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 SeptemberJune 30, 20212022
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 |
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 ☒ No ☐
As of November 12, 2021,August 1, 2022, the registrant had 297,341,227304,292,739 shares of common stock, $0.01 par value per share, outstanding.
Table of Contents
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2 | ||
PART I. | FINANCIAL INFORMATION |
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Item 1. | Financial Statements (Unaudited) | |
| 3 | |
| Condensed Consolidated Statements of Operations and Comprehensive Income |
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6 | ||
| Notes to | 8 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 23 |
Item 3. |
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Item 4. |
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PART II. | OTHER INFORMATION |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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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 include those we make regarding the following matters:
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The preceding list isare based on our management’s beliefs and assumptions and on information currently available to us. Such beliefs and assumptions may or may not intendedprove to be an exhaustive list of all of our forward-looking statements. We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable,correct. Additionally, such forward-looking statements are only predictions and involvesubject to a number of known and unknown risks, uncertainties and uncertainties, many of which are beyond our control. Theseassumptions, and other importantactual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to, those discussedidentified in this QuarterlyPart 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-Q10-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” and in Part II, Item IA. “Risk Factors” of ourthis Quarterly Report on Form 10-Q for10-Q. These risks and uncertainties include, but are not limited to:
Given these and other risks and uncertainties that affect our forward-looking statements described above. Given these 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 |
| As of |
| ||||||||||
| September 30, 2021 |
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| December 31, 2020 |
| June 30, 2022 |
|
| December 31, 2021 |
| ||||
Assets |
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Current assets: |
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Cash and cash equivalents | $ | 162,232 |
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| $ | 114,647 |
| $ | 37,724 |
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| $ | 19,738 |
|
Restricted cash |
| 272 |
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| 3,227 |
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| 45 |
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|
| 120 |
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Accounts receivable, net |
| 8,986 |
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| 4,613 |
|
| 2,291 |
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|
| 1,090 |
|
Inventory |
| 5,633 |
|
|
| 6,415 |
| |||||||
Other receivables |
| 14,343 |
|
|
| 22,796 |
| |||||||
Inventory, net |
| 7,102 |
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|
| 6,334 |
| |||||||
Prepaid expenses and other current assets |
| 12,879 |
|
|
| 6,068 |
|
| 14,312 |
|
|
| 8,766 |
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Total current assets |
| 190,002 |
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|
| 134,970 |
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| 75,817 |
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| 58,844 |
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Property and equipment, net |
| 300,676 |
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| 263,034 |
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| 521,874 |
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| 472,448 |
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Operating lease right of use assets, net |
| 699,274 |
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| 681,538 |
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| 727,107 |
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| 718,533 |
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Other intangible assets, net |
| 124,522 |
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|
| 127,019 |
|
| 127,110 |
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| 129,820 |
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Goodwill |
| 759,770 |
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|
| 737,415 |
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| 1,100,963 |
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| 1,060,221 |
|
Other assets |
| 5,328 |
|
|
| 4,477 |
|
| 8,090 |
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|
| 8,236 |
|
Total assets | $ | 2,079,572 |
|
| $ | 1,948,453 |
| $ | 2,560,961 |
|
| $ | 2,448,102 |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable | $ | 26,716 |
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| $ | 24,374 |
| $ | 25,512 |
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| $ | 27,346 |
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Accrued payroll and related expenses |
| 19,943 |
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| 11,424 |
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| 15,000 |
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| 16,963 |
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Other accrued expenses |
| 18,799 |
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| 20,264 |
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| 26,822 |
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| 20,201 |
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Current maturities of debt |
| 8,400 |
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| 8,400 |
| |||||||
Current maturities of operating lease liability |
| 36,218 |
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| 33,485 |
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| 38,548 |
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| 37,345 |
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Current maturities of finance lease liability |
| 542 |
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| 495 |
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| 628 |
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| 559 |
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Deferred revenue |
| 26,195 |
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| 24,505 |
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| 29,353 |
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| 27,815 |
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Total current liabilities |
| 136,813 |
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| 122,947 |
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| 135,863 |
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| 130,229 |
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Long-term portion of debt, net |
| 601,723 |
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| 1,054,820 |
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| 895,027 |
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| 896,336 |
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Operating lease liability |
| 700,548 |
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| 685,479 |
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| 722,941 |
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| 717,552 |
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Financing lease liability |
| 15,507 |
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| 15,917 |
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| 15,123 |
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| 15,359 |
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Long-term deferred tax liability |
| 12,571 |
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| 46,082 |
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| 37,183 |
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| 22,603 |
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Other long-term liabilities |
| 4,222 |
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| 6,558 |
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| 7,418 |
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| 8,871 |
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Total liabilities |
| 1,471,384 |
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| 1,931,803 |
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| 1,813,555 |
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| 1,790,950 |
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Commitments and contingencies (Note 15) |
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Stockholders’ equity: |
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Common stock, $0.01 par value, 1,000,000,000 shares authorized, 296,794,199 and 261,907,622 shares outstanding as of September 30, 2021 and December 31, 2020, respectively |
| 2,975 |
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| 2,622 |
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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 |
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| 3,007 |
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Additional paid-in capital |
| 740,657 |
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| 91,523 |
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| 769,242 |
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| 752,343 |
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Accumulated other comprehensive loss |
| (716 | ) |
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| (1,117 | ) | |||||||
Accumulated other comprehensive income |
| 2,395 |
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| 225 |
| |||||||
Accumulated deficit |
| (134,728 | ) |
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| (76,378 | ) |
| (27,276 | ) |
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| (98,423 | ) |
Total stockholders’ equity |
| 608,188 |
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| 16,650 |
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| 747,406 |
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| 657,152 |
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Total liabilities and stockholders’ equity | $ | 2,079,572 |
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| $ | 1,948,453 |
| $ | 2,560,961 |
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| $ | 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 (Loss)
(Amounts in thousands, except share and per share data)
(Unaudited)
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| |||||||||||||||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| 2022 |
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| 2021 |
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| 2022 |
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| 2021 |
| |||||||||||
Revenues, net | $ | 194,310 |
|
| $ | 155,796 |
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| $ | 566,898 |
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| $ | 412,904 |
| |||||||||||||||
Net revenues | $ | 225,159 |
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| $ | 197,080 |
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| $ | 444,578 |
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| $ | 372,588 |
| |||||||||||||||
Cost of labor and chemicals |
| 63,438 |
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| 50,245 |
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|
| 203,051 |
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| 141,874 |
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| 69,351 |
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| 87,864 |
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|
| 134,889 |
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| 139,613 |
|
Other store operating expenses |
| 68,435 |
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| 56,127 |
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| 194,889 |
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| 164,352 |
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| 79,029 |
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| 65,363 |
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| 156,830 |
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| 126,446 |
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General and administrative |
| 22,166 |
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| 10,476 |
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| 226,015 |
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| 37,069 |
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| 25,610 |
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| 188,896 |
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| 49,297 |
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| 203,857 |
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Loss (gain) on sale of assets |
| 748 |
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| (4,283 | ) |
|
| (5,559 | ) |
|
| (3,773 | ) | |||||||||||||||
Gain on sale of assets |
| (3,146 | ) |
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| (7,097 | ) |
|
| (2,687 | ) |
|
| (6,307 | ) | |||||||||||||||
Total costs and expenses |
| 154,787 |
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| 112,565 |
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| 618,396 |
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| 339,522 |
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| 170,844 |
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| 335,026 |
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| 338,329 |
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| 463,609 |
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Operating income (loss) |
| 39,523 |
|
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| 43,231 |
|
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| (51,498 | ) |
|
| 73,382 |
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| 54,315 |
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|
| (137,946 | ) |
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| 106,249 |
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| (91,021 | ) |
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Other expense: |
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| ||||||||||
Interest expense, net |
| 5,717 |
|
|
| 15,917 |
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|
| 33,416 |
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| 49,341 |
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| 8,762 |
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|
| 13,740 |
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|
| 16,928 |
|
|
| 27,699 |
|
Loss on extinguishment of debt |
| - |
|
|
| - |
|
|
| 3,183 |
|
|
| 1,918 |
|
| 0 |
|
|
| 3,183 |
|
|
| 0 |
|
|
| 3,183 |
|
Total other expense |
| 5,717 |
|
|
| 15,917 |
|
|
| 36,599 |
|
|
| 51,259 |
|
| 8,762 |
|
|
| 16,923 |
|
|
| 16,928 |
|
|
| 30,882 |
|
Income (loss) before taxes |
| 33,806 |
|
|
| 27,314 |
|
|
| (88,097 | ) |
|
| 22,123 |
|
| 45,553 |
|
|
| (154,869 | ) |
|
| 89,321 |
|
|
| (121,903 | ) |
Income tax provision (benefit) |
| 6,440 |
|
|
| 7,445 |
|
|
| (29,747 | ) |
|
| 2,148 |
|
| 9,894 |
|
|
| (44,569 | ) |
|
| 18,174 |
|
|
| (36,187 | ) |
Net income (loss) | $ | 27,366 |
|
| $ | 19,869 |
|
| $ | (58,350 | ) |
| $ | 19,975 |
| $ | 35,659 |
|
| $ | (110,300 | ) |
| $ | 71,147 |
|
| $ | (85,716 | ) |
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Other comprehensive income (loss), net of tax: |
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|
|
|
|
|
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|
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| ||||||||||
Gain (loss) on interest rate swap |
| 54 |
|
|
| (288 | ) |
|
| 401 |
|
|
| (1,189 | ) | |||||||||||||||
Gain on interest rate swap |
| 301 |
|
|
| 28 |
|
|
| 2,170 |
|
|
| 347 |
| |||||||||||||||
Total comprehensive income (loss) | $ | 27,420 |
|
| $ | 19,581 |
|
| $ | (57,949 | ) |
| $ | 18,786 |
| $ | 35,960 |
|
| $ | (110,272 | ) |
| $ | 73,317 |
|
| $ | (85,369 | ) |
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Net income (loss) per share: |
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| ||||||||||||||
Basic | $ | 0.09 |
|
| $ | 0.08 |
|
| $ | (0.21 | ) |
| $ | 0.08 |
| $ | 0.12 |
|
| $ | (0.42 | ) |
| $ | 0.24 |
|
| $ | (0.33 | ) |
Diluted | $ | 0.08 |
|
| $ | 0.07 |
|
| $ | (0.21 | ) |
| $ | 0.07 |
| $ | 0.11 |
|
| $ | (0.42 | ) |
| $ | 0.22 |
|
| $ | (0.33 | ) |
Weighted-average common shares outstanding: |
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| ||||||||||||||
Basic |
| 296,360,660 |
|
|
| 261,863,586 |
|
|
| 274,387,532 |
|
|
| 261,784,795 |
|
| 302,666,291 |
|
|
| 264,274,968 |
|
|
| 301,803,664 |
|
|
| 263,218,870 |
|
Diluted |
| 327,320,169 |
|
|
| 274,111,695 |
|
|
| 274,387,532 |
|
|
| 273,994,569 |
|
| 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 Stockholders’ Equity (Deficit)
(Amounts in thousands, except share and per share data)
(Unaudited)
| Common Stock |
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| Additional Paid-in Capital |
|
| Accumulated Other Comprehensive Loss |
|
| Accumulated Deficit |
|
| Stockholders’ Equity (Deficit) |
| |||||||||
| Shares |
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| Amount |
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| ||||||
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 |
| - |
|
|
| - |
|
|
| - |
|
|
| 319 |
|
|
| - |
|
|
| 319 |
|
Net income |
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 24,584 |
|
|
| 24,584 |
|
Balance as of March 31, 2021 |
| 262,415,371 |
|
| $ | 2,629 |
|
| $ | 91,559 |
|
| $ | (798 | ) |
| $ | (51,794 | ) |
| $ | 41,596 |
|
Issuance of common stock pursuant to initial public |
| 31,250,000 |
|
|
| 313 |
|
|
| 439,243 |
|
|
| - |
|
|
| - |
|
|
| 439,556 |
|
Stock-based compensation expense |
| - |
|
|
| - |
|
|
| 203,231 |
|
|
| - |
|
|
| - |
|
|
| 203,231 |
|
Vesting of restricted stock units |
| 7,680 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Exercise of stock options |
| 2,516,784 |
|
|
| 25 |
|
|
| 1,597 |
|
|
| - |
|
|
| - |
|
|
| 1,622 |
|
Shares repurchased |
| (127,357 | ) |
|
| - |
|
|
| (1,716 | ) |
|
| - |
|
|
| - |
|
|
| (1,716 | ) |
Gain on interest rate swap |
| - |
|
|
| - |
|
|
| - |
|
|
| 28 |
|
|
| - |
|
|
| 28 |
|
Net loss |
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (110,300 | ) |
|
| (110,300 | ) |
Balance as of June 30, 2021 |
| 296,062,478 |
|
| $ | 2,967 |
|
| $ | 733,914 |
|
| $ | (770 | ) |
| $ | (162,094 | ) |
| $ | 574,017 |
|
Stock-based compensation expense |
| - |
|
|
| - |
|
|
| 6,751 |
|
|
| - |
|
|
| - |
|
|
| 6,751 |
|
Exercise of stock options |
| 757,887 |
|
|
| 8 |
|
|
| 502 |
|
|
| - |
|
|
| - |
|
|
| 510 |
|
Shares repurchased |
| (26,166 | ) |
|
| - |
|
|
| (510 | ) |
|
| - |
|
|
| - |
|
|
| (510 | ) |
Gain on interest rate swap |
| - |
|
|
| - |
|
|
| - |
|
|
| 54 |
|
|
| - |
|
|
| 54 |
|
Net income |
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 27,366 |
|
|
| 27,366 |
|
Balance as of September 30, 2021 |
| 296,794,199 |
|
| $ | 2,975 |
|
| $ | 740,657 |
|
| $ | (716 | ) |
| $ | (134,728 | ) |
| $ | 608,188 |
|
See accompanying notes to unaudited condensed consolidated financial statements.
5
Mister Car Wash, Inc.
Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
(Amounts in thousands, except share and per share data)
(Unaudited)
| Common Stock |
|
| Additional Paid-in Capital |
|
| Accumulated Other Comprehensive Loss |
|
| Accumulated Deficit |
|
| Stockholders’ Equity (Deficit) |
| |||||||||
| Shares |
|
| Amount |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance as of December 31, 2019 |
| 261,749,196 |
|
| $ | 2,620 |
|
| $ | 90,358 |
|
| $ | - |
|
| $ | (156,580 | ) |
| $ | (63,602 | ) |
Adoption of new accounting standards, net of tax |
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 19,798 |
|
|
| 19,798 |
|
Stock-based compensation expense |
| - |
|
|
| - |
|
|
| 387 |
|
|
| - |
|
|
| - |
|
|
| 387 |
|
Shares repurchased |
| (4,624 | ) |
|
| - |
|
|
| (324 | ) |
|
| - |
|
|
| - |
|
|
| (324 | ) |
Net income |
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 8,860 |
|
|
| 8,860 |
|
Balance as of March 31, 2020 |
| 261,744,572 |
|
| $ | 2,620 |
|
| $ | 90,421 |
|
| $ | - |
|
| $ | (127,922 | ) |
| $ | (34,881 | ) |
Stock-based compensation expense |
| - |
|
|
| - |
|
|
| 398 |
|
|
| - |
|
|
| - |
|
|
| 398 |
|
Shares repurchased |
| (2,400 | ) |
|
| - |
|
|
| (5 | ) |
|
| - |
|
|
| - |
|
|
| (5 | ) |
Loss on interest rate swap |
| - |
|
|
| - |
|
|
| - |
|
|
| (901 | ) |
|
| - |
|
|
| (901 | ) |
Net loss |
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (8,754 | ) |
|
| (8,754 | ) |
Balance as of June 30, 2020 |
| 261,742,172 |
|
| $ | 2,620 |
|
| $ | 90,814 |
|
| $ | (901 | ) |
| $ | (136,676 | ) |
| $ | (44,143 | ) |
Stock-based compensation expense |
| - |
|
|
| - |
|
|
| 402 |
|
|
| - |
|
|
| - |
|
|
| 402 |
|
Exercise of stock options |
| 162,378 |
|
|
| 1 |
|
|
| 19 |
|
|
| - |
|
|
| - |
|
|
| 20 |
|
Shares repurchased |
| (14,400 | ) |
|
| - |
|
|
| (33 | ) |
|
| - |
|
|
| - |
|
|
| (33 | ) |
Loss on interest rate swap |
| - |
|
|
| - |
|
|
| - |
|
|
| (288 | ) |
|
| - |
|
|
| (288 | ) |
Net income |
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 19,869 |
|
|
| 19,869 |
|
Balance as of September 30, 2020 |
| 261,890,150 |
|
| $ | 2,621 |
|
| $ | 91,202 |
|
| $ | (1,189 | ) |
| $ | (116,807 | ) |
| $ | (24,173 | ) |
See accompanying notes to unaudited condensed consolidated financial statements.
6
Mister Car Wash, Inc.
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
| Nine Months Ended September 30, |
| Six Months Ended June 30, |
| ||||||||||
| 2021 |
|
| 2020 |
| 2022 |
|
| 2021 |
| ||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
| ||||
Net (loss) income | $ | (58,350 | ) |
| $ | 19,975 |
| |||||||
Adjustments to reconcile net (loss) income to net cash provided by 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 |
| 36,530 |
|
|
| 33,504 |
|
| 30,081 |
|
|
| 23,550 |
|
Stock-based compensation expense |
| 210,292 |
|
|
| 1,187 |
|
| 11,498 |
|
|
| 203,541 |
|
(Gain) loss on disposal of property and equipment |
| (5,559 | ) |
|
| (3,773 | ) | |||||||
Gain on sale of assets |
| (2,687 | ) |
|
| (6,307 | ) | |||||||
Loss on extinguishment of debt |
| 3,183 |
|
|
| 1,918 |
|
| 0 |
|
|
| 3,183 |
|
Amortization of deferred financing costs |
| 898 |
|
|
| 1,241 |
| |||||||
Amortization of deferred debt issuance costs |
| 842 |
|
|
| 698 |
| |||||||
Non-cash lease expense |
| 26,535 |
|
|
| 25,376 |
|
| 19,433 |
|
|
| 17,182 |
|
Deferred income tax |
| (33,247 | ) |
|
| 10,913 |
|
| 13,983 |
|
|
| (38,440 | ) |
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
| ||||
Accounts receivable |
| (4,374 | ) |
|
| (331 | ) | |||||||
Inventory |
| 850 |
|
|
| 689 |
| |||||||
Accounts receivable, net |
| (1,017 | ) |
|
| (1,783 | ) | |||||||
Other receivables |
| 8,455 |
|
|
| (1,998 | ) | |||||||
Inventory, net |
| (692 | ) |
|
| 41 |
| |||||||
Prepaid expenses and other current assets |
| (6,812 | ) |
|
| (183 | ) |
| (3,129 | ) |
|
| (2,196 | ) |
Accounts payable |
| 4,025 |
|
|
| (3,707 | ) |
| 6,137 |
|
|
| 14,926 |
|
Accrued expenses |
| 6,874 |
|
|
| 11,882 |
|
| (1,119 | ) |
|
| 8,614 |
|
Deferred revenue |
| 1,531 |
|
|
| 1,163 |
|
| 1,416 |
|
|
| 1,838 |
|
Operating lease liability |
| (26,468 | ) |
|
| (21,684 | ) |
| (18,374 | ) |
|
| (16,446 | ) |
Other noncurrent assets and liabilities |
| (2,599 | ) |
|
| (251 | ) |
| (1,359 | ) |
|
| (1,012 | ) |
Net cash provided by operating activities | $ | 153,309 |
|
| $ | 77,919 |
| $ | 134,615 |
|
| $ | 119,675 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
| ||||
Purchases of property and equipment |
| (86,330 | ) |
|
| (41,504 | ) |
| (76,399 | ) |
|
| (44,194 | ) |
Acquisition of car wash operations, net of cash acquired |
| (55,072 | ) |
|
| (21,958 | ) | |||||||
Acquisition of car wash operations, net of cash |
| (47,039 | ) |
|
| (44,652 | ) | |||||||
Proceeds from sale of property and equipment |
| 50,944 |
|
|
| 12,356 |
|
| 3,672 |
|
|
| 22,201 |
|
Net cash used in investing activities | $ | (90,458 | ) |
| $ | (51,106 | ) | $ | (119,766 | ) |
| $ | (66,645 | ) |
|
|
|
|
|
|
|
|
|
|
| ||||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
| ||||
Proceeds from issuance of common stock pursuant to initial public offering |
| 468,750 |
|
|
| - |
|
| 0 |
|
|
| 468,750 |
|
Proceeds from exercise of stock options |
| 121 |
|
|
| 40 |
| |||||||
Proceeds from issuance of common stock under employee plans |
| 5,436 |
|
|
| 121 |
| |||||||
Payments for repurchases of common stock |
| (308 | ) |
|
| (381 | ) |
| 0 |
|
|
| (308 | ) |
Proceeds from secondary offering for employee tax withholdings |
| 20,859 |
|
|
| - |
| |||||||
Tax withholdings paid on behalf of employees for secondary offering |
| (20,859 | ) |
|
| - |
| |||||||
Proceeds from debt borrowings |
| 0 |
|
|
| 45,625 |
| |||||||
Proceeds from revolving line of credit |
| 0 |
|
|
| 111,681 |
| |||||||
Proceeds from secondary public offering for employee tax withholdings |
| 0 |
|
|
| 14,874 |
| |||||||
Tax withholdings paid on behalf of employees for secondary public offering |
| 0 |
|
|
| (14,874 | ) | |||||||
Payments on debt borrowings |
| (456,972 | ) |
|
| (6,300 | ) |
| (2,100 | ) |
|
| (454,872 | ) |
Payments on revolving line of credit |
| 0 |
|
|
| (125,681 | ) | |||||||
Payments of debt extinguishment costs |
| (28 | ) |
|
| 0 |
|
| 0 |
|
|
| (28 | ) |
Payments of deferred financing costs |
| (226 | ) |
|
| 0 |
| |||||||
Payments of deferred debt issuance costs |
| 0 |
|
|
| (226 | ) | |||||||
Principal payments on finance lease obligations |
| (364 | ) |
|
| (106 | ) |
| (274 | ) |
|
| (240 | ) |
Payments of issuance costs pursuant to initial public offering |
| (29,194 | ) |
|
| 0 |
|
| 0 |
|
|
| (25,761 | ) |
Net cash (used in) provided by financing activities | $ | (18,221 | ) |
| $ | 24,878 |
| |||||||
Net cash provided by (used in) financing activities | $ | 3,062 |
|
| $ | (12,564 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
| ||||
Net change in cash and cash equivalents, and restricted cash during period |
| 44,630 |
|
|
| 51,691 |
| |||||||
Cash and cash equivalents, and restricted cash at beginning of period |
| 117,874 |
|
|
| 6,705 |
| |||||||
Cash and cash equivalents, and restricted cash at end of period | $ | 162,504 |
|
| $ | 58,396 |
| |||||||
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 | $ | 33,134 |
|
| $ | 34,412 |
| $ | 16,134 |
|
| $ | 27,577 |
|
Cash paid for income taxes | $ | 8,029 |
|
| $ | 0 |
| $ | 1,791 |
|
| $ | 5,594 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
| ||||
Property and equipment in accounts payable | $ | 14,817 |
|
| $ | 15,588 |
| $ | 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 |
|
| $ | 0 |
| |||||||
Deferred offering costs in accounts payable and other accrued expenses | $ | 0 |
|
| $ | 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 |
| - |
|
|
| - |
|
|
| - |
|
|
| 319 |
|
|
| - |
|
|
| 319 |
|
Net income |
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 24,584 |
|
|
| 24,584 |
|
Balance as of March 31, 2021 |
| 262,415,371 |
|
| $ | 2,629 |
|
| $ | 91,559 |
|
| $ | (798 | ) |
| $ | (51,794 | ) |
| $ | 41,596 |
|
Issuance of common stock pursuant to initial public offering, net of issuance of $29,194 |
| 31,250,000 |
|
|
| 313 |
|
|
| 439,243 |
|
|
| - |
|
|
| - |
|
|
| 439,556 |
|
Stock-based compensation expense |
| - |
|
|
| - |
|
|
| 203,231 |
|
|
| - |
|
|
| - |
|
|
| 203,231 |
|
Vesting of restricted stock units |
| 7,680 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Exercise of stock options |
| 2,516,784 |
|
|
| 25 |
|
|
| 1,597 |
|
|
| - |
|
|
| - |
|
|
| 1,622 |
|
Shares repurchased |
| (127,357 | ) |
|
| - |
|
|
| (1,716 | ) |
|
| - |
|
|
| - |
|
|
| (1,716 | ) |
Gain on interest rate swap |
| - |
|
|
| - |
|
|
| - |
|
|
| 28 |
|
|
| - |
|
|
| 28 |
|
Net loss |
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (110,300 | ) |
|
| (110,300 | ) |
Balance as of June 30, 2021 |
| 296,062,478 |
|
| $ | 2,967 |
|
| $ | 733,914 |
|
| $ | (770 | ) |
| $ | (162,094 | ) |
| $ | 574,017 |
|
See accompanying notes to unaudited condensed consolidated financial statements.
7
Mister Car Wash, Inc.
Notes to Condensed Consolidated Financial Statements
(Dollar amounts in thousands, except per share data)
(Unaudited)
1. Nature of Business
Mister Car Wash, Inc., together with its subsidiaries (collectively, the "Company"“Company”), is a Delaware corporation based in Tucson, Arizona and a leading provider of conveyorized car wash services. The Company primarily operates two location formats: Express Exterior Locations, which offeroffers express exterior cleaning services and Interior Cleaning Locations, which offer both express exterior cleaningalong with free vacuum services, and interior cleaning services.services at select locations. As of December 31, 2020June 30, 2022, the Company closed or sold all of its quick lube facilities. As of September 30, 2021, the Company operated 360409 car washes in 21 states.
Forward Stock Split
In June 2021, the Company's board of directors (the "Board"“Board”) and the stockholders of the Company approved a 96-for-1 forward stock split of the Company’s outstanding common stock, which was effectedeffective on June 16, 2021. All common stock and per share information has been retroactively adjusted to give effect to this forward stock split for all periods presented. Shares of common stock underlying outstanding stock options and other equity instruments were proportionately increased and the respective per share value and exercise prices, if applicable, were proportionately decreased in accordance with the terms of the agreements governing such securities. There were no changes to the par value per share of the Company’s common stock as a result of the forward stock split. Additionally, the Board and the stockholders of the Company approved an increase in the authorized shares of common stock to 1,000,000,000 shares.
Initial Public Offering
In June 2021, the Company completed its initial public offering (“IPO”) of 43,125,000 shares of common stock at a public offering price of $15.00 per share. The Company sold 31,250,000 shares of common stock and the selling stockholders identified in the Company’s final prospectus that forms a part of the Company’s Registration Statement on Form S-1 (File No. 333-256697), filed with the SEC pursuant to Rule 424(b)(4) on June 28, 2021 (the “Prospectus”), sold an aggregate amount of 11,875,000 shares of common stock, which selling stockholder amount included the underwriters' option to purchase up to an additional 5,625,000 shares of common stock. The Company received gross proceeds of approximately $468,750 before deducting underwriting discounts, commissions and offering related issuance costs; the Company did not receive any proceeds from the sale of shares by the selling stockholders. The unaudited condensed consolidated financial statements as of SeptemberJune 30, 2021,2022, including share and per share amounts, include the effects of the IPO.
Secondary Public Offering
In August 2021, the Company completed a secondary public offering of 12,000,000 shares of common stock sold by the selling stockholders identified in the Company’s final prospectus that forms a part of the Company’s Registration Statement on Form S-1 (File No. 333-258186), filed with the SEC pursuant to Rule 424(b)(5) on August 24, 2021. The Company did not receive any proceeds from the sale of shares by the selling stockholders, and the Company incurred $498 of expenses in connection with the secondary public offering, which were recorded in general and administrative expenses in the unaudited condensed consolidated statements of operations and comprehensive income (loss).income.
2. Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements as of SeptemberJune 30, 20212022 and for the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 20202021 included in the Prospectus.2021 10-K.
The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements. In the opinion of management, the included disclosures are adequate, and the accompanying unaudited condensed consolidated financial statements contain all adjustments which are necessary for a fair presentation of the Company’s consolidated financial position as of SeptemberJune 30, 2021,2022, consolidated results of operations and comprehensive income (loss) for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, and consolidated cash flows for the ninesix months ended SeptemberJune 30, 20212022 and 2020.2021. Such adjustments are of a normal and recurring nature. The consolidated results of operations for the three and ninesix months ended SeptemberJune 30, 20212022 are not necessarily indicative of the consolidated results of operations that may be expected for the year ending December 31, 2021.2022.
Principles of Consolidation
8
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company. All material intercompany balances and transactions have been eliminated in consolidation.
8
Use of Estimates
The preparation of the unaudited 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 the Company has 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 $9993 and $19770 as of SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively. The activity in the allowance for doubtful accounts was immaterial for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020.2021.
Other Receivables
Other receivables consisted of the following for the periods presented:
| As of |
| |||||
| June 30, 2022 |
|
| December 31, 2021 |
| ||
Payroll tax withholding and exercise proceeds receivable | $ | 4 |
|
| $ | 8,477 |
|
Construction receivable |
| 7,643 |
|
|
| 5,574 |
|
Income tax receivable |
| 2,535 |
|
|
| 4,935 |
|
Insurance receivable |
| 2,653 |
|
|
| 2,594 |
|
Other |
| 1,508 |
|
|
| 1,216 |
|
Total other receivables | $ | 14,343 |
|
| $ | 22,796 |
|
Inventory, Net
Inventory consisted of the following for the periods presented is as follows:presented:
| As of |
| |||||
| September 30, 2021 |
|
| December 31, 2020 |
| ||
Chemical washing solutions | $ | 5,708 |
|
| $ | 6,490 |
|
Other |
| 33 |
|
|
| 52 |
|
Total inventory, gross |
| 5,741 |
|
|
| 6,542 |
|
Reserve for obsolescence |
| (108 | ) |
|
| (127 | ) |
Total inventory, net | $ | 5,633 |
|
| $ | 6,415 |
|
| As of |
| |||||
| June 30, 2022 |
|
| December 31, 2021 |
| ||
Chemical washing solutions | $ | 7,248 |
|
| $ | 6,406 |
|
Other |
| 0 |
|
|
| 52 |
|
Total inventory, gross |
| 7,248 |
|
|
| 6,458 |
|
Reserve for obsolescence |
| (146 | ) |
|
| (124 | ) |
Total inventory, net | $ | 7,102 |
|
| $ | 6,334 |
|
The activity in the reserve for obsolescence was immaterial for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020.2021.
Revenue Recognition
The following table summarizes the composition of the Company’s revenue, net revenues for the periods presented:
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Recognized over time | $ | 149,062 |
|
| $ | 122,362 |
|
| $ | 289,936 |
|
| $ | 230,630 |
|
Recognized at a point in time |
| 75,822 |
|
|
| 73,734 |
|
|
| 153,830 |
|
|
| 140,057 |
|
Other revenue |
| 275 |
|
|
| 984 |
|
|
| 812 |
|
|
| 1,901 |
|
Net revenues | $ | 225,159 |
|
| $ | 197,080 |
|
| $ | 444,578 |
|
| $ | 372,588 |
|
9
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Recognized over time | $ | 127,825 |
|
| $ | 92,870 |
|
| $ | 358,456 |
|
| $ | 237,412 |
|
Recognized at a point in time |
| 66,026 |
|
|
| 55,377 |
|
|
| 206,087 |
|
|
| 154,022 |
|
Other revenue |
| 459 |
|
|
| 7,549 |
|
|
| 2,355 |
|
|
| 21,470 |
|
Revenue, net | $ | 194,310 |
|
| $ | 155,796 |
|
| $ | 566,898 |
|
| $ | 412,904 |
|
Net Income (Loss)(loss) Per Share
Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding for the period. Diluted net income (loss) per share is computed by dividing net income (loss) 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 (loss) per share if their effect is antidilutive. Reconciliations of the numerators and denominators of the basic and diluted net income (loss) per share calculations for the periods presented are as follows:
9
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| |||||||||||||||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| |||||||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net income (loss) | $ | 27,366 |
|
| $ | 19,869 |
|
| $ | (58,350 | ) |
| $ | 19,975 |
| $ | 35,659 |
|
| $ | (110,300 | ) |
| $ | 71,147 |
|
| $ | (85,716 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Weighted-average common shares outstanding - basic |
| 296,360,660 |
|
|
| 261,863,586 |
|
|
| 274,387,532 |
|
|
| 261,784,795 |
|
| 302,666,291 |
|
|
| 264,274,968 |
|
|
| 301,803,664 |
|
|
| 263,218,870 |
|
Effect of potentially dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Stock options |
| 30,251,223 |
|
|
| 12,248,109 |
|
|
| 0 |
|
|
| 12,209,774 |
|
| 23,912,934 |
|
|
| 0 |
|
|
| 25,461,476 |
|
|
| 0 |
|
Restricted stock units |
| 652,019 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
| 648,060 |
|
|
| 0 |
|
|
| 939,513 |
|
|
| 0 |
|
Employee stock purchase plan |
| 56,267 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
| 2,246 |
|
|
| 0 |
|
|
| 1,123 |
|
|
| 0 |
|
Weighted-average common shares outstanding - diluted |
| 327,320,169 |
|
|
| 274,111,695 |
|
|
| 274,387,532 |
|
|
| 273,994,569 |
|
| 327,229,531 |
|
|
| 264,274,968 |
|
|
| 328,205,776 |
|
|
| 263,218,870 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net income (loss) per share - basic | $ | 0.09 |
|
| $ | 0.08 |
|
| $ | (0.21 | ) |
| $ | 0.08 |
| $ | 0.12 |
|
| $ | (0.42 | ) |
| $ | 0.24 |
|
| $ | (0.33 | ) |
Net income (loss) per share - diluted | $ | 0.08 |
|
| $ | 0.07 |
|
| $ | (0.21 | ) |
| $ | 0.07 |
| $ | 0.11 |
|
| $ | (0.42 | ) |
| $ | 0.22 |
|
| $ | (0.33 | ) |
The following potentially dilutive shares were excluded from the computation of diluted net income (loss) per share for the periods presented because including them would have been antidilutive:
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
| 2021 |
| 2020 |
|
| 2021 |
| 2020 |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||||
Stock options |
| 2,086,437 |
|
|
| 2,020,079 |
|
|
| 33,773,922 |
|
|
| 1,951,043 |
|
| 2,139,197 |
|
|
| 34,522,248 |
|
|
| 2,090,169 |
|
|
| 34,522,248 |
|
Restricted stock units |
| 0 |
|
|
| 0 |
|
|
| 1,592,524 |
|
|
| 0 |
|
| 166,672 |
|
|
| 1,632,188 |
|
|
| 83,336 |
|
|
| 1,632,188 |
|
Employee stock purchase plan |
| 0 |
|
|
| 0 |
|
|
| 244,751 |
|
|
| 0 |
|
| 96,212 |
|
|
| 0 |
|
|
| 48,106 |
|
|
| 0 |
|
Deferred Offering Costs
The Company capitalizes certain legal, accounting, and other third-party fees that are directly related to the Company’s equity financings, including the IPO, until such financings are consummated. After consummation of an equity financing, these costs are then recorded as a reduction of the proceeds received as a result of the financing. Should a planned equity financing be abandoned, terminated, or significantly delayed, the deferred offering costs would be immediately written off to operating expenses. Upon the closing of the IPO in June 2021, all deferred offering costs in the accompanying unaudited condensed consolidated balance sheets were reclassified from prepaid expenses and other current assets and recorded against the IPO proceeds as a reduction to additional paid-in capital. As of SeptemberJune 30, 2020,2022 and December 31, 2021, there were 0 deferred offering costs capitalized.
Recently Adopted Accounting PronouncementsPrior Period Reclassification
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU No. 2019-12”), which simplifies the accounting for income taxes by removing a variety of exceptionsCertain prior period amounts related to other receivables within the framework of ASC 740. The Company early adopted ASU No. 2019-12 on April 1, 2021accounts receivable, net and the amendments applicable to the Company were applied prospectively. The adoption of this standard impacted the income tax benefit realized by the Companyprepaid expenses and other current assets in the unaudited condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2021, and the current tax liability and net deferred tax liability recorded in other accrued expenses and long-term deferred tax liability, respectively, in the unaudited condensed consolidated balance sheet as of September 30, 2021.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) (“ASU No. 2020-04”) and issued the following subsequent amendments to ASU No. 2020-04: ASU No. 2021-01. The new guidance is intended to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. Reference rate reform is necessary due to the phase out of the London Interbank Offered Rate (“LIBOR”) at the end of 2021. The adoption of this guidance is optional and provides relief around modification and hedge accounting as it specifically arises from changing reference rates, in addition to optional expedients for cash flow hedges. The guidance will be effective from March 12, 2020 through December 31, 2022. The Company adopted ASU No. 2020-04 on April 1, 2021, and the adoption of this standard did not have an impact on the Company’saccompanying unaudited condensed consolidated financial statements have been reclassified to conform to the current period presentation. There was no change to prior period current or disclosures.total assets.
Recently Issued Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU No. 2016-13”), which replaces the existing incurred loss impairment model with an expected credit loss model and requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected. The
10
guidance will be effective for the Company beginning January 1, 2023, and interim periods therein. Early adoption is permitted. The Company is currently evaluating the effect that ASU No. 2016-13 will have on its unaudited condensedconsolidated financial statements and related disclosures.
10
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805) – Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU No. 2021-08”). The guidance improves the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and certain inconsistencies in application. Under current U.S. GAAP, an acquirer generally recognizes contract assets acquired and liabilities assumed in a business combination at fair value on the acquisition date. The amendments in this update require that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC Topic 606 as if it had originated the contracts. The amendments in this update will be effective for the Company beginning January 1, 2023, and interim periods thereafter. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the effect that ASU No. 2021-08 will have on its consolidated financial statements and related disclosures.
3. Property and Equipment, Net
Property and equipment, net consisted of the following for the periods presented:
| As of |
| As of |
| ||||||||||
| September 30, 2021 |
|
| December 31, 2020 |
| June 30, 2022 |
|
| December 31, 2021 |
| ||||
Land | $ | 29,729 |
|
| $ | 28,316 |
| $ | 93,717 |
|
| $ | 81,911 |
|
Buildings and improvements |
| 70,757 |
|
|
| 55,250 |
|
| 191,580 |
|
|
| 171,540 |
|
Finance leases |
| 16,497 |
|
|
| 16,497 |
|
| 16,604 |
|
|
| 16,497 |
|
Leasehold improvements |
| 88,567 |
|
|
| 83,561 |
|
| 100,138 |
|
|
| 92,821 |
|
Vehicles and equipment |
| 168,620 |
|
|
| 143,435 |
|
| 199,878 |
|
|
| 188,053 |
|
Furniture, fixtures and equipment |
| 72,354 |
|
|
| 61,350 |
|
| 79,369 |
|
|
| 73,213 |
|
Construction in progress |
| 23,256 |
|
|
| 13,187 |
|
| 43,087 |
|
|
| 24,724 |
|
Property and equipment, gross |
| 469,780 |
|
|
| 401,596 |
|
| 724,373 |
|
|
| 648,759 |
|
Less: accumulated depreciation |
| (168,053 | ) |
|
| (138,238 | ) |
| (200,717 | ) |
|
| (175,017 | ) |
Less: accumulated depreciation - finance leases |
| (1,051 | ) |
|
| (324 | ) |
| (1,782 | ) |
|
| (1,294 | ) |
Property and equipment, net | $ | 300,676 |
|
| $ | 263,034 |
| $ | 521,874 |
|
| $ | 472,448 |
|
For the three months ended SeptemberJune 30, 20212022 and 2020,2021, depreciation expense was $11,38813,198 and $9,65410,237, respectively. For the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, depreciation expense was $31,59626,132 and $28,19720,208, respectively.respectively.
For the three months ended SeptemberJune 30, 20212022 and 2020,2021, amortization expense on finance leases was $242246 and $51243, respectively. For the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, amortization expense on finance leases was $727489 and $94485, respectively.
4. Other Intangible Assets, Net
Other intangibles assets, net consisted of the following as of the periods presented:
| September 30, 2021 |
|
| December 31, 2020 |
| June 30, 2022 |
|
| December 31, 2021 |
| ||||||||||||||||||||
| Gross Carrying Amount |
| Accumulated Amortization |
| Gross Carrying Amount |
| Accumulated Amortization |
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Gross Carrying Amount |
|
| Accumulated Amortization |
| |||||||||||
Trade names and Trademarks | $ | 107,000 |
|
| $ | 0 |
|
| $ | 107,000 |
|
| $ | 0 |
| |||||||||||||||
Trade names and trademarks | $ | 107,200 |
|
| $ | 175 |
|
| $ | 107,200 |
|
| $ | 0 |
| |||||||||||||||
CPC Unity System |
| 42,900 |
|
|
| 30,519 |
|
|
| 42,900 |
|
|
| 27,301 |
|
| 42,900 |
|
|
| 33,736 |
|
|
| 42,900 |
|
|
| 31,591 |
|
Customer relationships |
| 8,800 |
|
|
| 7,530 |
|
|
| 7,600 |
|
|
| 7,376 |
|
| 11,800 |
|
|
| 7,842 |
|
|
| 11,800 |
|
|
| 7,584 |
|
Covenants not to compete |
| 7,565 |
|
|
| 3,694 |
|
|
| 7,515 |
|
|
| 3,319 |
|
| 11,825 |
|
|
| 4,862 |
|
|
| 11,075 |
|
|
| 3,980 |
|
| $ | 166,265 |
|
| $ | 41,743 |
|
| $ | 165,015 |
|
| $ | 37,996 |
| $ | 173,725 |
|
| $ | 46,615 |
|
| $ | 172,975 |
|
| $ | 43,155 |
|
For the three months ended SeptemberJune 30, 20212022 and 2020,2021, amortization expense associated with the Company’s finite-lived intangible assets was $1,3501,692 and $1,7021,420, respectively.
For the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, amortization expense associated with the Company’s finite-lived intangible assets was $4,2073,460 and $5,2132,857, respectively.
As of SeptemberJune 30, 2021,2022, estimated future amortization expense was as follows:
Fiscal Year Ending: |
|
|
|
| |
2022 (remaining six months) |
|
| $ | 3,932 |
|
2023 |
|
|
| 6,868 |
|
2024 |
|
|
| 4,926 |
|
2025 |
|
|
| 1,467 |
|
2026 |
|
|
| 1,400 |
|
Thereafter |
|
|
| 1,317 |
|
Total estimated future amortization expense |
|
| $ | 19,910 |
|
11
Fiscal Year Ending: |
|
|
|
| |
2021 (remaining three months) |
|
| $ | 1,479 |
|
2022 |
|
|
| 6,081 |
|
2023 |
|
|
| 5,602 |
|
2024 |
|
|
| 3,529 |
|
2025 |
|
|
| 364 |
|
Thereafter |
|
|
| 467 |
|
Total estimated future amortization expense |
|
| $ | 17,522 |
|
5. Goodwill
Goodwill consisted of the following for the periods presented:
| As of |
| |||||
| June 30, 2022 |
|
| December 31, 2021 |
| ||
Balance at beginning of period | $ | 1,060,221 |
|
| $ | 737,415 |
|
Current period acquisitions |
| 50,851 |
|
|
| 323,477 |
|
Other provisional adjustments |
| (10,109 | ) |
|
| (671 | ) |
Balance at end of period | $ | 1,100,963 |
|
| $ | 1,060,221 |
|
11Goodwill is generally deductible for tax purposes, except for the portion related to purchase accounting step-up goodwill.
| As of |
| |||||
| September 30, 2021 |
|
| December 31, 2020 |
| ||
Balance at beginning of period | $ | 737,415 |
|
| $ | 731,989 |
|
Current period acquisitions |
| 23,248 |
|
|
| 21,467 |
|
Current period dispositions |
| - |
|
|
| (16,191 | ) |
Other provisional adjustments |
| (893 | ) |
|
| 150 |
|
Balance at end of period | $ | 759,770 |
|
| $ | 737,415 |
|
6. Other Accrued Expenses
6.Other accrued expenses consisted of the following for the periods presented:
|
| As of |
| |||||
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||
Utilities |
| $ | 5,370 |
|
| $ | 4,274 |
|
Accrued other tax expense |
|
| 7,860 |
|
|
| 8,088 |
|
Insurance expense |
|
| 3,335 |
|
|
| 3,200 |
|
Other |
|
| 10,257 |
|
|
| 4,639 |
|
Total other accrued expenses |
| $ | 26,822 |
|
| $ | 20,201 |
|
7. Income Taxes
The effective income tax rates on continuing operations for the ninesix months ended SeptemberJune 30, 20212022 and 20202021 were 33.7720.35% and 9.7029.69%, respectively. In general, the effective tax rates differed from the U.S. federal statutory income tax rate primarily due to state income taxes, non-deductible expenses such as those related to certain executive compensation, and other discrete tax benefits recorded during the period.
The year-to-date provision for income taxes for the ninesix months ended SeptemberJune 30, 2022 included taxes on earnings at an anticipated annual effective tax rate of 26.78% and a net, favorable tax impact of $5,744 related primarily to discrete tax benefits originating from stock options exercised during the six months ended June 30, 2022.
The year-to-date provision for income taxes for the six months ended June 30, 2021 included taxes on earnings at an anticipated annual effective tax rate of 25.1924.82% and a favorable tax impact of $58,43356,067 relatedrelated primarily to discrete tax benefits originating from stock option exercises and stock-based compensation expenses recorded in the threesix months ended June 30, 20212021..
The year-to-date provision for income taxes for the nine months ended September 30, 2020 included taxes on earnings at an anticipated annual effective tax rate of 25.52% and a favorable tax impact of $3,503 related primarily to the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) that was enacted into law in March 2020.
The CARES Act permitted the Company to carry back federal net operating losses to earlier tax years where the highest federal statutory income tax rate was 35.00%, resulting in an increase in the tax benefit originally computed at 21.00% of the expected net operating loss carryforward.
For the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, the Company did 0t record any unrecognized tax benefits or interest and penalties related to any uncertain tax positions.
7.8. Debt
The Company’s long-term debt consisted of the following as of the periods presented:
| As of |
| |||||
| June 30, 2022 |
|
| December 31, 2021 |
| ||
Credit agreement |
|
|
|
|
| ||
First lien term loan | $ | 901,201 |
|
| $ | 903,301 |
|
Less: unamortized discount and debt issuance costs |
| (6,174 | ) |
|
| (6,965 | ) |
First lien term loan, net |
| 895,027 |
|
|
| 896,336 |
|
Total long-term portion of debt, net | $ | 895,027 |
|
| $ | 896,336 |
|
12
| As of |
| |||||
| September 30, 2021 |
|
| December 31, 2020 |
| ||
Credit agreement |
|
|
|
|
| ||
First lien term loan | $ | 613,301 |
|
| $ | 827,600 |
|
Less: debt issuance costs |
| (3,178 | ) |
|
| (4,849 | ) |
Less: current maturities of debt |
| (8,400 | ) |
|
| (8,400 | ) |
First lien term loan, net |
| 601,723 |
|
|
| 814,352 |
|
Revolving commitment |
| 0 |
|
|
| 0 |
|
Credit agreement, net | $ | 601,723 |
|
| $ | 814,352 |
|
|
|
|
|
|
| ||
Second lien credit agreement |
|
|
|
|
| ||
Second lien term loan | $ | 0 |
|
| $ | 242,673 |
|
Less: debt issuance costs |
| 0 |
|
|
| (2,205 | ) |
Second lien credit agreement, net | $ | 0 |
|
| $ | 240,468 |
|
|
|
|
|
|
| ||
Total long-term portion of debt, net | $ | 601,723 |
|
| $ | 1,054,820 |
|
As of SeptemberJune 30, 2021,2022, annual maturities of debt were as follows:
Fiscal Year Ending: |
|
|
|
|
|
| ||||
2021 (remaining three months) |
|
| $ | 2,100 |
| |||||
2022 |
|
|
| 8,400 |
| |||||
2022 (remaining six months) |
|
| $ | 0 |
| |||||
2023 |
|
|
| 8,400 |
|
|
|
| 0 |
|
2024 |
|
|
| 8,400 |
|
|
|
| 0 |
|
2025 |
|
|
| 8,400 |
|
|
|
| 0 |
|
2026 |
|
|
| 901,201 |
| |||||
Thereafter |
|
|
| 577,601 |
|
|
|
| 0 |
|
Total maturities of debt |
|
| $ | 613,301 |
|
|
| $ | 901,201 |
|
12
As of SeptemberJune 30, 20212022 and December 31, 2020,2021, unamortized deferred financingdebt issuance costs, including those associated with the Company's Revolving Commitment (as defined below), were $3,6666,584 and $7,4947,427, respectively, and accumulated amortization of deferred financingdebt issuance costs was $2,5083,590 and $3,0572,748, respectively.
For the three months ended SeptemberJune 30, 20212022 and 2020,2021, the amortization of deferred financingdebt issuance costs in interest expense, net in the unaudited condensed consolidated statements of operations and comprehensive income (loss) was approximately $200423 and $414342, respectively.
For the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, the amortization of deferred financingdebt issuance costs in interest expense, net in the unaudited condensed consolidated statements of operations and comprehensive income (loss) was approximately $898842 and $1,241698, respectively..
Credit Agreement
On August 21, 2014, the Company entered into a Credit Agreement (“Credit Agreement”) which was originally comprised of a term loan (“First Lien Term Loan”) and a revolving commitment (“Revolving Commitment”). The Credit Agreement was collateralized by substantially all personal property (including cash, inventory, property and equipment, and intangible assets), real property, and equity interests owned by the Company.
Under the Credit Agreement and with respect to the First Lien Term Loan, the Company had the option of selecting either (i) a Base Rate interest rate plus fixed margin of 2.25% or (ii) a Eurodollar (LIBOR) interest rate for one, two, three or six months plus a fixed margin of 3.25%.
Under the Credit Agreement and with respect to the Revolving Commitment, the Company had the option of selecting either (i) a Base Rate interest rate plus a variable margin of 2.50% to 3.00%, based on the Company’s First Lien Net Debt Leverage Ratio, or (ii) a Eurodollar (LIBOR) interest rate for one, two, three or six months plus a variable margin of 3.50% to 4.00%, based on the Company’s First Lien Net Leverage Ratio.
First Lien Term Loan
In February 2020, the Company entered into Amendment No. 1 to Amended and Restated First Lien Credit Agreement (“Amended First Lien Credit Agreement”Amendment No. 1”) which amended and restated the Amended and Restated First Lien Credit Agreement entered into in May 2019 ("(the “A&R First Lien Credit Agreement"Agreement”). Amendment No. 1The Amended First Lien Credit Agreement changed the interest rate spreads associated with the A&R First Lien Credit Agreement where (i) the variable margin associated with the Base Rate interest rate plus a variable margin based on the Company’s First Lien Net Leverage Ratio changed from 2.25% to 2.50% to 2.00% to 2.25% and (ii) the variable margin associated with the Eurodollar Rate interest rate for one, two, three or six months plus a variable margin based on the Company’s First Lien Net Leverage Ratio changed from 3.25% to 3.50% to 3.00% to 3.25%. In connection with the Amended First Lien Credit Agreement, the Company expensed $1,918 of previously unamortized deferred financing costs as a loss on extinguishment of debt in the unaudited condensed consolidated statements of operations and comprehensive income (loss).
In February 2020 and March 2020, the Company borrowed $30,000 and $10,000, respectively, under the delayed draw facility under the First Lien Term Loan, utilizing the full $40,000 available under the delayed draw facility. As a result of the additional borrowings under the delayed draw facility, the quarterly principal payments associated with the First Lien Term Loan increased from $2,000 to $2,100.
In June 2021, the Company made a voluntary prepayment of $190,400 of outstanding principal under the First Lien Term Loan funded by the net proceeds from the IPO. In connection with the voluntary prepayment, the Company expensed $1,037 of previously unamortized deferred financingdebt issuance costs as a loss on extinguishment of debt in the unaudited condensed consolidated statements of operations and comprehensive income (loss).income. The early prepayment resulted in the elimination of required quarterly amortization principal payments through 2026.
In December 2021, in connection with the Clean Streak Ventures acquisition, the Company entered into Amendment No. 3 to Amended and Restated First Lien Credit Agreement (“Amendment No. 3”) which amended and restated the A&R First Lien Credit Agreement, as previously amended. Under the terms of Amendment No. 3, the previous First Lien Term Loan was increased by $290,000 to $903,301 with the balance due on May 14, 2026. The incremental increase in aggregate principal of $290,000 resulted in $285,962 of proceeds net of discount and deferred debt issuance costs.
As of SeptemberJune 30, 20212022 and December 31, 2020,2021, the amount outstanding under the First Lien Term Loan was $901,201 and $903,301, respectively. As of June 30, 2022 and December 31, 2021, the interest rate on the First Lien Term Loan was 3.084.67% and 3.403.10%, respectively.
13
The AmendedA&R First Lien Credit Agreement, as amended (the “Amended A&R First Lien Credit Agreement”), requires the Company to maintain compliance with a First Lien Net Leverage Ratio. As of SeptemberJune 30, 2021,2022, the Company was in compliance with the First Lien Net Leverage Ratio financial covenant of the Amended A&R First Lien Credit Agreement.
Revolving CommitmentCredit Agreement
In June 2021, the Company entered into Amendment No. 2 to the Amended and Restated First Lien Credit Agreement (“Amendment No. 2”) that (i) increased the maximum available borrowing capacity under the Revolving Commitment from $75,000 to $150,000 and (ii) extended the maturity date of the Revolving Commitment to the earliest to occur of (a) June 4, 2026, (b) the date that is six months prior to the maturity date of the First Lien Term Loan (provided that clause (b) shall not apply if the maturity date for the First Lien Term Loan is extended to a date that is at least six months after June 4, 2026, the First Lien Term Loan is refinanced having a maturity date at least six months after June 4, 2026, or the First Lien Term Loan is paid in full), (c) the date that commitments under the Revolving Commitment are permanently reduced to zero, and (d) the date of the termination of the commitments under the Revolving Commitment. The increase to the maximum available borrowing capacity was effected on the close of the IPO in June 2021. In connection with the amendment,Amendment No. 2, the Company expensed $87 of previously unamortized deferred financingdebt issuance costs as a loss on extinguishment of debt in the unaudited condensed consolidated statements of operations and comprehensive income (loss).
13As of June 30, 2022 and December 31, 2021, there were
0 amounts outstanding under the Revolving Commitment.
The maximum available borrowing capacity under the Revolving Commitment is reduced by outstanding letters of credit under the Revolving Commitment. As of SeptemberJune 30, 20212022 and December 31, 2020,2021, the available borrowing capacity under the Revolving Commitment was $149,694148,991 and $74,531149,503, respectively.
In addition, an unused commitment fee based on the Company’s First Lien Net Leverage Ratio is payable on the average of the unused borrowing capacity under the Revolving Commitment. As of SeptemberJune 30, 20212022 and December 31, 2020,2021, the unused commitment fee was 0.25% and 0.50%, respectively..
Standby Letters of Credit
As of SeptemberJune 30, 2021,2022, the Company has a letter of credit sublimit of $10,000 under the Revolving Commitment, provided that the total utilization of revolving commitments under the Revolving Commitment does not exceed $150,000 subsequent to the First Lien Credit Agreement.. Any letter of credit issued under the Credit Agreement has an expiration date which is the earlier of (i) no later than 12 months from the date of issuance or (ii) five business days prior to the maturity date of the Revolving Commitment, as amended under Amendment No. 2 to Amended and Restated First Lien Credit Agreement. Letters of credit under the Revolving Commitment reduce the maximum available borrowing capacity under the Revolving Commitment. As of SeptemberJune 30, 20212022 and December 31, 2020,2021, the amounts associated with outstanding letters of credit were $3061,009 and $469497, respectively, and unused letters of credit under the Revolving Commitment were $9,6948,991 and $9,5319,503, respectively.
Second Lien Credit Agreement
In March 2020, the Company entered into the First Amendment to Second Lien Credit Agreement (“Amended Second Lien Credit Agreement”). The Amended Second Lien Credit Agreement provided for an incremental term loan to the Company in an aggregate amount of $5,625 under the same terms as the Second Lien Credit Agreement. The incremental term loan under the Amended Second Lien Credit Agreement is an investment from a related party (see Note 14-Related-Party Transactions). The Amended Second Lien Credit Agreement also allowed the Company to make its quarterly interest payments on the term loan under the Amended Second Lien Credit Agreement ("Second Lien Term Loan") via payment-in-kind (“PIK”) by adding such amount to the outstanding principal amount of the Second Lien Term Loan. The Company made PIK additions to its outstanding principal amounts in the amounts of $5,906 and $6,142 in March 2020 and June 2020, respectively. The Amended Second Lien Credit Agreement also increased the interest rate of the Second Lien Term Loan to 10.50% effective January 1, 2020 to June 30, 2020.
In June 2021, the Company made a voluntary prepayment of all outstanding borrowings under the second lien term loan (the “Second Lien Term Loan”) pursuant to the Second Lien Term LoanCredit Agreement entered into May 2019, as amended by the First Amendment to Second Lien Credit Agreement in March 2020 (the “Amended Second Lien Credit Agreement”) funded by the net proceeds from the IPO, which included outstanding principal of $242,673 and accrued interest expense of $6,050. In connection with this voluntary prepayment, the Company expensed $2,059 of previously unamortized deferred financingdebt issuance costs as a loss on extinguishment of debt in the unaudited condensed consolidated statements of operations and comprehensive income (loss).
As of December 31, 2020 and through the date of extinguishment, the interest rate on the Second Lien Term Loan was 10.00%.income.
8.9. Fair Value Measurements
The following table presents financial liabilities which are measured at fair value on a recurring basis as of SeptemberJune 30, 2021:2022:
| Fair Value Measurements |
| |||||||||||||
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
| ||||
Interest rate swap | $ | 988 |
|
| $ | 0 |
|
| $ | 988 |
|
| $ | 0 |
|
| Fair Value Measurements |
| |||||||||||||
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
| ||||
Interest rate swap | $ | 3,375 |
|
| $ | 0 |
|
| $ | 3,375 |
|
| $ | 0 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
| ||||
Contingent Consideration | $ | 5,750 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 5,750 |
|
The following table presents financial liabilities which are measured at fair value on a recurring basis as of December 31, 2020:2021:
| Fair Value Measurements |
| |||||||||||||
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
| ||||
Interest rate swap | $ | 268 |
|
| $ | 0 |
|
| $ | 268 |
|
| $ | 0 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
| ||||
Contingent Consideration | $ | 5,750 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 5,750 |
|
14
| Fair Value Measurements |
| |||||||||||||
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
| ||||
Interest rate swap | $ | 1,488 |
|
| $ | 0 |
|
| $ | 1,488 |
|
| $ | 0 |
|
The Company measures the fair value of its financial assets and liabilities using the highest level of inputs that are available as of the measurement date. The carrying amounts of cash, accounts receivable, and accounts payable approximate their fair value due to the immediate or short-term maturity of these financial instruments. See Note 9-Interest10 Interest Rate Swap for additional information on the interest rate swap.
As of SeptemberJune 30, 20212022 and December 31, 2020,2021, the fair value of the Company’s First Lien Term Loan approximated its carrying value.value due to the debt’s variable interest rate terms.
AsThe Company recognized a Level 3 contingent consideration liability in connection with the Downtowner Car Wash acquisition in December 2021. The Company measured its contingent consideration liability using Level 3 unobservable inputs. The contingent consideration liability is associated with the achievement of September 30, 2021certain targets and December 31, 2020,is estimated at each balance sheet date by considering among other factors, results of completed periods and the Company's most recent financial projection for future periods subject to earn-out payments. There are two components to the contingent consideration: a payment when the Company obtains the certificate of occupancy for the car wash and opens to the public in 2023 and an annual payment based on certain financial metrics of the business. A change in the forecasted revenue or projected opening dates could result in a significantly lower or higher fair value measurement. The Company determined that there were 0 Level 3 financial assets or financial liabilities measured atsignificant changes to the unobservable inputs that would have resulted in a change in fair value on a recurring basis.of this contingent consideration liability at June 30, 2022.
During the three and ninesix months ended September 30,June 30, 202122 and 2020,21, there were 0 transfers between fair value measurement levels.
14
9.10. Interest Rate Swap
In May 2020, the Company entered into a pay-fixed, receive-floating interest rate swap (the “Swap”) to mitigate variability in forecasted interest payments on an amortizing notional of $550,000 of the Company’s variable-rate First Lien Term Loan. The Company designated the Swap as a cash flow hedge.
As of SeptemberJune 30, 2021,2022, information pertaining to the Swap was as follows:
Notional Amount | Notional Amount |
| Fair Value |
| Pay-Fixed |
| Receive-Floating |
| Maturity Date | Notional Amount |
|
| Fair Value |
|
| Pay-Fixed |
| Receive-Floating |
| Maturity Date | ||||
$ | 545,812 |
|
| $ | 988 |
|
| 0.308% |
| 0.087% |
| October 20, 2022 | 541,624 |
|
| $ | 3,375 |
|
| 0.308% |
| 1.60% |
| October 20, 2022 |
As of SeptemberJune 30, 20212022 and December 31, 2020, the current portion of2021, the fair value of the Swap was $9713,375 and $931268, respectively, and is reported as a debit balance as a result of floating interest rates above fixed interest rates, and is included in prepaid expenses and other accrued expensescurrent assets in the accompanying unaudited condensed consolidated balance sheets.
As of September 30, 2021 and December 31, 2020, the long-term portion of the fair value of the Swap was $17 and $557, respectively, and is included in other long-term liabilities in the accompanying unaudited condensed consolidated balance sheets.
For the three months ended SeptemberJune 30, 20212022 and 2020,2021, amounts reported in other comprehensive income (loss) in the accompanying unaudited condensed consolidated statements of operations and comprehensive income (loss) are net of tax of $18100 and $959, respectively.
For the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, amounts reported in other comprehensive income (loss) in the accompanying unaudited condensed consolidated statements of operations and comprehensive income (loss) are net of tax of $133725 and $394115, respectively.respectively
10.11. Leases
Balance sheet information related to leases consisted of the following for the periods presented:
|
|
|
| As of |
| |||||
|
| Classification |
| June 30, 2022 |
|
| December 31, 2021 |
| ||
Assets |
|
|
|
|
|
|
|
| ||
Operating |
| Operating lease right of use assets, net |
| $ | 727,107 |
|
| $ | 718,533 |
|
Finance |
| Property and equipment, net |
|
| 14,822 |
|
|
| 15,204 |
|
Total lease assets |
|
|
| $ | 741,929 |
|
| $ | 733,737 |
|
|
|
|
|
|
|
|
|
| ||
Liabilities |
|
|
|
|
|
|
|
| ||
Current |
|
|
|
|
|
|
|
| ||
Operating |
| Current maturities of operating lease liability |
| $ | 38,548 |
|
| $ | 37,345 |
|
Finance |
| Current maturities of finance lease liability |
|
| 628 |
|
|
| 559 |
|
Long-term |
|
|
|
|
|
|
|
| ||
Operating |
| Operating lease liability |
|
| 722,941 |
|
|
| 717,552 |
|
Finance |
| Financing lease liability |
|
| 15,123 |
|
|
| 15,359 |
|
Total lease liabilities |
|
|
| $ | 777,240 |
|
| $ | 770,815 |
|
15
|
|
|
| As of |
| |||||
|
| Classification |
| September 30, 2021 |
|
| December 31, 2020 |
| ||
Assets |
|
|
|
|
|
|
|
| ||
Operating |
| Operating right of use assets, net |
| $ | 699,274 |
|
| $ | 681,538 |
|
Finance |
| Property and equipment, net |
|
| 15,446 |
|
|
| 16,173 |
|
Total lease assets |
|
|
| $ | 714,720 |
|
| $ | 697,711 |
|
|
|
|
|
|
|
|
|
| ||
Liabilities |
|
|
|
|
|
|
|
| ||
Current |
|
|
|
|
|
|
|
| ||
Operating |
| Current maturities of operating lease liability |
| $ | 36,218 |
|
| $ | 33,485 |
|
Finance |
| Current maturities of finance lease liability |
|
| 542 |
|
|
| 495 |
|
Long-term |
|
|
|
|
|
|
|
| ||
Operating |
| Operating lease liability |
|
| 700,548 |
|
|
| 685,479 |
|
Finance |
| Financing lease liability |
|
| 15,507 |
|
|
| 15,917 |
|
Total lease liabilities |
|
|
| $ | 752,815 |
|
| $ | 735,376 |
|
Components of total lease cost, net, consisted of the following for the periods presented:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating lease expense(1) |
| $ | 20,134 |
|
| $ | 19,706 |
|
| $ | 58,654 |
|
| $ | 58,745 |
|
Finance lease expense |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Amortization of lease assets |
|
| 242 |
|
|
| 50 |
|
|
| 727 |
|
|
| 81 |
|
Interest on lease liabilities |
|
| 290 |
|
|
| 65 |
|
|
| 876 |
|
|
| 111 |
|
Short-term lease expense |
|
| 23 |
|
|
| 11 |
|
|
| 42 |
|
|
| 34 |
|
Variable lease expense(2) |
|
| 2,160 |
|
|
| 1,498 |
|
|
| 8,648 |
|
|
| 6,473 |
|
Total |
| $ | 22,849 |
|
| $ | 21,330 |
|
| $ | 68,947 |
|
| $ | 65,444 |
|
Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Operating lease expense(1) $ 21,653 $ 19,395 $ 42,857 $ 38,520 Finance lease expense Amortization of lease assets 246 243 $ 488 485 Interest on lease liabilities 283 292 $ 568 586 Short-term lease expense 8 15 $ 16 19 Variable lease expense(2) 2,488 2,564 $ 7,629 6,488 Total $ 24,678 $ 22,509 $ 51,558 $ 46,098
income.
15
The following includes supplemental information for the periods presented:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
Operating cash flows from operating leases |
| $ | 20,490 |
|
| $ | 19,085 |
|
| $ | 59,831 |
|
| $ | 56,730 |
|
| $ | 21,881 |
|
| $ | 19,814 |
|
| $ | 43,342 |
|
| $ | 39,341 |
|
Operating cash flows from finance leases |
| $ | 290 |
|
| $ | 65 |
|
| $ | 876 |
|
| $ | 111 |
|
| $ | 283 |
|
| $ | 292 |
|
| $ | 568 |
|
| $ | 586 |
|
Financing cash flows from finance leases |
| $ | 124 |
|
| $ | 45 |
|
| $ | 364 |
|
| $ | 106 |
|
| $ | 139 |
|
| $ | 121 |
|
| $ | 274 |
|
| $ | 240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Operating lease liabilities arising from obtaining ROU assets |
| $ | 12,251 |
|
| $ | 11,342 |
|
| $ | 44,271 |
|
| $ | 26,867 |
|
| $ | 20,193 |
|
| $ | 22,421 |
|
| $ | 28,011 |
|
| $ | 32,020 |
|
Finance lease liabilities arising from obtaining ROU assets |
| $ | 0 |
|
| $ | 15,597 |
|
| $ | 0 |
|
| $ | 15,597 |
|
| $ | 103 |
|
| $ | 0 |
|
| $ | 103 |
|
| $ | 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Weighted-average remaining operating lease term |
|
| 14.55 |
|
|
| 14.94 |
|
|
| 14.55 |
|
|
| 14.94 |
|
|
| 14.18 |
|
|
| 14.74 |
|
|
| 14.18 |
|
|
| 14.74 |
|
Weighted-average remaining finance lease term |
|
| 17.51 |
|
|
| 18.39 |
|
|
| 17.51 |
|
|
| 18.39 |
|
|
| 16.78 |
|
|
| 17.73 |
|
|
| 16.78 |
|
|
| 17.73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Weighted-average operating lease discount rate |
|
| 6.45 | % |
|
| 6.26 | % |
|
| 6.45 | % |
|
| 6.26 | % |
|
| 6.83 | % |
|
| 6.40 | % |
|
| 6.83 | % |
|
| 6.40 | % |
Weighted-average finance lease discount rate |
|
| 7.33 | % |
|
| 7.33 | % |
|
| 7.33 | % |
|
| 7.33 | % |
|
| 7.33 | % |
|
| 7.33 | % |
|
| 7.33 | % |
|
| 7.33 | % |
As of SeptemberJune 30, 2021,2022, lease obligation maturities were as follows:
Fiscal Year Ending: |
| Operating Leases |
|
| Finance Leases |
|
| Operating Leases |
|
| Finance Leases |
| ||||
2021 (remaining three months) |
| $ | 20,557 |
|
| $ | 419 |
| ||||||||
2022 |
|
| 82,311 |
|
|
| 1,683 |
| ||||||||
2022 (remaining six months) |
| $ | 44,088 |
|
| $ | 865 |
| ||||||||
2023 |
|
| 81,945 |
|
|
| 1,716 |
|
|
| 88,110 |
|
|
| 1,754 |
|
2024 |
|
| 81,325 |
|
|
| 1,741 |
|
|
| 87,605 |
|
|
| 1,780 |
|
2025 |
|
| 80,998 |
|
|
| 1,766 |
|
|
| 87,341 |
|
|
| 1,786 |
|
2026 |
|
| 86,307 |
|
|
| 1,792 |
| ||||||||
Thereafter |
|
| 809,097 |
|
|
| 23,883 |
|
|
| 817,819 |
|
|
| 22,090 |
|
Total future minimum obligations |
| $ | 1,156,233 |
|
| $ | 31,208 |
|
| $ | 1,211,270 |
|
| $ | 30,067 |
|
Less: Present value discount |
|
| (419,467 | ) |
|
| (15,159 | ) |
|
| (449,781 | ) |
|
| (14,316 | ) |
Present value of net future minimum lease obligations |
| $ | 736,766 |
|
| $ | 16,049 |
|
| $ | 761,489 |
|
| $ | 15,751 |
|
Less: current portion |
|
| (36,218 | ) |
|
| (542 | ) |
|
| (38,548 | ) |
|
| (628 | ) |
Long-term obligations |
| $ | 700,548 |
|
| $ | 15,507 |
|
| $ | 722,941 |
|
| $ | 15,123 |
|
Forward-Starting Leases
As of SeptemberJune 30, 2021,2022, the Company entered into 98 leases that had not yet commenced related to build-to-suit arrangements for car wash locations. These leases will commence in the remainder of 20212022, or in 20222023 or 2024 with initial lease terms of five15 to 20 years.
As of December 31, 2020,2021, the Company entered into 108 leases that had not yet commenced related to build-to-suit arrangements for car wash locations. These leases will commence in the remainder of 20212022 or in 20222023 with initial lease terms of five to 20 years.
16
Sale-Leaseback Transactions
During the three and six months ended SeptemberJune 30, 2021 and 2020,2022, the Company completed 1 and 2one sale-leaseback transactionstransaction related to its car wash locations respectively, for aggregate consideration of $5,000 and $7,0073,800, respectively, resulting in a net loss of $6 and net gain of $4,4083,203, respectively, which arewas included in loss (gain)gain on sale of assets in the accompanying unaudited condensed consolidated statements of operations and comprehensive income (loss).income.
During the three months ended June 30, 2021, the Company completed three sale-leaseback transaction related to its car wash locations with aggregate consideration of $46,200, resulting in a net gain of $7,117, which was included in loss on sale of assets in the accompanying unaudited condensed consolidated statements of operations and comprehensive income. Contemporaneously with the closing of this sale, the Company entered into a lease agreement for the land and buildings for an initial 20-year term. For the sale-leaseback transaction consummated in the three months ended June 30, 2021, the cumulative initial annual rent was approximately $2,655, subject to annual escalations. These leases are accounted for as operating leases.
During the six months ended June 30, 2021, the Company completed 4 sale-leaseback transactions related to its car wash locations, with aggregate consideration of $46,267, resulting in a net gain of $6,846, which are included in gain on sale of assets in the accompanying unaudited condensed consolidated statements of operations and comprehensive loss. Contemporaneously with the closing of the sales, the Company entered into lease agreements for the properties for initial 15- to 20-year terms. For the sale-leaseback transaction consummated in the three months ended September 30, 2021, the cumulative initial annual rent for the property was approximately $310, subject to annual escalations. This lease is accounted for as an operating lease. For the sale-leaseback transactions consummated in the three months ended September 30, 2020, the cumulative initial annual rents for the properties were approximately $433, subject to annual escalations. These leases are accounted for as operating leases.
During the nine months ended September 30, 2021 and 2020, the Company completed 5 and 3 sale-leaseback transactions related to its car wash locations, respectively, with aggregate consideration of $51,267 and $10,812, respectively, resulting in net gains of $6,840 and $4,210, respectively, which are included in loss (gain) on sale of assets in the accompanying unaudited condensed
16
consolidated statements of operations and comprehensive income (loss). Contemporaneously with the closing of the sales, the Company entered into lease agreements for the properties for initial 15- to 20-year terms. For the sale-leaseback transactions consummated in the ninesix months ended SeptemberJune 30, 2021, the cumulative initial annual rents for the properties wererent was approximately $3,192, subject to annual escalations. These leases are accounted for as operating leases. For the sale-leaseback transactions consummated in the nine months ended September 30, 2020, the cumulative initial annual rents for the properties were approximately $6812,882, subject to annual escalations. These leases are accounted for as operating leases.
11.12. Stockholders’ Equity
As of SeptemberJune 30, 2022, there were 1,000,000,000 shares of common stock authorized, 307,091,395 shares of common stock issued, and 303,917,168 shares of common stock outstanding. As of June 30, 2022, there were 5,000,000 shares of preferred stock authorized and NaN were issued or outstanding.
As of December 31, 2021, there were 1,000,000,000 shares of common stock authorized, 299,968,425303,294,678 shares of common stock issued, and 296,794,199300,120,451 shares of common stock outstanding.
As of December 31, 2020, there were 1,000,000,000 shares of common stock authorized, 264,747,644 shares of common stock issued, and 261,907,622 shares of common stock outstanding.
As of SeptemberJune 30, 20212022, and December 31, 2020,2021, the Company had 3,174,2263,174,227 shares and 2,840,022 shares, respectively, of treasury stock. As of SeptemberJune 30, 20212022 and December 31, 2020,2021, the cost of treasury stock included in additional paid-in capital in the accompanying unaudited condensed consolidated balance sheets was $6,091 and $3,330, respectively..
12.13. Stock-Based Compensation
The 2014 Plan
Under the 2014 Stock Option Plan of Hotshine Holdings, Inc. (the “2014 Plan”), the Company may grant incentive stock options or nonqualified stock options to purchase common shares of the Company to its employees, directors, officers, outside advisors and non-employee consultants.
All stock options granted under the 2014 Plan are equity-classified and have a contractual life of ten years. Under the 2014 Plan, 60% of the shares in a grant contain service-based vesting conditions and vest ratably over a five-year period and 40% of the shares in a grant contain performance-based vesting conditions (“Performance Vesting Options”). The condition for the Performance Vesting Options is a change in control or an initial public offering, where (i) 50% of the Performance Vesting Options vest and become exercisable if the Principal Stockholders receive the Target Proceeds at the Measurement Date and (ii) the remaining 50% of the Performance Vesting Options vest and become exercisable if the Principal Stockholders receive the Maximum Amount at the Measurement Date. Principal Stockholders is defined in the 2014 Plan as (a) Green Equity Investors VI, L.P., (b) Green Equity Investors Side VI, L.P., (c) LGP Associates VI-A, LLC, (d) LGP Associates VI-B LLC, and (e) the affiliates of the foregoing entities. Measurement Date is defined as the date of a change in control or an initial public offering, whichever comes first. The Target Proceeds and Maximum Amount are defined and measured by either multiples of invested capital or an annual compounded pre-tax internal rate of return on investment. In June 2021, the Company modified all outstanding shares of Performance Vesting Options to remove, subject to the successful completion of the IPO, the requirement that the Principal Stockholders receive the Target Proceeds and the Maximum Amount as conditions for the Performance Vesting Options to vest. The exercise prices for stock options granted under the 2014 Plan were not less than the fair market value of the common stock of the Company on the date of grant. For the avoidance of doubt, the IPO constituted a performance measurement date under the applicable option agreements for the Performance Vesting Options and the Performance Vesting Options vested in full in connection with the IPO.
The 2021 Plan
In June 2021, the Board adopted the 2021 Incentive Award Plan (the “2021 Plan”), which was subsequently approved by the Company's stockholders and became effective on June 25, 2021. Under the 2021 Plan, the Company may grant incentive stock options, nonqualified stock options, restricted stock units ("RSUs"), restricted stock, and other stock- or cash-based awards to its employees, directors, officers, and non-employee consultants. Initially, the maximum number of shares of the Company’s common stock that may be issued under the 2021 Plan is 29,800,000 new shares of common stock, which includes 256,431 shares of common stock that remained available for issuance under the 2014 Plan at June 25, 2021. In connection with the IPO, stock option and RSU
17
awards were granted with respect to 3,726,305 shares. Any shares of common stock subject to outstanding stock awards granted under the 2014 Plan and, following June 25, 2021, terminate, expire or are otherwise forfeited, reacquired or withheld will become available for issuance under the 2021 Plan.
All stock options granted under the 2021 Plan are equity-classified and have a contractual life of ten years. Under the 2021 Plan, the stock options contain service-based vesting conditions and generally vest ratably over a three- or five-year period (collectively with stock options under the 2014 Plan, the “Time Vesting Options”). The exercise prices for stock options granted under the 2021 Plan were not less than the fair market value of the common stock of the Company on the date of grant.
RSUs granted under the 2021 Plan are equity-classified and contain service-based conditions and generally vest ratably over one- to five-year periods. Each RSU represents the right to receive one share of the Company’s common stock upon vesting. The fair value is calculated based upon the Company’s closing stock price on the date of grant, and the stock-based compensation expense is recognized over the requisite service period, which is generally the vesting period.
17
The 2014 Plan and 2021 Plan are administered by the Board or, at the discretion of the Board, by a committee thereof. The exercise prices for stock options, the vesting of awards, and other restrictions are determined at the discretion of the Board, or its committee if so delegated.
The 2021 ESPP
In June 2021, the Board adopted the 2021 Employee Stock Purchase Plan (“2021 ESPP”), which was subsequently approved by the Company’s stockholders and became effective in June 2021. The 2021 ESPP authorizes the initial issuance of up to 5,000,000 shares of the Company’s common stock to eligible employees of the Company or, as designated by the Board, employees of a related company. The 2021 ESPP provides for offering periods not to exceed 27 months, and each offering period will include purchase periods. The Company determined that offering periods would commence at approximately the six-month period beginning with an enrollment date and ending with the next exercise date, except that the first offering period commenced on the effective date of the Company's registration statement and will endended on November 9, 2021.
The 2021 ESPP provides that the number of shares reserved and available for issuance under the 2021 ESPP will automatically increase on January 1 of each calendar year from January 1, 2022 through January 1, 2031 by an amount equal to the lesser of (i) 0.5% of the outstanding number of shares of common stock on the immediately preceding December 31 and (ii) such lesser number of shares of common stock as determined by the Board. The number of shares reserved and available for issuance under the 2021 ESPP as of January 1, 2022 is 6,057,993.
Share-Based Payment Valuation
The grant date fair value of Time Vesting Options granted is determined using the Black-Scholes option-pricing model. The grant date fair value of Performance Vesting Options is determined using a Monte Carlo simulation model and a barrier-adjusted Black-Scholes option-pricing model. The grant date fair value of stock purchase rights granted under the 2021 ESPP is determined using the Black-Scholes option-pricing model.
2021 ESPP Valuation
The following table presents, on a weighted-average basis, the assumptions used in the Black-Scholes option-pricing model to determine the grant date fair value of stock purchase rights granted under the 2021 ESPP during the three months ended September 30, 2021:periods presented:
| |
2022 | |
Expected volatility |
|
Risk-free interest rate |
|
Expected term (in years) |
|
Expected dividend yield |
|
Stock
Time Vesting Options
The following table summarizespresents, on a weighted-average basis, the assumptions used in the Black-Scholes option-pricing model to determine the grant date fair value of Time Vesting Options granted under the 2014 Plan and 2021 Plan during the periods presented:
| Six Months Ended June 30, | ||||
| 2022 |
|
| 2021 | |
Expected volatility | 35.63% - 35.87% |
|
| 40.83% - 44.75% | |
Risk-free interest rate | 2.96% - 3.34% |
|
| 0.9% - 1.19% | |
Expected term (in years) |
| 6.0 |
|
| 6.43 - 6.5 |
Expected dividend yield | NaN |
|
| NaN |
18
Performance Vesting Options
The following table presents, on a weighted-average basis, the assumptions used in the Black-Scholes option-pricing model to determine the grant date fair value of Performance Vesting Options granted under the 2014 Plan during the periods presented:
| Six Months Ended June 30, | ||
| 2022 |
| 2021 |
Expected volatility | 0 |
| 60.00% |
Risk-free interest rate | 0 |
| 0.63% |
Expected term (in years) | - |
| 5.2 |
Expected dividend yield | 0 |
| NaN |
Stock Options
A summary of the Company’s stock option activity since December 31, 2020:during the period presented is as follows:
| Time Vesting Options |
|
| Performance Vesting Options |
|
| Total Number of Stock Options |
|
| Weighted-Average Exercise Price |
| ||||
Outstanding as of December 31, 2020 |
| 19,958,043 |
|
|
| 13,341,504 |
|
|
| 33,299,547 |
|
| $ | 0.78 |
|
Granted |
| 3,208,581 |
|
|
| 747,936 |
|
|
| 3,956,517 |
|
| $ | 10.24 |
|
Exercised |
| (3,284,641 | ) |
|
| (104,573 | ) |
|
| (3,389,214 | ) |
| $ | 0.66 |
|
Forfeited |
| (55,776 | ) |
|
| (37,152 | ) |
|
| (92,928 | ) |
| $ | 2.31 |
|
Outstanding as of September 30, 2021 |
| 19,826,207 |
|
|
| 13,947,715 |
|
|
| 33,773,922 |
|
| $ | 1.90 |
|
Options vested or expected to vest as of September 30, 2021 |
| 19,100,621 |
|
|
| 13,947,715 |
|
|
| 33,048,336 |
|
| $ | 0.94 |
|
Options exercisable as of September 30, 2021 |
| 14,126,109 |
|
|
| 13,947,715 |
|
|
| 28,073,824 |
|
| $ | 0.84 |
|
| Time Vesting Options |
|
| Performance Vesting Options |
|
| Total Number of Stock Options |
|
| Weighted-Average Exercise Price |
| ||||
Outstanding as of December 31, 2021 |
| 18,513,356 |
|
|
| 12,239,595 |
|
|
| 30,752,951 |
|
| $ | 2.01 |
|
Granted |
| 412,703 |
|
| 0 |
|
|
| 412,703 |
|
| $ | 12.31 |
| |
Exercised |
| (1,882,265 | ) |
|
| (1,206,077 | ) |
|
| (3,088,342 | ) |
| $ | 0.98 |
|
Forfeited |
| (198,939 | ) |
| 0 |
|
|
| (198,939 | ) |
| $ | 7.29 |
| |
Outstanding as of June 30, 2022 |
| 16,844,855 |
|
|
| 11,033,518 |
|
|
| 27,878,373 |
|
| $ | 2.24 |
|
Options vested or expected to vest as of June 30, 2022 |
| 16,304,373 |
|
|
| 11,033,518 |
|
|
| 27,337,891 |
|
| $ | 6.74 |
|
Options exercisable as of June 30, 2022 |
| 12,596,452 |
|
|
| 11,033,518 |
|
|
| 23,629,970 |
|
| $ | 1.14 |
|
18
The number and weighted-average grant date fair value of stock options during the periodsperiod presented isare as follows:
| Number of Stock Options |
| Weighted-Average |
| Number of Stock Options |
| Weighted-Average |
| ||||||||||||||||||||
| Time Vesting Options |
| Performance Vesting Options |
| Time Vesting Options |
| Performance Vesting Options |
| Time Vesting Options |
|
| Performance Vesting Options |
| Time Vesting Options |
|
| Performance Vesting Options |
| ||||||||||
Non-vested as of December 31, 2020 |
| 3,450,607 |
|
|
| 13,341,504 |
|
| $ | 0.96 |
|
| $ | 0.59 |
| |||||||||||||
Non-vested as of September 30, 2021 |
| 5,700,098 |
|
|
| 0 |
|
| $ | 3.25 |
|
| $ | 0 |
| |||||||||||||
Non-vested as of December 31, 2021 |
| 5,266,469 |
|
| 0 |
| $ | 3.45 |
|
| $ | 0 |
| |||||||||||||||
Non-vested as of June 30, 2022 |
| 4,248,403 |
|
| 0 |
| $ | 3.68 |
|
| $ | 0 |
| |||||||||||||||
Granted during the period |
| 3,208,581 |
|
|
| 747,936 |
|
| $ | 5.11 |
|
| $ | 2.26 |
|
| 412,703 |
|
| 0 |
| $ | 4.89 |
|
| $ | 0 |
|
Vested during the period |
| 903,314 |
|
|
| 14,052,288 |
|
| $ | 0.86 |
|
| $ | 14.37 |
|
| (1,231,830 | ) |
| 0 |
| $ | 3.14 |
|
| $ | 0 |
|
Forfeited/canceled during the period |
| 55,776 |
|
|
| 37,152 |
|
| $ | 0.73 |
|
| $ | 1.27 |
|
| (198,939 | ) |
| 0 |
| $ | 3.19 |
|
| $ | 0 |
|
The totalCompany granted 412,703 Time Vesting Options with a grant date fair value of Time Vesting Options and$2,018 during the six months ended June 30, 2022. There were 0 Performance Vesting Options granted during the ninesix months ended SeptemberJune 30, 2021 was approximately $16,408 and $3,895, respectively.2022.
The fair value of stock options vested during the ninesix months ended SeptemberJune 30, 20212022 was $320,93619,420.
As of SeptemberJune 30, 2021,2022, the weighted-average remaining contractual life of outstanding stock options was approximately 4.904.38 years.years.
Restricted Stock Units
The following table summarizes the Company’s RSU activity since December 31, 2020:2021:
| Restricted Stock Units |
| Weighted-Average Grant Date Fair Value |
| Restricted Stock Units |
|
| Weighted-Average Grant Date Fair Value |
| |||||
Unvested as of December 31, 2020 |
| 0 |
|
| $ | 0 |
| |||||||
Unvested as of December 31, 2021 |
| 1,683,077 |
|
| $ | 15.14 |
| |||||||
Granted |
| 1,639,868 |
|
| $ | 15.00 |
|
| 1,126,748 |
|
| $ | 12.28 |
|
Vested |
| (7,680 | ) |
| $ | 15.00 |
|
| (457,372 | ) |
| $ | 15.00 |
|
Forfeited |
| (39,664 | ) |
| $ | 15.00 |
|
| (94,797 | ) |
| $ | 15.03 |
|
Unvested as of September 30, 2021 |
| 1,592,524 |
|
| $ | 15.00 |
| |||||||
Unvested as of June 30, 2022 |
| 2,257,656 |
|
| $ | 13.75 |
|
The Company granted 1,639,8681,126,748 RSUs with a grant date fair value of $13,835during the ninesix months ended SeptemberJune 30, 2021.2022.
The total fair value of RSUs thatstock options vested during the nine six months ended SeptemberJune 30, 20212022 was $1654,976.
As of June 30, 2022, the weighted-average remaining contractual life of outstanding RSUs was approximately 9.48 years.
Stock-Based Compensation Expense
19
The Company estimated a forfeiture rate of 6.96% for awards with service-based vesting conditions based on historical experience and future expectations of the vesting of these share-based payments. The Company used this rate as an assumption in calculating stock-based compensation expense for Time Vesting Options, RSUs, and stock purchase rights granted under the 2021 ESPP.
Total stock-based compensation expense, by caption, recorded in the unaudited condensed consolidated statements of operations and comprehensive income (loss) for the periods presented is as follows:
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
Cost of labor and chemicals | $ | 2,806 |
|
| $ | - |
|
| $ | 34,248 |
|
| $ | - |
| $ | 2,029 |
|
| $ | 31,442 |
|
| $ | 3,900 |
|
| $ | 31,442 |
|
General and administrative |
| 3,945 |
|
|
| 402 |
|
|
| 176,044 |
|
|
| 1,187 |
|
| 3,950 |
|
|
| 171,789 |
|
|
| 7,598 |
|
|
| 172,099 |
|
Total stock-based compensation expense | $ | 6,751 |
|
| $ | 402 |
|
| $ | 210,292 |
|
| $ | 1,187 |
| $ | 5,979 |
|
| $ | 203,231 |
|
| $ | 11,498 |
|
| $ | 203,541 |
|
Total stock-based compensation expense, by award type, recorded in the unaudited condensed consolidated statements of operations and comprehensive income (loss) for the periods presented is as follows:
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
Time Vesting Options | $ | 2,184 |
|
| $ | 402 |
|
| $ | 3,458 |
|
| $ | 1,187 |
| $ | 1,947 |
|
| $ | 964 |
|
| $ | 3,867 |
|
| $ | 1,274 |
|
Performance Vesting Options |
| 0 |
|
|
| 0 |
|
|
| 201,985 |
|
|
| 0 |
|
| 0 |
|
|
| 201,985 |
|
|
| 0 |
|
|
| 201,985 |
|
RSUs |
| 3,076 |
|
|
| 0 |
|
|
| 3,358 |
|
|
| 0 |
|
| 3,692 |
|
|
| 282 |
|
|
| 6,918 |
|
|
| 282 |
|
2021 ESPP |
| 1,491 |
|
|
| 0 |
|
|
| 1,491 |
|
|
| 0 |
|
| 340 |
|
|
| 0 |
|
|
| 713 |
|
|
| 0 |
|
Total stock-based compensation expense | $ | 6,751 |
|
| $ | 402 |
|
| $ | 210,292 |
|
| $ | 1,187 |
| $ | 5,979 |
|
| $ | 203,231 |
|
| $ | 11,498 |
|
| $ | 203,541 |
|
19
As of SeptemberJune 30, 2021,2022, total unrecognized compensation expense related to unvested Time Vesting Options was $13,99010,460, which is expected to be recognized over a weighted-average period of 3.373.38 years.
As of SeptemberJune 30, 2021,2022, there was 0 unrecognized compensation expense related to unvested Performance Vesting Options as the completion of the IPO satisfied the performance condition and as a result, all outstanding Performance Vesting Options vested.
As of SeptemberJune 30, 2021,2022, total unrecognized compensation expense related to unvested RSUs was $17,62624,610, whichwhich is expected to be recognized over a weighted-average period of 3.552.97 years.
As of SeptemberJune 30, 2021,2022, total unrecognized compensation expense related to unvested stock purchase rights under the 2021 ESPP was $711549, which is expected to be recognized over a weighted-average period of 0.110.38 years.
Modification of Stock Options
In February 2021, the Company modified a total of 7,874,304 shares of Performance Vesting Options for 12 grantees to provide for an additional service-based vesting condition related to the acceleration of vesting in connection with a grantees’ death. The modification resulted in an incremental increase to unrecognized compensation expense related to unvested Performance Vesting Options of $75,217, which was recognized in June 2021 in connection with the completion of the IPO. The Company did not recognize current incremental stock-based compensation expense in connection with the modification during the three months ended March 31, 2021 because the grants vest upon the earlier of a performance condition or a service condition, neither of which are probable of occurring until the condition is met. The modification resulted in an increase to unrecognized compensation expense related to unvested condition.Performance Vesting Options of $75,217 during the three months ended March 31, 2021.
In June 2021, the Company modified all outstanding shares of Performance Vesting Options to remove, subject to the successful completion of the IPO, the requirement that the Principal Stockholders receive the Target Proceeds and the Maximum Amount as conditions for the Performance Vesting Options to vest. This modification resulted in incremental stock-based compensation expense of $117,708, which was recognized in the three months ended June 30, 2021 in connection with the completion of the IPO.
13.14. Business Combinations
From time to time, the Company may pursue acquisitions of conveyorized car washes that either strategically fit with the Company’s business or expand the Company’s presence in new and attractive markets.
The Company accounts for business combinations under the acquisition method of accounting. The assets acquired and liabilities assumed in connection with business acquisitions are recorded at the date of acquisition at their estimated fair values, with any excess of the purchase price over the estimated fair values of the net assets acquired and intangible assets assigned, recorded as goodwill. Significant judgment is required in estimating the fair value of assets acquired and liabilities assumed and in assigning their respective useful lives. Accordingly, the Company may engage third-party valuation specialists to assist in these determinations. The fair value estimates are based on available historical information and on future expectations and assumptions deemed reasonable by management; but are inherently uncertain.
The unaudited condensed consolidated financial statements reflect the operations of an acquired business starting from the effective date of the acquisition. The Company expensed $26306 and $12094 of acquisition-related costs for the three months ended SeptemberJune 30, 20212022 and 2020,2021, respectively. The Company expensed $269435 and $259243 of acquisition-related costs for the ninesix months ended SeptemberJune 30, 2021 2022
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and 2020,2021, respectively. These acquisition-related costs are expensed as incurred and are included in general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations and comprehensive income (loss).income.
For the three and ninesix months ended SeptemberJune 30, 2021,2022, the amount of acquired goodwill that was not deductible for income tax purposes was $114386 and $1,196, respectively.. For the yearthree and six months ended December 31, 2020,June 30, 2021, the amount of acquired goodwill that was not deductible for income tax purposes was$5,3121,082.
20212022 Acquisitions
For the three and six months ended SeptemberJune 30, 2021,2022, the Company acquired the assets and liabilities of 1 conveyorized car wash in one acquisition for total consideration of approximately $10,420, which was paid in cash. This acquisition resulted in the preliminary recognition of $4,622 of goodwill, $5,565 of property and equipment, $180 of intangible assets related to covenants not to compete, and $53 of other assets and liabilities.
For the nine months ended September 30, 2021, the Company acquired the assets and liabilities of 65 conveyorized car washes in two acquisitions for total consideration of approximately $55,07958,900, which was paid in cash. TheseThe acquisitions resulted in the preliminary recognition of $23,02550,851 of goodwill, $30,0847,181 of property and equipment, $1,200 of intangible assets related to customer relationships, $560750 of intangible assets related to covenants not to compete, and $210118 ofin other assets and liabilities.
The weighted-average amortization period for the acquired covenants not to compete is 5.0 years.
The acquisitions were located in the following markets:
Location (Seller) | Number of Washes | Month Acquired | |
Georgia (Bamboo Carwash) | 1 | April | |
California (Speedwash) | 4 | April |
2021 Acquisitions
In 2021, the Company acquired the assets and liabilities of 37 conveyorized car washes in five acquisitions for total consideration of approximately $524,839, which was paid in cash. These acquisitions resulted in the preliminary recognition of $323,477 of goodwill, $202,708 of property and equipment, $4,300 of intangible assets related to customer relationships, $3,970 of intangible assets related to covenants not to compete, and $9,665 of net liabilities. In connection with the Downtowner Car Wash acquisition, the Company recognized a contingent consideration liability of $5,750. See Note 9 Fair Value Measurements for additional information regarding the contingent consideration liability. During the three months ended June 30, 2022, as a result of receiving $11,845 in escrow funds associated with an acquired location that did not receive zoning permits as required under the purchase agreement, the Company recorded an adjustment during the measurement period to its Clean Streak Ventures LLC purchase price allocation which reduced goodwill by $10,670 and land by $1,175. Additional adjustments related to 2021 acquisitions were not material in the current period.
The weighted-average amortization periods for the acquired customer relationships and covenants not to compete are 7.0 years and 5.0 years, respectively.
The acquisitions were located in the following markets:
Location (Seller) | Number of Washes | Month Acquired | ||
Florida (Superwash Express) | 5 | June | ||
Texas (Super Suds Car Wash) | 1 | July |
Unaudited Supplemental Pro Forma Information
The following table presents unaudited supplemental pro forma information for the periods presented as if the business combinations had occurred on January 1, 2020, the earliest period presented herein:
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| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Revenues, net | $ | 194,370 |
|
| $ | 158,770 |
|
| $ | 574,943 |
|
| $ | 420,900 |
|
Net income (loss) | $ | 27,008 |
|
| $ | 20,649 |
|
| $ | (55,370 | ) |
| $ | 22,121 |
|
The unaudited pro forma results presented above primarily include amortization charges for acquired intangible assets, depreciation adjustments for property and equipment that has been revalued, adjustments for certain acquisition-related charges, and the related tax effects. The unaudited pro forma information is presented for information purposes only and is not indicative of the results of operations that would have been achieved if the acquisitions had taken place at such time.
For the three months ended September 30, 2021, the revenues and earnings of the acquisitions reflected in the accompanying unaudited condensed consolidated statements of operations and comprehensive income (loss) were $2,948 and $872, respectively.
For the nine months ended September 30, 2021, the revenues and earnings of the acquisitions reflected in the accompanying unaudited condensed consolidated statements of operations and comprehensive income (loss) were $2,973 and $802, respectively.
2020 Acquisitions
For the year ended December 31, 2020, the Company acquired the assets and liabilities of 10 conveyorized car washes in four separate acquisitions for total consideration of approximately $33,584, which was paid in cash. These acquisitions resulted in the preliminary recognition of $21,467 of goodwill, $9,463 of property and equipment, $830 of intangible assets related to covenants not to compete, and $1,824 in other assets and liabilities.
The acquisitions were located in the following markets:
| 3 |
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| November | ||
Florida | 5 |
| December | |
Florida (Clean Streak Ventures LLC) | 23 | December |
14.15. Related-Party Transactions
LGP,For various advisory and monitoring services provided to the Company, Leonard Green & Partners ("LGP"), the majority owner of the Company, historically received $1,000 annually for various advisory and monitoring services provided to the Company. During the COVID-19 pandemic, these fees were waived for the remainder of 2020. TheCompany pursuant to a management services agreement with LGP that provided for the advisory and monitoring services terminated in June 2021 upon the consummation of the IPO.
agreement. For the three and six months ended SeptemberJune 30, 2021 and 2020,2022, the Company did not pay fees and expenses to LGP. For the ninethree and six months ended, SeptemberJune 30, 2021, and 2020, total fees and expenses paid by the Company to LGP were $500250 and $250500, respectively. Fees and expenses paid to LGP are included in general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations and comprehensive income (loss).income. The management services agreement terminated in June 2021 upon the consummation of the IPO.
LGP was one of the Company’s creditors under the Amended Second Lien Credit Agreement with an investment in 2020 of $5,625 allowed throughin the Amended Second Lien Credit Agreement.Term Loan. The Company made a voluntary prepayment of all outstanding balances under the Second Lien Term Loan in June 2021 (see2021. See Note 7-Debt).8 Debt for additional information.
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15.16. Commitments and Contingencies
Litigation
From time to time, the Company is party to pending or threatened lawsuits arising out of or incident to the ordinary course of business. The Company carries professional and general liability insurance coverage and other insurance coverages. In the opinion of management and upon consultation with legal counsel, none of the pending or threatened lawsuits will have a material effect upon the consolidated financial position, operations, or cash flows of the Company.
Insurance
The Company carries a broad range of insurance coverage, including general and business auto liability, commercial property, workers’ compensation, cyber risk, and general umbrella policies. As of SeptemberJune 30, 20212022 and December 31, 2020,2021, the Company accrued $2,7653,254 and $2,4673,169, respectively, for assessments on insurance claims filed, which are included in other accrued expenses in the accompanying unaudited condensed consolidated balance sheets. As of SeptemberJune 30, 20212022 and December 31, 2020,2021, the Company recorded $2,1742,653 and $2,0522,594, respectively, in receivables from its non-healthcare insurance carriers related to these insurance claims, which are included in accounts receivable, netother receivables in the accompanying unaudited condensed consolidated balance sheets. The receivables are paid when the claim is finalized and the reserved amounts on these claims are expected to be paid within one year.
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Environmental Matters
Operations at certain facilities currently or previously owned or leased by the Company utilize, or in the past have utilized, hazardous substances generally in compliance with applicable law. Periodically, the Company has had minor claims asserted against it by regulatory agencies or private parties for environmental matters relating to the handling of hazardous substances by the Company, and it has incurred obligations for investigations or remedial actions with respect to certain of these matters. There can be no assurances that activities at these facilities, or future facilities owned or operated by the Company, may not result in additional environmental claims being asserted against the Company or additional investigations or remedial actions being required. The Company is not aware of any significant remediation matters as of SeptemberJune 30, 2021.2022. Because of various factors including the difficulty of identifying the responsible parties for any particular site, the complexity of determining the relative liability among them, the uncertainty as to the most desirable remediation techniques and the amount of damages and clean-up costs and the time period during which such costs may be incurred, the Company is unable to reasonably estimate the ultimate cost of claims asserted against the Company related to environmental matters; however, the Company does not believe such costs will be material to its unaudited condensed consolidated financial statements.
In addition to potential claims asserted against the Company, there are certain regulatory obligations associated with these facilities. The Company also has a third-party specialist to review the sites subject to these regulations annually, for the purpose of assigning future cost. A third party has conducted a preliminary assessment of site restoration provisions arising from these regulations and the Company has recognized a provisional amount. As of SeptemberJune 30, 2022 and December 31, 2021, the Company recorded an environmental remediation accrual of $12, which is included in other accrued expenses in the accompanying unaudited condensed consolidated balance sheets.
16.17. Subsequent Events
TheOn July 15, 2022, the Company has evaluated all subsequent events after September 30, 2021 through the datecompleted 1 sale-leaseback transaction related to its car wash locations with aggregate consideration of the issuance of these unaudited condensed consolidated financial statements and has determined there have been no subsequent events for which disclosure is required.$55,200.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes included in our prospectus that forms a part of our Registration Statement on Form S-1 (File No. 333-256697) which was filed with the Securities and Exchange Commission, or SEC, pursuant to Rule 424 on June 28, 2021 (the "Prospectus").10-K. This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in other parts of this Quarterly Report on Form 10-Q and in Part II,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 Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021 (the “Second Quarter 10-Q”).10-K.
Who We Are
Mister Car Wash, Inc. is the largest national car wash brand, primarily offering express exterior andcleaning services, with interior cleaning services to customersat select locations, across 360409 car wash locationswashes in 21 states as of SeptemberJune 30, 2021.2022. Founded in 1996, we employ an efficient, repeatable, and scalable process, which we call the “Mister Experience,” to deliver a clean, dry, and shiny car every time. The core pillars of the “Mister Experience” are greeting every customer with a wave and smile, providing them the highest quality car wash, and delivering the experience quickly and conveniently. We offer a monthly subscription program, which we call the Unlimited Wash Club ("UWC"Club(R) (“UWC”), as a flexible, quick, and convenient option for customers to keep their cars clean. As of SeptemberJune 30, 2022 and June 30, 2021, we had 1.6approximately 1.8 million and approximately 1.5 million UWC members, and inMembers, respectively. This represented a 20% increase over the same time last year. For the three and nine months ended SeptemberJune 30, 2022 and 2021, UWC sales represented 66% and 63%62% of our total wash sales, respectively, and UWC volume represented 74%76% and 72% of our total wash volume, respectively. Our scale and over 25 years of innovation allow us to drive operating efficiencies and invest in training, infrastructure, and technology that improve speed of service, quality, and sustainability and realize strong financial performance.
Factors Affecting Our Business and Trends
We believe that our business and growth depend on a number of factors that present significant opportunities for us and may pose risks and challenges, including those discussed below and in Part II,I, Item 1A. "Risk Factors"“Risk Factors” of our Second Quarter 10-Q.2021 10-K.
| • |
| Growth in comparable store sales. Comparable store sales have been a strong driver of our net revenue growth and we expect it to continue to play a key role in our future growth and profitability. We will seek to continue to grow our comparable store sales by increasing the number of UWC |
| • |
| Number and loyalty of UWC |
| • |
| Labor management. Hiring and retaining skilled team members and experienced management represents one of our largest costs. We believe people are the key to our success and we have been able to successfully attract and retain engaged, high-quality team |
|
|
Factors Affecting the Comparability of Our Results of Operations
Our results have been affected by, and may in the future be affected by, the following factors, which must be understood in order to assess the comparability of our period-to-period financial performance and condition.
Impact of COVID-19
To ensure the safety of our team members and customers and in compliance with local regulations at the onset of the COVID-19 pandemic in March 2020 and April 2020, we temporarily suspended operations at more than 300 of our locations and paused UWC membership billing. During this period, we upgraded our safety protocols and modified our operating model by temporarily suspending all interior cleaning services from locations offering those services. While our operations were suspended, we furloughed
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approximately 5,500 of our hourly car wash team members. Furloughed team members were not paid by us unless they elected to use accrued paid time off; however, we did continue to provide benefits coverage to any team member who was enrolled at the time of furlough. The suspension of our operations negatively impacted our net revenues, but improved our net income margin and Adjusted EBITDA margin as express exterior cleaning services are less labor intensive compared to interior cleaning services. We also proactively undertook several measures to augment our liquidity, such as drawing on our Revolving Commitment, requesting rent deferrals, suspending all acquisition activity, and pausing all greenfield development initiatives.
By the end of May 2020, all of our locations were safely reopened and offering express exterior cleaning services, including exterior-only services at Interior Cleaning Locations, we rehired a majority of our team members, and we had surpassed all-time highs in UWC membership. As of September 30, 2021, we employed 6,392 team members. By the end of 2020, we also repaid 100% of our deferred rent and successfully resumed both greenfield development initiatives and acquisition activity. Although our actions at the beginning of the COVID-19 pandemic impacted our financial results in 2020, we believe that our people-first approach engendered goodwill and loyalty among our team members and our customers, and allowed us to emerge an even stronger business.
Keeping our customers and team members safe has always been the highest priority for Mister Car Wash. We have been closely monitoring the national and local government health guidelines in each of our communities, and we proactively implemented extensive measures in response to COVID-19 throughout our business operations.
Given the unpredictable nature of this situation, we cannot estimate with certainty the long-term impacts of the pandemic related to COVID-19 and variants thereof, on our business, financial condition, results of operations, and cash flows. Although the future economic environment is uncertain, we are confident in our ability to continue to provide car wash services to our customers, and we remain committed to serving our customers as we continue to navigate the public health challenge of COVID-19.
We are closely monitoring the impact of COVID-19 and its variants on all aspects of our business and in all of our locations. See Part II, Item 1A. “Risk Factors—Risks Relating to Our Business— The ongoing pandemic related to COVID-19 and its variants has materially and adversely affected our business, financial condition and results of operations and may continue to do so” included elsewhere in this Quarterly Report on Form 10-Q.
Greenfield Location Development
Our primary historical growth strategy has involved acquiring local and regional car wash operators, upgrading the facilities and equipment, training the team to provide the “Mister Experience,” and converting the site to the “Mister” brand. More recently, we have also grown through greenfield development of Mister Car Wash locations, with particular focus on Express Exterior Locations, and anticipate further pursuit of this strategy in the future. As of SeptemberIn the three and six months ended June 30, 2021,2022, we have successfully opened 31four and seven greenfield locations, with the expectation of driving the majority of ourrespectively. Our future location growth throughwill be dependent on greenfield development. We believe such a strategy will drive improvements in our net income margins and Adjusted EBITDA margins as express exterior cleaning services are less labor intensive than interior cleaning services.
The comparability of our results may be impacted by the inclusion of financial performance of greenfield locations that have not delivered a full fiscal year of financial results nor rampedmatured to more mature average unit volumes, which we typically expect after approximately three full years of operation.
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Acquisitions
In the three and six months ended SeptemberJune 30, 2021,2022, we completed one acquisition of one property that operated as a conveyorized car wash. In the nine months ended September 30, 2021, we completed threetwo acquisitions of tenfive properties six of whichthat operated as conveyorized car washes atwashes.
Following an acquisition, we implement a variety of operational improvements to unify branding and enhance profitability. As soon as feasible, we fully integrate and transition acquired locations to the time“Mister” brand and make investments to improve site flow, upgrade tunnel equipment and technology, and install our proprietary Unity Chemical system, which is a unique blend of acquisitionour signature products utilizing the newest technology and four of which previously operated as car washes; two of these four properties were conveyorized car washes and two of these four properties were self-serve washes. In the three months ended September 30, 2021, we reopened one of the two conveyorizedservices to make a better car wash properties; once renovatedexperience for our customers. We also establish member-only lanes, optimize service offerings and convertedimplement training initiatives that we have successfully utilized to improve team member engagement and drive UWC growth post-acquisition. The costs associated with these onboarding initiatives, which vary by site, can impact the Mister brand, we will reopen the remaining conveyorized car wash property, at which point it will be included incomparability of our location count. The real property and any preexisting improvements to the two self-serve wash properties will subsequently be sold.results.
The comparability of our results may also be impacted by the inclusion of financial performance of our acquisitions that have not delivered a full fiscal year of operatingfinancial results under ourMister Car Wash’s ownership.
DivestituresSee Note 14 Business Combinations to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional discussion.
In the three and nine months ended September 30, 2021, we did not consummate any significant divestitures.
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Key Performance Indicators
We prepare and analyze various operating and financial data to assess the performance of our business and allocateto help in the allocation of our resources. The key operating performance and financial metrics and indicators we use are set forth below, as of and for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020.2021.
| Three Months Ended September 30, |
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| Nine Months Ended September 30, |
| Three Months Ended June 30, |
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| Six Months Ended June 30, |
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(Dollars in thousands) | 2021 |
| 2020 |
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| 2021 |
| 2020 |
| 2022 |
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| 2021 |
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| 2022 |
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| 2021 |
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Financial and Operating Data |
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Location count (end of period) |
| 360 |
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| 338 |
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| 360 |
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| 338 |
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| 409 |
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| 351 |
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|
| 409 |
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|
| 351 |
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Comparable store sales growth |
| 21 | % |
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| (6 | )% |
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| 39 | % |
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| (15 | )% |
| 2 | % |
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| 93 | % |
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| 7 | % |
|
| 50 | % |
UWC Members (in thousands, end of period) |
| 1,564 |
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| 1,189 |
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| 1,564 |
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| 1,189 |
|
| 1,841 |
|
|
| 1,534 |
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|
| 1,841 |
|
|
| 1,534 |
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UWC sales as a percentage of total wash sales |
| 66 | % |
|
| 62 | % |
|
| 63 | % |
|
| 60 | % |
| 66 | % |
|
| 62 | % |
|
| 65 | % |
|
| 62 | % |
Net income (loss) | $ | 27,366 |
|
| $ | 19,869 |
|
| $ | (58,350 | ) |
| $ | 19,975 |
| $ | 35,659 |
|
| $ | (110,300 | ) |
| $ | 71,147 |
|
| $ | (85,716 | ) |
Net income (loss) margin |
| 14.1 | % |
|
| 12.8 | % |
|
| (10.3 | )% |
|
| 4.8 | % |
| 15.8 | % |
|
| (56.0 | )% |
|
| 16.0 | % |
|
| (23.0 | )% |
Adjusted EBITDA | $ | 62,450 |
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| $ | 43,385 |
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| $ | 197,000 |
|
| $ | 111,609 |
| $ | 74,476 |
|
| $ | 73,078 |
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| $ | 149,325 |
|
| $ | 134,550 |
|
Adjusted EBITDA margin |
| 32.1 | % |
|
| 27.8 | % |
|
| 34.8 | % |
|
| 27.0 | % |
| 33.1 | % |
|
| 37.1 | % |
|
| 33.6 | % |
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| 36.1 | % |
Location Count (end of period)
Our location count refers to the total number of car wash locations at the end of a period, inclusive of new greenfield locations, acquired locations, and closed locations. The total number of locations that we operate, as well as the timing of location openings, acquisitions, and closings, have, and will continue to have, an impact on our performance. In the three months ended SeptemberJune 30, 2021,2022, we increased our location count by nine10 locations, including sevencomprised of four greenfield locations and twosix acquired locations. In the ninesix months ended SeptemberJune 30, 2021,2022, we increased our location count by 1813 locations, comprised of 11seven greenfield locations and sevensix acquired locations. One location, which was part of a 2021 acquisition, opened during the three months ended June 30, 2022 and is included as an acquired location above.
Our Express Exterior Locations, which offer express exterior cleaning services, comprise 276332 of our current locations and our Interior Cleaning Locations, which offer both express exterior cleaning services and interior cleaning services, comprise 8477 of our current locations.
Comparable Store Sales Growth
A location is considered a comparable store on the first day of the 13th full calendar month following a location���slocation’s first day of operations. A location converted from an Interior Cleaning Location format to an Express Exterior Location format is excluded when the location did not offer interior cleaning services in the current period but did offer interior cleaning services in the prior year period. Comparable store sales growth is the percentage change in total wash sales of all comparable store car washes.
Opening new locations is a primary component of our growth strategy and as we continue to execute on our growth strategy, we expect that a significant portion of our sales growth will be attributable to non-comparable store sales. Accordingly, comparable store sales are only one measure we use to assess the success of our growth strategy. For the three months ended June 30, 2022, comparable store sales increased to 2% compared to an increase of 93% in the three months ended June 30, 2021.
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UWC Members (end of period)
Members of our monthly subscription service are known as Unlimited Wash Club Members, or UWC Members. We view the number of UWC membersMembers and the growth in the number of UWC membersMembers on a net basis from period to period as key indicators of our revenue growth. The number of UWC membersMembers has grown over time as we have acquired new customers and retained previously acquired customers. There were approximately 1.61.8 million and approximately 1.5 million UWC membersMembers as of SeptemberJune 30, 2022 and June 30, 2021, respectively. There were approximately 1.7 million UWC Members as of December 31, 2021.
Our UWC programMembers grew by approximately 0.3 million UWC members, or20% from June 30, 2021 through June 30, 2022 and approximately 27%,11% from December 31, 20202021 through SeptemberJune 30, 2021.2022.
UWC Sales as a Percentage of Total Wash Sales
UWC sales as a percentage of total wash sales represents the penetration of our subscription membership program as a percentage of our overall wash sales. Total wash sales are defined as the net revenue generated from express exterior cleaning services and interior cleaning services for both UWC membersMembers and retail customers. UWC sales as a percentage of total wash sales is calculated as revenues, netsales generated from UWC membersMembers as a percentage of total wash sales. We have consistently grown this measure over time as we educate customers as to the value of our subscription offering. UWC sales were 66% and 63%62% of our total wash sales for the three and nine months ended SeptemberJune 30, 2021.
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2022 and 2021, respectively. UWC sales were 65% and 62% of our total wash sales for the six months ended June 30, 2022 and 2021, respectively.
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA is a non-GAAP measure of our financial performance and should not be considered as an alternative to net income as a measure of financial performance or any other performance measure derived in accordance with generally accepted accounting principles in the United States of America ("(“U.S. GAAP"GAAP”) and should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items. Adjusted EBITDA is defined as net income (loss) before interest expense, net, income tax provision, (benefit), depreciation and amortization expense, loss (gain) on sale of assets, gain on sale of quick lube facilities, dividend recapitalization fees and payments, loss on early debt extinguishment, stock-based compensation expense, acquisition expenses, management fees, non-cash rent expense, expenses associated with securities offerings, and other nonrecurring charges. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by net revenues net for a given period.
We present Adjusted EBITDA because we believe it assists investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our ongoing operating performance. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in our presentation of Adjusted EBITDA. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. There can be no assurance that we will not modify the presentation of Adjusted EBITDA in future periods, and any such modification may be material. In addition, Adjusted EBITDA may not be comparable to similarly titled measures used by other companies in our industry or across different industries.
Our management believes Adjusted EBITDA is helpful in highlighting trends in our core operating performance compared to other measures, which can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments. We also use Adjusted EBITDA in connection with establishing discretionary annual incentive compensation; to supplement U.S. GAAP measures of performance in the evaluation of the effectiveness of our business strategies; to make budgeting decisions; and because our Amended A&R First Lien Credit Agreement (as defined below) uses measures similar to Adjusted EBITDA to measure our compliance with certain covenants.
Adjusted EBITDA has its limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations include:
| • |
| Adjusted EBITDA does not reflect our cash expenditure or future requirements for capital expenditures or contractual commitments; |
| • |
| Adjusted EBITDA does not reflect changes in our cash requirements for our working capital needs; |
| • |
| Adjusted EBITDA does not reflect the interest expense and the cash requirements necessary to service interest or principal payments on our debt; |
| • |
| Adjusted EBITDA does not reflect cash requirements for replacement of assets that are being depreciated and amortized; |
| • |
| Adjusted EBITDA does not reflect non-cash compensation, which is a key element of our overall long-term compensation; |
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| • |
| Adjusted EBITDA does not reflect the impact of certain cash charges or cash receipts resulting from matters we do not find indicative of our ongoing operations; and |
| • |
| other companies in our industry may calculate Adjusted EBITDA differently than we do. |
Our Adjusted EBITDA was approximately $62.5$74.5 million and $43.4$73.1 million in the three months ended SeptemberJune 30, 20212022 and 2020, respectively, and approximately $197.0 million and $111.6 million in the nine months ended September 30, 2021, and 2020, respectively. Our Adjusted EBITDA margin was 32.1%33.1% and 27.8% in37.1% in the three months ended SeptemberJune 30, 2022 and 2021, respectively. Adjusted EBITDA was approximately $149.3 million and 2020, respectively, and approximately 34.8% and 27.0%$134.6 million in the ninesix months ended SeptemberJune 30, 2022 and 2021, and 2020, respectively. The Adjusted EBITDA andOur Adjusted EBITDA margin resultswas 33.6% and 36.1% in the threesix months ended SeptemberJune 30, 2021 compared to the prior year period are primarily attributable to the increase in the number of UWC members participating in our UWC program. The Adjusted EBITDA2022 and Adjusted EBITDA margin results in the nine months ended September 30, 2021 compared to the prior year period are primarily attributable to our car wash locations remaining open and operating for the entirety of the nine months ended September 30, 2021, as well as the increase in the number of UWC members participating in our UWC program.2021. The following is a reconciliation of our net income (loss) to Adjusted EBITDA for the periods presented.
26
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(Dollars in thousands) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Reconciliation of net income (loss) to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income (loss) |
| $ | 27,366 |
|
| $ | 19,869 |
|
| $ | (58,350 | ) |
| $ | 19,975 |
|
Interest expense, net |
|
| 5,717 |
|
|
| 15,917 |
|
|
| 33,416 |
|
|
| 49,341 |
|
Income tax provision (benefit) |
|
| 6,440 |
|
|
| 7,445 |
|
|
| (29,747 | ) |
|
| 2,148 |
|
Depreciation and amortization expense |
|
| 12,980 |
|
|
| 11,407 |
|
|
| 36,530 |
|
|
| 33,504 |
|
Loss (gain) on sale of assets (a) |
|
| 748 |
|
|
| (4,283 | ) |
|
| (5,559 | ) |
|
| (3,773 | ) |
Dividend recapitalization fees and payments (b) |
|
| - |
|
|
| 2 |
|
|
| - |
|
|
| 774 |
|
Loss on extinguishment of debt |
|
| - |
|
|
| - |
|
|
| 3,183 |
|
|
| 1,918 |
|
Stock-based compensation expense (c) |
|
| 6,751 |
|
|
| 402 |
|
|
| 210,292 |
|
|
| 1,187 |
|
Acquisition expenses (d) |
|
| 968 |
|
|
| 551 |
|
|
| 1,977 |
|
|
| 1,565 |
|
Management fees (e) |
|
| - |
|
|
| - |
|
|
| 500 |
|
|
| 250 |
|
Non-cash rent expense (f) |
|
| 380 |
|
|
| (8,293 | ) |
|
| 1,136 |
|
|
| 3,175 |
|
Expenses associated with initial public offering (g) |
|
| 124 |
|
|
| - |
|
|
| 1,574 |
|
|
| - |
|
Expenses associated with secondary public offering (h) |
|
| 498 |
|
|
| - |
|
|
| 498 |
|
|
| - |
|
Other (i) |
|
| 478 |
|
|
| 368 |
|
|
| 1,550 |
|
|
| 1,545 |
|
Adjusted EBITDA |
| $ | 62,450 |
|
| $ | 43,385 |
|
| $ | 197,000 |
|
| $ | 111,609 |
|
Revenues, net |
| $ | 194,310 |
|
| $ | 155,796 |
|
| $ | 566,898 |
|
| $ | 412,904 |
|
Adjusted EBITDA margin |
|
| 32.1 | % |
|
| 27.8 | % |
|
| 34.8 | % |
|
| 27.0 | % |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
(Dollars in thousands) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Reconciliation of net income to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income (loss) |
| $ | 35,659 |
|
| $ | (110,300 | ) |
| $ | 71,147 |
|
| $ | (85,716 | ) |
Interest expense, net |
|
| 8,762 |
|
|
| 13,740 |
|
|
| 16,928 |
|
|
| 27,699 |
|
Income tax provision (benefit) |
|
| 9,894 |
|
|
| (44,569 | ) |
|
| 18,174 |
|
|
| (36,187 | ) |
Depreciation and amortization expense |
|
| 15,136 |
|
|
| 11,900 |
|
|
| 30,081 |
|
|
| 23,550 |
|
Gain on sale of assets (a) |
|
| (3,146 | ) |
|
| (7,097 | ) |
|
| (2,687 | ) |
|
| (6,307 | ) |
Loss on extinguishment of debt |
|
| - |
|
|
| 3,183 |
|
|
| - |
|
|
| 3,183 |
|
Stock-based compensation expense (b) |
|
| 5,979 |
|
|
| 203,231 |
|
|
| 11,498 |
|
|
| 203,541 |
|
Acquisition expenses (c) |
|
| 704 |
|
|
| 555 |
|
|
| 1,238 |
|
|
| 1,009 |
|
Management fees (d) |
|
| - |
|
|
| 250 |
|
|
| - |
|
|
| 500 |
|
Non-cash rent expense (e) |
|
| 555 |
|
|
| 378 |
|
|
| 1,075 |
|
|
| 756 |
|
Expenses associated with initial public offering (f) |
|
| (14 | ) |
|
| 1,450 |
|
|
| 272 |
|
|
| 1,450 |
|
Other (g) |
|
| 947 |
|
|
| 357 |
|
|
| 1,599 |
|
|
| 1,072 |
|
Adjusted EBITDA |
| $ | 74,476 |
|
| $ | 73,078 |
|
| $ | 149,325 |
|
| $ | 134,550 |
|
Net Revenues |
| $ | 225,159 |
|
| $ | 197,080 |
|
| $ | 444,578 |
|
| $ | 372,588 |
|
Adjusted EBITDA margin |
|
| 33.1 | % |
|
| 37.1 | % |
|
| 33.6 | % |
|
| 36.1 | % |
Components of Our Results of Operations
Net Revenues net
We recognize revenue in two main streams: (i) the UWC program that entitles the customer to unlimited washes for a monthly subscription fee, cancellable at any time and (ii) retail car washes and other services. In the UWC program, we enter into a contract with the customer that falls under the definition of a customer contract under ASC 606, Revenue from Contracts with Customers. Customers are automatically charged on a credit card or debit card on the same date of the month that they originally signed up. Our performance obligations are to provide unlimited car wash services for a monthly fee. Revenue from the UWC program is recognized ratably over the month in which it is earned and amounts unearned are recorded as deferred revenue on the unaudited condensed consolidated balance sheets; all amounts recorded as deferred revenue at year-end are recognized as revenue in the following year. Revenue from retail car wash and other services is recognized at the point in time at which services are rendered and the customer pays with
2726
pays with cash, debit card, or credit card. Revenues are net of sales tax, refunds, and discounts applied as a reduction of revenue at the time of payment.
Store Operating Costs
Store operating costs consist of cost of labor and chemicals and other car wash store operating expenses.
Cost of Labor and Chemicals
Cost of labor and chemicals include compensation and related employee benefit expenses associated with car wash employees, maintenance employees, warehouse employees, and chemicals and associated supplies. The related employee benefits for the aforementioned employees, such assupplies, including wages, cash bonuses, stock-based compensation, taxes, insurance, and workers compensation are also included in the cost of labor and chemicalspayments as reported in the unaudited condensed consolidated statementstatements of operations and comprehensive income (loss) included elsewhere in this Quarterly Report on Form 10-Q.
Other Store Operating Expenses
Other store operating expenses includes all other costs related to the operations of car wash and warehouse locations such as credit card fees, car damages, office and lobby supplies, information technology costs associated with the locations, telecommunications, advertising, non-healthcare related insurance, rent, repairs and maintenance related to held-for-use assets, utilities, property taxes, and depreciation expense on held-for-use assets at the car wash and warehouse locations.
General and Administrative
General and administrative expenses include compensation expenses and the related employee benefits of headquarters employees, including wages, cash bonuses, stock-based compensation, taxes, insurance, and workers compensation payments, as well as information technology expenses, administrative office expenses, professional services and other related expenses, depreciation expense on held-for-use assets used at our headquarters, and amortization expense associated with our intangible assets.
We will continue to incur significant expenses on an ongoing basis that we did not incur as a private company. Those costs include additional director and officer liability insurance expenses, as well as third-party and internal resources related to accounting, auditing, Sarbanes-Oxley Act compliance, legal, and investor and public relations expenses. We expect such expenses to further increase after we are no longer an emerging growth company. These costs will generally be expensed under general and administrative expenses in the unaudited condensed consolidated statementstatements of operations and comprehensive income (loss) included elsewhere in this Quarterly Report on Form 10-Q.
Loss (Gain) on Sale of Assets
Loss (gain) on sale of assets includes gains or losses on the sale-leaseback of our locations and sale of property and equipment.
Interest Expense, net
Interest expense, net consists primarily of cash and non-cash interest expense on borrowings, partially offset by interest income earned on our cash balances.
Loss on Extinguishment of Debt
Loss on extinguishment of debt includes losses associated with amendments to our existing debt that are accounted for as extinguishments, as well as losses associated with partial or whole payments on our debt that qualify for extinguishment accounting.
Income Tax Provision (Benefit)
We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized differently in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement carrying amounts and tax basis of assets and liabilities using enacted tax rates.
We have adopted a more-likely-than-not threshold for financial statement recognition and measurement of an uncertain tax position taken or expected to be taken in a tax return. We recognize interest and penalties related to uncertain tax positions in income tax provision (benefit) in our unaudited condensed consolidated statementstatements of operations and comprehensive income (loss) included elsewhere in this Quarterly Report on Form 10-Q.
2827
Results of Operations for the Three Months Ended SeptemberJune 30, 20212022 and 20202021 (Unaudited)
The unaudited results of operations data for the three months ended SeptemberJune 30, 20212022 and 20202021 have been derived from the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
|
| Three Months Ended September 30, |
|
| Three Months Ended June 30, |
| ||||||||||||||||||||||||||
|
| 2021 |
| 2020 |
|
| 2022 |
|
| 2021 |
| |||||||||||||||||||||
(Dollars in thousands) |
| Amount |
|
| % of Revenue |
| Amount |
|
| % of Revenue |
|
| Amount |
|
| % of Revenue |
|
| Amount |
|
| % of Revenue |
| |||||||||
Revenues, net |
| $ | 194,310 |
|
|
| 100 | % |
| $ | 155,796 |
|
|
| 100 | % | ||||||||||||||||
Net revenues |
| $ | 225,159 |
|
|
| 100 | % |
| $ | 197,080 |
|
|
| 100 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Store operating costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Cost of labor and chemicals |
|
| 63,438 |
|
|
| 33 | % |
|
| 50,245 |
|
|
| 32 | % |
|
| 69,351 |
|
|
| 31 | % |
|
| 87,864 |
|
|
| 45 | % |
Other store operating expenses |
|
| 68,435 |
|
|
| 35 | % |
|
| 56,127 |
|
|
| 36 | % |
|
| 79,029 |
|
|
| 35 | % |
|
| 65,363 |
|
|
| 33 | % |
General and administrative |
|
| 22,166 |
|
|
| 11 | % |
|
| 10,476 |
|
|
| 7 | % |
|
| 25,610 |
|
|
| 11 | % |
|
| 188,896 |
|
|
| 96 | % |
Loss (gain) on sale of assets |
|
| 748 |
|
|
| 0 | % |
|
| (4,283 | ) |
|
| (3 | )% | ||||||||||||||||
Gain on sale of assets |
|
| (3,146 | ) |
|
| (1 | )% |
|
| (7,097 | ) |
|
| (4 | )% | ||||||||||||||||
Total costs and expenses |
|
| 154,787 |
|
|
| 80 | % |
|
| 112,565 |
|
|
| 72 | % |
|
| 170,844 |
|
|
| 76 | % |
|
| 335,026 |
|
|
| 170 | % |
Operating income |
|
| 39,523 |
|
|
| 20 | % |
|
| 43,231 |
|
|
| 28 | % |
|
| 54,315 |
|
|
| 24 | % |
|
| (137,946 | ) |
|
| (70 | )% |
Other expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Interest expense, net |
|
| 5,717 |
|
|
| 3 | % |
|
| 15,917 |
|
|
| 10 | % |
|
| 8,762 |
|
|
| 4 | % |
|
| 13,740 |
|
|
| 7 | % |
Loss on extinguishment of debt |
|
| - |
|
|
| 0 | % |
|
| - |
|
|
| 0 | % |
|
| - |
|
|
| 0 | % |
|
| 3,183 |
|
|
| 2 | % |
Total other expense |
|
| 5,717 |
|
|
| 3 | % |
|
| 15,917 |
|
|
| 10 | % |
|
| 8,762 |
|
|
| 4 | % |
|
| 16,923 |
|
|
| 9 | % |
Income before taxes |
|
| 33,806 |
|
|
| 17 | % |
|
| 27,314 |
|
|
| 18 | % | ||||||||||||||||
Income tax provision |
|
| 6,440 |
|
|
| 3 | % |
|
| 7,445 |
|
|
| 5 | % | ||||||||||||||||
Net income |
|
| 27,366 |
|
|
| 14 | % |
|
| 19,869 |
|
|
| 13 | % | ||||||||||||||||
Income (loss) before taxes |
|
| 45,553 |
|
|
| 20 | % |
|
| (154,869 | ) |
|
| (79 | )% | ||||||||||||||||
Income tax provision (benefit) |
|
| 9,894 |
|
|
| 4 | % |
|
| (44,569 | ) |
|
| (23 | )% | ||||||||||||||||
Net income (loss) |
|
| 35,659 |
|
|
| 16 | % |
|
| (110,300 | ) |
|
| (56 | )% |
Net Revenues
Revenues, net
|
| Three Months Ended June 30, |
|
|
|
|
|
|
| |||||||
(Dollars in thousands) |
| 2022 |
|
| 2021 |
|
| $ Change |
|
| % Change |
| ||||
Net revenues |
| $ | 225,159 |
|
| $ | 197,080 |
|
| $ | 28,079 |
|
|
| 14 | % |
|
| Three Months Ended September 30, |
|
|
|
|
|
|
| |||||||
(Dollars in thousands) |
| 2021 |
|
| 2020 |
|
| $ Change |
|
| % Change |
| ||||
Revenues, net |
| $ | 194,310 |
|
| $ | 155,796 |
|
| $ | 38,514 |
|
|
| 25 | % |
Revenues, netNet revenues were $194.3$225.2 million for the three months ended SeptemberJune 30, 20212022 compared to $155.8$197.1 million for the three months ended SeptemberJune 30, 2020,2021, an increase of $38.5$28.1 million, or 25%14%. The increase in net revenues net was primarily attributable to an increase of $45.3 million in car wash revenue and was partially offset by a $6.8 million decrease in oil change revenue as a result of the sale of our quick lube facilities in December 2020. The increase in car wash revenue was attributablesales due to comparable store sales growth in UWC Members and the year-over-year addition of 2258 locations.
Store Operating Costs
Cost of Labor and Chemicals
|
| Three Months Ended September 30, |
|
|
|
|
|
|
| Three Months Ended June 30, |
|
|
|
|
|
| ||||||||||||||||
(Dollars in thousands) |
| 2021 |
| 2020 |
| $ Change |
|
| % Change |
|
| 2022 |
|
| 2021 |
|
| $ Change |
|
| % Change |
| ||||||||||
Cost of labor and chemicals |
| $ | 63,438 |
|
| $ | 50,245 |
|
| $ | 13,193 |
|
|
| 26 | % |
| $ | 69,351 |
|
| $ | 87,864 |
|
| $ | (18,513 | ) |
|
| (21 | )% |
Percentage of revenues, net |
|
| 33 | % |
|
| 32 | % |
|
|
|
|
| |||||||||||||||||||
Percentage of net revenues |
|
| 31 | % |
|
| 45 | % |
|
|
|
|
|
Cost of labor and chemicals was $63.4$69.4 million for the three months ended SeptemberJune 30, 20212022 compared to $50.2$87.9 million for the three months ended SeptemberJune 30, 2020, an increase2021, a decrease of $13.2$18.5 million, or 26%21%. The increasedecrease in the cost of labor and chemicals wasis primarily driven by the prior year recognition of stock-basedstock-based compensation expense for store-level employees of $2.8$31.3 million increasedrelated to our performance-based vesting stock options that vested on the consummation of our IPO in June 2021, as well as the approximately $0.8 million of costs associated with gasoline sales which were offered in the three months ended June 30, 2021 but which we did not offer in the three months ended June 30, 2022. These decreases were partially offset by an increase in labor and benefits of $8.3$11.0 million in connection with theand an increase in wash chemicals and supplies of approximately $1.5 million during the three months ended June 30, 2022, both attributable to an increase in volume and the year-over-year addition of 58 locations, as well as increases in crew wage rates. These increases were partially offset by decreases insome inflationary pressures on both our labor and chemical costs as a result of an optimized labor model and the sale of our quick lube facilities in December 2020.chemicals.
Other Store Operating Expenses
2928
|
| Three Months Ended September 30, |
|
|
|
|
|
|
| Three Months Ended June 30, |
|
|
|
|
|
| ||||||||||||||||
(Dollars in thousands) |
| 2021 |
| 2020 |
| $ Change |
|
| % Change |
|
| 2022 |
|
| 2021 |
|
| $ Change |
|
| % Change |
| ||||||||||
Other store operating expenses |
| $ | 68,435 |
|
| $ | 56,127 |
|
| $ | 12,308 |
|
|
| 22 | % |
| $ | 79,029 |
|
| $ | 65,363 |
|
| $ | 13,666 |
|
|
| 21 | % |
Percentage of revenues, net |
|
| 35 | % |
|
| 36 | % |
|
|
|
|
| |||||||||||||||||||
Percentage of net revenues |
|
| 35 | % |
|
| 33 | % |
|
|
|
|
|
Other store operating expenses were $68.4$79.0 million for the three months ended SeptemberJune 30, 20212022 compared to $56.1$65.4 million for the three months ended SeptemberJune 30, 2020,2021, an increase of $12.3$13.7 million, or 22%21%. The increase in other store operating expenses was attributable to an increase in volume with comparable store sales growth and the year-over-year addition of 2258 locations partially offset by a decrease in other store operating expenses from the sale ofand some inflationary pressures on our quick lube facilities in December 2020. utilities and maintenance expenses. Rent expense increased approximately $2.5 million with the addition of 2435 new real estate leases, which was offset by rental income on subleases following the sale of our quick lube facilities in December 2020.land and building leases.
General and Administrative
|
| Three Months Ended September 30, |
|
|
|
|
|
|
| Three Months Ended June 30, |
|
|
|
|
|
| ||||||||||||||||
(Dollars in thousands) |
| 2021 |
| 2020 |
| $ Change |
|
| % Change |
|
| 2022 |
|
| 2021 |
|
| $ Change |
|
| % Change |
| ||||||||||
General and administrative |
| $ | 22,166 |
|
| $ | 10,476 |
|
| $ | 11,690 |
|
|
| 112 | % |
| $ | 25,610 |
|
| $ | 188,896 |
|
| $ | (163,286 | ) |
|
| (86 | )% |
Percentage of revenues, net |
|
| 11 | % |
|
| 7 | % |
|
|
|
|
| |||||||||||||||||||
Percentage of net revenues |
|
| 11 | % |
|
| 96 | % |
|
|
|
|
|
General and administrative expenses were $22.2$25.6 million for the three months ended SeptemberJune 30, 20212022 compared to $10.5$188.9 million for the three months ended SeptemberJune 30, 2020, an increase2021, a decrease of $11.7$163.3 million, or 112%86%. The increasedecrease in general and administrative expenses was primarily driven by the prior year recognition of stock-based compensation expense of $170.7 million related to the performance-based vesting stock options that vested on the consummation of our IPO in June 2021. This decrease was partially offset by an increase of approximately $4.6$2.0 million in salaries and benefits, an increase of approximately $3.5$4.2 million in stock-based compensation expense, $0.5 million of expenses associated with our August 2021 secondary offering,and an increase in general and administrative expenses in 2021 after a decrease in 2020 expenses related to the COVID-19 pandemic, which was driven by temporary closures of corporate offices and reductionsapproximately $2.4 million in other administrative expenses, andcosts, which were primarily attributable to the increased costs of being a public company.company and increase in corporate headcount.
Loss (Gain)Gain on Sale of Assets
|
| Three Months Ended September 30, |
|
|
|
|
|
|
| |||||||
(Dollars in thousands) |
| 2021 |
|
| 2020 |
|
| $ Change |
|
| % Change |
| ||||
Loss (gain) on sale of assets |
| $ | 748 |
|
| $ | (4,283 | ) |
| $ | 5,031 |
|
|
| (117 | )% |
Percentage of revenues, net |
|
| 0 | % |
|
| (3 | )% |
|
|
|
|
|
|
|
| Three Months Ended June 30, |
|
|
|
|
|
|
| |||||||
(Dollars in thousands) |
| 2022 |
|
| 2021 |
|
| $ Change |
|
| % Change |
| ||||
Gain on sale of assets |
| $ | (3,146 | ) |
| $ | (7,097 | ) |
| $ | 3,951 |
|
|
| (56 | )% |
Percentage of net revenues |
|
| (1 | )% |
|
| (4 | )% |
|
|
|
|
|
|
Loss (gain)Gain on sale of assets reflected a loss of $0.7was $3.1 million for the three months ended SeptemberJune 30, 20212022 compared to a gain of $4.3$7.1 million for the three months ended SeptemberJune 30, 2020, an increase2021, a decrease of $5.0$4.0 million, or 117%56%. The increase in loss (gain)gain on sale of assets was primarily driven by gains associated with our sale-leaseback transactions in 2020.transactions.
Other Expense
|
| Three Months Ended September 30, |
|
|
|
|
|
|
| Three Months Ended June 30, |
|
|
|
|
|
| ||||||||||||||||
(Dollars in thousands) |
| 2021 |
| 2020 |
| $ Change |
|
| % Change |
|
| 2022 |
|
| 2021 |
|
| $ Change |
|
| % Change |
| ||||||||||
Other expense |
| $ | 5,717 |
|
| $ | 15,917 |
|
| $ | (10,200 | ) |
|
| (64 | )% |
| $ | 8,762 |
|
| $ | 16,923 |
|
| $ | (8,161 | ) |
|
| (48 | )% |
Percentage of revenues, net |
|
| 3 | % |
|
| 10 | % |
|
|
|
|
| |||||||||||||||||||
Percentage of net revenues |
|
| 4 | % |
|
| 9 | % |
|
|
|
|
|
Other expense was $5.7$8.8 million for the three months ended SeptemberJune 30, 20212022 compared to $15.9$16.9 million for the three months ended SeptemberJune 30, 2020,2021, a decrease of $10.2$8.1 million, or 64%48%. The decrease in other expense was primarily driven by a $9.9$5.0 million reduction onin interest expense, resulting from the June 2021 pay down of our amended and restated senior secured first lien term loan facility ("the First Lien Term Loan") pursuant to the amended and restated first lien credit agreement entered into in May 2019 ("Amended First Lien Credit Agreement")Loan and the June 2021 pay-off of our senior secured second lien term loan facility ("the Second Lien Term Loan") pursuant toLoan and a $3.2 million loss on extinguishment of debt recorded in the second lien credit agreement entered into in May 2019 (as amended in March 2020, the "Amended Second Lien Credit Agreement").
30
prior year period.
Income Tax Provision (Benefit)
|
| Three Months Ended June 30, |
|
|
|
|
|
|
| |||||||
(Dollars in thousands) |
| 2022 |
|
| 2021 |
|
| $ Change |
|
| % Change |
| ||||
Income tax provision (benefit) |
| $ | 9,894 |
|
| $ | (44,569 | ) |
| $ | 54,463 |
|
|
| (122 | )% |
Percentage of net revenues |
|
| 4 | % |
|
| (23 | )% |
|
|
|
|
|
|
29
|
| Three Months Ended September 30, |
|
|
|
|
|
|
| |||||||
(Dollars in thousands) |
| 2021 |
|
| 2020 |
|
| $ Change |
|
| % Change |
| ||||
Income tax provision |
| $ | 6,440 |
|
| $ | 7,445 |
|
| $ | (1,005 | ) |
|
| (13 | )% |
Percentage of revenues, net |
|
| 3 | % |
|
| 5 | % |
|
|
|
|
|
|
Income tax provision was $6.4$9.9 million for the three months ended SeptemberJune 30, 20212022 compared to $7.4a benefit of $44.6 million for the three months ended SeptemberJune 30, 2020, a decrease2021, an increase of $1.0$54.5 million, or 13%122%. The decreaseincrease in the income tax provision was primarily driven by discrete tax benefits originating from stock option exercises duringthe recognition of stock-based compensation expense related to performance-based options that vested on the consummation of the Company's IPO in June 2021, resulting in increased income before taxes for the three months ended SeptemberJune 30, 2021.2022.
Results of Operations for the NineSix Months Ended SeptemberJune 30, 20212022 and 20202021 (Unaudited)
The unaudited results of operations data for the ninesix months ended SeptemberJune 30, 20212022 and 20202021 have been derived from the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
|
| Six Months Ended June 30, |
| |||||||||||||
|
| 2022 |
|
| 2021 |
| ||||||||||
(Dollars in thousands) |
| Amount |
|
| % of Revenue |
|
| Amount |
|
| % of Revenue |
| ||||
Net revenues |
| $ | 444,578 |
|
|
| 100 | % |
| $ | 372,588 |
|
|
| 100 | % |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Store operating costs: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cost of labor and chemicals |
|
| 134,889 |
|
|
| 30 | % |
|
| 139,613 |
|
|
| 37 | % |
Other store operating expenses |
|
| 156,830 |
|
|
| 35 | % |
|
| 126,446 |
|
|
| 34 | % |
General and administrative |
|
| 49,297 |
|
|
| 11 | % |
|
| 203,857 |
|
|
| 55 | % |
Gain on sale of assets |
|
| (2,687 | ) |
|
| (1 | )% |
|
| (6,307 | ) |
|
| (2 | )% |
Total costs and expenses |
|
| 338,329 |
|
|
| 76 | % |
|
| 463,609 |
|
|
| 124 | % |
Operating income |
|
| 106,249 |
|
|
| 24 | % |
|
| (91,021 | ) |
|
| (24 | )% |
Other expense: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest expense, net |
|
| 16,928 |
|
|
| 4 | % |
|
| 27,699 |
|
|
| 7 | % |
Loss on extinguishment of debt |
|
| - |
|
|
| 0 | % |
|
| 3,183 |
|
|
| 1 | % |
Total other expense |
|
| 16,928 |
|
|
| 4 | % |
|
| 30,882 |
|
|
| 8 | % |
Income (loss) before taxes |
|
| 89,321 |
|
|
| 20 | % |
|
| (121,903 | ) |
|
| (33 | )% |
Income tax provision (benefit) |
|
| 18,174 |
|
|
| 4 | % |
|
| (36,187 | ) |
|
| (10 | )% |
Net income (loss) |
|
| 71,147 |
|
|
| 16 | % |
|
| (85,716 | ) |
|
| (23 | )% |
|
| Nine Months Ended September 30, |
| |||||||||||||
|
| 2021 |
|
| 2020 |
| ||||||||||
(Dollars in thousands) |
| Amount |
|
| % of Revenue |
|
| Amount |
|
| % of Revenue |
| ||||
Revenues, net |
| $ | 566,898 |
|
|
| 100 | % |
| $ | 412,904 |
|
|
| 100 | % |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Store operating costs: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cost of labor and chemicals |
|
| 203,051 |
|
|
| 36 | % |
|
| 141,874 |
|
|
| 34 | % |
Other store operating expenses |
|
| 194,889 |
|
|
| 34 | % |
|
| 164,352 |
|
|
| 40 | % |
General and administrative |
|
| 226,015 |
|
|
| 40 | % |
|
| 37,069 |
|
|
| 9 | % |
Gain on sale of assets |
|
| (5,559 | ) |
|
| (1 | )% |
|
| (3,773 | ) |
|
| (1 | )% |
Total costs and expenses |
|
| 618,396 |
|
|
| 109 | % |
|
| 339,522 |
|
|
| 82 | % |
Operating (loss) income |
|
| (51,498 | ) |
|
| (9 | )% |
|
| 73,382 |
|
|
| 18 | % |
Other expense: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest expense, net |
|
| 33,416 |
|
|
| 6 | % |
|
| 49,341 |
|
|
| 12 | % |
Loss on extinguishment of debt |
|
| 3,183 |
|
|
| 1 | % |
|
| 1,918 |
|
|
| 0 | % |
Total other expense |
|
| 36,599 |
|
|
| 6 | % |
|
| 51,259 |
|
|
| 12 | % |
(Loss) income before taxes |
|
| (88,097 | ) |
|
| (16 | )% |
|
| 22,123 |
|
|
| 5 | % |
Income tax (benefit) provision |
|
| (29,747 | ) |
|
| (5 | )% |
|
| 2,148 |
|
|
| 1 | % |
Net (loss) income |
|
| (58,350 | ) |
|
| (10 | )% |
|
| 19,975 |
|
|
| 5 | % |
Net Revenues
Revenues, net
|
| Six Months Ended June 30, |
|
|
|
|
|
|
| |||||||
(Dollars in thousands) |
| 2022 |
|
| 2021 |
|
| $ Change |
|
| % Change |
| ||||
Net revenues |
| $ | 444,578 |
|
| $ | 372,588 |
|
| $ | 71,990 |
|
|
| 19 | % |
|
| Nine Months Ended September 30, |
|
|
|
|
|
|
| |||||||
(Dollars in thousands) |
| 2021 |
|
| 2020 |
|
| $ Change |
|
| % Change |
| ||||
Revenues, net |
| $ | 566,898 |
|
| $ | 412,904 |
|
| $ | 153,994 |
|
|
| 37 | % |
Revenues, netNet revenues were $566.9$444.6 million for the ninesix months ended SeptemberJune 30, 20212022 compared to $412.9$372.6 million for the ninesix months ended SeptemberJune 30, 2020,2021, an increase of $154.0$72.0 million, or 37%19%. The increase in net revenues net was primarily attributable to an increase of $172.9 million in car wash revenue and was partially offset by a $18.9 million decrease in oil change revenue as a result of the sale of our quick lube facilities in December 2020. The increase in car wash revenue was attributablesales due to comparable store sales growth in UWC Members and the year-over-year addition of 2258 locations.
Store Operating Costs
Cost of Labor and Chemicals
|
| Nine Months Ended September 30, |
|
|
|
|
|
|
| Six Months Ended June 30, |
|
|
|
|
|
| ||||||||||||||||
(Dollars in thousands) |
| 2021 |
| 2020 |
| $ Change |
|
| % Change |
|
| 2022 |
|
| 2021 |
|
| $ Change |
|
| % Change |
| ||||||||||
Cost of labor and chemicals |
| $ | 203,051 |
|
| $ | 141,874 |
|
| $ | 61,177 |
|
|
| 43 | % |
| $ | 134,889 |
|
| $ | 139,613 |
|
| $ | (4,724 | ) |
|
| (3 | )% |
Percentage of revenues, net |
|
| 36 | % |
|
| 34 | % |
|
|
|
|
| |||||||||||||||||||
Percentage of net revenues |
|
| 30 | % |
|
| 37 | % |
|
|
|
|
|
31
Cost of labor and chemicals was $203.1$134.9 million for the ninesix months ended SeptemberJune 30, 20212022 compared to $141.9$139.6 million for the ninesix months ended SeptemberJune 30, 2020, an increase2021, a decrease of $61.2$4.7 million, or 43%3%. The increasedecrease in the cost of labor and chemicals was primarily driven by the prior year recognition of stock-based compensation expense of $31.3 million related to our performance-based vesting stock options that vested on the consummation of our IPO in June 2021, as well as the approximately $1.5 million of costs associated with gasoline sales which were offered in the six months ended June 30, 2021 but which we did not offer in the six months ended June 30, 2022. These decreases were partially offset by an increase in labor and benefits of $32.6approximately $23.5 million in connection with the increase in wash volume, and an increase in crew wage rates. These increases were partially offset by decreaseswash chemicals and supplies of approximately $2.8 million during the three months ended June 30, 2022, both attributable to an
30
increase in labor costs driven by optimizing our wash labor modelvolume and the saleyear-over-year addition of 58 locations, as well as some inflationary pressures on both our quick lube facilities in December 2020.labor and chemicals.
Other Store Operating Expenses
|
| Nine Months Ended September 30, |
|
|
|
|
|
|
| Six Months Ended June 30, |
|
|
|
|
|
| ||||||||||||||||
(Dollars in thousands) |
| 2021 |
| 2020 |
| $ Change |
| % Change |
|
| 2022 |
|
| 2021 |
|
| $ Change |
|
| % Change |
| |||||||||||
Other store operating expenses |
| $ | 194,889 |
|
| $ | 164,352 |
|
| $ | 30,537 |
|
|
| 19 | % |
| $ | 156,830 |
|
| $ | 126,446 |
|
| $ | 30,384 |
|
|
| 24 | % |
Percentage of revenues, net |
|
| 34 | % |
|
| 40 | % |
|
|
|
|
| |||||||||||||||||||
Percentage of net revenues |
|
| 35 | % |
|
| 34 | % |
|
|
|
|
|
Other store operating expenses were $194.9$156.8 million for the ninesix months ended SeptemberJune 30, 20212022 compared to $164.4$126.4 million for the ninesix months ended SeptemberJune 30, 2020,2021, an increase of $30.5$30.4 million, or 19%24%. The increase in other store operating expenses was attributable to an increase in volume with comparable store sales growth and the year-over-year addition of 2258 locations partially offset by a decrease in other store operating expenses from the sale ofand some inflationary pressures on our quick lube facilities in December 2020. utilities and maintenance expenses. Rent expense increased approximately $4.8 million with the addition of 2435 new real estate leases, which was offset by rental income on subleases following the sale of our quick lube facilities in December 2020.land and building leases.
General and Administrative
|
| Nine Months Ended September 30, |
|
|
|
|
|
|
| Six Months Ended June 30, |
|
|
|
|
|
| ||||||||||||||||
(Dollars in thousands) |
| 2021 |
| 2020 |
| $ Change |
| % Change |
|
| 2022 |
|
| 2021 |
|
| $ Change |
|
| % Change |
| |||||||||||
General and administrative |
| $ | 226,015 |
|
| $ | 37,069 |
|
| $ | 188,946 |
|
|
| 510 | % |
| $ | 49,297 |
|
| $ | 203,857 |
|
| $ | (154,560 | ) |
|
| (76 | )% |
Percentage of revenues, net |
|
| 40 | % |
|
| 9 | % |
|
|
|
|
| |||||||||||||||||||
Percentage of net revenues |
|
| 11 | % |
|
| 55 | % |
|
|
|
|
|
General and administrative expenses were $226.0$49.3 million for the ninesix months ended SeptemberJune 30, 20212022 compared to $37.1$203.9 million for the ninesix months ended SeptemberJune 30, 2020, an increase2021, a decrease of $188.9$154.6 million, or 510%76%. The increasedecrease in general and administrative expenses was primarily attributable todriven by the prior year recognition of stock-based compensation expense of $170.7 million related to our performance-basedthe performance-based vesting stock options that vested on the consummation of our IPO in June 2021, $0.5 million of expenses associated with our August 2021 secondary offering,2021. This decrease was partially offset by an increase of approximately $19.3$5.0 million in generalsalaries and administrative expensesbenefits, an increase of approximately $7.5 million in 2021 after the 2020 decrease related to the COVID-19 pandemic, which was driven by a furloughstock-based compensation expense, and an increase of corporate employees, temporary reductions in pay, temporary closures of corporate offices, and reductionsapproximately $4.6 million in other administrative expenses, andcosts, which were primarily attributable to the increased costs of being a public company.company and increase in corporate headcount.
Gain on Sale of Assets
|
| Nine Months Ended September 30, |
|
|
|
|
|
|
| Six Months Ended June 30, |
|
|
|
|
|
| ||||||||||||||||
(Dollars in thousands) |
| 2021 |
| 2020 |
| $ Change |
| % Change |
|
| 2022 |
|
| 2021 |
|
| $ Change |
|
| % Change |
| |||||||||||
Gain on sale of assets |
| $ | (5,559 | ) |
| $ | (3,773 | ) |
| $ | (1,786 | ) |
|
| 47 | % |
| $ | (2,687 | ) |
| $ | (6,307 | ) |
| $ | 3,620 |
|
|
| (57 | )% |
Percentage of revenues, net |
|
| (1 | )% |
|
| (1 | )% |
|
|
|
|
| |||||||||||||||||||
Percentage of net revenues |
|
| (1 | )% |
|
| (2 | )% |
|
|
|
|
|
GainLoss on sale of assets reflected a gain of $5.6was $2.7 million for the ninesix months ended SeptemberJune 30, 20212022 compared to a gain of $3.8$6.3 million for the ninesix months ended SeptemberJune 30, 2020, an increase2021, a decrease of $1.8$3.6 million, or 47%57%. The increase in gain on sale of assets was primarily driven by gains associated with our sale-leaseback transactions.
Other Expense
|
| Six Months Ended June 30, |
|
|
|
|
|
|
| |||||||
(Dollars in thousands) |
| 2022 |
|
| 2021 |
|
| $ Change |
|
| % Change |
| ||||
Other expense |
| $ | 16,928 |
|
| $ | 30,882 |
|
| $ | (13,954 | ) |
|
| (45 | )% |
Percentage of net revenues |
|
| 4 | % |
|
| 8 | % |
|
|
|
|
|
|
|
| Nine Months Ended September 30, |
|
|
|
|
|
|
| |||||||
(Dollars in thousands) |
| 2021 |
|
| 2020 |
|
| $ Change |
|
| % Change |
| ||||
Other expense |
| $ | 36,599 |
|
| $ | 51,259 |
|
| $ | (14,660 | ) |
|
| (29 | )% |
Percentage of revenues, net |
|
| 6 | % |
|
| 12 | % |
|
|
|
|
|
|
32
Other expense was $36.6$16.9 million for the ninesix months ended SeptemberJune 30, 20212022 compared to $51.3$30.9 million for the ninesix months ended SeptemberJune 30, 2020,2021, a decrease of $14.7$14.0 million, or 29%45%. The decrease in other expense was primarily driven by a $15.7$10.8 million reduction onin interest expense, resulting from the June 2021 pay down of ourthe First Lien Term Loan pursuant to the Amended First Lien Credit Agreement and the June 2021 pay-off of ourthe Second Lien Term Loan pursuant to the Amended Second Lien Credit Agreement, partially offset byand a $1.3$3.2 million increase in loss on early extinguishment of debt.debt recorded in the prior year period.
31
Income Tax Provision (Benefit) Provision
|
| Nine Months Ended September 30, |
|
|
|
|
|
|
| |||||||
(Dollars in thousands) |
| 2021 |
|
| 2020 |
|
| $ Change |
|
| % Change |
| ||||
Income tax (benefit) provision |
| $ | (29,747 | ) |
| $ | 2,148 |
|
| $ | (31,895 | ) |
|
| (1,485 | )% |
Percentage of revenues, net |
|
| (5 | )% |
|
| 1 | % |
|
|
|
|
|
|
|
| Six Months Ended June 30, |
|
|
|
|
|
|
| |||||||
(Dollars in thousands) |
| 2022 |
|
| 2021 |
|
| $ Change |
|
| % Change |
| ||||
Income tax provision (benefit) |
| $ | 18,174 |
|
| $ | (36,187 | ) |
| $ | 54,361 |
|
|
| (150 | )% |
Percentage of net revenues |
|
| 4 | % |
|
| (10 | )% |
|
|
|
|
|
|
Income tax benefitprovision was $29.7$18.2 million for the ninesix months ended SeptemberJune 30, 20212022 compared to an income tax provisiona benefit of $2.1$36.2 million for the ninesix months ended SeptemberJune 30, 2020, a decrease2021, an increase of $31.8$54.4 million, or 1,485%150%. The increase in the income tax benefitprovision was primarily driven by the increaserecognition of stock-based compensation expense related to performance-based options that vested on the consummation of the Company's IPO in the lossJune 2021, resulting in increased income before taxes infor the ninesix months ended SeptemberJune 30, 2021.2022.
Liquidity and Capital Resources
Funding Requirements
Our primary requirements for liquidity and capital are to fund our investments in our core business, to pursue greenfield expansion and acquisitions, and to service our indebtedness. Historically, these cash requirements have been met through borrowing underfunds raised by the sale of common equity, utilization of our Revolving Commitment, First Lien Term Loan, Second Lien Term Loan, and Revolving Commitment, proceeds from sale-leaseback transactions, and cash provided by operations. As of SeptemberJune 30, 2022 and December 31, 2021, we had cash and cash equivalents of $162.2$37.7 million and $149.7$19.7 million, respectively, and $149.0 million and $149.5 million, respectively, of available borrowing capacity under our Revolving Commitment.
In June 2021, we entered into an amendment to our Amended First Lien Credit Agreement to, among other things, increaseAmendment No. 2, which increased the commitments under the Revolving Commitment from $75.0 million to $150.0 million. In June 2021, we made a voluntary prepayment of all outstanding balances under our Second Lien Term Loan, which included $242.7 million in outstanding principal and $6.1 million in accrued interest expense, and a voluntary prepayment of $190.4 million of outstanding principal under our First Lien Term Loan. These voluntary prepayments were funded with the net proceeds of our June 2021 IPO and the Amended Second Lien Credit Agreement was terminated.
In December 2021, in connection with the Clean Streak Ventures acquisition, we entered into Amendment No. 3, which increased the principal borrowings under the First Lien Term Loan by $290.0 million to $903.0 million. For a description of our credit facilities, please see Note 8 Debt in the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
As of SeptemberJune 30, 2021,2022, we were in compliance with the covenants under ourthe Amended A&R First Lien Credit Agreement.
We believe that our sources of liquidity and capital will be sufficient to finance our growth strategy and resulting operations, planned capital expenditures, and the additional expenses we expect to incur as a public company for at least the next 12 months. However, we cannot assure you that cash provided by operating activities or cash and cash equivalents will be sufficient to meet our future needs. If we are unable to generate sufficient cash flows from operations in the future, we may have to obtain additional financing. If we obtain additional capital by issuing equity, the interests of our existing stockholders will be diluted. If we incur additional indebtedness, that indebtedness may contain significant financial and other covenants that may significantly restrict our operations. We cannot assure you that we could obtain additional financing on favorable terms or at all.
Cash Flows for the NineSix Months Ended SeptemberJune 30, 20212022 and 20202021 (Unaudited)
The following table shows summary cash flow information for the ninesix months ended SeptemberJune 30, 20212022 and 2020:2021:
|
| Nine Months Ended September 30, |
|
| Six Months Ended June 30, |
| ||||||||||
(Dollars in thousands) |
| 2021 |
| 2020 |
|
| 2022 |
|
| 2021 |
| |||||
Net cash provided by operating activities |
| $ | 153,309 |
|
| $ | 77,919 |
|
| $ | 134,615 |
|
| $ | 119,675 |
|
Net cash used in investing activities |
|
| (90,458 | ) |
|
| (51,106 | ) |
|
| (119,766 | ) |
|
| (66,645 | ) |
Net cash (used in) provided by financing activities |
|
| (18,221 | ) |
|
| 24,878 |
| ||||||||
Net cash used in financing activities |
|
| 3,062 |
|
|
| (12,564 | ) | ||||||||
Net increase in cash and cash equivalents, and restricted cash |
| $ | 44,630 |
|
| $ | 51,691 |
|
| $ | 17,911 |
|
| $ | 40,466 |
|
Operating Activities. Net cash provided by operating activities consists of net (loss) income adjusted for certain non-cash items, including stock-based compensation expense, depreciation expense associated with property and equipment (gains) and lossesdepreciation, gains on the disposal of property and equipment, amortization expense associated with intangible assets andof leased assets and deferred income taxes, as well as the effect of changes in other working capital balances.
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amounts.
For the ninesix months ended SeptemberJune 30, 2022, net cash provided by operating activities was $134.6 million and was comprised of net income of $71.1 million, increased by $73.2 million as a result of non-cash adjustments comprised primarily of stock-based
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compensation expense, depreciation and amortization expense, non-cash lease expense, deferred income taxes, a gain on disposal of property and equipment, and amortization of deferred financing costs. Changes in working capital balances decreased cash provided by operating activities by $9.7 million and were primarily driven by increases in the operating lease liability, other noncurrent assets and liabilities and prepaid expenses and other current assets, offset by a decrease in other receivables, accounts payable and accrued expenses.
For the six months ended June 30, 2021, net cash provided by operating activities was $153.3$119.7 million and was comprised of a net loss of $58.4$85.7 million, which was increased by $238.6$203.4 million as a result of non-cash adjustments comprised primarily of stock-based compensation expense, deferred income taxes, depreciation and amortization expense, non-cash lease expense, a gain on disposal of property and equipment, and a loss on extinguishment of debt. Changes in working capital balances decreasedincreased cash provided by operating activities by $27.0$2.0 million and were primarily driven by an increase in accounts payable, accrued expenses, and a decrease in deferred revenue, partially offset by decreases in the operating lease liability and other noncurrent assets and liabilities, and increases in accounts receivable, net and prepaid expenses and other current assets, partially offset by increases in accounts payable, accrued expenses, and a decrease in deferred revenue.
For the nine months ended September 30, 2020, net cash provided by operating activities was $77.9 million and was comprised of net income of $20.0 million, increased by $70.4 million as a result of non-cash adjustments comprised primarily of depreciation and amortization expense, non-cash lease expense, deferred income taxes, and a gain on disposal of property and equipment. Changes in working capital balances increased cash provided by operating activities by $12.4 million and were primarily driven by an increase in accrued expenses and a decrease in deferred revenue, partially offset by a decrease in the operating lease liability and a decrease in accounts payable.assets.
Investing Activities. Our net cash used in investing activities primarily consists of purchases and salessale of property and equipment and acquisition of conveyorized car washes.
For the ninesix months ended SeptemberJune 30, 2022, net cash used in investing activities was $119.8 million and was primarily comprised of investment in property and equipment to support our greenfield development and other initiatives and two acquisitions, partially offset by the sale of property and equipment.
For the six months ended June 30, 2021, net cash used in investing activities was $90.5 million and was comprised of purchases of property and equipment to support our greenfield and other initiatives and the acquisition of conveyorized car washes, partially offset by the sale of property and equipment including sale-leaseback transactions.
For the nine months ended September 30, 2020, net cash used in investing activities was $51.1$66.6 million and was comprised of purchases of property and equipment primarily to support our greenfield and other initiatives and two acquisitions, partially offset by the sale of property and equipment including sale-leaseback transactions.
Financing Activities. Our net cash (used in) provided byused in financing activities primarily consists of proceeds and payments on our First Lien Term Loan, Second Lien Term Loan, and Revolving Commitment, as well as proceeds from our IPO.
For the ninesix months ended SeptemberJune 30, 2022, net cash used in financing activities was $3.1 million and was primarily comprised of repayments of our First Lien Term Loan and principal payments on finance lease obligations, partially offset by proceeds from exercise of stock options.
For the six months ended June 30, 2021, net cash used in financing activities was $18.2$12.6 million and was primarily comprised of repayments of our First Lien Term Loan and Second Lien Term Loan and payments of issuance costs associated with our IPO, partially offset by proceeds from the consummation of our IPO in June 2021.
For the nine months ended September 30, 2020, net cash provided by financing activities was $24.9 million and was primarily comprised of proceeds from borrowings under our Revolving Commitment, First Lien Term Loan, and Second Lien Term Loan, partially offset by repayments of our Revolving Commitment and First Lien Term Loan.
Contractual Obligations and Commitments
There have been no material changes during the three months ended September 30, 2021 to the contractual obligations disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in the Prospectus and our Second Quarter 10-Q.
Seasonality
Our business model is generally not seasonal in nature. As we have expanded our national footprint to 21 states, the geographic diversity of our locations ensures that we are not subject to the weather patterns of one specific region. The success of the UWC program has further mitigated our seasonality, as members pay on a monthly basis, irrespective of the weather and their usage frequency. As our UWC program revenues have grown to comprise 66% and 63% of our total wash sales in the three and nine months ended September 30, 2021, respectively, our financial performance has become more predictable.
Off-Balance Sheet Arrangements
We did not have off-balance sheet arrangements during the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Critical Accounting Policies and Estimates
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Our critical accounting policies are those that materially affect our unaudited condensed consolidated financial statements including those that involve difficult, subjective or complex judgments by management. The preparation of our consolidated financial statementshave been prepared in accordance with U.S. GAAPGAAP. The preparation of these financial statements requires us to make estimates and assumptionsjudgments that affect the reported amounts of assets, liabilities, revenue,revenues and expenses and related disclosuresdisclosure of contingent assets and liabilities.
On an ongoing basis, we evaluate our estimates and assumptions, including those related to revenue recognition, goodwill and other intangible assets, income taxes and stock-based compensation. We base our estimates on historical experience, current developments and on various other assumptions that we believe areto be reasonable under these circumstances, the circumstances,results of which form the basis for making judgments about carrying values of assets and we evaluate these estimates on an ongoing basis. Actualliabilities that cannot readily be determined from other sources. There can be no assurance that actual results maywill not differ from those estimates. A thorough understanding of these critical accounting policies is essential when reviewing our unaudited condensed consolidated financial statements. We believe that these critical accounting policies are those that are most important to the portrayal of our results of operations or involve the most difficult management decisions related to the use of significant estimates and assumptions as described above.
The significant accounting policies and estimates used in preparation of the unaudited condensed consolidated financial statements are described in our audited consolidated financial statements as of and for the year ended December 31, 2020, and the notes thereto, which are included in the Prospectus.2021 10-K. There have been no material changes to our significant accounting policies during the three and ninesix months ended SeptemberJune 30, 2021.2022.
Recent Accounting Pronouncements
See the sections titled “Summary of Significant Accounting Policies—Recently adopted accounting pronouncements” and “—Recently issued accounting pronouncements not yet adopted” in Note 2 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.Risk
We are exposed to market risk from changes in interest rates and inflation. All these market risks arise in the normal course of business, as we do not engage in speculative trading activities. The following analysis provides quantitative information regarding these risks.
Interest Rate Risk
Our First Lien Term Loan bears interest at variable rates, which exposes us to market risks relating to changes in interest rates. Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax policies, U.S. and international economic factors, and other factors beyond our control. As of SeptemberJune 30, 2022 and December 31, 2021, we had $613.3$901.2 million and $903.3 million, respectively, of variable rate debt outstanding under our First Lien Term Loan. Based on the balance outstanding under our First Lien Term Loan as of SeptemberJune 30, 2021,2022, an increase or decrease of 10%100 basis points in the effective interest rate on the First Lien Term Loan would cause an increase or decrease in interest expense of approximately $1.9$9 million over the next 12 months.
In May 2020, we entered into an interest rate swap to mitigate variability in forecasted interest payments on an amortizing notional of $550.0 million of our variable-rate First Lien Term Loan. We designated the interest rate swap as a pay-fixed, receive-floating interest rate swap instrument and are accounting for this derivative as a cash flow hedge.
Impact of Inflation
Our results of operations and financial condition are presented based on historical cost. While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we have recently experienced some rising inflationary pressures due to higher chemical costs, transportation, labor and other costs that may have impactedthe effects of inflation on our results of operations and financial condition. WeIn light of the current inflationary market conditions, we cannot assure you that our results of operations and financial condition will not be materially impacted by inflation in the future.
Item 4. Controls and Procedures.
Evaluation
Limitations on Effectiveness of Disclosure Controls and Procedures
We maintain “disclosureIn designing and evaluating our disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectivesthe desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management necessarily applies itsis required to apply judgment in evaluating the cost-benefit relationshipbenefits of possible controls and procedures.procedures relative to their costs.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2021.the end of the period covered by this Quarterly Report on Form 10-Q. Disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed in the reports that we file or submit under the Exchange Act has been appropriately recorded, processed, summarized and reported on a timely basis and are effective in ensuring that such information is accumulated and communicated to the Company’s management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based upon theon such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date,June 30, 2022, our disclosure controls and procedures were effective at athe reasonable assurance level.
Changes in Internal Control over Financial Reporting
Due to a transition period established by SEC rules applicable to newly public companies, our management is not required to evaluate the effectiveness of our internal control over financial reporting until after the filing of our Annual Report on Form 10-K for the year ended December 31, 2021. As a result, this Quarterly Report on Form 10-Q does not address whether there have been anyThere were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred during the three months ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
We are from time to time subject to various claims, lawsuits and other legal proceedings, including intellectual property claims. Some of these claims, lawsuits and other legal proceedings involve highly complex issues, and often these issues are subject to substantial uncertainties. Accordingly, our potential liability with respect to a large portion of such claims, lawsuits and other legal proceedings cannot be estimated with certainty. Management, with the assistance of legal counsel, periodically reviews the status of each significant matter and assesses potential financial exposure. We recognize provisions for claims or pending litigation when we determine that an unfavorable outcome is probable and the amount of loss can be reasonably estimated. Due to the inherent uncertain nature of litigation, the ultimate outcome or actual cost of settlement may materially vary from estimates. If management’s estimates prove incorrect, we could incur a charge to earnings which could have a material and adverse effect on our business, results of operations, and financial condition.condition. We are not party to any material legal proceedings.
Item 1A. Risk Factors.
You should carefully consider the risks described in Part II, Item 1A. "Risk Factors" of our Second Quarter 10-Q, which risk factors are incorporated herein by reference, together with all ofIn addition to the other information includedset forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors disclosed 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 2021 10-K, before making an investment decision. Our business, financial condition and results of operations could be materially and adversely affected by any of these risks or uncertainties. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. Furthermore,There have been no material changes to the potential impact of the COVID-19 pandemic, including from variants thereof, on our business operations and financial results and on the world economy as a whole may heighten the risksrisk factors described in Part II,I. Item 1A. "Risk Factors" of our Second Quarter 10-Q.2021 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits.
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* Filed herewith.
** Furnished herewith.
+ Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company undertakes to furnish supplemental copies of any of the omitted schedules upon request by the SEC.
38^ Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| Mister Car Wash, Inc. | |
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Date: |
| By: | /s/ John Lai |
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| John Lai |
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| Chairperson, President and Chief Executive Officer (Principal Executive Officer) |
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Date: |
| By: | /s/ Jedidiah Gold |
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| Jedidiah Gold |
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| Chief Financial Officer (Principal Financial Officer) |
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