10-Q 1 mcw-20220630.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40542

 

Mister Car Wash, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

47-1393909

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

222 E. 5th Street

Tucson, Arizona

85705

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (520) 615-4000

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, par value $0.01 per share

 

MCW

 

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

As of August 1, 2022, the registrant had 304,292,739 shares of common stock, $0.01 par value per share, outstanding.

 

 

 

 


 

Table of Contents

 

 

 

Page

 

FORWARD-LOOKING STATEMENTS

2

 

 

 

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

 

 

Condensed Consolidated Balance Sheets

3

 

Condensed Consolidated Statements of Operations and Comprehensive Income

4

 

Condensed Consolidated Statements of Cash Flows

5

 

Condensed Consolidated Statements of Stockholders' Equity

6

 

Notes to Condensed Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

34

Item 4.

Controls and Procedures

34

 

 

 

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

35

Item 1A.

Risk Factors

35

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

35

Item 3.

Defaults Upon Senior Securities

35

Item 4.

Mine Safety Disclosures

35

Item 5.

Other Information

35

Item 6.

Exhibits

36

 

 

Signatures

37

 

i


 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of present and historical facts contained in this Quarterly Report on Form 10-Q, including without limitation, statements regarding our future results of operations and financial position, business strategy and approach may be forward-looking. You can generally identify forward-looking statements by our use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “seek,” “vision,” or “should,” or the negative thereof or other variations thereon or comparable terminology.

Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to us. Such beliefs and assumptions may or may not prove to be correct. Additionally, such forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to, those identified in Part I. Item 1A. “Risk Factors” and in Part II. Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the “2021 10-K”) and in Part I. Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q. These risks and uncertainties include, but are not limited to:

We may be unable to attract new customers, retain existing customers and maintain or grow the number of Unlimited Wash Club (“UWC”) Members, which could adversely affect our business, financial condition and results of operations and rate of growth.
If we fail to acquire or operate new locations in a timely and cost-effective manner, enter into new markets or leverage new technologies, our competitive advantage or financial performance could be materially and adversely affected.
We may not be able to successfully implement our growth strategies on a timely basis or at all.
We are subject to a number of risks and regulations related to credit card and debit card payments we accept.
An overall decline in the health of the economy and other factors impacting consumer spending, such as natural disasters and fluctuations in inflation, may affect consumer purchases, reduce demand for our services and materially and adversely affect our business, results of operations and financial condition.
Growing inflation, supply chain disruption and other increased operating costs could materially and adversely affect our results of operations.
Our locations may experience difficulty hiring and retaining qualified personnel, resulting in higher labor costs.
We lease or sublease the land and buildings where a number of our locations are situated, which could expose us to possible liabilities and losses.
Our indebtedness could adversely affect our financial health and competitive position.
Our business is subject to various laws and regulations and changes in such laws and regulations, or failure to comply with existing or future laws and regulations, may result in litigation, investigation or claims by third parties or employees that could adversely affect our business.
Our locations are subject to certain environmental laws and regulations.
We are subject to data security and privacy risks that could negatively impact our results of operations or reputation.
We may be unable to adequately protect, and we may incur significant costs in enforcing or defending, our intellectual property and other proprietary rights.
Stockholders’ ability to influence corporate matters may be limited because a small number of stockholders beneficially own a substantial amount of our common stock and continue to have substantial control over us.
Our stock price may be volatile or may decline regardless of our operating performance, resulting in substantial losses for investors purchasing shares of our common stock.

Given these and other risks and uncertainties applicable to us, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included elsewhere in this Quarterly Report on Form 10-Q are not guarantees of future performance and our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate, may differ materially from the forward-looking statements included elsewhere in this Quarterly Report on Form 10-Q. In addition, even if our results of operations, financial condition and liquidity, and events in the industry in which we operate, are consistent with the forward-looking statements included elsewhere in this Quarterly Report on Form 10-Q, they may not be predictive of results or developments in future periods.

Any forward-looking statement that we make in this Quarterly Report on Form 10-Q speaks only as of the date of such statement. Except as required by law, we do not undertake any obligation to update or revise, or to publicly announce any update or revision to, any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Quarterly Report on Form 10-Q.

As used in this Quarterly Report on Form 10-Q, unless otherwise stated or the context requires otherwise, references to “Mister Car Wash,” “Mister,” the “Company,” “we,” “us,” and “our,” refer to Mister Car Wash, Inc. and its subsidiaries on a consolidated basis.

2


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

 

Mister Car Wash, Inc.

Condensed Consolidated Balance Sheets

(Amounts in thousands, except share and per share data)

(Unaudited)

 

 

As of

 

 

June 30, 2022

 

 

December 31, 2021

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

37,724

 

 

$

19,738

 

Restricted cash

 

45

 

 

 

120

 

Accounts receivable, net

 

2,291

 

 

 

1,090

 

Other receivables

 

14,343

 

 

 

22,796

 

Inventory, net

 

7,102

 

 

 

6,334

 

Prepaid expenses and other current assets

 

14,312

 

 

 

8,766

 

Total current assets

 

75,817

 

 

 

58,844

 

 

 

 

 

 

 

Property and equipment, net

 

521,874

 

 

 

472,448

 

Operating lease right of use assets, net

 

727,107

 

 

 

718,533

 

Other intangible assets, net

 

127,110

 

 

 

129,820

 

Goodwill

 

1,100,963

 

 

 

1,060,221

 

Other assets

 

8,090

 

 

 

8,236

 

Total assets

$

2,560,961

 

 

$

2,448,102

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

25,512

 

 

$

27,346

 

Accrued payroll and related expenses

 

15,000

 

 

 

16,963

 

Other accrued expenses

 

26,822

 

 

 

20,201

 

Current maturities of operating lease liability

 

38,548

 

 

 

37,345

 

Current maturities of finance lease liability

 

628

 

 

 

559

 

Deferred revenue

 

29,353

 

 

 

27,815

 

Total current liabilities

 

135,863

 

 

 

130,229

 

 

 

 

 

 

 

Long-term portion of debt, net

 

895,027

 

 

 

896,336

 

Operating lease liability

 

722,941

 

 

 

717,552

 

Financing lease liability

 

15,123

 

 

 

15,359

 

Long-term deferred tax liability

 

37,183

 

 

 

22,603

 

Other long-term liabilities

 

7,418

 

 

 

8,871

 

Total liabilities

 

1,813,555

 

 

 

1,790,950

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock, $0.01 par value, 1,000,000,000 shares authorized, 303,917,168 and 300,120,451 shares outstanding as of June 30, 2022 and December 31, 2021, respectively

 

3,045

 

 

 

3,007

 

Additional paid-in capital

 

769,242

 

 

 

752,343

 

Accumulated other comprehensive income

 

2,395

 

 

 

225

 

Accumulated deficit

 

(27,276

)

 

 

(98,423

)

Total stockholders’ equity

 

747,406

 

 

 

657,152

 

Total liabilities and stockholders’ equity

$

2,560,961

 

 

$

2,448,102

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

3


 

Mister Car Wash, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income

(Amounts in thousands, except share and per share data)

(Unaudited)

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net revenues

$

225,159

 

 

$

197,080

 

 

$

444,578

 

 

$

372,588

 

Cost of labor and chemicals

 

69,351

 

 

 

87,864

 

 

 

134,889

 

 

 

139,613

 

Other store operating expenses

 

79,029

 

 

 

65,363

 

 

 

156,830

 

 

 

126,446

 

General and administrative

 

25,610

 

 

 

188,896

 

 

 

49,297

 

 

 

203,857

 

Gain on sale of assets

 

(3,146

)

 

 

(7,097

)

 

 

(2,687

)

 

 

(6,307

)

Total costs and expenses

 

170,844

 

 

 

335,026

 

 

 

338,329

 

 

 

463,609

 

Operating income (loss)

 

54,315

 

 

 

(137,946

)

 

 

106,249

 

 

 

(91,021

)

 

 

 

 

 

 

 

 

 

 

 

 

Other expense:

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

8,762

 

 

 

13,740

 

 

 

16,928

 

 

 

27,699

 

Loss on extinguishment of debt

 

-

 

 

 

3,183

 

 

 

-

 

 

 

3,183

 

Total other expense

 

8,762

 

 

 

16,923

 

 

 

16,928

 

 

 

30,882

 

Income (loss) before taxes

 

45,553

 

 

 

(154,869

)

 

 

89,321

 

 

 

(121,903

)

Income tax provision (benefit)

 

9,894

 

 

 

(44,569

)

 

 

18,174

 

 

 

(36,187

)

Net income (loss)

$

35,659

 

 

$

(110,300

)

 

$

71,147

 

 

$

(85,716

)

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

Gain on interest rate swap

 

301

 

 

 

28

 

 

 

2,170

 

 

 

347

 

Total comprehensive income (loss)

$

35,960

 

 

$

(110,272

)

 

$

73,317

 

 

$

(85,369

)

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.12

 

 

$

(0.42

)

 

$

0.24

 

 

$

(0.33

)

Diluted

$

0.11

 

 

$

(0.42

)

 

$

0.22

 

 

$

(0.33

)

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

302,666,291

 

 

 

264,274,968

 

 

 

301,803,664

 

 

 

263,218,870

 

Diluted

 

327,229,531

 

 

 

264,274,968

 

 

 

328,205,776

 

 

 

263,218,870

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

4


 

Mister Car Wash, Inc.

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)

 

 

Six Months Ended June 30,

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

Net income (loss)

$

71,147

 

 

$

(85,716

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization expense

 

30,081

 

 

 

23,550

 

Stock-based compensation expense

 

11,498

 

 

 

203,541

 

Gain on sale of assets

 

(2,687

)

 

 

(6,307

)

Loss on extinguishment of debt

 

-

 

 

 

3,183

 

Amortization of deferred debt issuance costs

 

842

 

 

 

698

 

Non-cash lease expense

 

19,433

 

 

 

17,182

 

Deferred income tax

 

13,983

 

 

 

(38,440

)

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable, net

 

(1,017

)

 

 

(1,783

)

Other receivables

 

8,455

 

 

 

(1,998

)

Inventory, net

 

(692

)

 

 

41

 

Prepaid expenses and other current assets

 

(3,129

)

 

 

(2,196

)

Accounts payable

 

6,137

 

 

 

14,926

 

Accrued expenses

 

(1,119

)

 

 

8,614

 

Deferred revenue

 

1,416

 

 

 

1,838

 

Operating lease liability

 

(18,374

)

 

 

(16,446

)

Other noncurrent assets and liabilities

 

(1,359

)

 

 

(1,012

)

Net cash provided by operating activities

$

134,615

 

 

$

119,675

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(76,399

)

 

 

(44,194

)

Acquisition of car wash operations, net of cash

 

(47,039

)

 

 

(44,652

)

Proceeds from sale of property and equipment

 

3,672

 

 

 

22,201

 

Net cash used in investing activities

$

(119,766

)

 

$

(66,645

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from issuance of common stock pursuant to initial public offering

 

-

 

 

 

468,750

 

Proceeds from issuance of common stock under employee plans

 

5,436

 

 

 

121

 

Payments for repurchases of common stock

 

-

 

 

 

(308

)

Proceeds from secondary public offering for employee tax withholdings

 

-

 

 

 

14,874

 

Tax withholdings paid on behalf of employees for secondary public offering

 

-

 

 

 

(14,874

)

Payments on debt borrowings

 

(2,100

)

 

 

(454,872

)

Payments of debt extinguishment costs

 

-

 

 

 

(28

)

Payments of deferred debt issuance costs

 

-

 

 

 

(226

)

Principal payments on finance lease obligations

 

(274

)

 

 

(240

)

Payments of issuance costs pursuant to initial public offering

 

-

 

 

 

(25,761

)

Net cash provided by (used in) financing activities

$

3,062

 

 

$

(12,564

)

 

 

 

 

 

 

Net change in cash and cash equivalents and restricted cash during period

 

17,911

 

 

 

40,466

 

Cash and cash equivalents and restricted cash at beginning of period

 

19,858

 

 

 

117,874

 

Cash and cash equivalents and restricted cash at end of period

$

37,769

 

 

$

158,340

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

Cash paid for interest

$

16,134

 

 

$

27,577

 

Cash paid for income taxes

$

1,791

 

 

$

5,594

 

 

 

 

 

 

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

Property and equipment in accounts payable

$

9,182

 

 

$

8,782

 

Property and equipment accrued in other accrued expenses

$

5,687

 

 

$

-

 

Proceeds from issuance of common stock under employee plans in other receivables

$

2

 

 

$

-

 

Deferred offering costs in accounts payable and other accrued expenses

$

-

 

 

$

3,433

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

5


 

Mister Car Wash, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Amounts in thousands, except share and per share data)

(Unaudited)

 

Six Months Ended June 30, 2022

 

Common Stock

 

 

Additional Paid-in Capital

 

 

Accumulated Other Comprehensive Income

 

 

Accumulated Deficit

 

 

Stockholders’ Equity

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2021

 

300,120,451

 

 

$

3,007

 

 

$

752,343

 

 

$

225

 

 

$

(98,423

)

 

$

657,152

 

Stock-based compensation expense

 

-

 

 

 

-

 

 

 

5,519

 

 

 

-

 

 

 

-

 

 

 

5,519

 

Exercise of stock options

 

1,486,727

 

 

 

15

 

 

 

1,311

 

 

 

-

 

 

 

-

 

 

 

1,326

 

Gain on interest rate swap

 

-

 

 

 

-

 

 

 

-

 

 

 

1,869

 

 

 

-

 

 

 

1,869

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

35,488

 

 

 

35,488

 

Balance as of March 31, 2022

 

301,607,178

 

 

$

3,022

 

 

$

759,173

 

 

$

2,094

 

 

$

(62,935

)

 

$

701,354

 

Stock-based compensation expense

 

-

 

 

 

-

 

 

 

5,979

 

 

 

-

 

 

 

-

 

 

 

5,979

 

Issuance of common stock under employee plans

 

251,003

 

 

 

2

 

 

 

2,415

 

 

 

-

 

 

 

-

 

 

 

2,417

 

Vesting of restricted stock units

 

457,372

 

 

 

5

 

 

 

(5

)

 

 

-

 

 

 

-

 

 

 

 

Exercise of stock options

 

1,601,615

 

 

 

16

 

 

 

1,680

 

 

 

-

 

 

 

-

 

 

 

1,696

 

Gain on interest rate swap

 

-

 

 

 

-

 

 

 

-

 

 

 

301

 

 

 

-

 

 

 

301

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

35,659

 

 

 

35,659

 

Balance as of June 30, 2022

 

303,917,168

 

 

$

3,045

 

 

$

769,242

 

 

$

2,395

 

 

$

(27,276

)

 

$

747,406

 

 

 

 

 

6


 

Six Months Ended June 30, 2021

 

Common Stock

 

 

Additional Paid-in Capital

 

 

Accumulated Other Comprehensive Loss

 

 

Accumulated Deficit

 

 

Stockholders’ Equity

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2020

 

261,907,622

 

 

$

2,622

 

 

$

91,523

 

 

$

(1,117

)

 

$

(76,378

)

 

$

16,650

 

Stock-based compensation expense

 

-

 

 

 

-

 

 

 

310

 

 

 

-

 

 

 

-

 

 

 

310

 

Exercise of stock options

 

688,430

 

 

 

7

 

 

 

260

 

 

 

-

 

 

 

-

 

 

 

267

 

Shares repurchased

 

(180,681

)

 

 

-

 

 

 

(534

)

 

 

-

 

 

 

-

 

 

 

(534

)

Gain on interest rate swap