Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes included in our 2022 Form 10-K. This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in other parts of this Quarterly Report on Form 10-Q and in Part I, Item 1A. “Risk Factors” and in Part II. Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2022 Form 10-K.
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 439 car washes in 21 states as of March 31, 2023. Founded in 1996, we employ an efficient, repeatable, and scalable process, which we call the “Mister Experience,” to deliver a clean, dry, and shiny car every time. The core pillars of the “Mister Experience” are greeting every customer with a wave and smile, providing the highest quality car wash, and delivering the experience quickly and conveniently. We offer a monthly subscription program, which we call the Unlimited Wash Club® (“UWC”), as a flexible, quick, and convenient option for customers to keep their cars clean. Our scale and over 25 years of innovation allow us to drive operating efficiencies and invest in training, infrastructure, and technology that improve speed of service, quality, and sustainability and realize strong financial performance.
Factors Affecting Our Business and Trends
We believe that our business and growth depend on a number of factors that present significant opportunities for us and may pose risks and challenges, including those discussed below and in Part I, Item 1A. “Risk Factors” of our 2022 Form 10-K.
|
|
|
|
|
|
|
Growth in comparable store sales. Comparable store sales have been a driver of our net revenue growth and we expect it to continue to play a key role in our future growth and profitability. We will seek to continue to grow our comparable store sales by increasing the number of UWC Members, maximizing efficiency and throughput of our car wash locations, optimizing marketing spend to add new customers, and increasing customer visitation frequency. |
|
|
|
|
|
|
|
Number and loyalty of UWC Members. The UWC program is a critical element of our business. 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. 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. While the competition for skilled labor is intense and subject to high turnover, we believe our approach to wages and benefits will continue to allow us to attract suitable team members and management to support our growth. |
Factors Affecting the Comparability of Our Results of Operations
Our results have been affected by, and may in the future be affected by, the following factors, which must be understood in order to assess the comparability of our period-to-period financial performance and condition.
Greenfield Location Development
More recently, a component of our growth strategy has been to grow 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. In the three months ended March 31, 2023, we successfully opened four greenfield locations, with the expectation of driving the majority of our future location growth through greenfield development. We believe such a strategy will drive a more controllable pipeline of unit growth for future locations in existing and adjacent markets.
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.
Acquisitions
20
In the three months ended March 31, 2023, we did not consummate any acquisitions.
Following an acquisition, we implement a variety of operational improvements to unify branding and enhance profitability. As soon as feasible, we fully integrate and transition acquired locations to the “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. We also establish member-only lanes, optimize service offerings and implement training initiatives that we have successfully utilized to improve team member engagement and drive UWC growth post-acquisition. The costs associated with these onboarding initiatives, which vary by site, can impact the comparability of our results.
The comparability of our results may also be impacted by the inclusion of financial performance of our acquisitions that have not delivered a full fiscal year of financial results under Mister Car Wash’s ownership.
See Note 14 Business Combinations to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional discussion.
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 three months ended March 31, 2023 and 2022.
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
(Dollars in thousands) |
2023 |
|
|
2022 |
|
Financial and Operating Data |
|
|
|
|
|
Location count (end of period) |
|
439 |
|
|
|
399 |
|
Comparable store sales growth |
|
(2 |
)% |
|
|
11 |
% |
UWC Members (in thousands, end of period) |
|
2,006 |
|
|
|
1,781 |
|
UWC sales as a percentage of total wash sales |
|
69 |
% |
|
|
64 |
% |
Net income |
$ |
21,136 |
|
|
$ |
35,488 |
|
Net income margin |
|
9.4 |
% |
|
|
16.2 |
% |
Adjusted EBITDA |
$ |
70,976 |
|
|
$ |
74,849 |
|
Adjusted EBITDA margin |
|
31.4 |
% |
|
|
34.1 |
% |
Location Count (end of period)
Our location count refers to the total number of car wash locations at the end of a period, inclusive of new greenfield locations, acquired locations and offset by closed locations. The total number of locations that we operate, as well as the timing of location openings, acquisitions, and closings, have, and will continue to have, an impact on our performance. In the three months ended March 31, 2023, we increased our location count by the four greenfield locations noted above, offset by one location that was closed.
Our Express Exterior Locations, which offer express exterior cleaning services, comprise 365 of our current locations and our Interior Cleaning Locations, which offer both express exterior cleaning services and interior cleaning services, comprise 74 of our current locations.
Comparable Store Sales Growth
We consider a location a comparable store on the first day of the 13th full calendar month following a location’s first day of operations. A location converted from an Interior Cleaning Location format to an Express Exterior Location format is excluded when the location did not offer interior cleaning services in the current period but did offer interior cleaning services in the prior year period. Comparable store sales growth is the percentage change in total wash sales of all comparable store car washes.
Opening new locations is a component of our growth strategy and as we continue to execute on our growth strategy, we expect that a significant portion of our sales growth will be attributable to non-comparable store sales. Accordingly, comparable store sales are only one measure we use to assess the success of our growth strategy. For the three months ended March 31, 2023, comparable store sales decreased to (2)% compared to an increase of 11% in the three months ended March 31, 2022.
UWC Members (end of period)
Members of our monthly subscription service are known as Unlimited Wash Club Members, or UWC Members. We view the number of UWC Members 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
21
acquired customers. There were approximately 2.0 million and approximately 1.8 million UWC Members as of March 31, 2023 and March 31, 2022, respectively. There were approximately 1.9 million UWC Members as of December 31, 2022.
Our UWC Members grew by approximately 13% from March 31, 2022 through March 31, 2023 and approximately 6% from December 31, 2022 through March 31, 2023.
UWC Sales as a Percentage of Total Wash Sales
UWC sales as a percentage of total wash sales represents the penetration of our subscription membership program as a percentage of our overall wash sales. Total wash sales are defined as the net revenue generated from express exterior cleaning services and interior cleaning services for both UWC Members and retail customers. UWC sales as a percentage of total wash sales is calculated as sales generated from UWC Members as a percentage of total wash sales. We have consistently grown this measure over time as we educate customers as to the value of our subscription offering. UWC sales were 69% and 64% of our total wash sales for the three months ended March 31, 2023 and 2022, respectively.
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA is a non-GAAP measure of our operating performance and should not be considered as an alternative to net income as a measure of financial performance or any other performance measure derived in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). Adjusted EBITDA is defined as net income before interest expense, net, income tax provision, depreciation and amortization expense, (gain) loss on sale of assets, stock-based compensation expense, acquisition expenses, non-cash rent expense, expenses associated with the completion of our initial public offering in June 2021 ("the IPO"), and other nonrecurring charges. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by net revenues for a given period.
We present Adjusted EBITDA because we believe it assists investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our ongoing operating performance. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in our presentation of Adjusted EBITDA. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. There can be no assurance that we will not modify the presentation of Adjusted EBITDA in future periods, and any such modification may be material. In addition, Adjusted EBITDA may not be comparable to similarly titled measures used by other companies in our industry or across different industries.
Our management believes Adjusted EBITDA is helpful in highlighting trends in our core operating performance compared to other measures, which can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments. We also use Adjusted EBITDA in connection with establishing discretionary annual incentive compensation; to supplement U.S. GAAP measures of performance in the evaluation of the effectiveness of our business strategies; to make budgeting decisions; and because our Amended First Lien Credit Agreement uses measures similar to Adjusted EBITDA to measure our compliance with certain covenants.
Adjusted EBITDA has its limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations include:
|
|
|
|
|
|
|
Adjusted EBITDA does not reflect our cash expenditure or future requirements for capital expenditures or contractual commitments; |
|
|
|
|
|
|
|
Adjusted EBITDA does not reflect changes in our cash requirements for our working capital needs; |
|
|
|
|
|
|
|
Adjusted EBITDA does not reflect the interest expense and the cash requirements necessary to service interest or principal payments on our debt; |
|
|
|
|
|
|
|
Adjusted EBITDA does not reflect cash requirements for replacement of assets that are being depreciated and amortized; |
|
|
|
|
|
|
|
Adjusted EBITDA does not reflect non-cash compensation, which is a key element of our overall long-term compensation; |
|
|
|
|
|
|
|
Adjusted EBITDA does not reflect the impact of certain cash charges or cash receipts resulting from matters we do not find indicative of our ongoing operations; and |
|
|
|
|
|
|
|
other companies in our industry may calculate Adjusted EBITDA differently than we do. |
Adjusted EBITDA was approximately $71.0 million and $74.8 million in the three months ended March 31, 2023 and 2022, respectively. Our Adjusted EBITDA margin was 31.4% and 34.1% in the three months ended March 31, 2023 and 2022, respectively. The Adjusted EBITDA and Adjusted EBITDA margin results in the three months ended March 31, 2023 compared to the prior year
22
period are primarily attributable to the increase in Other store operating expenses during three months ended March 31, 2023. The following is a reconciliation of our net income to Adjusted EBITDA for the periods presented.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
(Dollars in thousands) |
|
2023 |
|
|
2022 |
|
Reconciliation of net income to Adjusted EBITDA: |
|
|
|
|
|
|
Net income |
|
$ |
21,136 |
|
|
$ |
35,488 |
|
Interest expense, net |
|
|
17,748 |
|
|
|
8,166 |
|
Income tax provision |
|
|
6,698 |
|
|
|
8,280 |
|
Depreciation and amortization expense |
|
|
17,307 |
|
|
|
14,945 |
|
(Gain) loss on sale of assets (a) |
|
|
(63 |
) |
|
|
459 |
|
Stock-based compensation expense (b) |
|
|
5,361 |
|
|
|
5,519 |
|
Acquisition expenses (c) |
|
|
459 |
|
|
|
534 |
|
Non-cash rent expense (d) |
|
|
1,030 |
|
|
|
520 |
|
Expenses associated with initial public offering (e) |
|
|
- |
|
|
|
286 |
|
Other (f) |
|
|
1,300 |
|
|
|
652 |
|
Adjusted EBITDA |
|
$ |
70,976 |
|
|
$ |
74,849 |
|
Net Revenues |
|
$ |
225,960 |
|
|
$ |
219,419 |
|
Adjusted EBITDA margin |
|
|
31.4 |
% |
|
|
34.1 |
% |
(a)Consists of (gains) and losses on the disposition of assets associated with sale-leaseback transactions, store closures or the sale of property and equipment.
(b)Represents non-cash expense associated with our share-based payments.
(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.
(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 IPO in June 2021.
(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.
Results of Operations for the Three Months Ended March 31, 2023 and 2022 (Unaudited)
The unaudited results of operations data for the three months ended March 31, 2023 and 2022 have been derived from the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2023 |
|
|
2022 |
|
(Dollars in thousands) |
|
Amount |
|
|
% of Revenue |
|
|
Amount |
|
|
% of Revenue |
|
Net revenues |
|
$ |
225,960 |
|
|
|
100 |
% |
|
$ |
219,419 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Store operating costs: |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of labor and chemicals |
|
|
66,792 |
|
|
|
30 |
% |
|
|
65,538 |
|
|
|
30 |
% |
Other store operating expenses |
|
|
89,466 |
|
|
|
40 |
% |
|
|
77,801 |
|
|
|
35 |
% |
General and administrative |
|
|
24,183 |
|
|
|
11 |
% |
|
|
23,687 |
|
|
|
11 |
% |
(Gain) loss on sale of assets |
|
|
(63 |
) |
|
|
(0 |
)% |
|
|
459 |
|
|
|
0 |
% |
Total costs and expenses |
|
|
180,378 |
|
|
|
80 |
% |
|
|
167,485 |
|
|
|
76 |
% |
Operating income |
|
|
45,582 |
|
|
|
20 |
% |
|
|
51,934 |
|
|
|
24 |
% |
Other expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
17,748 |
|
|
|
8 |
% |
|
|
8,166 |
|
|
|
4 |
% |
Total other expense |
|
|
17,748 |
|
|
|
8 |
% |
|
|
8,166 |
|
|
|
4 |
% |
Income before taxes |
|
|
27,834 |
|
|
|
12 |
% |
|
|
43,768 |
|
|
|
20 |
% |
Income tax provision |
|
|
6,698 |
|
|
|
3 |
% |
|
|
8,280 |
|
|
|
4 |
% |
Net income |
|
|
21,136 |
|
|
|
9 |
% |
|
|
35,488 |
|
|
|
16 |
% |
23
Net Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|
(Dollars in thousands) |
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
Net revenues |
|
$ |
225,960 |
|
|
$ |
219,419 |
|
|
$ |
6,541 |
|
|
|
3 |
% |
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.
Store Operating Costs
Cost of Labor and Chemicals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|
(Dollars in thousands) |
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
Cost of labor and chemicals |
|
$ |
66,792 |
|
|
$ |
65,538 |
|
|
$ |
1,254 |
|
|
|
2 |
% |
Percentage of net revenues |
|
|
30 |
% |
|
|
30 |
% |
|
|
|
|
|
|
The increase in the cost of labor and chemicals is primarily attributable to the year-over-year addition of 40 locations and some inflationary pressures on our wash chemicals and supplies. The increase from additional stores and inflationary pressures were partially offset by a decrease of approximately $2.9 million in store labor costs from optimized scheduling guidelines implemented in the second half of fiscal year 2022.
Other Store Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|
(Dollars in thousands) |
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
Other store operating expenses |
|
$ |
89,466 |
|
|
$ |
77,801 |
|
|
$ |
11,665 |
|
|
|
15 |
% |
Percentage of net revenues |
|
|
40 |
% |
|
|
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. Rent expense increased approximately $3.2 million with the addition of 45 new land and building leases.
General and Administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|
(Dollars in thousands) |
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
General and administrative |
|
$ |
24,183 |
|
|
$ |
23,687 |
|
|
$ |
496 |
|
|
|
2 |
% |
Percentage of net revenues |
|
|
11 |
% |
|
|
11 |
% |
|
|
|
|
|
|
The increase in general and administrative expenses was primarily driven by an increase of approximately $0.9 million in salaries and benefits, offset by a decrease of approximately $0.3 million in stock-based compensation costs. As a percentage of net revenues, general and administrative expenses for the three months ended March 31, 2023 remained consistent to the prior year period.
(Gain) Loss on Sale of Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|
(Dollars in thousands) |
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
(Gain) loss on sale of assets |
|
$ |
(63 |
) |
|
$ |
459 |
|
|
$ |
(522 |
) |
|
|
(114 |
)% |
Percentage of net revenues |
|
|
(0 |
)% |
|
|
0 |
% |
|
|
|
|
|
|
The change in (gain) loss on sale of assets was primarily driven by gains associated with our sale-leaseback transactions in the current year.
24
Other Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|
(Dollars in thousands) |
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
Other expense |
|
$ |
17,748 |
|
|
$ |
8,166 |
|
|
$ |
9,582 |
|
|
|
117 |
% |
Percentage of net revenues |
|
|
8 |
% |
|
|
4 |
% |
|
|
|
|
|
|
The increase in other expense was primarily driven by an increase in interest expense due to higher average interest rates as compared to the prior year period and the expiration of our interest rate hedge in October 2022.
Income Tax Provision
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|
(Dollars in thousands) |
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
Income tax provision |
|
$ |
6,698 |
|
|
$ |
8,280 |
|
|
$ |
(1,582 |
) |
|
|
(19 |
)% |
Percentage of net revenues |
|
|
3 |
% |
|
|
4 |
% |
|
|
|
|
|
|
The decrease in income tax provision was primarily driven by reduced pre-tax income, net of the reduced impact of income tax benefits from equity awards in the current quarter.
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. Historically, these cash requirements have been met through funds raised by the sale of our common stock, utilization of our Revolving Commitment, First Lien Term Loan, Second Lien Term Loan, sale-leaseback transactions, and cash provided by operations.
As of March 31, 2023 and December 31, 2022, we had cash and cash equivalents of $69.9 million and $65.2 million, respectively, and $148.8 million and $148.6 million, respectively, of available borrowing capacity under our Revolving Commitment.
For a description of our Credit Facilities, please see Note 8 Debt in the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. As of March 31, 2023, we were in compliance with the covenants under the Amended and Restated First Lien Credit Agreement.
We believe that our sources of liquidity and capital will be sufficient to finance our growth strategy and resulting operations, as well as planned capital expenditures, for at least the next 12 months. However, we cannot assure you that cash provided by operating activities or cash and cash equivalents will be sufficient to meet our future needs. If we are unable to generate sufficient cash flows from operations in the future, we may have to obtain additional financing. If we obtain additional capital by issuing equity, the interests of our existing stockholders will be diluted. If we incur additional indebtedness, that indebtedness may contain significant financial and other covenants that may significantly restrict our operations. We cannot assure you that we could obtain additional financing on favorable terms or at all.
Cash Flows for the Three Months Ended March 31, 2023 and 2022 (Unaudited)
The following table shows summary cash flow information for the three months ended March 31, 2023 and 2022:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
(Dollars in thousands) |
|
2023 |
|
|
2022 |
|
Net cash provided by operating activities |
|
$ |
67,017 |
|
|
$ |
81,544 |
|
Net cash used in investing activities |
|
|
(63,160 |
) |
|
|
(30,014 |
) |
Net cash provided (used) by financing activities |
|
|
894 |
|
|
|
(953 |
) |
Net increase in cash and cash equivalents, and restricted cash |
|
$ |
4,751 |
|
|
$ |
50,577 |
|
Operating Activities. Net cash used in operating activities consists of net income 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.
25
For the three months ended March 31, 2023, net cash provided by operating activities was $67.0 million and was comprised of net income of $21.1 million, increased by $39.2 million as a result of non-cash adjustments comprised primarily of depreciation and amortization expense, stock-based compensation expense, non-cash lease expense, deferred income taxes, a gain on disposal of property and equipment, and amortization of debt issuance costs. Changes in working capital balances increased cash provided by operating activities by $6.7 million and were primarily driven by decreases in current assets and increases in current liabilities, partially offset by the decrease in operating lease liability.
For the three months ended March 31, 2022, net cash provided by operating activities was $81.5 million and was comprised of net income of $35.5 million, increased by $36.0 million as a result of non-cash adjustments comprised primarily of stock-based compensation expense, depreciation and amortization expense, non-cash lease expense, and a gain on disposal of property and equipment. Changes in working capital balances decreased cash provided by operating activities by $10.1 million and were primarily driven by increases in the operating lease liability, other noncurrent assets and liabilities and accounts payable, offset by a decrease in other receivables, prepaid expenses and other accrued expenses.
Investing Activities. Our net cash used in investing activities primarily consists of purchases and sale of property and equipment.
For the three months ended March 31, 2023, net cash used in investing activities was $63.2 million and was primarily comprised of investments in property and equipment to support our greenfield development and other initiatives, offset by the sale of property and equipment.
For the three months ended March 31, 2022, net cash used in investing activities was $30.0 million and was primarily comprised of investment in property and equipment primarily to support our greenfield and other initiatives, partially offset by the sale of property and equipment.
Financing Activities. Our net cash provided by financing activities primarily consists of proceeds and payments on our First Lien Term Loan and Revolving Commitment, payments on finance lease obligations, as well as issuance of common stock under employee plans.
For the three months ended March 31, 2023, net cash provided by financing activities was $0.9 million and was primarily comprised of proceeds from exercise of stock options, partially offset by payments on finance lease obligations.
For the three months ended March 31, 2022, net cash used by financing activities was $1.0 million and was primarily comprised of repayments of our First Lien Term Loan and principal payments on finance lease obligations, partially offset by proceeds from exercise of stock options.
Critical Accounting Policies and Estimates
Our unaudited condensed 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.
On an ongoing basis, we evaluate our estimates and assumptions, including those related to revenue recognition, goodwill and other intangible assets, income taxes and stock-based compensation. We base our estimates on historical experience, current developments and on various other assumptions that we believe to be reasonable under these circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that cannot readily be determined from other sources. There can be no assurance that actual results will not differ from those estimates.
The significant accounting policies and estimates used in preparation of the unaudited condensed consolidated financial statements are described in our 2022 Form 10-K. There have been no material changes to our significant accounting policies during the three months ended March 31, 2023.
Recent Accounting Pronouncements
See the section titled “Summary of Significant Accounting Policies—Recently Adopted Accounting Pronouncements” in Note 2 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements.
26