Mister Car Wash(MCW) - 2024 Q1 - Quarterly Report

Forward-Looking Statements This section provides a cautionary note regarding forward-looking statements and their inherent uncertainties Forward-Looking Statements This section details forward-looking statements, emphasizing that actual results may differ due to various known and unknown risks and uncertainties - Key risks and uncertainties include economic health decline, customer retention, competition, growth strategy implementation, supply chain disruptions, increased operating costs, personnel challenges, leased property liabilities, regulatory compliance, intellectual property protection, and stock price volatility[11] PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis for the period Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for Q1 2024 show total assets of $2.93 billion, net revenues of $239.2 million, and a net income of $16.6 million Condensed Consolidated Balance Sheets Total assets increased to $2.93 billion as of March 31, 2024, driven by property and equipment, while cash and cash equivalents decreased Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $10,701 | $19,047 | | Total current assets | $52,736 | $60,894 | | Property and equipment, net | $773,230 | $725,121 | | Goodwill | $1,134,734 | $1,134,734 | | Total assets | $2,925,261 | $2,881,536 | | Liabilities & Equity | | | | Total current liabilities | $174,669 | $169,561 | | Long-term portion of debt, net | $913,350 | $897,424 | | Total liabilities | $1,996,537 | $1,966,501 | | Total stockholders' equity | $928,724 | $915,035 | Condensed Consolidated Statements of Operations Net revenues increased to $239.2 million in Q1 2024, but net income declined to $16.6 million due to higher costs and debt extinguishment loss Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended Mar 31, 2024 | Three Months Ended Mar 31, 2023 | | :--- | :--- | :--- | | Net revenues | $239,183 | $225,960 | | Total costs and expenses | $196,638 | $180,378 | | Operating income | $42,545 | $45,582 | | Interest expense, net | $20,024 | $17,748 | | Loss on extinguishment of debt | $1,882 | - | | Net income | $16,637 | $21,136 | | Diluted EPS | $0.05 | $0.06 | Condensed Consolidated Statements of Cash Flows Operating cash flow decreased to $58.0 million in Q1 2024, while investing activities used $76.9 million, and financing activities provided $10.7 million Summary of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended Mar 31, 2024 | Three Months Ended Mar 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $57,990 | $67,017 | | Net cash used in investing activities | $(76,944) | $(63,160) | | Net cash provided by financing activities | $10,652 | $894 | | Net change in cash | $(8,302) | $4,751 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, including a March 2024 debt refinancing, a $5.2 million Employee Retention Credit, and 482 car wash locations - As of March 31, 2024, the company operated 482 car washes in 21 states[26] - In March 2024, the company qualified for a $5.2 million Employee Retention Credit (ERC) for March 13, 2020, to December 31, 2020, recorded as 'Other income'[39] - In March 2024, the company refinanced its term loans with $925 million in new commitments maturing in March 2031, resulting in a $1.9 million loss on extinguishment of debt[66] - During Q1 2024, the company completed one sale-leaseback transaction for a car wash location, receiving $4.9 million and recognizing a net gain of $1.7 million[87] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 5.8% revenue increase driven by UWC memberships and new locations, despite a net income decrease due to higher operating costs Key Performance Indicators | Indicator | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Location count (end of period) | 482 | 439 | | Comparable store sales growth | 0.9% | (1.6)% | | UWC Members (in thousands) | 2,112 | 2,006 | | UWC sales as a % of total wash sales | 74% | 69% | | Adjusted EBITDA ($ thousands) | $75,172 | $70,976 | - The company's growth strategy increasingly focuses on greenfield development, with six new locations opened in Q1 2024, expected to drive future unit growth[128] - Net revenues increased by $13.2 million (6%) year-over-year, primarily due to growth in UWC Members and the addition of 43 locations[151] - General and administrative expenses rose by 23% to $29.7 million, largely due to $4.2 million in third-party costs related to the March debt refinancing[155] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are interest rate fluctuations, with a 100-basis-point change impacting annual interest expense by approximately $9 million - The company holds $925.0 million in variable-rate debt under its First Lien Term Loan as of March 31, 2024[176] - A 100 basis point increase or decrease in the effective interest rate would cause an approximate $9 million change in annual interest expense[176] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal controls - Management concluded that disclosure controls and procedures were effective as of March 31, 2024[178] - There were no material changes in internal control over financial reporting during Q1 2024[179] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, other information, and a list of exhibits filed with the report Legal Proceedings The company is involved in various legal proceedings, including a settled class action lawsuit against a subsidiary, pending final court approval - A class action lawsuit against subsidiary Prime Shine LLC in California has been settled, with the agreement pending final court approval, and the accrued financial amount is not material[182] Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's 2023 Annual Report on Form 10-K - No material changes to the risk factors described in the 2023 Form 10-K have occurred[183] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the first quarter - None[184] Other Information No directors or officers adopted, modified, or terminated Rule 10b5-1 trading arrangements during the first quarter of 2024 - No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading plan during the quarter ended March 31, 2024[187] Exhibits This section lists all exhibits filed, including debt agreement amendments, CEO/CFO certifications, and Inline XBRL documents - The list of exhibits includes Amendment No. 5 to the First Lien Term Loan Agreement, CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906, and XBRL data files[191]