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

Quarterly report pursuant to Section 13 or 15(d)

Leases

Leases

9 Months Ended

Sep. 30, 2024

Leases [Abstract]

Leases

10. Leases

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


		As of
	Classification	September 30, 2024		December 31, 2023
Assets
Operating	Operating right of use assets, net	$	857,861	$	833,547
Finance	Property and equipment, net		12,616		13,315
Total lease assets		$	870,477	$	846,862

Liabilities
Current
Operating	Current maturities of operating lease liability	$	47,195	$	43,979
Finance	Current maturities of finance lease liability		811		746
Long-term
Operating	Operating lease liability		826,213		809,409
Finance	Financing lease liability		13,473		14,033
Total lease liabilities		$	887,692	$	868,167

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023

Operating lease expense (a)	$	28,126	$	26,361	$	82,997	$	75,680
Finance lease expense
Amortization of lease assets		254		251		756		753
Interest on lease liabilities		258		271		782		820
Short-term lease expense		52		12		155		38
Variable lease expense (b)		3,548		2,949		13,568		11,765
Total	$	32,238	$	29,844	$	98,258	$	89,056

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.

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 consolidated statements of operations.

The following includes supplemental information for the periods presented:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Operating cash flows from operating leases	$	27,091		$	25,758		$	80,451		$	74,458
Operating cash flows from finance leases	$	258		$	271		$	782		$	820
Financing cash flows from finance leases	$	190		$	168		$	552		$	492

Operating lease right of use assets obtained in exchange for lease liabilities	$	25,821		$	27,365		$	60,768		$	86,420
Finance lease right of use assets obtained in exchange for lease liabilities	$	57		$	-		$	57		$	-

Weighted-average remaining operating lease term		13.63			13.97			13.63			13.97
Weighted-average remaining finance lease term		14.96			15.77			14.96			15.77

Weighted-average operating lease discount rate		8.09	%		7.98	%		8.09	%		7.98	%
Weighted-average finance lease discount rate		7.33	%		7.33	%		7.33	%		7.33	%

As of September 30, 2024, lease obligation maturities were as follows:


Fiscal Year Ending:	Operating Leases			Finance Leases
2024 (remaining three months)	$	27,723		$	454
2025		112,224			1,802
2026		111,383			1,809
2027		107,638			1,835
2028		101,494			1,856
Thereafter		1,025,386			18,424
Total future minimum obligations		1,485,848			26,180
Less: present value discount		(612,440	)		(11,896	)
Present value of net future minimum lease obligations		873,408			14,284
Less: current portion		(47,195	)		(811	)
Long-term obligations	$	826,213		$	13,473

Forward-Starting Leases

As of September 30, 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 September 30, 2024 and 2023, we completed four and two sale-leaseback transactions related to car wash locations, respectively, with aggregate consideration of $18,636 and $10,455, respectively, resulting in a net gain of $2,514 and a net loss of $373, respectively, which are included in (gain) loss on sale of assets in the accompanying 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 September 30, 2024 and 2023, the cumulative initial annual rent for the properties was approximately $1,239 and $640, respectively, subject to annual escalations. These leases are accounted for as operating leases.

During the nine months ended September 30, 2024 and 2023, we completed eight and 14 sale-leaseback transactions related to car wash locations, respectively, with aggregate consideration of $37,381 and $99,710, respectively, resulting in a net gain of $1,553 and $4,893, respectively, which are included in (gain) loss on sale of assets in the accompanying 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 nine months ended September 30, 2024 and 2023, the cumulative initial annual rent for the properties was approximately $2,426 and $6,227, respectively, subject to annual escalations. These leases are accounted for as operating leases.