Mister Car Wash(MCW) - 2025 Q2 - Quarterly Report

FORWARD-LOOKING STATEMENTS This report contains forward-looking statements subject to risks and uncertainties, protected under safe harbor provisions - This section highlights that the Quarterly Report on Form 10-Q contains forward-looking statements, which are covered by safe harbor provisions[11] - Readers are cautioned that actual results may differ materially from forward-looking statements due to known and unknown risks, uncertainties, and assumptions[12][13] - The Company does not undertake any obligation to update or revise forward-looking statements after the report date, except as required by law[14] PART I - FINANCIAL INFORMATION This part presents the unaudited financial statements and management's analysis of financial condition and operations Item 1. Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements, including operations, cash flows, and balance sheets Consolidated Statements of Operations and Comprehensive Income The company reports increased net revenues and net income for the three and six months ended June 30, 2025 Consolidated Statements of Operations and Comprehensive Income (Unaudited) - Key Figures (Amounts in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net revenues | $265,415 | $255,043 | $527,071 | $494,226 | | Operating income | $54,146 | $55,000 | $107,113 | $97,545 | | Net income | $28,595 | $22,091 | $55,595 | $38,728 | | Total comprehensive income | $28,945 | $22,091 | $55,945 | $38,728 | | Basic EPS | $0.09 | $0.07 | $0.17 | $0.12 | | Diluted EPS | $0.09 | $0.07 | $0.17 | $0.12 | - Net revenues increased by 4% for the three months ended June 30, 2025, and by 7% for the six months ended June 30, 2025, compared to the respective prior periods[19] - Net income increased by 29.4% for the three months ended June 30, 2025, and by 43.5% for the six months ended June 30, 2025, compared to the respective prior periods[19] Consolidated Statements of Cash Flows Operating cash flow increased while investing cash use decreased, and financing activities shifted to a net outflow Consolidated Statements of Cash Flows (Unaudited) - Key Figures (Amounts in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $134,378 | $118,882 | | Net cash used in investing activities | $(111,329) | $(144,642) | | Net cash provided by (used in) financing activities | $(64,032) | $10,395 | | Net change in cash and cash equivalents and restricted cash | $(40,983) | $(15,365) | | Cash and cash equivalents and restricted cash at end of period | $26,629 | $3,754 | - Net cash provided by operating activities increased by $15.5 million (13%) for the six months ended June 30, 2025, compared to the same period in 2024[22] - Net cash used in investing activities decreased by $33.3 million (23%) for the six months ended June 30, 2025, primarily due to lower purchases of property and equipment[22] - Net cash from financing activities shifted from a $10.4 million inflow in 2024 to a $64.0 million outflow in 2025, mainly due to significant debt payments[22] Consolidated Balance Sheets Total assets remained stable, while liabilities decreased and stockholders' equity increased from year-end 2024 Consolidated Balance Sheets (Unaudited) - Key Figures (Amounts in thousands) | Metric | As of June 30, 2025 | As of December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $57,676 | $99,090 | | Total assets | $3,105,997 | $3,101,796 | | Total current liabilities | $176,388 | $186,968 | | Total liabilities | $2,035,014 | $2,103,444 | | Total stockholders' equity | $1,070,983 | $998,352 | - Total current assets decreased by $41.4 million (41.8%) from December 31, 2024, to June 30, 2025, primarily due to a decrease in cash and cash equivalents[25] - Total liabilities decreased by $68.4 million (3.3%) from December 31, 2024, to June 30, 2025, driven by reductions in long-term debt and operating lease liabilities[25] - Total stockholders' equity increased by $72.6 million (7.3%) from December 31, 2024, to June 30, 2025, mainly due to retained earnings and additional paid-in capital[25] Consolidated Statements of Stockholders' Equity Stockholders' equity grew, driven primarily by net income and stock-based compensation expense Consolidated Statements of Stockholders' Equity (Unaudited) - Key Changes (Amounts in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Balance as of December 31, 2024/2023 | $998,352 | $915,035 | | Stock-based compensation expense | $13,320 | $12,152 | | Net income | $55,595 | $38,728 | | Balance as of June 30, 2025/2024 | $1,070,983 | $949,400 | - Stockholders' equity increased by $72.6 million in the first six months of 2025, primarily driven by net income of $55.6 million and stock-based compensation expense of $13.3 million[28] - The number of common shares outstanding increased from 323,693,863 as of December 31, 2024, to 327,257,547 as of June 30, 2025, due to employee stock plans[28] Notes to Consolidated Financial Statements These notes provide detailed disclosures on accounting policies, financial statement items, and other relevant information 1. Nature of Business The company operates as a leading provider of conveyorized car wash services across the United States - Mister Car Wash, Inc. is a provider of conveyorized car wash services, primarily operating Express Exterior Locations with free vacuum services[31] - As of June 30, 2025, the Company operated 522 car washes across 21 states[31] 2. Summary of Significant Accounting Policies This note details the U.S. GAAP basis of preparation, key estimates, revenue composition, and new accounting pronouncements - The unaudited consolidated financial statements are prepared in accordance with U.S. GAAP and SEC rules for interim financial statements[32] - Management makes estimates and assumptions affecting reported amounts, particularly for deferred tax assets/liabilities and impairment evaluations[34] Net Revenues Composition (Amounts in thousands) | Revenue Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Recognized over time | $200,191 | $184,082 | $392,039 | $360,341 | | Recognized at a point in time | $64,917 | $70,861 | $134,601 | $133,707 | | Other revenue | $307 | $100 | $431 | $178 | | Net revenues | $265,415 | $255,043 | $527,071 | $494,226 | - The Company recognized a $4,663 thousand Employee Retention Credit (net of tax advisory costs) in March 2024, recorded in Other income[44][45] - New accounting pronouncements include ASU No. 2023-09 (Income Taxes) and ASU No. 2024-03 (Expense Disaggregation Disclosures)[46][49] 3. Property and Equipment, Net This note details the components and changes in the company's net property and equipment balances Property and Equipment, Net (Amounts in thousands) | Category | As of June 30, 2025 | As of December 31, 2024 | | :--- | :--- | :--- | | Property and equipment, gross | $1,238,908 | $1,141,487 | | Accumulated depreciation | $(353,692) | $(322,676) | | Accumulated amortization - finance leases | $(4,689) | $(4,211) | | Property and equipment, net | $880,527 | $814,600 | - Depreciation expense for the six months ended June 30, 2025, was $41,239 thousand, up from $36,072 thousand in the prior year period[50] - During Q2 2025, the Company sold a car wash location, recording a gain of $338 thousand[52] 4. Other Intangible Assets, Net This note outlines the composition of intangible assets and related amortization expense Other Intangible Assets, Net (Amounts in thousands) | Category | Gross Carrying Amount (June 30, 2025) | Accumulated Amortization (June 30, 2025) | Gross Carrying Amount (Dec 31, 2024) | Accumulated Amortization (Dec 31, 2024) | | :--- | :--- | :--- | :--- | :--- | | Trade names and trademarks | $107,000 | $0 | $107,000 | $0 | | Customer relationships | $9,700 | $7,253 | $9,700 | $7,019 | | Covenants not to compete | $6,940 | $4,810 | $13,230 | $10,404 | | Other intangible assets, net | $123,640 | $12,063 | $129,930 | $17,423 | - Amortization expense for finite-lived intangible assets decreased significantly to $930 thousand for the six months ended June 30, 2025, from $3,282 thousand in the prior year period[54] Estimated Future Amortization Expense (Amounts in thousands) | Fiscal Year Ending | Amount | | :--- | :--- | | 2025 (remaining) | $897 | | 2026 | $1,585 | | 2027 | $758 | | 2028 | $433 | | 2029 | $310 | | Thereafter | $594 | | Total | $4,577 | 5. Other Accrued Expenses This note provides a breakdown of other accrued expenses, highlighting a decrease in greenfield development accruals Other Accrued Expenses (Amounts in thousands) | Category | As of June 30, 2025 | As of December 31, 2024 | | :--- | :--- | :--- | | Utilities | $7,444 | $6,685 | | Accrued tax expense | $12,028 | $11,485 | | Insurance expense | $6,540 | $4,843 | | Greenfield development accruals | $3,983 | $9,653 | | Other | $4,913 | $6,496 | | Total other accrued expenses | $34,908 | $39,162 | - Greenfield development accruals decreased from $9,653 thousand at December 31, 2024, to $3,983 thousand at June 30, 2025[56][57] 6. Income Taxes This note details the effective income tax rate and factors influencing the tax provision - The effective income tax rate for the six months ended June 30, 2025, was 26.8%, a decrease from 36.1% in the prior year period[58] - The year-to-date provision for income taxes included a net unfavorable tax impact of $1,095 thousand from stock options, significantly lower than the $6,399 thousand impact in the prior year[59][60] - The 'One Big Beautiful Bill Act' (OBBBA) was signed into law on July 4, 2025, and the Company is evaluating its impact[61] 7. Debt This note describes the company's long-term debt structure, recent changes, and covenant compliance Long-term Debt (Amounts in thousands) | Category | Maturity | Stated Interest Rate | Effective Interest Rate | As of June 30, 2025 | As of December 31, 2024 | | :--- | :--- | :--- | :--- | :--- | :--- | | First lien term loan | Mar 27, 2031 | 6.83% | 6.95% | $853,074 | $920,381 | | Unamortized discount and debt issuance costs | | | | $(4,019) | $(4,367) | | Current maturities of debt | | | | $0 | $(6,920) | | Total long-term portion of debt, net | | | | $849,055 | $909,094 | - Long-term debt, net, decreased by $60.0 million from December 31, 2024, to June 30, 2025, due to principal payments on the First Lien Term Loan[63] - The Revolving Commitment borrowing capacity increased from $150,000 thousand to $300,000 thousand in March 2024, with $299,791 thousand available as of June 30, 2025[69][70] - The Company was in compliance with all debt covenants as of June 30, 2025[74] 8. Fair Value Measurements This note presents the fair value hierarchy for the company's financial assets and liabilities Fair Value Measurements (Amounts in thousands) | Category | Total (June 30, 2025) | Level 1 (June 30, 2025) | Level 2 (June 30, 2025) | Level 3 (June 30, 2025) | | :--- | :--- | :--- | :--- | :--- | | Deferred compensation plan (Assets) | $7,059 | $7,059 | $0 | $0 | | Interest rate swap (Assets) | $466 | $0 | $466 | $0 | | Deferred compensation plan (Liabilities) | $4,266 | $4,266 | $0 | $0 | | Contingent consideration (Liabilities) | $4,328 | $0 | $0 | $4,328 | - The fair value of the First Lien Term Loan approximated its carrying value due to its variable interest rate terms[78] - The Level 3 contingent consideration liability of $4,328 thousand remained unchanged as of June 30, 2025[79] 9. Interest Rate Swap This note details the interest rate swap agreement executed to hedge against interest rate variability - On April 28, 2025, the Company executed a pay-fixed, receive-floating interest rate swap with a notional amount of $250,000 thousand[81] Interest Rate Swap Details (As of June 30, 2025, Amounts in thousands) | Notional Amount | Fair Value | Pay-Fixed Rate | Receive-Floating Rate | Maturity Date | | :--- | :--- | :--- | :--- | :--- | | $250,000 | $466 | 3.369% | 4.327% | June 30, 2027 | - The swap is designated as a cash flow hedge, with changes in fair value recorded in Other comprehensive income (loss), net of tax[39][81] 10. Leases This note provides comprehensive information on the company's operating and finance leases Lease Balance Sheet Information (Amounts in thousands) | Category | As of June 30, 2025 | As of December 31, 2024 | | :--- | :--- | :--- | | Operating right of use assets, net | $905,229 | $924,896 | | Property and equipment, net (Finance) | $11,809 | $12,344 | | Current maturities of operating lease liability | $51,020 | $48,986 | | Operating lease liability (Long-term) | $874,858 | $890,613 | | Financing lease liability (Long-term) | $12,795 | $13,262 | Total Lease Cost (Amounts in thousands) | Lease Cost Component | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Operating lease expense | $30,783 | $27,659 | $61,487 | $54,871 | | Finance lease expense | $488 | $511 | $982 | $1,026 | | Short-term lease expense | $22 | $52 | $39 | $103 | | Variable lease expense | $3,015 | $2,756 | $10,909 | $10,020 | | Total lease expense | $34,308 | $30,978 | $73,417 | $66,020 | - The weighted-average remaining operating lease term is 13.59 years with a discount rate of 8.13% as of June 30, 2025[85] - As of June 30, 2025, the Company had 11 forward-starting leases for car wash locations[86] - No sale-leaseback transactions were completed during the three and six months ended June 30, 2025[87][88] 11. Stockholders' Equity This note details the changes in the company's common stock and treasury stock accounts - As of June 30, 2025, there were 327,257,547 shares of common stock outstanding, an increase from 323,693,863 shares at December 31, 2024[89] - The Company had 6,172,921 shares of treasury stock as of June 30, 2025, accounted for using the cost method[91] 12. Stock-Based Compensation This note outlines the company's stock-based compensation plans and associated expenses - Stock-based compensation expense is recognized for stock options, restricted stock units (RSUs), and stock purchase rights[92] Stock-Based Compensation Expense (Amounts in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Cost of labor and chemicals | $2,794 | $2,465 | $5,576 | $4,938 | | General and administrative | $3,683 | $3,441 | $7,744 | $7,214 | | Total expense | $6,477 | $5,906 | $13,320 | $12,152 | - Total unrecognized compensation expense as of June 30, 2025, was $9,258 thousand for Time Vesting Options, $25,919 thousand for RSUs, and $289 thousand for 2021 ESPP stock purchase rights[103][104][105] 13. Commitments and Contingencies This note discloses the company's legal proceedings and insurance-related accruals - The Company is involved in various legal proceedings but does not believe any will have a material adverse effect on its financial position[106] - Accrued insurance claims were $6,468 thousand as of June 30, 2025, with corresponding receivables from carriers of $5,622 thousand[107] 14. Segment Information This note confirms the company operates as a single reportable segment - The Company operates as a single operating segment, deriving revenue from car wash services across the United States[108] - The Chief Executive Officer, as the chief operating decision maker (CODM), evaluates consolidated performance primarily through net income and total assets[109] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial condition, results of operations, and key performance indicators Who We Are Mister Car Wash is the leading U.S. car wash brand, focusing on express exterior services and its subscription program - Mister Car Wash, Inc. is the leading car wash brand in the U.S., operating 522 locations in 21 states as of June 30, 2025[111] - The Unlimited Wash Club® (UWC) monthly subscription program is a core offering, providing flexible, quick, and convenient services[111] Factors Affecting Our Business and Trends Business performance is influenced by comparable store sales, UWC membership, labor management, and macroeconomic conditions - The Company's business and growth are influenced by factors such as comparable store sales growth, the number and loyalty of UWC Members, and effective labor management[117] - Potential macroeconomic impacts from tariffs or other factors affecting consumer discretionary income could materially impact the business[113] Factors Affecting the Comparability of Our Results of Operations The ongoing greenfield development of new locations can affect the year-over-year comparability of financial results - The Company's growth strategy includes greenfield development of new locations, which can impact comparability of financial results[115][116] Key Performance Indicators The company tracks location count, comparable store sales growth, UWC membership, and profitability metrics Key Performance Indicators (Dollars in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Location count (end of period) | 522 | 491 | 522 | 491 | | Comparable store sales growth | 1.2% | 2.4% | 3.6% | 1.6% | | UWC Members (in thousands, end of period) | 2,228 | 2,126 | 2,228 | 2,126 | | UWC sales as a percentage of total wash sales | 76% | 72% | 74% | 73% | | Net income | $28,595 | $22,091 | $55,595 | $38,728 | | Net income margin | 10.8% | 8.7% | 10.5% | 7.8% | | Adjusted EBITDA | $87,046 | $88,692 | $172,695 | $163,864 | | Adjusted EBITDA margin | 32.8% | 34.8% | 32.8% | 33.2% | - Location count increased by 31 year-over-year to 522 as of June 30, 2025, with 8 greenfield locations added in the first six months of 2025[119][120] - UWC Members grew by approximately 5% from December 31, 2024, to June 30, 2025, reaching 2.2 million[119][124][125] - Adjusted EBITDA decreased by 1.9% for the three months ended June 30, 2025, but increased by 5.4% for the six months ended June 30, 2025[119] Results of Operations for the Three Months Ended June 30, 2025 and 2024 Net revenues increased by 4% to $265.4 million, and net income rose by 29% to $28.6 million Results of Operations - Three Months Ended June 30 (Amounts in thousands) | Metric | 2025 Amount | 2025 % of Revenue | 2024 Amount | 2024 % of Revenue | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net revenues | $265,415 | 100% | $255,043 | 100% | $10,372 | 4% | | Cost of labor and chemicals | $76,627 | 29% | $72,691 | 29% | $3,936 | 5% | | Other store operating expenses | $108,850 | 41% | $99,543 | 39% | $9,307 | 9% | | General and administrative | $25,113 | 9% | $24,912 | 10% | $201 | 1% | | Operating income | $54,146 | 20% | $55,000 | 22% | $(854) | (2)% | | Interest expense, net | $15,172 | 6% | $20,254 | 8% | $(5,082) | (25)% | | Net income | $28,595 | 11% | $22,091 | 9% | $6,504 | 29% | - Net revenues increased by $10.4 million (4%) due to growth in UWC Members, wash package mix, and the addition of 31 locations year-over-year[135] - Other store operating expenses increased by $9.3 million (9%), primarily due to new locations, increased utilities, maintenance, and rent expenses[137] - Total other expense, net, decreased by $5.1 million (25%), driven by a $5.1 million decrease in interest expense[140] Results of Operations for the Six Months Ended June 30, 2025 and 2024 Net revenues grew by 7% to $527.1 million, and net income significantly increased by 43% to $55.6 million Results of Operations - Six Months Ended June 30 (Amounts in thousands) | Metric | 2025 Amount | 2025 % of Revenue | 2024 Amount | 2024 % of Revenue | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net revenues | $527,071 | 100% | $494,226 | 100% | $32,845 | 7% | | Cost of labor and chemicals | $150,879 | 29% | $144,349 | 29% | $6,530 | 5% | | Other store operating expenses | $218,517 | 41% | $196,346 | 40% | $22,171 | 11% | | General and administrative | $49,772 | 9% | $54,622 | 11% | $(4,850) | (9)% | | Operating income | $107,113 | 20% | $97,545 | 20% | $9,568 | 10% | | Interest expense, net | $31,195 | 6% | $40,278 | 8% | $(9,083) | (23)% | | Net income | $55,595 | 11% | $38,728 | 8% | $16,867 | 43% | - Net revenues increased by $32.8 million (7%) due to UWC Member growth, increased retail customer traffic, and the addition of 31 locations[144] - General and administrative expenses decreased by $4.9 million (9%), primarily due to lower debt refinancing costs and decreased amortization expense[147][149] - Total other expense, net, decreased by $5.8 million (16%), driven by a $9.1 million decrease in interest expense[151] Liquidity and Capital Resources The Company's liquidity is deemed sufficient for the next 12 months, supported by cash reserves and available credit - As of June 30, 2025, the Company had $26.4 million in cash and cash equivalents and $299.8 million in available borrowing capacity[155] - Net cash provided by operating activities was $134.4 million for the six months ended June 30, 2025, an increase from $118.9 million in the prior year[157][158] - Net cash used in investing activities decreased to $111.3 million for the six months ended June 30, 2025, from $144.6 million in the prior year[159][160] - Net cash used in financing activities was $64.0 million for the six months ended June 30, 2025, a shift from a $10.4 million inflow in the prior year[161][162] Critical Accounting Policies and Estimates The company's critical accounting policies, which require significant management judgment, have not materially changed - The preparation of financial statements requires estimates and judgments, particularly for revenue recognition, goodwill, income taxes, and stock-based compensation[163][164] - There have been no material changes to the Company's significant accounting policies during the six months ended June 30, 2025[165] Recent Accounting Pronouncements This section refers to Note 2 for details on recently issued accounting standards - This section refers to Note 2 of the consolidated financial statements for a discussion of recent accounting pronouncements[166] Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes to the Company's exposure to market risk since its 2024 Form 10-K - No material changes in market risk exposure were reported compared to the 2024 Form 10-K[167] Item 4. Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective Disclosure Controls and Procedures The company's disclosure controls and procedures were evaluated and found to be effective as of June 30, 2025 - Management, with the participation of the CEO and CFO, evaluated and concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[168] Changes in Internal Control over Financial Reporting No material changes to internal control over financial reporting occurred during the second quarter of 2025 - No changes in internal control over financial reporting occurred during the three months ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, internal controls[169] PART II - OTHER INFORMATION This part covers legal proceedings, risk factors, equity sales, and other required disclosures Item 1. Legal Proceedings No material changes to legal proceedings are reported beyond disclosures in the financial statement notes - No material changes to legal proceedings were reported, other than those in Note 13 of the consolidated financial statements[172] Item 1A. Risk Factors No material changes to the risk factors previously described in the Company's 2024 Form 10-K have occurred - No material changes to risk factors were reported compared to the 2024 Form 10-K[173] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report during the period - No unregistered sales of equity securities or use of proceeds occurred[174] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities to report during the period - No defaults upon senior securities occurred[175] Item 4. Mine Safety Disclosures This item is not applicable to the Company - This item is not applicable[176] Item 5. Other Information This section reports on other information, specifically regarding Rule 10b5-1 trading plan arrangements Rule 10b5-1 Trading Plan Arrangements No directors or officers adopted, modified, or terminated Rule 10b5-1 trading arrangements during the quarter - None of the Company's directors or officers adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[177] Item 6. Exhibits This section lists all exhibits filed or furnished with the Quarterly Report on Form 10-Q - The report includes certifications from the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2)[179] - XBRL (eXtensible Business Reporting Language) documents are filed herewith, including the Inline XBRL Instance Document and related files[179] SIGNATURES The report is duly signed by the Chief Executive Officer and Chief Financial Officer as of August 1, 2025 - The report was signed on August 1, 2025, by John Lai, Chairperson, President and Chief Executive Officer, and Jedidiah Gold, Chief Financial Officer[182]