10q10k10q10k.net

What changed in Mister Car Wash, Inc.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of Mister Car Wash, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+153 added−178 removedSource: 10-K (2023-12-31) vs 10-K (2022-12-31)

Top changes in Mister Car Wash, Inc.'s 2023 10-K

153 paragraphs added · 178 removed · 133 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

19 edited+2 added−1 removed28 unchanged
Biggest changeThis reduction was achieved primarily through natural attrition combined with more precise staffing guidelines for our wash locations and converting eight of our interior clean locations to express locations. 6 Environmental Matters & Other Governmental Regulation We are subject to various laws and regulations, including those governing labor and employment including minimum wages and paid sick time, workplace safety, employee and public health including COVID-19, consumer protection, recurring debit and credit card charges, information security, consumer protection, data privacy, marketing and advertising, environmental protection and compliance, including recycling, waste and water usage, zoning and land use, taxation and public company compliance.
Biggest changeThis increase was primarily due to adding 40 net locations throughout the year. 5 Environmental Matters & Other Governmental Regulation We are subject to various laws and regulations, including those governing labor and employment including minimum wages and paid sick time, workplace safety, employee and public health, consumer protection, recurring debit and credit card charges, information security, consumer protection, data privacy, marketing and advertising, environmental protection and compliance, including recycling, waste and water usage, zoning and land use, taxation and public company compliance.
Seasonality As a result of our presence in certain markets that are subject to seasonal weather patterns, some of our business is seasonal. However, our 21-state geographic diversity typically limits the weather impacts of a specific region on overall performance. Additionally, we do experience a large majority of sales of UWC memberships during the first six months of the year.
Seasonality As a result of our presence in certain markets that are subject to seasonal weather patterns, some of our business is seasonal. However, our 21-state geographic diversity typically limits the weather impacts of a specific region on overall performance. Additionally, we do experience a majority of sales of UWC memberships during the first six months of the year.
Resources Our Proprietary Products and Advanced Technology Our research and development team is responsible for car wash processes, equipment and technology improvements. The team tests new products, formulations, processes and ideas in select markets before rolling out improvement and changes across the broader platform.
Resources Our Proprietary Products and Advanced Technology Our research and development team is responsible for car wash processes, equipment and technology improvements. The team tests new products, formulations, processes and ideas in select markets before rolling out improvements and changes across the broader platform.
The reference to the Company's or other websites herein does not constitute incorporation by reference of the information contained on or available through our website, and you should not consider such information to be a part of this Form 10-K. 7
The reference to the Company's or other websites herein does not constitute incorporation by reference of the information contained on or available through our website, and you should not consider such information to be a part of this Form 10-K.
As of December 31, 2022, we had approximately 47 trademark registrations and applications, including registrations for “Mister Car Wash,” “Hotshine,” “Mister Hotshine” and “Unlimited Wash Club,” and held one U.S. patent, one foreign patent and one pending U.S. patent application. Our issued patents are expected to expire between 2023 and 2025. We have also registered the Internet domain name: “mistercarwash.com”.
As of December 31, 2023, we had approximately 56 trademark registrations and applications, including registrations for “Mister Car Wash,” “Hotshine,” “Mister Hotshine” and “Unlimited Wash Club,” and held one U.S. patent, one foreign patent and one pending U.S. patent application. Our issued patents are expected to expire between 2024 and 2025. We have also registered the Internet domain name: “mistercarwash.com”.
Build Upon Our Established Success in Opening Greenfield Locations During 2022, we successfully opened 28 greenfield locations and expect to lead our future location growth through greenfield locations. We have developed a process for opening new greenfield locations, from site selection to post-opening local marketing initiatives, which has driven our greenfield performance consistently over time.
Build Upon Our Established Success in Opening Greenfield Locations During 2023, we successfully opened 35 greenfield locations and expect to lead our future location growth through greenfield locations. We have developed a process for opening new greenfield locations, from site selection to post-opening local marketing initiatives, which has driven our greenfield performance consistently over time.
As we grow and to serve the approximately 276 million registered vehicles in the United States as of the end of 2022, we are dedicated to putting our team members first and delivering a consistent, convenient and high-quality car wash experience at scale.
As we grow and to serve the approximately 290 million registered vehicles in the United States as of the end of 2023, we are dedicated to putting our team members first and delivering a consistent, convenient and high-quality car wash experience at scale.
Through continuous research and development, Mister Car Wash has formulated a balanced wash process that factors in conveyor length, line speed, water quality, mechanical equipment, ambient temperature and soil conditions. 5 Suppliers and Distribution We maintain long-term relationships with our key vendors. We believe our scale and large purchase quantities provide us leverage in securing competitive pricing.
Through continuous research and development, Mister Car Wash has 4 formulated a balanced wash process that factors in conveyor length, line speed, water quality, mechanical equipment, ambient temperature and soil conditions. Suppliers and Distribution We maintain long-term relationships with our key vendors. We believe our scale and large volume purchases provide us leverage in securing competitive pricing.
We post, and stockholders may access without charge, the Company's recent filings and any amendments of its annual reports on Form 10-K, Quarterly reports on Form 10-Q, Current Reports on Form 8-K and its Proxy Statement as soon as reasonably practicable after such reports are filed with the Securities and Exchange Commission ("SEC").
We post, and stockholders may access without charge, our recent filings and any amendments to our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and our Proxy Statement as soon as reasonably practicable after such reports are filed with the Securities and Exchange Commission ("SEC").
Key Growth Drivers Grow Our UWC Members to Drive Predictable Earnings Growth and Higher Annual Customer Spend We believe there is an opportunity to grow UWC penetration further in core, acquired and greenfield locations. In 2022, we increased overall UWC penetration from 64% to 68% of total wash sales.
Key Growth Drivers Grow Our UWC Members to Drive Predictable Earnings Growth and Higher Annual Customer Spend We believe there is an opportunity to continue to grow UWC penetration in core, acquired and greenfield locations. In 2023, we increased overall UWC penetration from 68% to 71% of total wash sales.
Products and Services Our car wash locations consist of two formats: (a) Express Exterior Locations (360 locations as of December 31, 2022) and (b) Interior Cleaning Locations (76 locations as of December 31, 2022). All locations offer express exterior wash packages and have exterior-only lanes. Every wash includes our T3 Cleaning Conditioner, Wheel Cleaner, and Dynamic Dry system.
Products and Services Our car wash locations consist of two formats: (a) Express Exterior Locations (406 locations as of December 31, 2023) and (b) Interior Cleaning Locations (70 locations as of December 31, 2023). All locations offer express exterior wash packages and have exterior-only lanes. Every wash includes our T3 Cleaning Conditioner, Wheel Cleaner, and Dynamic Dry system.
We believe satisfied employees are more productive, are more likely to have a positive impact on other employees around them and are more likely to deliver great customer service. Team Members Throughout 2022, we focused our efforts on refining our staffing model to ensure our wash locations run as efficiently as possible.
We believe engaged employees are more productive, are more likely to have a positive impact on other employees around them and are more likely to deliver great customer service. Team Members We continually focus our efforts on refining our staffing model to ensure our wash locations run as efficiently as possible.
Marketing We lead with a unified national brand across our entire footprint. To acquire, convert and retain our customers at a local level, we use a mix of traditional and digital marketing tactics and channels to emphasize our convenient, easy, and high-quality wash experience. Competitive Conditions The car wash industry is fragmented, and we compete with a variety of operators.
Marketing We lead with a unified national brand across our entire footprint. To acquire, convert and retain our customers at a local level, we use a mix of traditional and digital marketing tactics and channels to emphasize our convenient, easy, and high-quality wash experience.
Item 1. Business Who We Are Mister Car Wash, Inc. is the largest national car wash brand offering express exterior and interior cleaning services to customers across 436 car wash locations in 21 states, as of December 31, 2022.
Item 1. Business Who We Are Mister Car Wash, Inc. is the largest national car wash brand, primarily offering express exterior cleaning services, with interior cleaning services at select locations, across 476 car wash locations in 21 states, as of December 31, 2023.
As a result, our team members are highly engaged and deliver memorable experiences to our customers. Through these efforts, we expect to build strength in our bench of future leaders while increasing retention and diversity.
As a result, our team members are highly engaged and deliver memorable experiences to our customers. Through these efforts, we expect to build strength in our bench of future leaders while increasing retention and diversity. As of December 31, 2023, we employed approximately 6,600 team members, which is a 4% increase from the prior year.
Competitors include national, regional and local independent car wash operators, and other retailers (including gasoline and convenience retailers), each of which offer car washes. We believe our scale allows us to compete effectively due to our convenience, quality, price, and service.
Competitive Conditions The car wash industry is fragmented, and we compete with a variety of operators including national, regional and local independent car wash operators, and gasoline and convenience retailers that also offer car washes. We believe our scale allows us to compete effectively due to our convenience, quality, price, and service.
Our scale, consistency of operations at every location and culture of continuous improvement have allowed us to develop an efficient and high-quality customer experience with every wash. 4 We believe our key differentiators include our unified national brand, robust training & development programs which generate a talent pipeline, dedicated regional support infrastructure, sophisticated technology and proprietary product formulation, and strategic market density "network effect".
We believe our key differentiators include our unified national brand, robust training & development programs which generate a talent pipeline, dedicated regional support infrastructure, sophisticated technology and proprietary product formulation, and strategic market density "network effect".
Markets We are the largest national car wash brand and have developed extensive resources and capabilities over our 25-year history.
Our customer service, convenient locations and easy-to-manage membership programs have helped position our locations as the “go-to” destinations for our customers’ car wash needs. 3 Markets We are the largest national car wash brand and have developed extensive resources and capabilities over our 25-year history.
The portfolio of cars serviced across our locations is diverse and represents a balance across new and old cars and across all vehicle price points. Our customer service, convenient locations and easy-to-manage membership programs have helped position our locations as the “go-to” destinations for our customers’ car wash needs.
The portfolio of cars serviced across our locations is diverse and represents a balance across new and old cars and across all vehicle price points.
Removed
As of December 31, 2022, we employed approximately 6,350 team members, which is a 6% reduction from the prior year, even while adding 40 locations throughout the year.
Added
Our scale, consistency of operations at every location and culture of continuous improvement have allowed us to develop an efficient and high-quality customer experience with every wash.
Added
The SEC also maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us, at http://www.sec.gov. 6

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

46 edited+10 added−29 removed112 unchanged
Biggest changeIn addition, we may not be able to terminate a particular lease if or when we would like to do so, which could prevent us from closing or relocating certain underperforming locations. Our obligations to pay rent are generally non-cancelable, even if the location operated at the leased or subleased location is closed.
Biggest changeThe terms of the leases and subleases vary in length, with primary terms (i.e., before consideration of option periods) expiring on various dates. In addition, we may not be able to terminate a particular lease if or when we would like to do so, which could prevent us from closing or relocating certain underperforming locations.
These provisions include: • establishing a classified Board such that not all members of the Board are elected at one time; • allowing the total number of directors to be determined exclusively (subject to the rights of holders of any series of preferred stock to elect additional directors) by resolution of our Board and granting to our Board the sole power (subject to the rights of holders of any series of preferred stock or rights granted pursuant to the Stockholders’ Agreement) to fill any vacancy on the Board; • providing that our stockholders may remove members of our Board only for cause and only by the affirmative vote of the holders of at least two-thirds of the voting power of our then-outstanding stock, following such time as LGP ceases to beneficially own, in the aggregate, at least 50% of the voting power of our common stock; • authorizing the issuance of “blank check” preferred stock by our Board, without further stockholder approval, to thwart a takeover attempt; 19 • prohibiting stockholder action by written consent (and, thus, requiring that all stockholder actions be taken at a meeting of our stockholders), if LGP ceases to beneficially own, in the aggregate, at least 50% of the voting power of our common stock; • eliminating the ability of stockholders to call a special meeting of stockholders, except for LGP for so long as LGP beneficially owns, in the aggregate, at least 50% of the voting power of our common stock; • establishing advance notice requirements for nominations for election to the Board or for proposing matters that can be acted upon at annual stockholder meetings; and • requiring the approval of the holders of at least two-thirds of the voting power of all outstanding stock entitled to vote thereon, voting together as a single class, to amend or repeal our certificate of incorporation or bylaws if LGP ceases to beneficially own, in the aggregate, at least 50% of the voting power of our common stock.
These provisions include: • establishing a classified Board such that not all members of the Board are elected at one time; • allowing the total number of directors to be determined exclusively (subject to the rights of holders of any series of preferred stock to elect additional directors) by resolution of our Board and granting to our Board the sole power (subject to the rights of holders of any series of preferred stock or rights granted pursuant to the Stockholders’ Agreement) to fill any vacancy on the Board; 17 • providing that our stockholders may remove members of our Board only for cause and only by the affirmative vote of the holders of at least two-thirds of the voting power of our then-outstanding stock, following such time as LGP ceases to beneficially own, in the aggregate, at least 50% of the voting power of our common stock; • authorizing the issuance of “blank check” preferred stock by our Board, without further stockholder approval, to thwart a takeover attempt; • prohibiting stockholder action by written consent (and, thus, requiring that all stockholder actions be taken at a meeting of our stockholders), if LGP ceases to beneficially own, in the aggregate, at least 50% of the voting power of our common stock; • eliminating the ability of stockholders to call a special meeting of stockholders, except for LGP for so long as LGP beneficially owns, in the aggregate, at least 50% of the voting power of our common stock; • establishing advance notice requirements for nominations for election to the Board or for proposing matters that can be acted upon at annual stockholder meetings; and • requiring the approval of the holders of at least two-thirds of the voting power of all outstanding stock entitled to vote thereon, voting together as a single class, to amend or repeal our certificate of incorporation or bylaws if LGP ceases to beneficially own, in the aggregate, at least 50% of the voting power of our common stock.
We are unaware of pending changes to environmental laws and regulations that will have a material adverse effect on our financial condition, results of operations or cash available for distribution to our stockholders; nonetheless, there exists the possibility that new laws or regulations may be imposed in the future that could result in more stringent 14 and costly compliance requirements that potentially could materially and adversely affect our business.
We are unaware of pending changes to environmental laws and regulations that will have a material adverse effect on our financial condition, results of operations or cash available for distribution to our stockholders; nonetheless, there exists the possibility that new laws or regulations may be imposed in the future that could result in more stringent and costly compliance requirements that potentially could materially and adversely affect our business.
The credit agreements governing our Credit Facilities contain, and any agreements evidencing or governing other future debt may contain, certain restrictive covenants that limit our ability, among other things, to engage in certain activities that are in our long-term best interests, including our ability to: • incur liens; • incur or assume additional debt or amend our debt and other material agreements; • issue certain disqualified stock; • declare or make dividends or distributions and redeem, repurchase or retire equity interests; • prepay, redeem or repurchase debt; • make investments, loans, advances, guarantees and acquisitions; • enter into agreements restricting the ability to pay dividends or grant liens securing the obligations under the credit agreements; 12 • amend or modify governing documents; • enter into transactions with affiliates; • engage in certain business activities or alter the business conducted by us and our restricted subsidiaries; and • engage in certain mergers, consolidations and asset sales.
The credit agreements governing our Credit Facilities contain, and any agreements evidencing or governing other future debt may contain, certain restrictive covenants that limit our ability, among other things, to engage in certain activities that are in our long-term best interests, including our ability to: • incur liens; • incur or assume additional debt or amend our debt and other material agreements; • issue certain disqualified stock; • declare or make dividends or distributions and redeem, repurchase or retire equity interests; 11 • prepay, redeem or repurchase debt; • make investments, loans, advances, guarantees and acquisitions; • enter into agreements restricting the ability to pay dividends or grant liens securing the obligations under the credit agreements; • amend or modify governing documents; • enter into transactions with affiliates; • engage in certain business activities or alter the business conducted by us and our restricted subsidiaries; and • engage in certain mergers, consolidations and asset sales.
Even if LGP were to own or control less than a majority of our total outstanding shares of 17 common stock, it will be able to influence the outcome of corporate actions so long as it owns a significant portion of our total outstanding shares of common stock.
Even if LGP were to own or control less than a majority of our total outstanding shares of common stock, it will be able to influence the outcome of corporate actions so long as it owns a significant portion of our total outstanding shares of common stock.
In addition, changes in federal and state tax rates, laws and regulations may result in additional income and non-income tax liabilities being imposed on us and have an adverse effect on our effective tax rate, results of 11 operations and financial condition.
In addition, changes in federal and state tax rates, laws and regulations may result in additional income and non-income tax liabilities being imposed on us and have an adverse effect on our effective tax rate, results of operations and financial condition.
We are not presently aware of any material liability related to the costs of investigations and cleaning up sites of spills, disposals or other releases of hazardous materials at our current or former locations or business operations.
We are not 13 presently aware of any material liability related to the costs of investigations and cleaning up sites of spills, disposals or other releases of hazardous materials at our current or former locations or business operations.
Water service interruptions are also possible due to severe weather events, including winter storms and freezing conditions in colder climate locations, high wind conditions in areas known to experience tornados, earthquakes in areas known to experience seismic activity, high water conditions in areas located in or near designated flood plains, hurricanes, and severe electrical storms. 15 Any interruption in our ability to access water could materially and adversely affect the results of our operations and financial condition.
Water service interruptions are also possible due to severe weather events, including winter storms and freezing conditions in colder climate locations, high wind conditions in areas known to experience tornados, earthquakes in areas known to experience seismic activity, high water conditions in areas located in or near designated flood plains, hurricanes, and severe electrical storms. 14 Any interruption in our ability to access water could materially and adversely affect the results of our operations and financial condition.
Changes in areas around our locations or to the adjacent streets that reduce car traffic or otherwise render the locations unsuitable, could cause our sales to be less than expected.
Changes in areas around our locations or to the adjacent streets that reduce car traffic or otherwise render the locations unsuitable, could cause our sales to decline or otherwise be less than expected.
We rely upon a combination of trademark, 16 patent, trade secret, copyright, and unfair competition laws, and other contractual provisions, to protect our intellectual property and other proprietary rights.
We rely upon a combination of trademark, patent, trade secret, copyright, and unfair competition laws, and other contractual provisions, to protect our intellectual property and other proprietary rights.
General global economic downturns and macroeconomic trends, including heightened inflation, capital market volatility, interest rate fluctuations, and economic slowdown or recession, may result in unfavorable conditions that could negatively affect demand for our products and exacerbate some of the other risks that affect our business, financial condition and results of operations.
General global economic downturns and macroeconomic trends, including heightened inflation, capital market volatility, interest rate fluctuations, and economic slowdown or recession, may result in unfavorable conditions that could negatively affect demand for our services and exacerbate some of the other risks that affect our business, financial condition and results of operations.
Moreover, holders of approximately 73% of our outstanding common stock as of the date of this Annual Report on Form 10-K have rights, pursuant to the Stockholders Agreement, to require us to file registration statements for the public sale of their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.
Moreover, holders of approximately 71% of our outstanding common stock as of the date of this Annual Report on Form 10-K have rights, pursuant to the Stockholders Agreement, to require us to file registration statements for the public sale of their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.
Our ability to execute our growth strategy on favorable terms and successfully operate new locations may be exposed to significant risks, including, but not limited to, the following: 8 • we may be unable to acquire a desired location or property because of competition from other investors with significant capital; • even if we are able to acquire a desired location or property, competition from other potential acquirers may significantly increase the purchase price or result in other less favorable terms; • we may be unable to complete an acquisition because we cannot obtain debt and/or equity financing on favorable terms or at all; • we may spend more than budgeted amounts to make necessary improvements or renovations to acquired locations; • we may be unable to quickly and efficiently integrate acquired locations into our existing operations; • acquired properties may be subject to tax reassessment, which may result in higher-than-expected property tax payments; • loss of key staff at acquired locations or inability to attract, retain and motivate staff necessary for our expanded operations; • acquired locations or greenfield expansions in regions where we have not historically conducted business may subject us to new operational risks, laws, regulations, staff expectations, customs, and practices; and • we may acquire properties subject to liabilities and without any recourse, or with only limited recourse, with respect to unknown liabilities, such as liabilities for the remediation of undisclosed environmental contamination; and claims for indemnification by general partners, directors, officers, and others indemnified by the former owners of the properties.
Our ability to execute our growth strategy on favorable terms and successfully operate new locations may be exposed to significant risks, including, but not limited to, the following: • we may be unable to acquire a desired location or property because of competition from other investors with significant capital; 7 • even if we are able to acquire a desired location or property, competition from other potential acquirers may significantly increase the purchase price or result in other less favorable terms; • we may be unable to complete an acquisition because we cannot secure sale leaseback financing on favorable terms or at all; • we may spend more than budgeted amounts to make necessary improvements or renovations to acquired locations; • we may be unable to quickly and efficiently integrate acquired locations into our existing operations; • acquired properties may be subject to tax reassessment, which may result in higher-than-expected property tax payments; • loss of key staff at acquired locations or inability to attract, retain and motivate staff necessary for our expanded operations; • acquired locations or greenfield expansions in regions where we have not historically conducted business may subject us to new operational risks, laws, regulations, staff expectations, customs, and practices; and • we may acquire properties subject to liabilities and without any recourse, or with only limited recourse, with respect to unknown liabilities, such as liabilities for the remediation of undisclosed environmental contamination; and claims for indemnification by general partners, directors, officers, and others indemnified by the former owners of the properties.
As a result, stockholders must rely on sales of their common stock after price appreciation as the only way to realize any future gains on their investment. Item 1B. Unresolved Staff Comments None. 20
As a result, stockholders must rely on sales of their common stock after price appreciation as the only way to realize any future gains on their investment. 18 Item 1B. Unresolved Staff Comments None.
LGP has more than 50% of the voting power for the election of directors, and, as a result, we are considered a “controlled company” for the purposes of the New York Stock Exchange (“the NYSE”).
(“LGP”) has more than 50% of the voting power for the election of directors, and, as a result, we are considered a “controlled company” for the purposes of the New York Stock Exchange (“the NYSE”).
If such legislation or regulations are enacted, we could incur increased energy, environmental and other costs and capital expenditures to comply with the limitations. We, along with other companies in many business sectors, are considering and implementing environmental, social and governance ("ESG") and sustainability strategies, specifically ways to reduce GHG emissions.
If such legislation or regulations are enacted, we could incur increased energy, environmental and other costs and capital expenditures to comply with the limitations. We, along with other companies in many business sectors, are considering and implementing sustainability strategies, specifically ways to reduce GHG emissions.
New or existing laws, regulations and policies, liabilities arising thereunder and the related interpretations and enforcement practices, particularly those dealing with minimum wages, paid sick time, workplace safety, employee and public health crisis, such as the COVID-19 pandemic, advertising and marketing, consumer protection, recurring debit and credit card charges, information security, data privacy, environmental protection including recycling, waste, water usage, zoning and land use, taxation and public company compliance, may result in significant added expenses or may require extensive system and operating changes that may be difficult to implement and/or could materially increase our cost of doing business.
New or existing laws, regulations and policies, liabilities arising thereunder and the related interpretations and enforcement practices, particularly those dealing with minimum wages, paid sick time, workplace safety, employee and public health emergencies, advertising and marketing, consumer protection, recurring debit and credit card charges, information security, data privacy, environmental protection including recycling, waste, water usage, zoning and land use, taxation and public company compliance, may result in significant added expenses or may require extensive system and operating changes that may be difficult to implement and/or could materially increase our cost of doing business.
As of December 31, 2022, we had $895.5 million of indebtedness, net of unamortized debt issuance costs, outstanding pursuant to an amended and restated first lien credit agreement entered into on May 14, 2019 “(First Lien Term Loan”). To service this debt and any additional debt we may incur in the future, we need to generate cash.
As of December 31, 2023, we had $897.2 million of indebtedness, net of unamortized debt issuance costs, outstanding pursuant to an amended and restated first lien credit agreement entered into on May 14, 2019 “(First Lien Term Loan”). To service this debt and any additional debt we may incur in the future, we need to generate cash.
We intend to continue to make significant investments to support our business growth, respond to business challenges or opportunities, develop new services, enhance our existing services and operating infrastructure and potentially acquire complementary businesses and assets. For the year ended December 31, 2022, our net cash provided by operating activities was $229.2 million.
We intend to continue to make significant investments to support our business growth, respond to business challenges or opportunities, develop new services, enhance our existing services and operating infrastructure and potentially acquire complementary businesses and assets. For the year ended December 31, 2023, our net cash provided by operating activities was $204.7 million.
Risks Related to Ownership of Our Common Stock We are a "controlled company" within the meaning of the NYSE rules and, as a result, will qualify for, and may rely on, exemptions from certain corporate governance requirements.
Risks Related to Ownership of Our Common Stock We are a "controlled company" within the meaning of the NYSE rules and, as a result, will qualify for, and may rely on, exemptions from certain corporate governance requirements. Leonard Green & Partners, L.P.
When we assign or sublease vacated locations, we may remain liable on the lease obligations if the assignee or sub-lessee does not perform. Accordingly, we are subject to the risks associated with leasing locations which can have a material adverse effect on us.
We may not assign or sublet the leased locations without consent of the landlord. When we assign or sublease vacated locations, we may remain liable on the lease obligations if the assignee or sub-lessee does not perform. Accordingly, we are subject to the risks associated with leasing locations which can have a material adverse effect on us.
Although there are limited exemptions for health-related information, including Protected Health Information and clinical trial data, the CCPA may increase our compliance costs and potential liability.
Although there are limited exemptions for health-related information, including Protected Health Information and clinical trial data, the CCPA and other state privacy laws may increase our compliance costs and potential liability.
Because our UWC subscription program accounted for 68% of our total wash sales in 2022, our continued business and revenue growth is dependent on our ability to continue to attract and retain UWC Members.
Because our UWC subscription program accounted for 71% of our total wash sales in 2023, our continued business and revenue growth is largely dependent on our ability to continue to attract and retain UWC Members.
If we are unable to obtain adequate financing or financing on terms satisfactory to us, it could have a material and adverse effect on our business, results of operations and financial condition. 13 We are a holding company and depend on our subsidiaries for cash to fund operations and expenses, including future dividend payments, if any.
If we are unable to obtain adequate financing or financing on 12 terms satisfactory to us, it could have a material and adverse effect on our business, results of operations and financial condition. We are a holding company and depend on our subsidiaries for cash to fund operations and expenses.
We view the number of UWC Members and the growth in the number of UWC Members on a net basis from period to period as key indicators of our revenue growth. We may not be successful, however, in continuing to grow the number of UWC Members on a net basis from period to period and our membership levels may decline.
We may not be successful, however, in continuing to grow the number of UWC Members on a net basis from period to period and our membership levels may decline.
Any shortage or interruption to our supply chain could reduce our sales and profit margins, which in turn may materially and adversely affect our business and results of operations. 10 Our locations may experience difficulty hiring and retaining qualified personnel, resulting in higher labor costs.
Decreased fuel supplies are anticipated to increase fuel prices, which may adversely impact our transportation costs. Any shortage or interruption to our supply chain could reduce our sales and profit margins, which in turn may materially and adversely affect our business and results of operations. Our locations may experience difficulty hiring and retaining qualified personnel, resulting in higher labor costs.
In addition, LGP’s concentration of ownership could have the effect of delaying or preventing a change in control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which could cause the market price of our common stock to decline or prevent our stockholders from realizing a premium over the market price for their common stock.
In addition, LGP’s concentration of ownership could have the effect of delaying or preventing a change in control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which could cause the market price of our common stock to decline or prevent our stockholders from realizing a premium over the market price for their common stock. 16 Our amended and restated certificate of incorporation could prevent us from benefiting from corporate opportunities that might otherwise have been available to us.
As of December 31, 2022, we had $65.2 million of cash and cash equivalents, which were held for working capital purposes.
As of December 31, 2023, we had $19.0 million of cash and cash equivalents, which were held for working capital purposes.
To the extent that our intellectual property and other proprietary rights are not adequately protected, third parties may challenge, invalidate, circumvent, infringe or misappropriate our intellectual property or the intellectual property of our third-party licensors, or such intellectual property may not be sufficient to permit us to take advantage of current market trends or otherwise to provide competitive advantages, which could result in costly redesign efforts, discontinuance of certain service offerings or other competitive harm.
To the extent that our intellectual property and other proprietary rights are not adequately protected, third parties may challenge, invalidate, circumvent, infringe or misappropriate our intellectual property or the intellectual property of our third-party licensors, or such intellectual property may not be sufficient to permit us to take advantage of current market trends or otherwise to provide competitive advantages, which could result in costly redesign efforts, discontinuance of certain service offerings or other competitive harm. 15 We may have to litigate to enforce or determine the scope and enforceability of our intellectual property rights, which is expensive and could exceed applicable insurance coverage, could cause a diversion of resources and may not prove successful.
In addition, the Federal Reserve in the U.S. has raised, and may continue to raise, interest rates in response to concerns about inflation, which, coupled with reduced government spending and volatility in financial markets, may have the effect of further increasing economic uncertainty and heightening these risks.
Domestic markets experienced significant inflationary pressures in fiscal year 2023. In addition, in fiscal year 2023 the Federal Reserve in the U.S. raised interest rates in response to concerns about inflation, which, coupled with reduced government spending and volatility in financial markets, had the effect of further increasing economic uncertainty and heightening these risks.
Item 1A. Risk Factors You should carefully consider the risks described below, together with all of the other information included in this Annual Report on Form 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.
Item 1A. Risk Factors You should carefully consider the risks described below, together with all of the other information included in this Annual Report on Form 10-K, which could materially affect our business, financial condition and results of operations.
If we are unable to comply with the security standards established by banks and the payment card industry, we may be subject to fines, restrictions and expulsion from card acceptance programs, which could materially and adversely affect our retail operations and the UWC program.
If we are unable to comply with the security standards established by banks and the payment card industry, we may be subject to fines, restrictions and expulsion from card acceptance programs, which could materially and adversely affect our retail operations and the UWC program. 9 We depend on a limited number of suppliers for most of our car wash equipment and certain supplies.
The promotion of our brand may require us to make substantial investments and we anticipate that, as our market becomes increasingly competitive, these marketing initiatives may become increasingly difficult and expensive.
We believe that maintaining and enhancing our reputation and brand recognition are critical to our relationships with existing customers and our ability to attract new customers. The promotion of our brand may require us to make substantial investments and we anticipate that, as our market becomes increasingly competitive, these marketing initiatives may become increasingly difficult and expensive.
We depend on cash from our operating activities to make lease payments for our leases, which may strain our cash flow. We depend on net cash provided by operating activities to pay our rent and other lease expenses and to fulfill our other cash needs.
We depend on net cash provided by operating activities to pay our rent and other lease expenses and to fulfill our 10 other cash needs.
Thus, if we decide to close locations, we generally are required to continue paying rent and operating expenses for the balance of the lease term. The performance of any of these obligations may be expensive. We may not assign or sublet the leased locations without consent of the landlord.
Our obligations to pay rent are generally non-cancelable, even if the location operated at the leased or subleased location is closed. Thus, if we decide to close locations, we generally are required to continue paying rent and operating expenses for the balance of the lease term. The performance of any of these obligations may be expensive.
These costs and losses may not be adequately covered by applicable insurance coverage or other contractual rights available to us. We must comply with increasingly and complex privacy and security laws and regulations in the United States. Further, in June 2018 California enacted the California Consumer Privacy Act (the “CCPA”), which went into effect on January 1, 2020.
These costs and losses may not be adequately covered by applicable insurance coverage or other contractual rights available to us. We must comply with increasingly and complex privacy and security laws and regulations in the United States, including the California Consumer Privacy Act, as amended, and state data privacy laws that have been enacted to date.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” The deterioration of the earnings from, or other available assets of, our subsidiaries for any reason could impair their ability to make distributions to us.
The deterioration of the earnings from, or other available assets of, our subsidiaries for any reason could impair their ability to make distributions to us.
Our ability to secure such equipment and supplies from alternative sources as needed may be time-consuming or expensive or may cause a temporary disruption in our supply chain.
We rely on a limited number of suppliers for most of the car wash equipment and certain other supplies we use in our operations. Our ability to secure such equipment and supplies from alternative sources as needed may be time-consuming or expensive or may cause a temporary disruption in our supply chain.
Further, contractual obligations related to confidentiality and noncompetition may be ineffective or unenforceable, and departing employees may share our proprietary information with competitors in ways that could adversely impact us. We lease or sublease the land and buildings where a number of our locations are situated, which could expose us to possible liabilities and losses.
Further, contractual obligations related to confidentiality and noncompetition may be ineffective or unenforceable, and departing employees may share our proprietary information with competitors in ways that could adversely impact us.
The historical transportation, distribution and storage of motor fuels (diesel fuel and gasoline) and other chemicals are subject to environmental protection and operational safety laws and regulations. As of December 31, 2020, the Company had divested its quick lube business but in December 2021 acquired four quick lube operations.
The historical transportation, distribution and storage of motor fuels (diesel fuel and gasoline) and other chemicals are subject to environmental protection and operational safety laws and regulations. As of December 31, 2023, we have ceased dispensing gasoline and diesel fuels at all locations.
If we do not successfully maintain and enhance our reputation and brand recognition with our customers, our business may not grow and we could lose our relationships with customers, which would materially and adversely affect our business, results of operations and financial condition. 9 We are subject to a number of risks and regulations related to credit card and debit card payments we accept.
The harm may be immediate without affording us an opportunity for redress or correction. If we do not successfully maintain and enhance our reputation and brand recognition with our customers, our business may not grow and we could lose our relationships with customers, which would materially and adversely affect our business, results of operations and financial condition.
In addition, the formation of unions may increase the operating expenses of our locations. Any such future difficulties could result in a decline in customer service negatively impacting sales at our locations, which could in turn materially and adversely affect our business, results of operations and financial condition.
Any such future difficulties could result in a decline in customer service negatively impacting sales at our locations, which could in turn materially and adversely affect our business, results of operations and financial condition. Many of our key personnel have worked for us for a significant amount of time or were recruited by us specifically due to their experience.
In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. Risks Related to Our Business Global economic conditions, including inflation and supply chain disruptions, could adversely affect our operations.
In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. The risks described below are not the only risks we face.
It will also create a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement. Similar laws have been proposed or enacted in other states and at the federal level, and when passed, such laws may have potentially conflicting requirements that would make compliance challenging.
Similar laws have been proposed or enacted in other states and at the federal level, and when passed, such laws may have potentially conflicting requirements that would make compliance challenging. Our operations are subject to the Telephone Consumer Protection Act and similar state laws.
Many of our key personnel have worked for us for a significant amount of time or were recruited by us specifically due to their experience. Our success depends in part upon the reputation and influence within the industry of our senior managers.
Our success depends in part upon the reputation and influence within the industry of our senior managers.
We accept payments through credit card and debit card transactions. For credit card and debit card payments, we pay interchange and other fees, which may increase over time.
Acceptance and processing of these payment methods are subject to certain rules, regulations, and industry standards, including data storage requirements, additional authentication requirements for certain payment methods, and require payment of interchange and other fees. For credit card and debit card payments, we pay interchange and other fees, which may increase over time.
Removed
Domestic markets experienced significant inflationary pressures in fiscal year 2022 and inflation rates in the U.S. are currently expected to continue at elevated levels for the near-term.
Added
Additional risks not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and results of operations in future periods. Risks Related to Our Business Global economic conditions, including inflation and supply chain disruptions, could adversely affect our operations.
Removed
We may not be able to successfully implement our growth strategies on a timely basis or at all. We believe that maintaining and enhancing our reputation and brand recognition are critical to our relationships with existing customers and our ability to attract new customers.
Added
If we are unable to compete successfully against other companies and operators in our industry, we may lose customers and market share and our revenues may decline. The car wash industry is fragmented, and we compete with a variety of operators.
Removed
The harm may be immediate without affording us an opportunity for redress or correction.
Added
We believe customers consider a number of competitive factors, including name and brand recognition, location, price, product availability and customer service. In addition, our reputation is critical to our continued success.
Removed
We depend on a limited number of suppliers for most of our car wash equipment and certain supplies. We rely on a limited number of suppliers for most of the car wash equipment and certain other supplies we use in our operations.
Added
If we fail to maintain high standards for, or receive negative publicity relating to, customer service or quality, as well as our integrity and reputation, we could lose customers to our competition. Competition may also require us to reduce our prices, alter current service offerings, or change some of our current operating strategies.
Removed
Decreased fuel supplies are anticipated to increase fuel prices, which may adversely impact our transportation costs.
Added
If we do not have the resources, expertise and consistent execution, or otherwise fail to develop successful strategies, to address these potential competitive disadvantages, we may lose customers and market share, and our business and results of operations could be adversely affected. 8 We may not be able to successfully implement our growth strategies on a timely basis or at all.
Removed
We lease the land and buildings where a significant number of our locations are located. The terms of the leases and subleases vary in length, with primary terms (i.e., before consideration of option periods) expiring on various dates.
Added
We are subject to a number of risks and regulations related to credit card and debit card payments we accept. Our customers pay for our services using a variety of different payment methods, including credit and debit cards, gift cards, and prepaid cards. We rely on internal systems and those of third parties to process payment.
Removed
On March 5, 2021, the ICE Benchmark Administration (“IBA”), the administrator of LIBOR, and the United Kingdom’s Financial Conduct Authority (the “FCA”), the regulatory supervisor of the IBA, announced in public statements (the “Announcements”) that the final publication or representativeness date for one-week and two-month USD LIBOR tenors will be December 31, 2021 and all other USD Libor tenors (overnight, one-month, three-month, six-month and 12-month) will be June 20, 2023.
Added
In addition, the formation of unions may increase the operating expenses of our locations. Our ability to meet our labor needs is subject to many factors such as prevailing wage rates, minimum wage legislation, unemployment levels, and actions by our competitors with respect to compensation levels and incentive plans.
Removed
As a result, USD LIBOR will not be available for use in agreements and other instruments after the relevant cessation date and may ultimately cease to be utilized in advance of such relevant cessation date.
Added
We rely on cash from our operating activities to make lease payments for the land and buildings where many of our locations are situated, which may strain our cash flow and expose us to potential liabilities and losses. We lease the land and buildings where a significant number of our locations are located.
Removed
In December 2022, we entered into Amendment No. 4 to our Amended and Restated First Lien Credit Agreement with the lenders party thereto, and Jeffries Finance LLC, as administrative agent, to transition from LIBOR to Eurocurrency rate SOFR spread, whereas all revolver borrowings and term loan borrowings under the existing credit agreement will be SOFR based.
Added
However, our historical operations, at limited locations inherited through acquisitions, involved using underground storage tanks (USTs) for fuel and chemicals. Some of these tanks remain on leased properties, with future obligations for removal and potential environmental remediation. Instances of contamination have been identified in the past, leading to remediation costs.
Removed
We do not currently expect to declare or pay dividends on our common stock for the foreseeable future; however, the agreements governing the indebtedness of our subsidiaries impose restrictions on our subsidiaries’ ability to pay dividends or other distributions to us.
Added
This historical legacy presents ongoing environmental risks and potential liabilities under our lease agreements and environmental laws. We continue to evaluate and address these risks, recognizing their potential impact on our financial condition and operations. Evolving global climate change regulations and effects of greenhouse gas emissions may adversely affect our operations and financial performance.
Removed
As of December 31, 2022, the Company was no longer dispensing gasoline or diesel fuels at any location. Where releases of motor fuels, petroleum products, chemicals or other substances or wastes have occurred, federal and state laws and regulations require that contamination caused by such releases be assessed and remediated to meet applicable clean-up standards.
Removed
Changing Climate, Global Climate Change Regulations and Greenhouse Gas Effects may Adversely Affect our Operations and Financial Performance.
Removed
The CCPA gives California residents certain rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation.
Removed
Further, the California Privacy Rights and Enforcement Act (the “CPRA”), which went into effect on January 1, 2023, significantly amends the CCPA and will impose additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk processing, and opt outs for certain uses of sensitive data.
Removed
Our operations are subject to the Telephone Consumer Protection Act and similar state laws.
Removed
We may have to litigate to enforce or determine the scope and enforceability of our intellectual property rights, which is expensive and could exceed applicable insurance coverage, could cause a diversion of resources and may not prove successful.
Removed
Our amended and restated certificate of incorporation could prevent us from benefiting from corporate opportunities that might otherwise have been available to us.
Removed
As of December 31, 2022 we are no longer an “emerging growth company”, and we are no longer able to take advantage of the reduced disclosure requirements applicable to “emerging growth companies”.
Removed
As of June 30, 2022, the market value of our ordinary shares that were held by non-affiliates exceeded $700.0 million and therefore, as of December 31, 2022, we no longer qualified as an emerging growth company under the Jumpstart Our Business Startups Act of 2012.
Removed
On December 31, 2022, we became a large accelerated filer and the reduced disclosure obligations of emerging growth companies are no longer available to us. As an emerging growth 18 company, we took advantage of certain exemptions from various reporting requirements that are applicable to other public companies.
Removed
As a result, we will need to comply with the independent auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, beginning with this Annual Report on Form 10-K for the year ended December 31, 2022, will be required to hold a say-on-frequency vote at our 2023 annual general meeting of stockholders, and will no longer be entitled to provide the reduced executive compensation disclosures permitted by emerging growth companies in this Annual Report on Form 10-K and our proxy statement for the 2023 annual general meeting of stockholders.
Removed
We expect that our transition from “emerging growth company” to “large accelerated filer” will require additional attention from management and will result in increased costs to us, which could include higher legal fees, accounting fees and fees associated with investor relations activities, among others.
Removed
If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, our ability to operate our business and investors’ views of us. We are required to comply with Section 404 of the Sarbanes-Oxley Act.
Removed
Section 404 of the Sarbanes-Oxley Act requires public companies to maintain effective internal control over financial reporting. In particular, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting.

… 5 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed0 unchanged
Biggest changeThe chart below provides a breakdown of our operating car wash locations as of December 31, 2022: State Locations Alabama 13 Arizona 16 California 48 Colorado 6 Florida 75 Georgia 22 Idaho 7 Illinois 1 Iowa 15 Maryland 2 Michigan 29 Minnesota 24 Mississippi 8 Missouri 7 New Mexico 18 Pennsylvania 4 Tennessee 16 Texas 77 Utah 19 Washington 15 Wisconsin 14 Total 436
Biggest changeThe chart below provides a breakdown of our operating car wash locations as of December 31, 2023: State Locations Alabama 13 Arizona 18 California 55 Colorado 9 Florida 78 Georgia 22 Idaho 7 Illinois 1 Iowa 19 Maryland 2 Michigan 29 Minnesota 27 Mississippi 8 Missouri 8 New Mexico 21 Pennsylvania 6 Tennessee 16 Texas 84 Utah 23 Washington 16 Wisconsin 14 Total 476
Item 2. Properties We lease 25,350 and own 27,973 square feet of office space at our corporate headquarters in Tucson, Arizona. As of December 31, 2022, we leased 374 locations and owned 59 locations. We also operate 3 locations still owned by third-party developers.
Item 2. Properties We lease 25,350 and own 27,973 square feet of office space at our corporate headquarters in Tucson, Arizona. As of December 31, 2023, we leased 419 locations and owned 55 locations. We also operate 2 locations still owned by third-party developers.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

4 edited+5 added−2 removed0 unchanged
Biggest changeMs. Chimienti had served as the Company’s Vice President, Operations Services since July 2017. Ms. Chimienti joined the Company in 2007 and previously served as Director of Training & Development from March 2013 to July 2017.
Biggest changeMr. Gold received an M.B.A. in Finance and Accounting from Indiana University and a B.S. in accounting from the University of Utah. Mayra Chimienti: Effective March 14, 2022, Mayra Chimienti was appointed Chief Operating Officer of the Company. Ms. Chimienti had served as our Vice President, Operations Services since July 2017. Ms.
Mine Safety Disclosures Not applicable. 21 Information About Our Executive Officers Our executive officers as of February 24, 2023, are as follows: Name Age Officer Since Position John Lai 59 2013 Chairperson, President and Chief Executive Officer Jedidiah Gold 43 2019 Chief Financial Officer Mayra Chimienti 39 2022 Chief Operating Officer Markus Hartmann 59 2022 General Counsel Effective March 14, 2022, Mayra Chimienti was appointed Chief Operating Officer of the Company.
Mine Safety Disclosures Not applicable. 20 Information About Our Executive Officers Our executive officers as of February 23, 2024, are as follows: Name Age Officer Since Position John Lai 60 2013 Chairman, President and Chief Executive Officer Jedidiah Gold 44 2019 Chief Financial Officer Mayra Chimienti 40 2022 Chief Operating Officer Markus Hartmann 60 2022 General Counsel Mary Porter 53 2023 Chief People Officer Joseph Matheny 48 2023 Chief Innovation Officer John Lai: Mr.
Effective October 28, 2022, Markus Hartmann was named General Counsel and leads the Company’s legal function in ethics and compliance, intellectual property and other general corporate legal matters. Mr.
Chimienti joined the Company in 2007 and previously served as Director of Training & Development from March 2013 to July 2017. Markus Hartmann: Effective October 28, 2022, Markus Hartmann was named General Counsel and leads our legal function in ethics and compliance, intellectual property and other general corporate legal matters. Mr.
He began his career as an associate attorney with the law firm Hale & Dorr LLP (now WilmerHale) and is a retired Colonel in the Marine Corp Reserve. 22 PART II
Hartmann brings over 25 years of experience advising companies on wide-ranging critical corporate initiatives, legal and compliance related activities. He began his career as an associate attorney with the law firm Hale & Dorr LLP (now WilmerHale) and is a retired Colonel in the Marine Corp Reserve.
Removed
Hartmann brings over 20 years of experience advising companies on wide-ranging critical corporate initiatives and most recently served as Senior Compliance Officer at Stryker Corporation (Spine Division) (NYSE: SYK), one of the world’s leading medical technology companies. Prior to joining Stryker in 2021, Mr. Hartmann served as Vice President – General Counsel and Corporate Secretary at Carrols Restaurant Group, Inc.
Added
Lai has served as our President and Chief Executive Officer and as a member of our board of directors since June 2013, and previously served as our Vice President of Market Development. Mr. Lai joined Mister Car Wash in 2002. Mr. Lai has served as a director at the Southern Arizona Leadership Council since December 2019. Mr.
Removed
(NASDAQ: TAST), one of the largest restaurant franchisees in the United States, and before that, as Vice President – Technical Compliance NAFTA for Mercedes-Benz Research & Development North America, Inc. (a Daimler company).
Added
Lai received a B.S. from the University of Arizona. Jed Gold: Mr. Gold has served as our Treasurer and Chief Financial Officer since July 2019. Mr. Gold previously served as Senior Director Finance, Assistant Treasurer at Yum Brands, Inc. from May 2016 to July 2019, and as Chief Financial Officer MENAPak at KFC Corporation from October 2014 to May 2016.
Added
Mary Porter: Effective April 17, 2023, Mary Porter was named our first Chief People Officer. Ms. Porter previously served as the Vice President of Human Resources for Nordstrom from January 2018 to April 2023, supporting Nordstrom and Nordstrom Rack locations across both US and Canada, a position she achieved as the culmination of a 27-year long journey with the company.
Added
From HR compliance to Talent Acquisition to strategic business support, Ms. Porter has experience across many Human Resources functions. Ms. Porter earned a Bachelor of Arts from the University of Washington. Joseph Matheny: Effective October 13, 2023, Joseph Matheny was appointed Chief Innovation Officer of the Company. Mr. Matheny had served as our Senior Vice President, Operations since March 2020.
Added
Mr. Matheny previously served as our Vice President, Operations from December 2016 to March 2020, and served as our General Manager, Regional Manager, and Division Manager since 1998. 21 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+0 added−0 removed4 unchanged
Biggest changeThe graph assumes that the value of the investment in our stock and in each index was $100 at June 25, 2021, and that all dividends were reinvested. 6/25/21 12/31/21 12/31/22 Mister Car Wash, Inc. $ 100.00 $ 90.00 $ 45.00 S&P 1500 Consumer Services $ 100.00 $ 105.00 $ 90.00 S&P 500 Total Return $ 100.00 $ 112.00 $ 92.00 Russell 2000 $ 100.00 $ 97.00 $ 76.96 23 Item 6. [Reserved] 24
Biggest changeThe graph assumes that the value of the investment in our stock and in each index was $100 at June 25, 2021, and that all dividends were reinvested. 6/25/21 12/31/21 12/31/22 12/31/23 Mister Car Wash, Inc. $ 100.00 $ 90.00 $ 45.00 $ 43.00 S&P 1500 Consumer Services $ 100.00 $ 105.00 $ 90.00 $ 115.00 S&P 500 Total Return $ 100.00 $ 112.00 $ 92.00 $ 116.00 Russell 2000 $ 100.00 $ 97.00 $ 76.96 $ 89.99 22 Item 6. [Reserved] 23
Issuer Purchases of Equity Securities During the quarter ended December 31, 2022, we did not repurchase any equity securities that were not registered under the Securities Act.
Issuer Purchases of Equity Securities During the quarter ended December 31, 2023, we did not repurchase any equity securities that were not registered under the Securities Act.
Holders of Record As of February 15, 2023, there were 1,429 holders of record of our common stock. This number excludes stockholders whose stock is held in street name by banks, brokers and other nominees.
Holders of Record As of February 15, 2024, there were 1,342 holders of record of our common stock. This number excludes stockholders whose stock is held in street name by banks, brokers and other nominees.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

55 edited+3 added−11 removed56 unchanged
Biggest changeYear Ended December 31, 2022 2021 (Dollars in thousands) Amount % of Revenue Amount % of Revenue Net revenues $ 876,506 100 % $ 758,357 100 % Store operating costs: Cost of labor and chemicals 268,467 31 % 265,171 35 % Other store operating expenses 322,414 37 % 266,069 35 % General and administrative 98,855 11 % 254,815 34 % Gain on sale of assets, net (949 ) (0 )% (23,188 ) (3 )% Total costs and expenses 688,787 79 % 762,867 101 % Operating income (loss) 187,719 21 % (4,510 ) (1 )% Other expense: Interest expense, net 41,895 5 % 39,424 5 % Loss on extinguishment of debt — 0 % 3,204 0 % Total other expense 41,895 5 % 42,628 6 % Income (loss) before taxes 145,824 17 % (47,138 ) (6 )% Income tax provision (benefit) 32,924 4 % (25,093 ) (3 )% Net income (loss) $ 112,900 13 % $ (22,045 ) (3 )% Net Revenues Year Ended December 31, (Dollars in thousands) 2022 2021 $ Change % Change Net revenues $ 876,506 $ 758,357 $ 118,149 16 % The increase in net revenues was primarily attributable to the increase in car wash sales due to growth in UWC Members and the year-over-year addition of 40 locations.
Biggest changeYear Ended December 31, 2023 2022 (Dollars in thousands) Amount % of Revenue Amount % of Revenue Net revenues $ 927,070 100 % $ 876,506 100 % Store operating costs: Cost of labor and chemicals 279,375 30 % 268,467 31 % Other store operating expenses 363,717 39 % 322,414 37 % General and administrative 105,708 11 % 98,855 11 % (Gain) loss on sale of assets, net 125 0 % (949 ) (0 )% Total costs and expenses 748,925 81 % 688,787 79 % Operating income 178,145 19 % 187,719 21 % Other expense: Interest expense, net 75,104 8 % 41,895 5 % Total other expense 75,104 8 % 41,895 5 % Income before taxes 103,041 11 % 145,824 17 % Income tax provision 22,911 2 % 32,924 4 % Net income $ 80,130 9 % $ 112,900 13 % Net Revenues Year Ended December 31, (Dollars in thousands) 2023 2022 $ Change % Change Net revenues $ 927,070 $ 876,506 $ 50,564 6 % The increase in net revenues was primarily attributable to the increase in car wash sales due to growth in UWC Members and the year-over-year addition of 40 net locations.
As soon as feasible, we fully integrate and transition acquired locations to the “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 our signature products utilizing the newest technology and services to make a better car wash experience for our 25 customers.
As soon as feasible, we fully integrate and transition acquired locations to the “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 our signature products utilizing the newest technology and services to make a better car wash experience for our customers.
This assessment relies on estimates and assumptions and any changes in the recognition or measurement of these benefits or liabilities are reflected in the period in which the change in judgment occurs. We recognize interest and penalties related to uncertain tax positions within income tax provision (benefit) on our consolidated statement of operations and comprehensive income (loss).
This assessment relies on 32 estimates and assumptions and any changes in the recognition or measurement of these benefits or liabilities are reflected in the period in which the change in judgment occurs. We recognize interest and penalties related to uncertain tax positions within income tax provision (benefit) on our consolidated statement of operations and comprehensive income (loss).
For the year ended December 31, 2022, net cash used in investing activities was $190.1 million and was primarily comprised of purchases in property and equipment to support our greenfield and other initiatives, and the acquisition of car washes, partially offset by sale-leaseback transactions and the sale of property and equipment.
For the year ended December 31, 2022, net cash used in investing activities was $190.1 million and was primarily comprised of purchases in property and equipment to support our greenfield and other initiatives, and the acquisition of car washes, partially offset by sale-leaseback transactions and the sale of property and equipment. Financing Activities .
Opening new locations is a 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.
Opening new locations is a 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. 25 Accordingly, comparable store sales are only one measure we use to assess the success of our growth strategy.
However, in determining the amount and timing of revenue from contracts with customers, we make judgments as to whether uncertainty as to collectability of the consideration that we are owed precludes recognition of the revenue on an accrual basis. These judgments are based on the facts specific to each circumstance.
However, in determining the amount and timing of revenue from contracts with customers, we make judgments as to whether uncertainty as to collectability of the consideration that we are owed precludes recognition of the revenue on an 31 accrual basis. These judgments are based on the facts specific to each circumstance.
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; 27 • 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.
Some of these limitations include: • Adjusted EBITDA does not reflect our cash expenditure or future requirements for capital expenditures or contractual commitments; 26 • 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.
UWC entitles a UWC Member to unlimited washes for a monthly fee, 32 cancelable at any time. UWC Members are automatically charged on a credit or debit card on the same day of the month that they originally signed up.
UWC entitles a UWC Member to unlimited washes for a monthly fee, cancelable at any time. UWC Members are automatically charged on a credit or debit card on the same day of the month that they originally signed up.
We view the number of UWC Members and the growth in the number of UWC Members on a net basis from period to period as key indicators of our revenue growth. The number of UWC Members has grown over time as we have 26 acquired new customers and retained previously acquired customers.
We view the number of UWC Members and the growth in the number of UWC Members on a net basis from period to period as key indicators of our revenue growth. The number of UWC Members has grown over time as we have acquired new customers and retained previously acquired customers.
We believe it is more likely than not that our federal deferred tax assets will be realized in the 33 future based primarily on the timing and reversal of existing taxable temporary differences in that jurisdiction.
We believe it is more likely than not that our federal deferred tax assets will be realized in the future based primarily on the timing and reversal of existing taxable temporary differences in that jurisdiction.
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 financial results under Mister Car Wash’s ownership. Divestitures During the years ended December 31, 2022 and December 31, 2021, we did not consummate any significant divestitures.
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 financial results under Mister Car Wash’s ownership. Divestitures During the years ended December 31, 2023 and 2022, we did not consummate any significant divestitures.
Recent Accounting Pronouncements See the sections titled “Summary of Significant Accounting Policies—Recent Accounting Pronouncements” and “—Recently issued accounting pronouncements not yet adopted” in Note 2 to our consolidated financial statements included elsewhere in this Annual Report on Form 10‑K. 34
Recent Accounting Pronouncements See the sections titled “Summary of Significant Accounting Policies—Recent Accounting Pronouncements” and “—Recently issued accounting pronouncements not yet adopted” in Note 2 to our consolidated financial statements included elsewhere in this Annual Report on Form 10‑K. 33
As of December 31, 2022, we were in compliance with the covenants under our Credit Facilities and we expect to comply with our covenants in the next 12 months from the issuance date of the financial statements included in this Annual Report on Form 10-K.
As of December 31, 2023, we were in compliance with the covenants under our Credit Facilities and we expect to comply with our covenants in the next 12 months from the issuance date of the financial statements included in this Annual Report on Form 10-K.
Key Performance Indicators We prepare and analyze various operating and financial data to assess the performance of our business and 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 years ended December 31, 2022 and 2021.
Key Performance Indicators We prepare and analyze various operating and financial data to assess the performance of our business and 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 years ended December 31, 2023 and 2022.
Net cash used in operating activities consists of net income (loss) adjusted for certain non-cash items, including stock-based compensation expense, depreciation of property and equipment, gains on disposal of property and equipment, amortization of leased assets and deferred income taxes, as well as the effect of changes in other working capital amounts.
Net cash used in operating activities consists of net income (loss) adjusted for certain non-cash items, including stock-based compensation expense, depreciation of property and equipment, amortization of leased assets and deferred income taxes, as well as (gain) losses on disposal of property and equipment and the effect of changes in other working capital amounts.
No impairment losses associated with our goodwill were recognized during the years ended December 31, 2022, and December 31, 2021. Income Taxes We account for income taxes in accordance with ASC 740, Income Taxes .
No impairment losses associated with our goodwill were recognized during the years ended December 31, 2023, and December 31, 2022. Income Taxes We account for income taxes in accordance with ASC 740, Income Taxes .
The increase experienced in the year ended December 31, 2022 compared to the prior year is primarily attributable to an increase in car wash sales due to growth in UWC Members and the year-over-year addition of 40 locations, offset by an increase in operating costs and expenses.
The increase experienced in the year ended December 31, 2023 compared to the prior year is primarily attributable to an increase in car wash sales due to growth in UWC Members and the year-over-year addition of 40 net locations, offset by an increase in operating costs and expenses.
(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.
(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, as well as expenses associated with greenfield construction.
For the year ended December 31, 2022, net cash provided by operating activities was $229.2 million and was comprised of net income of $112.9 million, increased by $154.8 million related to non-cash adjustments, which includes $22.3 million for stock-based compensation expense. Other non-cash adjustments included depreciation and amortization, loss on extinguishment of debt and deferred income tax.
For the year ended December 31, 2022, net cash provided by operating activities was $229.2 million and was comprised of net income of $112.9 million, increased by $154.8 million related to non-cash adjustments, which includes $22.3 million for stock-based compensation expense. Other non-cash adjustments included depreciation and amortization, non-cash interest income and deferred income tax.
The change in other receivables was primarily driven by the collection of payroll tax withholding and exercise proceeds receivables 31 outstanding in the prior year, partially offset by increases in construction receivables associated with an increased number of build-to-suit arrangements and insurance receivables.
The change in other 30 receivables was primarily driven by the collection of payroll tax withholding and exercise proceeds receivables outstanding in the prior year, partially offset by increases in construction receivables associated with an increased number of build-to-suit arrangements and insurance receivables. Investing Activities .
(h) 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 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. 28 Results of Operations The results of operations data for the years ended December 31, 2022 and 2021 have been derived from the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
(f) Consists of other items as determined by management not to be reflective of our ongoing operating performance, such as costs associated with 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. 27 Results of Operations The results of operations data for the years ended December 31, 2023 and 2022 have been derived from the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
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.
Greenfield Location Development A part of our 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.
Approximately $6.3 million of impairment losses associated with our long-lived assets were recognized during the year ended December 31, 2022. No impairments were recorded for the year ended December 31, 2021. See Note 4 for additional information.
No impairment losses associated with our long-lived assets were recognized during the year ended December 31, 2023. Approximately $6.3 million of impairment losses associated with our long-lived assets were recognized for the year ended December 31, 2022. See Note 4 for additional information.
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. During 2022, we successfully opened a total of 28 greenfield locations, with the expectation of driving the majority of our future location growth through greenfield development.
More recently, we have also grown through greenfield development of Mister Car Wash locations, with particular focus on Express Exterior Locations, and anticipate continued pursuit of this strategy in the future. During 2023, we successfully opened a total of 35 greenfield locations, with the expectation of driving the majority of our future location growth through greenfield development.
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 matured to average unit volumes, which we typically expect after approximately three full years of operation. Business Acquisitions In 2022, we completed four business acquisitions of 11 properties.
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 matured to average unit volumes, which we typically expect after approximately three full years of operation. 24 Business Acquisitions In 2023, we completed two business acquisitions of six properties.
During 2022, comparable store sales increased 5% compared to an increase of 32% in 2021. UWC Members (end of period) Members of our monthly subscription service are known as Unlimited Wash Club Members, or UWC Members.
During 2023, comparable store sales increased 0.3% compared to an increase of 5% in 2022. UWC Members (end of period) Members of our monthly subscription service are known as Unlimited Wash Club Members, or UWC Members.
For the year ended December 31, 2021, net cash used in investing activities was $543.8 million and was primarily comprised of purchases in property and equipment to support our greenfield and other initiatives, and the acquisition of car washes, partially offset by sale-leaseback transactions and the sale of property and equipment. Financing Activities .
For the year ended December 31, 2023, net cash used in investing activities was $259.4 million and was primarily comprised of purchases in property and equipment to support our greenfield and other initiatives, and the acquisition of car washes, partially offset by sale-leaseback transactions and the sale of property and equipment.
As of December 31, 2022 and December 31, 2021, we had cash and cash equivalents of $65.2 million and $19.7 million, respectively, and $148.6 million and $149.5 million, respectively, of available borrowing capacity under our Revolving Commitment.
As of December 31, 2023 and 2022, we had cash and cash equivalents of $19.0 million and $65.2 million, respectively, and $149.2 million and $148.6 million, respectively, of available borrowing capacity under our Revolving Commitment.
UWC sales were 68% and 64% of our total wash sales for the years ended December 31, 2022, and 2021, respectively.
UWC sales were 71% and 68% of our total wash sales for the years ended December 31, 2023, and 2022, respectively.
For the year ended December 31, 2022, net cash provided by financing activities was $6.3 million and was primarily comprised of proceeds from issuance of common stock under employee plans, partially offset by payments of long-term debt and finance lease obligations.
For the year ended December 31, 2023, net cash provided by financing activities was $8.6 million and was primarily comprised of proceeds from issuance of common stock under employee plans, partially offset by payments of finance lease obligations and other financing activities.
There were approximately 1.9 million and approximately 1.7 million UWC Members as of December 31, 2022 and 2021, respectively. Our UWC program grew by approximately 0.2 million UWC Members, or approximately 13.8%, from December 31, 2021 to December 31, 2022.
There were approximately 2.1 million and approximately 1.9 million UWC Members as of December 31, 2023 and 2022, respectively. Our UWC program grew by approximately 0.2 million UWC Members, or approximately 10.2%, from December 31, 2022 to December 31, 2023.
The timing of recognition does not require significant judgment as it is based on the UWC monthly charge and deferral or the date of car wash sale, none of which require a significant amount of estimation.
Discounts are applied as a reduction of revenue at the time of payment. The timing of recognition does not require significant judgment as it is based on the UWC monthly charge and deferral or the date of car wash sale, none of which require a significant amount of estimation.
We believe people are the key to our success and we have been able to successfully attract and retain engaged, high-quality team members by paying competitive wages, offering attractive benefit packages, and providing robust training and development opportunities.
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 by paying competitive wages, offering attractive benefit packages, and providing robust training and development opportunities.
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 fiscal year 2022, we increased our location count by 40 locations, including 28 greenfield locations and 12 business acquisition 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 fiscal year 2023, we increased our location count by 40 net locations, including 35 greenfield locations and six business acquisition locations, offset by one location that was closed.
One location, which was part of a 2021 acquisition, opened during the second quarter of 2022 and is included as an acquired location above. In fiscal year 2021, we increased our location count by 54 locations, including 17 greenfield locations, 37 business acquisition locations, and one asset purchase location, partially offset by one closed location.
In fiscal year 2022, we increased our location count by 40 locations, including 28 greenfield locations and 12 business acquisition locations. One location, which was part of a 2021 acquisition, opened during the second quarter of 2022 and is included as an acquired location above.
Store Operating Costs Cost of Labor and Chemicals Year Ended December 31, (Dollars in thousands) 2022 2021 $ Change % Change Cost of labor and chemicals $ 268,467 $ 265,171 $ 3,296 1 % Percentage of net revenues 31 % 35 % The increase in the cost of labor and chemicals is primarily driven by an increase in labor and benefits of approximately $25.6 million and an increase in wash chemicals and supplies of approximately $5.8 million during the year ended December 31, 2022, both attributable to an increase in volume and the year-over-year addition of 40 locations, as well as some inflationary pressures on both our labor and chemicals.
Store Operating Costs Cost of Labor and Chemicals Year Ended December 31, (Dollars in thousands) 2023 2022 $ Change % Change Cost of labor and chemicals $ 279,375 $ 268,467 $ 10,908 4 % Percentage of net revenues 30 % 31 % The increase in the cost of labor and chemicals is primarily driven by an increase in labor and benefits of approximately $9.1 million and an increase in wash chemicals and supplies of approximately $1.8 million during the year ended December 31, 2023, both attributable to an increase in volume and the year-over-year addition of 40 net locations, as well as some inflationary pressures on both our labor and chemicals.
Year Ended December 31, (Dollars in thousands) 2022 2021 Financial and Operating Data Location count (end of period) 436 396 Comparable store sales growth 5 % 32 % UWC Members (in thousands, end of period) 1,884 1,656 UWC sales as a percentage of total wash sales 68 % 64 % Net income (loss) $ 112,900 $ (22,045 ) Net income (loss) margin 12.9 % (2.9 )% Adjusted EBITDA $ 281,646 $ 254,348 Adjusted EBITDA margin 32.1 % 33.5 % Location Count (end of period) Our location count refers to the total number of car wash locations operating at the end of a period, inclusive of new greenfield locations, acquired locations and offset by closed locations.
Year Ended December 31, (Dollars in thousands) 2023 2022 Financial and Operating Data Location count (end of period) 476 436 Comparable store sales growth 0.3 % 5 % UWC Members (in thousands, end of period) 2,077 1,884 UWC sales as a percentage of total wash sales 71 % 68 % Net income (loss) $ 80,130 $ 112,900 Net income (loss) margin 8.6 % 12.9 % Adjusted EBITDA $ 285,924 $ 281,646 Adjusted EBITDA margin 30.8 % 32.1 % Location Count (end of period) Our location count refers to the total number of car wash locations operating at the end of a period, inclusive of new greenfield locations, acquired locations and offset by closed locations.
Our Adjusted EBITDA was approximately $281.6 million and $254.3 million for the years ended December 31, 2022 and 2021, respectively. Our Adjusted EBITDA margin was 32% and 34% for the years ended December 31, 2022 and 2021, respectively.
Our Adjusted EBITDA was approximately $285.9 million and $281.6 million for the years ended December 31, 2023 and 2022, respectively. Our Adjusted EBITDA margin was 31% and 32% for the years ended December 31, 2023 and 2022, respectively.
The UWC revenue is recognized ratably over the month in which it is earned and amounts unearned are recorded as deferred revenue on the consolidated balance sheets based on the date of the re-charge.
The UWC revenue is recognized ratably over the month in which it is earned and amounts unearned are recorded as deferred revenue on the consolidated balance sheets based on the date of the re-charge. Second, the revenue from car wash services is recognized at the point in time services are rendered and the customer pays.
Cash Flows for the Years Ended December 31, 2022 and 2021 The following table shows summary cash flow information for the periods presented: Year Ended December 31, (Dollars in thousands) 2022 2021 Net cash provided by operating activities $ 229,201 $ 173,354 Net cash used in investing activities (190,131 ) (543,832 ) Net cash provided by financing activities 6,294 272,462 Net change in cash and cash equivalents, and restricted cash during period $ 45,364 $ (98,016 ) Operating Activities .
Cash Flows for the Years Ended December 31, 2023 and 2022 The following table shows summary cash flow information for the periods presented: Year Ended December 31, (Dollars in thousands) 2023 2022 Net cash provided by operating activities $ 204,653 $ 229,201 Net cash used in investing activities (259,365 ) (190,131 ) Net cash provided by financing activities 8,609 6,294 Net change in cash and cash equivalents, and restricted cash during period $ (46,103 ) $ 45,364 Operating Activities .
Other (Expense) Year Ended December 31, (Dollars in thousands) 2022 2021 $ Change % Change Other expense $ 41,895 $ 42,628 $ (733 ) (2 )% Percentage of net revenues 5 % 6 % The decrease in other expense was primarily driven by the result of no loss on extinguishment of debt in the current year, which was offset by an increase in interest expense due to higher average interest rates, an increase in borrowing levels and the expiration of our interest rate swap in October 2022, as compared to the prior year period .
Other Expense Year Ended December 31, (Dollars in thousands) 2023 2022 $ Change % Change Other expense $ 75,104 $ 41,895 $ 33,209 79 % Percentage of net revenues 8 % 5 % The increase in other expense was primarily driven by an increase in interest expense due to higher average interest rates and the expiration of our interest rate swap in October 2022, as compared to the prior year period .
Year Ended December 31, (Dollars in thousands) 2022 2021 Reconciliation of net income (loss) to Adjusted EBITDA: Net income (loss) $ 112,900 $ (22,045 ) Interest expense, net 41,895 39,424 Income tax provision (benefit) 32,924 (25,093 ) Depreciation and amortization expense 61,580 50,559 Gain on sale of assets, net (a) (949 ) (23,188 ) Loss on extinguishment of debt — 3,204 Stock-based compensation expense (b) 22,305 216,579 Acquisition expenses (c) 3,648 4,617 Management fees (d) — 500 Non-cash rent expense (e) 2,792 1,659 Expenses associated with initial public offering (f) 272 1,599 Expenses associated with secondary public offering (g) — 498 Other (h) 4,279 6,035 Adjusted EBITDA $ 281,646 $ 254,348 Net Revenues $ 876,506 $ 758,357 Adjusted EBITDA margin 32.1 % 33.5 % (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.
Year Ended December 31, (Dollars in thousands) 2023 2022 Reconciliation of net income (loss) to Adjusted EBITDA: Net income (loss) $ 80,130 $ 112,900 Interest expense, net 75,104 41,895 Income tax provision 22,911 32,924 Depreciation and amortization expense 69,991 61,580 (Gain) loss on sale of assets, net (a) 125 (949 ) Stock-based compensation expense (b) 24,310 22,305 Acquisition expenses (c) 3,471 3,648 Non-cash rent expense (d) 5,043 2,792 Expenses associated with initial public offering (e) — 272 Other (f) 4,839 4,279 Adjusted EBITDA $ 285,924 $ 281,646 Net revenues $ 927,070 $ 876,506 Adjusted EBITDA margin 30.8 % 32.1 % (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.
(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 initial public offering in June 2021. (e) Represents the difference between cash paid for rent expense and U.S. GAAP rent expense.
(d) Represents the difference between cash paid for rent expense and U.S. GAAP rent expense. (e) Represents nonrecurring expenses associated with the consummation of our initial public offering in June 2021.
However, we determined that an amount of our state deferred tax assets is not more likely than not to be realized in the future based primarily on prior years’ cumulative financial results in one state jurisdiction and such state's currently enacted legislation.
However, we determined that an amount of our state deferred tax assets is not more likely than not to be realized in the future based primarily on projected future taxable income available in various jurisdictions.
Rent expense increased approximately $10.6 million with the addition of 44 new land and building leases.
Utilities and maintenance expenses increased approximately $14.7 million, depreciation expense increased approximately $8.6 million and rent expense increased approximately $14.5 million with the addition of 47 new land and building leases.
Changes in working capital decreased cash provided by operating activities by $61.6 million, primarily due to $34.3 million of payments towards operating lease liabilities, decreased other noncurrent liabilities coupled with a $18.5 million increase in other receivables.
Changes in working capital decreased cash provided by operating activities by $34.5 million, primarily due to $40.4 million of payments towards operating lease liabilities, partially offset by an increase of $6.1 million in accrued expenses.
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.
The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related 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.
As a percentage of net revenues, costs of labor and chemicals for the year ended December 31, 2022 decreased by 4% due to improved labor staffing and express volume mix as compared to the prior year period, as well as the prior year period recognition of stock-based compensation expense as noted above. 29 Other Store Operating Expenses Year Ended December 31, (Dollars in thousands) 2022 2021 $ Change % Change Other store operating expenses $ 322,414 $ 266,069 $ 56,345 21 % Percentage of net revenues 37 % 35 % The increase in other store operating expenses was attributable to the year-over-year addition of 40 locations and some inflationary pressures on our utilities and maintenance expenses.
As a percentage of net revenues, costs of labor and chemicals for the year ended December 31, 2023 decreased by 1% due to improved labor staffing and volume mix as compared to the prior year period. 28 Other Store Operating Expenses Year Ended December 31, (Dollars in thousands) 2023 2022 $ Change % Change Other store operating expenses $ 363,717 $ 322,414 $ 41,303 13 % Percentage of net revenues 39 % 37 % The increase in other store operating expenses was primarily attributable to the year-over-year addition of 40 net locations.
Gain on Sale of Assets, net Year Ended December 31, (Dollars in thousands) 2022 2021 $ Change % Change Gain on sale of assets, net $ (949 ) $ (23,188 ) $ 22,239 (96 )% Percentage of net revenues (0 )% (3 )% The gain on sale of assets, net in 2022 was primarily driven by $8.4 million of gains associated with our sale-leaseback transactions, offset by a $6.3 million impairment loss associated with two properties that were impaired during the fourth quarter.
(Gain) Loss on Sale of Assets, net Year Ended December 31, (Dollars in thousands) 2023 2022 $ Change % Change (Gain) loss on sale of assets, net $ 125 $ (949 ) $ 1,074 (113 )% Percentage of net revenues 0 % (0 )% The (gain) loss on sale of assets, net in 2023 was primarily driven by losses associated with our sale-leaseback transactions.
For the year ended December 31, 2021, net cash provided by operating activities was $173.4 million and was comprised of net loss of $22.0 million, increased by $257.0 million related to non-cash adjustments and an increase of $216.6 million for stock-based compensation expense.
For the year ended December 31, 2023, net cash provided by operating activities was $204.7 million and was comprised of net income of $80.1 million, increased by $159.0 million related to non-cash adjustments, which includes $24.0 million for stock-based compensation expense. Other non-cash adjustments included depreciation and amortization, non-cash lease expense, and deferred income tax.
UWC Members contribute a significant portion of our net revenue and provide recurring revenue through their monthly membership fees. • Labor management. Hiring and retaining skilled team members and experienced management represents one of our largest costs.
UWC Members contribute a significant portion of our net revenue and provide recurring revenue through their monthly membership fees. We view the number of UWC Members and the growth in the number of UWC Members on a net basis from period to period as key indicators of our revenue growth. • Labor management.
General and Administrative Year Ended December 31, (Dollars in thousands) 2022 2021 $ Change % Change General and administrative $ 98,855 $ 254,815 $ (155,960 ) (61 )% Percentage of net revenues 11 % 34 % The decrease in general and administrative expenses was primarily driven by a decrease of approximately $170.7 million in stock-based compensation costs driven by the prior year recognition of stock-based compensation expense related to the performance-based vesting stock options that vested on the consummation of our IPO in June 2021.
General and Administrative Year Ended December 31, (Dollars in thousands) 2023 2022 $ Change % Change General and administrative $ 105,708 $ 98,855 $ 6,853 7 % Percentage of net revenues 11 % 11 % The increase in general and administrative expenses was primarily driven by an increase of approximately $3.2 million in salaries and benefits, an increase of approximately $1.4 million in stock-based compensation expense and related taxes, an increase of $1.8 million in marketing expenses and an increase of approximately $0.5 million in other corporate-related costs.
Our net cash provided by financing activities primarily consists of proceeds from our initial public offering along with proceeds and payments on our long-term debt and Revolving Commitment.
Our net cash provided by financing activities primarily consists of proceeds from issuance of common stock under employee plans and payments on finance lease obligations.
Liquidity and Capital Resources Funding Requirements Our primary requirements for liquidity and capital are to fund our investments in our core business, which includes lease payments, pursue greenfield expansion, acquisitions of new locations and to service our indebtedness.
Income Tax Provision Year Ended December 31, (Dollars in thousands) 2023 2022 $ Change % Change Income tax provision $ 22,911 $ 32,924 $ (10,013 ) (30 )% Percentage of net revenues 2 % 4 % The decrease in income tax provision in 2023 was primarily due to our income before taxes generated during the current year, which was lower than in 2022. 29 Liquidity and Capital Resources Funding Requirements Our primary requirements for liquidity and capital are to fund our investments in our core business, which includes lease payments, pursue greenfield expansion, acquisitions of new locations and to service our indebtedness.
For the year ended December 31, 2021, net cash provided by financing activities was $272.5 million and was primarily comprised of proceeds from our initial public offering and long-term debt, partially offset by payments of offering costs pursuant to initial public offering, long-term debt, and debt issuance costs.
For the year ended December 31, 2022, net cash provided by financing activities was $6.3 million and was primarily comprised of proceeds from issuance of common stock under employee plans, partially offset by payments of long-term debt and finance lease obligations. Critical Accounting Policies and Estimates Our consolidated financial statements have been prepared in accordance with U.S. GAAP.
Removed
(b) Represents non-cash expense associated with our share-based payments, including approximately $201.9 million in stock-based compensation expense associated with our performance-based vesting stock options that vested on the consummation of our initial public offering in June 2021.
Added
The following includes a discussion and analysis of our financial condition and results of operations for 2023 and 2022 and year-to-year comparisons between 2023 and 2022.
Removed
(f) Represents nonrecurring expenses associated with the consummation of our initial public offering in June 2021. (g) Represents nonrecurring expenses incurred by us in connection with the secondary public offering in August 2021.
Added
For discussion and analysis of our financial condition and results of operations for 2021 and year-to-year comparisons between 2022 and 2021, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022.
Removed
The prior year period reflected the 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, which offset the current year increases.
Added
(b) Represents non-cash expense associated with our share-based payments as well as related taxes.
Removed
This decrease was partially offset by an increase of approximately $7.9 million in salaries and benefits, an increase of approximately $4.6 million in stock-based compensation expense not related to the performance-based vesting stock options noted above and an increase of approximately $2.1 million in other costs, which were primarily attributable to the increased costs of being a public company and the amortization of intangible assets.
Removed
The gain on sale of assets, net in 2021 was primarily attributable to gains associated with our sale-leaseback transactions.
Removed
Income Tax Provision (Benefit) Year Ended December 31, (Dollars in thousands) 2022 2021 $ Change % Change Income tax provision (benefit) $ 32,924 $ (25,093 ) $ 58,017 (231 )% Percentage of net revenues 4 % (3 )% 30 The increase in income tax provision in 2022 was primarily due to the Company’s income before taxes generated during the current year, as compared to loss before taxes generated in 2021.
Removed
Additional income tax benefits were also recorded in 2021 related to income tax deductions related to stock option exercises, net of income tax expense related to non-deductible executive compensation.
Removed
Stock-based compensation expense included $201.9 million associated with performance vesting options which vested upon completion of the initial public offering in June 2021. Other non-cash adjustments included depreciation and amortization, loss on extinguishment of debt and deferred income tax.
Removed
The increase in other receivables was driven by $8.5 million payroll tax withholding and exercise proceeds receivables, $4.9 million of income tax receivables, and $5.6 million of construction receivables associated with an increased number of build-to-suit arrangements. Investing Activities .
Removed
Critical Accounting Policies and Estimates Our consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities.
Removed
Second, the revenue from car wash and, prior to 2021, quick lube services is recognized at the point in time services are rendered and the customer pays. Discounts are applied as a reduction of revenue at the time of payment.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−2 removed2 unchanged
Biggest changeAs of December 31, 2022, we had $901.2 million of variable-rate debt outstanding under our First Lien Term Loan. As of December 31, 2021, we had $903.3 million of variable-rate debt outstanding under our First Lien Term Loan.
Biggest changeAs of December 31, 2023 and 2022, we had $901.2 million of variable-rate debt outstanding under our First Lien Term Loan.
Based on the balance outstanding under our First Lien Term Loan as of December 31, 2022, an increase or decrease of 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 $9 million over the next 12 months.
Based on the balance outstanding under our First Lien Term Loan as of December 31, 2023, an increase or decrease of 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 $9 million over the next 12 months.
In 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. 35
In 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. 34
While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we have recently experienced the effects of inflation on our results of operations and financial condition.
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 the effects of inflation on our results of operations and financial condition.
Removed
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.
Removed
This interest rate swap matured on October 20, 2022 and no new swap was entered into. See Note 11 for additional information. Impact of Inflation Our results of operations and financial condition are presented based on historical cost.

Other MCW 10-K year-over-year comparisons