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)

6 Months Ended

Jun. 30, 2024

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

Reclassification

Within the condensed consolidated financial statements certain immaterial amounts have been reclassified to conform with current period presentation. We reclassified Restricted cash of $145 and $72 from an individual line item on the condensed consolidated balance sheets at June 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 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 $39 and $68 as of June 30, 2024 and December 31, 2023, respectively. The activity in the allowance for doubtful accounts was immaterial for the three and six months ended June 30, 2024 and 2023.

Other Receivables

Other receivables consisted of the following for the periods presented:


	As of
	June 30, 2024		December 31, 2023
Construction receivable	$	7,097	$	6,480
Income tax receivable		1,500		3,051
Insurance receivable		4,118		3,686
Employee retention credit receivable		5,189		-
Other		1,539		1,497
Total other receivables		19,443		14,714

Inventory, Net

Inventory consisted of the following for the periods presented:


	As of
	June 30, 2024			December 31, 2023
Chemical washing solutions	$	5,979		$	9,135
Reserve for obsolescence		(120	)		(183	)
Total inventory, net	$	5,859		$	8,952

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

Revenue Recognition

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Recognized over time	$	184,082	$	164,733	$	360,341	$	321,624
Recognized at a point in time		70,861		72,029		133,707		140,999
Other revenue		100		132		178		231
Net revenues	$	255,043	$	236,894	$	494,226	$	462,854

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 June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Numerator:
Net income	$	22,091	$	27,132	$	38,728	$	48,268

Denominator:
Weighted-average common shares outstanding - basic		319,415,156		309,314,858		317,626,972		308,308,972
Effect of potentially dilutive securities:
Stock options		7,509,205		18,363,467		10,097,192		19,081,022
Restricted stock units		1,399,443		603,008		1,428,419		550,611
Employee stock purchase plan		1,331		2,020		16,057		10,794
Weighted-average common shares outstanding - diluted		328,325,135		328,283,353		329,168,640		327,951,399

Net income per share - basic	$	0.07	$	0.09	$	0.12	$	0.16
Net income per share - diluted	$	0.07	$	0.08	$	0.12	$	0.15

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 June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Stock options		4,153,264		3,555,410		3,909,744		3,116,583
Restricted stock units		1,336,924		235,216		668,462		295,808
Employee stock purchase plan		95,582		88,163		49,358		45,891

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 six months ended June 30, 2024. 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 condensed consolidated statements of operations during the three and six months ended June 30, 2024, respectively. A corresponding accrual of the tax credit receivable was recorded under Other receivables on our condensed consolidated balance sheet as of June 30, 2024.

Recently Adopted Accounting Pronouncements

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. We are currently evaluating the impact this ASU may have on our consolidated financial statements.