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.

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 ~~297,341,227~~304,292,739 shares of common stock, $0.01 par value per share, outstanding.

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:~~

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

See accompanying notes to unaudited condensed consolidated financial statements.

Condensed Consolidated Statements of Operations and Comprehensive Income ~~(Loss)~~

See accompanying notes to unaudited condensed consolidated financial statements.

~~See accompanying notes to unaudited condensed consolidated financial statements.~~

See accompanying notes to unaudited condensed consolidated financial statements.

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 ~~offer~~offers express exterior cleaning services ~~and Interior Cleaning Locations, which offer both express exterior cleaning~~along with free vacuum services, and interior cleaning ~~services.~~services at select locations. As of ~~December 31, 2020~~June 30, 2022, the Company ~~closed or sold all of its quick lube facilities. As of September 30, 2021, the Company~~ operated ~~360~~409 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 ~~effected~~effective 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 ~~September~~June 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.

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 ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, depreciation expense was $~~11,388~~13,198 and $~~9,654~~10,237, respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, depreciation expense was $~~31,596~~26,132 and $~~28,197~~20,208, respectively.~~respectively.~~

For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, amortization expense on finance leases was $~~242~~246 and $51243, respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, amortization expense on finance leases was $~~727~~489 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 ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, amortization expense associated with the Company’s finite-lived intangible assets was $~~1,350~~1,692 and $~~1,702~~1,420, respectively.

For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, amortization expense associated with the Company’s finite-lived intangible assets was $~~4,207~~3,460 and $~~5,213~~2,857, respectively.

As of ~~September~~June 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

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 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 ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 were ~~33.77~~20.35% and ~~9.70~~29.69%, 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 ~~nine~~six months ended ~~September~~June 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 ~~25.19~~24.82% and a favorable tax impact of $~~58,433~~56,067 r~~elated~~related primarily to discrete tax benefits originating from stock option exercises and stock-based compensation expenses recorded in the ~~three~~six months ended June 30, ~~2021~~2021..

~~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~~ re~~lated 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 ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 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

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 ~~September~~June 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

As of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, unamortized ~~deferred financing~~debt issuance costs, including those associated with the Company's Revolving Commitment (as defined below), were $~~3,666~~6,584 and $~~7,494~~7,427, respectively, and accumulated amortization of ~~deferred financing~~debt issuance costs was $~~2,508~~3,590 and $~~3,057~~2,748, respectively.

For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, the amortization of deferred ~~financing~~debt issuance costs in interest expense, net in the unaudited condensed consolidated statements of operations and comprehensive income ~~(loss)~~ was approximately $~~200~~423 and $~~414~~342, respectively.

For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, the amortization of deferred ~~financing~~debt issuance costs in interest expense, net in the unaudited condensed consolidated statements of operations and comprehensive income ~~(loss)~~ was approximately $~~898~~842 and $~~1,241~~698~~, respectively.~~.

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.

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. 1~~The 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 financing~~debt 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 ~~September~~June 30, ~~2021~~2022 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 ~~3.08~~4.67% and ~~3.40~~3.10%, respectively.

The ~~Amended~~A&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 ~~September~~June 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.

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 financing~~debt issuance costs as a loss on extinguishment of debt in the unaudited condensed consolidated statements of operations and comprehensive income ~~(loss)~~.

The maximum available borrowing capacity under the Revolving Commitment is reduced by outstanding letters of credit under the Revolving Commitment. As of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the available borrowing capacity under the Revolving Commitment was $~~149,694~~148,991 and $~~74,531~~149,503, 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 ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the unused commitment fee was 0.25% ~~and~~ ~~0.50%, respectively.~~.

As of ~~September~~June 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 ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the amounts associated with outstanding letters of credit were $~~306~~1,009 and $~~469~~497, respectively, and unused letters of credit under the Revolving Commitment were $~~9,694~~8,991 and $~~9,531~~9,503, respectively.

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 Loan~~Credit 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 financing~~debt 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 ~~September~~June 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

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-Interest~~10 Interest Rate Swap for additional information on the interest rate swap.

As of ~~September~~June 30, ~~2021~~2022 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, 2~~021certain targets and ~~December 31, 2~~0~~20,~~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 at~~significant 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 ~~nine~~six months ended ~~September 3~~0,June 30, 202122 and 2020,21, there were 0 transfers between fair value measurement levels.

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 ~~September~~June 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 ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020, the current portion of~~2021, the fair value of the Swap was $~~971~~3,375 and $~~931~~268, 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 expenses~~current 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 ~~September~~June 30, ~~2021~~2022 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 ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 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 $~~133~~725 and $~~394~~115, ~~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

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

(1)

Operating lease expense includes an immaterial amount of sublease income and is included in other store operating expenses and general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations and comprehensive ~~income (loss).~~

income.

(2)

Variable lease costs consist of property taxes, property insurance, and common area or other maintenance costs for the Company’s leases of ~~buildings.~~

land and buildings and is included in other store operating expenses in the accompanying unaudited condensed consolidated statements of operations and comprehensive income.

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 ~~September~~June 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 ~~September~~June 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 ~~2021~~2022, or in ~~2022~~2023 or 2024 with initial lease terms of ~~five~~15 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 ~~2021~~2022 or in ~~2022~~2023 with initial lease terms of five to 20 years.

Sale-Leaseback Transactions

During the three and six months ended ~~September~~June 30, ~~2021 and 2020,~~2022, the Company completed 1 ~~and~~ 2one sale-leaseback ~~transactions~~transaction related to its car wash locations ~~respectively,~~ for ~~aggregate consideration of~~ $~~5,000~~ ~~and $7,007~~3,800, ~~respectively,~~ resulting in a net ~~loss of $~~6 ~~and net~~ gain of $~~4,408~~3,203, ~~respectively,~~ which ~~are~~was 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~~

~~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 ~~nine~~six months ended ~~September~~June 30, 2021, the cumulative initial annual ~~rents for the properties were~~rent 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 $~~681~~2,882, subject to annual escalations. These leases are accounted for as operating leases.

~~11.~~12. Stockholders’ Equity

As of ~~September~~June 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, ~~299,968,425~~303,294,678 shares of common stock issued, and ~~296,794,199~~300,120,451 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 September~~June 30, ~~2021~~2022, and December 31, ~~2020,~~2021, the Company had ~~3,174,226~~3,174,227 shares ~~and~~ ~~2,840,022~~ ~~shares, respectively,~~ of treasury stock. As of ~~September~~June 30, ~~2021~~2022 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

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.

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 end~~ended 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:


	~~Three~~Six Months Ended ~~September~~ June 30, ~~2021~~
	2022
Expected volatility	~~38.64~~34.33% - 52.72%
Risk-free interest rate	~~0.05~~0.07% - 1.54%
Expected term (in years)	~~0.35~~0.49 - 0.50
Expected dividend yield	~~0.00~~%NaN

~~Stock~~

Time Vesting Options

The following table ~~summarizes~~presents, 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

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

The number and weighted-average grant date fair value of stock options during the ~~periods~~period presented isare as follows:


	Number of Stock Options				Weighted-Average Grant Date Fair Value				Number of Stock Options				Weighted-Average Grant Date Fair Value
	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 ~~total~~Company 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 ~~nine~~six months ended ~~September~~June 30, ~~2021 was approximately~~ $~~16,408~~ ~~and~~ $~~3,895, respectively.~~2022.

The fair value of stock options vested during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was $~~320,936~~19,420.

As of ~~September~~June 30, ~~2021,~~2022, the weighted-average remaining contractual life of outstanding stock options was approximately ~~4.90~~4.38 ~~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 ~~1,639,868~~1,126,748 RSUs with a grant date fair value of $13,835during the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022.

The ~~total~~ fair value of ~~RSUs that~~stock options vested during the ~~nine~~ six months ended ~~September~~June 30, ~~2021~~2022 was $~~165~~4,976.

As of June 30, 2022, the weighted-average remaining contractual life of outstanding RSUs was approximately 9.48 years.

Stock-Based Compensation Expense

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

As of ~~September~~June 30, ~~2021,~~2022, total unrecognized compensation expense related to unvested Time Vesting Options was $~~13,990~~10,460, which is expected to be recognized over a weighted-average period of ~~3.37~~3.38 years.

As of ~~September~~June 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 ~~September~~June 30, ~~2021,~~2022, total unrecognized compensation expense related to unvested RSUs was $~~17,626~~24,610, w~~hich~~which is expected to be recognized over a weighted-average period of ~~3.55~~2.97 years.

As of ~~September~~June 30, ~~2021,~~2022, total unrecognized compensation expense related to unvested stock purchase rights under the 2021 ESPP was $~~711~~549, which is expected to be recognized over a weighted-average period of ~~0.11~~0.38 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 $~~120~~94 of acquisition-related costs for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The Company expensed $~~269~~435 and $~~259~~243 of acquisition-related costs for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~ 2022

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 ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, the amount of acquired goodwill ~~that was~~ not deductible for income tax purposes was $~~114~~386 ~~and $1,196, respectively.~~. For the ~~year~~three and six months ended ~~December 31, 2020,~~June 30, 2021, the amount of acquired goodwill ~~that was~~ not deductible for income tax purposes was$~~5,312~~1,082.

~~2021~~2022 Acquisitions

For the three and six months ended ~~September~~June 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 $~~55,079~~58,900, which was paid in cash. ~~These~~The acquisitions resulted in the preliminary recognition of $~~23,025~~50,851 of goodwill, $~~30,084~~7,181 of property and equipment, $~~1,200~~ ~~of intangible assets related to customer relationships, $560~~750 of intangible assets related to covenants not to compete, and $~~210~~118 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:

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:~~


~~Location (Seller)~~Texas (Daddy O's Car Wash)	3	~~Number of Washes~~		~~Month Acquired~~
~~Florida (Love)~~		1		~~January~~
~~Washington (Bush)~~		7		~~September~~
~~Texas (Soapbox Express)~~		1		November
Florida ~~(Avatar)~~(Downtowner Car Wash)	5	1	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. The~~Company 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 ~~September~~June 30, ~~2021 and 2020,~~2022, the Company did not pay fees and expenses to LGP. For the ~~nine~~three and six months ended, ~~September~~June 30, 2021, ~~and 2020,~~ total fees and expenses paid by the Company to LGP were $~~500~~250 and $~~250~~500, 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 through~~in 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 (see~~2021. See Note ~~7-Debt).~~8 Debt for additional information.

~~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 ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company accrued $~~2,765~~3,254 and $~~2,467~~3,169, respectively, for assessments on insurance claims filed, which are included in other accrued expenses in the accompanying unaudited condensed consolidated balance sheets. As of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company recorded $~~2,174~~2,653 and $~~2,052~~2,594, respectively, in receivables from its non-healthcare insurance carriers related to these insurance claims, which are included in ~~accounts receivable, net~~other 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.

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 ~~September~~June 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 ~~September~~June 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

~~The~~On July 15, 2022, the Company ~~has evaluated all subsequent events after September 30, 2021 through the date~~completed 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.

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 ~~and~~cleaning services, with interior cleaning services ~~to customers~~at select locations, across ~~360~~409 car ~~wash locations~~washes in 21 states as of ~~September~~June 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 ~~September~~June 30, 2022 and June 30, 2021, we had ~~1.6~~approximately 1.8 million and approximately 1.5 million UWC ~~members, and in~~Members, respectively. This represented a 20% increase over the same time last year. For the three ~~and nine~~ months ended ~~September~~June 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 ~~members,~~Members, increasing efficiency and throughput of our car wash locations, increasing marketing spend to add new customers, and increasing customer visitation frequency.


	•		Number and loyalty of UWC ~~members~~Members. The UWC program is a critical element of our business. UWC ~~members~~Members contribute a significant portion of our net revenue and provide recurring revenue through their monthly ~~membership~~Membership fees. Our subscription business model is a key driver of our growth and allows us to capture a significant amount of data about our members, which we utilize to optimize our service offerings and user engagement.


	•		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 ~~members~~Members by paying competitive wages, offering attractive benefit packages, and providing robust training and development opportunities. While the competition for skilled labor is intense and subject to high turnover, we believe our approach to wages and benefits will continue to allow us to attract suitable team ~~members~~Members and management to support our growth.


	•		~~Macroeconomic trends.~~ Macroeconomic factors may affect consumer spending patterns and thereby our results of operations. These factors include general economic conditions, consumer confidence, employment rates, business conditions, changes in the housing and new vehicle markets, the availability of credit, interest rates, tax rates, and fuel and energy costs.

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

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 September~~In 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 our~~respectively. Our future location growth ~~through~~will 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 ~~ramped~~matured to ~~more mature~~ average unit volumes, which we typically expect after approximately three full years of operation.

Acquisitions

In the three and six months ended ~~September~~June 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 three~~two acquisitions of ~~ten~~five properties ~~six of which~~that operated as conveyorized car ~~washes at~~washes.

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 ~~acquisition~~our 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 conveyorized~~services to make a better car wash ~~properties; once renovated~~experience for our customers. We also establish member-only lanes, optimize service offerings and ~~converted~~implement 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 in~~comparability 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 ~~operating~~financial results under ~~our~~Mister Car Wash’s ownership.

~~Divestitures~~See 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.~~

Key Performance Indicators

We prepare and analyze various operating and financial data to assess the performance of our business and ~~allocate~~to 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 ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021.


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2021			2020			2021			2020			2022			2021			2022			2021
Financial and Operating Data
Location count (end of period)		360			338			360			338			409			351			409			351
Comparable store sales growth		21	%		(6	)%		39	%		(15	)%		2	%		93	%		7	%		50	%
UWC Members (in thousands, end of period)		1,564			1,189			1,564			1,189			1,841			1,534			1,841			1,534
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		$	43,385		$	197,000		$	111,609		$	74,476		$	73,078		$	149,325		$	134,550
Adjusted EBITDA margin		32.1	%		27.8	%		34.8	%		27.0	%		33.1	%		37.1	%		33.6	%		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 ~~September~~June 30, ~~2021,~~2022, we increased our location count by ~~nine~~10 locations, ~~including seven~~comprised of four greenfield locations and ~~two~~six acquired locations. In the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, we increased our location count by 1813 locations, comprised of 11seven greenfield locations and ~~seven~~six 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 ~~276~~332 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��s~~location’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.

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 ~~members~~Members and the growth in the number of UWC ~~members~~Members on a net basis from period to period as key indicators of our revenue growth. The number of UWC ~~members~~Members has grown over time as we have acquired new customers and retained previously acquired customers. There were approximately ~~1.6~~1.8 million and approximately 1.5 million UWC ~~members~~Members as of ~~September~~June 30, 2022 and June 30, 2021, respectively. There were approximately 1.7 million UWC Members as of December 31, 2021.

Our UWC ~~program~~Members grew by approximately ~~0.3 million UWC members, or~~20% from June 30, 2021 through June 30, 2022 and approximately ~~27%,~~11% from December 31, ~~2020~~2021 through ~~September~~June 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 ~~members~~Members and retail customers. UWC sales as a percentage of total wash sales is calculated as ~~revenues, net~~sales generated from UWC ~~members~~Members 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 ~~September~~June 30, ~~2021.~~

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;


	•		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 ~~September~~June 30, ~~2021~~2022 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% in~~37.1% in the three months ended ~~September~~June 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 ~~nine~~six months ended ~~September~~June 30, 2022 and 2021, ~~and 2020,~~ respectively. ~~The Adjusted EBITDA and~~Our Adjusted EBITDA margin ~~results~~was 33.6% and 36.1% in the ~~three~~six months ended ~~September~~June 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 EBITDA~~2022 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.

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	%

(a)

Consists of ~~(gains) and~~ losses on the disposition of assets associated with sale-leaseback transactions, store closures or the sale of property and equipment.

(b)

Represents payments to holders of our stock options made pursuant to anti-dilution provisions in connection with dividends paid to holders of our common stock and legal fees related to dividend recapitalizations.

~~(c)~~

~~Represents~~ non-cash expense associated with our share-based payments, including approximately $202.0 million in stock-based compensation expense associated with our performance-based vesting stock options that vested on the consummation of our initial public offering ("IPO") in June 2021.payments.

~~(d)~~(c)

Represents expenses incurred in strategic acquisitions, including professional fees for accounting and auditing services, appraisals, legal fees and financial services, one-time costs associated with supplies for rebranding the acquired stores, and distinct travel expenses for related, distinct integration efforts by team members who are not part of our dedicated integration team.

~~(e)~~(d)

Represents ~~management~~ fees paid to Leonard Green & Partners ~~L.P. ("LGP")~~ in accordance with our management services agreement, which terminated on the consummation of our ~~IPO~~initial public offering in June ~~2021.~~2021 (“IPO”).

~~(f)~~(e)

Represents the difference between cash paid for rent expense and U.S. GAAP rent expense.

~~(g)~~(f)

Represents nonrecurring expenses associated with the consummation of our IPO in June 2021.

~~(h)~~

~~Represents nonrecurring expenses incurred by us in connection with the secondary public offering in August 2021.~~

~~(i)~~(g)

Consists of other ~~nonrecurring or discrete~~ items as determined by management not to be reflective of our ongoing operating performance, such as costs associated with our one-time rebranding initiative costs, severance pay, non-deferred legal fees and other expenses related to credit agreement amendments, legal settlements and legal fees related to contract terminations, and nonrecurring strategic project costs.

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 as~~supplies, including wages, cash bonuses, stock-based compensation, taxes, insurance, and workers compensation ~~are also included in the cost of labor and chemicals~~payments as reported in the unaudited condensed consolidated ~~statement~~statements 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 ~~statement~~statements 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 ~~statement~~statements 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 ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 (Unaudited)

The unaudited results of operations data for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 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, net~~Net revenues were ~~$194.3~~$225.2 million for the three months ended ~~September~~June 30, ~~2021~~2022 compared to ~~$155.8~~$197.1 million for the three months ended ~~September~~June 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 attributable~~sales 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 ~~September~~June 30, ~~2021~~2022 compared to ~~$50.2~~$87.9 million for the three months ended ~~September~~June 30, ~~2020, an increase~~2021, a decrease of ~~$13.2~~$18.5 million, or ~~26%~~21%. The ~~increase~~decrease in the cost of labor and chemicals ~~was~~is primarily driven by the prior year recognition of ~~stock-based~~stock-based compensation expense ~~for store-level employees~~ of ~~$2.8~~$31.3 million ~~increased~~related 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 the~~and 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 in~~some 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 ~~September~~June 30, ~~2021~~2022 compared to ~~$56.1~~$65.4 million for the three months ended ~~September~~June 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 of~~and 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 ~~September~~June 30, ~~2021~~2022 compared to ~~$10.5~~$188.9 million for the three months ended ~~September~~June 30, ~~2020, an increase~~2021, a decrease of ~~$11.7~~$163.3 million, or ~~112%~~86%. The ~~increase~~decrease 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 reductions~~approximately $2.4 million in other ~~administrative expenses, and~~costs, 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 $0.7~~was $3.1 million for the three months ended ~~September~~June 30, ~~2021~~2022 compared to ~~a gain of $4.3~~$7.1 million for the three months ended ~~September~~June 30, ~~2020, an increase~~2021, 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 ~~September~~June 30, ~~2021~~2022 compared to ~~$15.9~~$16.9 million for the three months ended ~~September~~June 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 to~~Loan 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").~~

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	)%

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 ~~September~~June 30, ~~2021~~2022 compared to ~~$7.4~~a benefit of $44.6 million for the three months ended ~~September~~June 30, ~~2020, a decrease~~2021, an increase of ~~$1.0~~$54.5 million, or ~~13%~~122%. The ~~decrease~~increase in ~~the~~ income tax provision was primarily driven by ~~discrete tax benefits originating from stock option exercises during~~the 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 ~~September~~June 30, ~~2021.~~2022.

Results of Operations for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 (Unaudited)

The unaudited results of operations data for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 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, net~~Net revenues were ~~$566.9~~$444.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to ~~$412.9~~$372.6 million for the ~~nine~~six months ended ~~September~~June 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 attributable~~sales 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	%

Cost of labor and chemicals was ~~$203.1~~$134.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to ~~$141.9~~$139.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020, an increase~~2021, a decrease of ~~$61.2~~$4.7 million, or ~~43%~~3%. The ~~increase~~decrease 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 ~~$32.6~~approximately $23.5 million ~~in connection with the increase in wash volume,~~ and an increase in ~~crew wage rates. These increases were partially offset by decreases~~wash chemicals and supplies of approximately $2.8 million during the three months ended June 30, 2022, both attributable to an

increase in ~~labor costs driven by optimizing our wash labor model~~volume and the ~~sale~~year-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 ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to ~~$164.4~~$126.4 million for the ~~nine~~six months ended ~~September~~June 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 of~~and 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 ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to ~~$37.1~~$203.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020, an increase~~2021, a decrease of ~~$188.9~~$154.6 million, or ~~510%~~76%. The ~~increase~~decrease in general and administrative expenses was primarily ~~attributable to~~driven by the prior year recognition of stock-based compensation expense of $170.7 million related to ~~our performance-based~~the 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 ~~general~~salaries and ~~administrative expenses~~benefits, an increase of approximately $7.5 million in ~~2021 after the 2020 decrease related to the COVID-19 pandemic, which was driven by a furlough~~stock-based compensation expense, and an increase of ~~corporate employees, temporary reductions in pay, temporary closures of corporate offices, and reductions~~approximately $4.6 million in other ~~administrative expenses, and~~costs, 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	)%

~~Gain~~Loss on sale of assets ~~reflected a gain of $5.6~~was $2.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to ~~a gain of $3.8~~$6.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020, an increase~~2021, 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
%

Other expense was ~~$36.6~~$16.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to ~~$51.3~~$30.9 million for the ~~nine~~six months ended ~~September~~June 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 ~~our~~the First Lien Term Loan ~~pursuant to the Amended First Lien Credit Agreement~~ and the June 2021 pay-off of ~~our~~the Second Lien Term Loan ~~pursuant to the Amended Second Lien Credit Agreement, partially offset by~~and a ~~$1.3~~$3.2 million ~~increase in~~ loss on ~~early~~ extinguishment of ~~debt.~~debt recorded in the prior year period.

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 ~~benefit~~provision was ~~$29.7~~$18.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to ~~an income tax provision~~a benefit of ~~$2.1~~$36.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020, a decrease~~2021, an increase of ~~$31.8~~$54.4 million, or ~~1,485%~~150%. The increase in ~~the~~ income tax ~~benefit~~provision was primarily driven by the ~~increase~~recognition of stock-based compensation expense related to performance-based options that vested on the consummation of the Company's IPO in ~~the loss~~June 2021, resulting in increased income before taxes infor the ~~nine~~six months ended ~~September~~June 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 under~~funds 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 ~~September~~June 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, increase~~Amendment 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 ~~September~~June 30, ~~2021,~~2022, we were in compliance with the covenants under ~~our~~the 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 ~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 (Unaudited)

The following table shows summary cash flow information for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 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 losses~~depreciation, gains on the disposal of property and equipment, amortization ~~expense associated with intangible assets and~~of leased assets and deferred income taxes, as well as the effect of changes in other working capital ~~balances.~~

amounts.

For the ~~nine~~six months ended ~~September~~June 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

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 ~~decreased~~increased 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 ~~sales~~sale of property and equipment and acquisition of ~~conveyorized~~ car washes.

For the ~~nine~~six months ended ~~September~~June 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 by~~used 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 ~~nine~~six months ended ~~September~~June 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

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 statements~~have been prepared in accordance with U.S. ~~GAAP~~GAAP. The preparation of these financial statements requires us to make estimates and ~~assumptions~~judgments that affect the reported amounts of assets, liabilities, ~~revenue,~~revenues and expenses and related ~~disclosures~~disclosure 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 ~~are~~to 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. Actual~~liabilities that cannot readily be determined from other sources. There can be no assurance that actual results ~~may~~will 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 ~~nine~~six months ended ~~September~~June 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.

3533

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 ~~September~~June 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 ~~September~~June 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 impacted~~the 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 “disclosure~~In 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 objectives~~the 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 its~~is required to apply judgment in evaluating the ~~cost-benefit relationship~~benefits 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 the~~on 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.

3634

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 ~~conditio~~n.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 of~~In addition to the other information ~~included~~set 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 risks~~risk 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.

3735

Item 6. Exhibits.

~~Exhibit~~

~~Number~~


Exhibit Number	Description	Form	File. No	Exhibit	Filing Date	Filed/Furnished Herewith
2.1+ ^	Equity Purchase Agreement, dated December 8, 2021, by and among Sunshine Acquisition Sub Corp., Clean Streak Ventures, LLC, MDKMH Partners, Inc., Clean Streak Ventures Intermediate Holdco, LLC (the “CSV Seller”), MKH Capital Partners Offshore Fund I, LP (the “CSV Blocker Seller” and together with the CSV Seller, each a “Seller” and together the “Sellers”), and Clean Streak Ventures Holdco, LLC, as the representative of the Sellers	10-Q	001-40542	2.1	05/13/2022
3.1	Amended and Restated Certificate of Incorporation of the Company	8-K	001-40542	3.2	06/01/2022
3.2	Amended and Restated Bylaws of the Company	8-K	001-40542	3.2	07/02/2021
10.1	Transition Agreement, dated June 21, 2022, by and between Mister Car Wash, Inc. and Lisa Funk	8-K	001-40542	10.1	06/24/2022
31.1	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					*
31.2	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					*
32.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					**
32.2	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					**
101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.					*
101.SCH	Inline XBRL Taxonomy Extension Schema Document					*
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document					*
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document					*
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document					*
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document					*
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)					*

~~Description~~

~~3.1~~

~~Amended and Restated Certificate of Incorporation of the Company (filed with the SEC as Exhibit 3.1 to the Company's Form 8-K filed on July 2, 2021 and incorporated herein by reference)~~

~~3.2~~

~~Amended and Restated Bylaws of the Company (filed with the SEC as Exhibit 3.2 to the Company's Form 8-K filed on July 2, 2021 and incorporated herein by reference)~~

31.1*

~~Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

31.2*

~~Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

32.1**

~~Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

32.2**

~~Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

101.INS*

~~Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.~~

101.SCH*

~~Inline XBRL Taxonomy Extension Schema Document~~

101.CAL*

~~Inline XBRL Taxonomy Extension Calculation Linkbase Document~~

101.DEF*

~~Inline XBRL Taxonomy Extension Definition Linkbase Document~~

101.LAB*

~~Inline XBRL Taxonomy Extension Label Linkbase Document~~

101.PRE*

~~Inline XBRL Taxonomy Extension Presentation Linkbase Document~~

104*

~~Cover Page Interactive Data File (embedded within the Inline XBRL document)~~

* 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.

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.


	Mister Car Wash, Inc.

Date: ~~November~~ 15~~, 2021~~August 12, 2022	By:	/s/ John Lai
		John Lai
		Chairperson, President and Chief Executive Officer ~~and President~~ (Principal Executive Officer)

Date: ~~November~~ 15~~, 2021~~August 12, 2022	By:	/s/ Jedidiah Gold
		Jedidiah Gold
		Chief Financial Officer (Principal Financial Officer)

3937


Delaware	47-1393909
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
222 E. 5th Street Tucson, Arizona	85705
(Address of principal executive offices)	(Zip Code)


	As of						As of
	September 30, 2021			December 31, 2020			June 30, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	162,232		$	114,647		$	37,724		$	19,738
Restricted cash		272			3,227			45			120
Accounts receivable, net		8,986			4,613			2,291			1,090
Inventory		5,633			6,415
Other receivables								14,343			22,796
Inventory, net								7,102			6,334
Prepaid expenses and other current assets		12,879			6,068			14,312			8,766
Total current assets		190,002			134,970			75,817			58,844

Property and equipment, net		300,676			263,034			521,874			472,448
Operating lease right of use assets, net		699,274			681,538			727,107			718,533
Other intangible assets, net		124,522			127,019			127,110			129,820
Goodwill		759,770			737,415			1,100,963			1,060,221
Other assets		5,328			4,477			8,090			8,236
Total assets	$	2,079,572		$	1,948,453		$	2,560,961		$	2,448,102

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	26,716		$	24,374		$	25,512		$	27,346
Accrued payroll and related expenses		19,943			11,424			15,000			16,963
Other accrued expenses		18,799			20,264			26,822			20,201
Current maturities of debt		8,400			8,400
Current maturities of operating lease liability		36,218			33,485			38,548			37,345
Current maturities of finance lease liability		542			495			628			559
Deferred revenue		26,195			24,505			29,353			27,815
Total current liabilities		136,813			122,947			135,863			130,229

Long-term portion of debt, net		601,723			1,054,820			895,027			896,336
Operating lease liability		700,548			685,479			722,941			717,552
Financing lease liability		15,507			15,917			15,123			15,359
Long-term deferred tax liability		12,571			46,082			37,183			22,603
Other long-term liabilities		4,222			6,558			7,418			8,871
Total liabilities		1,471,384			1,931,803			1,813,555			1,790,950

Commitments and contingencies (Note 15)

Stockholders’ equity:
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			2,622
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 303,917,168 and 300,120,451 shares outstanding as of June 30, 2022 and December 31, 2021, respectively								3,045			3,007
Additional paid-in capital		740,657			91,523			769,242			752,343
Accumulated other comprehensive loss		(716	)		(1,117	)
Accumulated other comprehensive income								2,395			225
Accumulated deficit		(134,728	)		(76,378	)		(27,276	)		(98,423	)
Total stockholders’ equity		608,188			16,650			747,406			657,152
Total liabilities and stockholders’ equity	$	2,079,572		$	1,948,453		$	2,560,961		$	2,448,102


	Common Stock					Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Stockholders’ Equity (Deficit)
	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 costs 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
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


	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	)


	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


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


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


		Page
	FORWARD-LOOKING STATEMENTS	2

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations and Comprehensive Income ~~(Loss~~)	4
	~~Condensed Consolidated Statements of Stockholders' Equity (Deficit)~~	54
	Condensed Consolidated Statements of Cash Flows	75
	Condensed Consolidated Statements of Stockholders' Equity	6
	Notes to ~~Unaudited~~ Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3634
Item 4.	Controls and Procedures	3634

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	3735
Item 1A.	Risk Factors	3735
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3735
Item 3.	Defaults Upon Senior Securities	3735
Item 4.	Mine Safety Disclosures	3735
Item 5.	Other Information	3735
Item 6.	Exhibits	3836

Signatures		3937


	•		~~developments involving our competitors and our industry;~~


	•		~~our ability to attract new customers, retain existing customers and maintain or grow the number of our Unlimited Wash Club ("UWC") members;~~


	•		~~potential future impacts of the COVID-19 pandemic, including from variants thereof;~~


	•		~~our ability to maintain comparable store sales growth;~~


	•		~~our ability to continue to identify and open greenfield locations;~~


	•		~~our estimates of greenfield location expansions and our whitespace opportunity;~~


	•		~~our ability to maintain security and prevent unauthorized access to electronic and other confidential information;~~


	•		~~our ability to continue to identify suitable acquisition targets and consummate such acquisitions on attractive terms;~~


	•		~~our ability to attract and retain a qualified management team and other team members while controlling our labor costs;~~


	•		~~the impact of our debt and lease obligations on our ability to raise additional capital to fund our operations and maintain flexibility in operating our business;~~


	•		~~our reliance on and relationships with third-party suppliers;~~


	•		~~our ability to respond to risks associated with existing and future payment options;~~


	•		~~our ability to maintain and enhance a strong brand image;~~


	•		~~our status as a “controlled company” and Leonard Green & Partners, L.P.’s ("LGP") control of us as a public company;~~


	•		~~the impact of evolving governmental laws and regulations and the outcomes of legal proceedings; and~~


	•		~~the effects of potential changes to U.S. regulations and policies on our business.~~


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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company