Ended

Dec. 31, 2024

12. Leases

Our incremental borrowing rate for a lease is the rate of interest we expect to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. To determine the incremental borrowing rates used to discount the lease payments, we estimated our synthetic credit rating and utilized market data for similarly situated companies.

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


		As of
	Classification	December 31, 2024		December 31, 2023
Assets
Operating	Operating right of use assets, net	$	924,896	$	833,547
Finance	Property and equipment, net		12,344		13,315
Total lease assets		$	937,240	$	846,862

Liabilities
Current:
Operating	Current maturities of operating lease liability	$	48,986	$	43,979
Finance	Current maturities of finance lease liability		804		746
Long-term:
Operating	Operating lease liability		890,613		809,409
Finance	Financing lease liability		13,262		14,033
Total lease liabilities		$	953,665	$	868,167

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


	Year Ended December 31,
	2024		2023
Operating lease expense(a)	$	112,647	$	102,422
Finance lease expense:
Amortization of lease assets		1,006		1,005
Interest on lease liabilities		1,036		1,087
Short-term lease expense		203		52
Variable lease expense(b)		22,185		18,141
Total lease expense	$	137,077	$	122,707

(a)

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 consolidated statements of operations.

(b)

Variable lease costs consist primarily 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 consolidated statements of operations.

The following includes supplemental information for the periods presented:


	Year Ended December 31,
	2024			2023
Operating cash flows from operating leases	$	108,492		$	100,586
Operating cash flows from finance leases	$	1,036		$	1,087
Financing cash flows from finance leases	$	748		$	668

Operating lease ROU assets obtained in exchange for lease liabilities	$	141,139		$	101,861
Finance lease ROU assets obtained in exchange for lease liabilities	$	57		$	—

Weighted-average remaining operating lease term		13.94			13.86
Weighted-average remaining finance lease term		14.80			15.57

Weighted-average operating lease discount rate		8.10	%		8.06	%
Weighted-average finance lease discount rate		7.33	%		7.33	%

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


Fiscal Year Ending:	Operating Leases			Finance Leases
2025	$	119,215		$	1,783
2026		118,855			1,809
2027		115,219			1,835
2028		109,052			1,856
2029		108,701			1,575
Thereafter		1,047,969			16,850
Total future minimum obligations	$	1,619,011		$	25,708
Present value discount		(679,412	)		(11,642	)
Present value of net future minimum lease obligations	$	939,599		$	14,066
Current portion		(48,986	)		(804	)
Long-term obligations	$	890,613		$	13,262

Forward Starting Leases

As of December 31, 2024, we entered into 10 leases that had not yet commenced related to build-to-suit arrangements for car wash locations. These leases will commence in years 2025 through 2027 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 year ended December 31, 2024, we completed 29 sale-leaseback transactions related to car wash locations with aggregate consideration of $134,912 resulting in net losses of $8,862, which is included in (gain) loss on sale of assets, net in the 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 for the year ended December 31, 2024, the cumulative initial annual rents for the properties were approximately $8,887, subject to annual escalations. These leases are accounted for as operating leases.

During the year ended December 31, 2023, we completed 19 sale-leaseback transactions related to car wash locations with aggregate consideration of $123,528, resulting in net gains of $1,074, which is included in (gain) loss

on sale of assets, net in the consolidated statements of operations. Contemporaneously with the closing of the sales, we entered into lease agreements for the properties for initial 15- to 20-year terms. For the sale-leaseback transactions consummated for the year ended December 31, 2023, the cumulative initial annual rents for the properties were approximately $7,737, subject to annual escalations. These leases are accounted for as operating leases.